<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997
REGISTRATION NO. 333-14187
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RIVIERA TOOL COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C> <C>
MICHIGAN 3544
(State or other jurisdiction of (Primary Standard Industrial 38-2828870
incorporation or organization) Classification Code Number) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
5460 EXECUTIVE PARKWAY SE
GRAND RAPIDS, MICHIGAN 49512
(616) 698-2100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
KENNETH K. RIETH, PRESIDENT
5460 EXECUTIVE PARKWAY SE
GRAND RAPIDS, MICHIGAN 49512
(616) 698-2100
(Address, including zip code, and telephone number, including area code, of
agent for service)
------------------------
Copies to:
<TABLE>
<C> <C>
STUART F. CHENEY, ESQ. ALAN I. ANNEX, ESQ.
Dickinson, Wright, Moon, Van Dusen & Freeman Camhy Karlinsky & Stein LLP
200 Ottawa Avenue, N.W., Suite 900 1740 Broadway, Sixteenth Floor
Grand Rapids, MI 49503 New York, NY 10019
(616) 458-1300 (212) 977-6600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
RIVIERA TOOL COMPANY
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION
----------------------- --------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page; Outside Back Cover
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... Prospectus Summary; Risk Factors: The Company
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........ Description of Capital Stock
10. Interests of Named Experts and Counsel............ Legal Matters; Experts
11. Information with Respect to the Registrant
(a) Description of Business....................... Prospectus Summary -- The Company; Business
(b) Description of Property....................... Business -- Properties
(c) Legal Proceedings............................. Business -- Legal Proceedings
(d) Market Price and Dividends on the Registrant's
Common Equity and Related Stockholder
Matter........................................ Cover Page; Dividend Policy; Selected
Financial Data; Principal Shareholders;
Description of Capital Stock; Underwriting
(e) Financial Statements.......................... Financial Statements
(f) Selected Financial Data....................... Selected Financial Data
(g) Supplementary Financial Information........... Not Applicable
(h) Management's Discussion and Analysis of
Financial Condition and Results of Operations..... Management's Discussion and Analysis of
Financial Condition and Results of Operations
(i) Disagreements with Accountants on Accounting
and Financial Disclosure.......................... Not Applicable
(j) Directors and Executive Directors............. Management -- Executive Officers, Directors
and Key Employees
(k) Executive Compensation........................ Management -- Compensation of Executive
Officers and Directors
(l) Security Ownership of Certain Beneficial
Owners and Management............................. Principal Shareholders
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Management -- Limitations of Liability and
Indemnification Matters
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1997
PROSPECTUS
RIVIERA LOGO
RIVIERA TOOL COMPANY
1,100,000 SHARES
COMMON STOCK
------------------------
Prior to this offering (this "Offering"), there has been no market for the
common stock (the "Common Stock") of Riviera Tool Company ("Riviera" or the
"Company") and there can be no assurance that such a market will develop or, if
developed, that it will be sustained. It is estimated that the initial public
offering price of the Common Stock will be between $7.00 and $8.00 per share.
See "Underwriting" with respect to the method to be used in determining the
initial public offering price. The Common Stock has been approved for quotation
subject to notice of issuance on the American Stock Exchange under the symbol
"RTC."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Per Share....................................... $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(3)........................................ $ $ $
============================================================================================================
</TABLE>
(1) Excludes a non-accountable expense allowance payable to National Securities
Corporation as representative (the "Representative") of the several
underwriters (the "Underwriters") equal to 3% of the total Price to Public.
The Company will sell five-year warrants to the Representative (the
"Representative's Warrants") entitling the Representative to purchase up to
110,000 shares of Common Stock. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting the expenses of this Offering which are payable by the
Company estimated at $ , which includes the nonaccountable expense
allowance payable to the Representative.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
165,000 additional shares of Common Stock to cover over-allotments. If this
option is exercised in full, the total Price to Public, Underwriters'
Discounts and Commissions, and Net Proceeds to the Company will be
$ , $ , and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are being offered by the Underwriters subject to
prior sales when, as, and if delivered to and accepted by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the shares will be made against payment at the offices of National
Securities Corporation, 1001 Fourth Avenue, Seattle, Washington 98154, on or
about March , 1997.
NATIONAL SECURITIES CORPORATION
The date of this Prospectus is February , 1997.
<PAGE> 4
From the simplest
die to the most
complicated parts
assembly, Riviera's
single-source
capability covers
every aspect of
die production
from concept
to completion.
[PHOTO]
[PHOTO]
[PHOTO]
Process development and engineering
are
critical stages in every project.
Riviera's
computer-integrated design and
manufacturing
systems ensure the accurate and
efficient
completion of these important
phases.
Located minutes away from I-96 and Kent
County
International Airport in Grand Rapids,
Michigan, the
Company's 180,000 square foot facility
features a unique layout that
facilitates the seamless flow of ideas,
data,
and die production.
[RIVIERA LOGO]
- --------------------------------------------------------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements included elsewhere in this Prospectus.
Unless the context indicates otherwise, Riviera Tool Company, dba Riviera Die &
Tool, Inc, is referred to as the "Company" or "Riviera." Except as otherwise
noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. Investors should carefully consider the
information set forth under the heading, "Risk Factors."
THE COMPANY
The Company designs, develops and manufactures custom large scale metal
stamping die systems used in the high speed production of sheet metal stamped
parts and assemblies for the automobile industry. The Company incorporates its
knowledge of integrated computer technologies with the design and manufacture of
metal stamping die systems resulting in solutions that address the specific
manufacturing requirements of its main customers, Chrysler Corporation
("Chrysler"), Ford Motor Company ("Ford") and General Motors Corporation
("General Motors"), the three largest domestic automobile manufacturers (the
"OEMs"), and their tier one suppliers of sheet metal stamped parts and
assemblies.
Management has strategically positioned the Company as one of North
America's most technologically advanced independent suppliers of metal stamping
die systems utilizing a totally computer integrated process for the design,
manufacture and validation of its products. The Company should continue to
benefit from current trends in the global automotive industry which require
continuous quality improvement, simultaneous engineering and development, and
increasing reliance on a select number of suppliers capable of utilizing
computer integrated technology to develop new automobile models. Examples of
parts made from die systems recently developed and manufactured by the Company
include the bumper system for the Ford Explorer and F-Series trucks, door panels
and wheels for the Jeep Wrangler, structural body components for the Chrysler
Neon and mini-vans, as well as body panels for semi-tractor vehicles.
The Company maintains "Preferred Supplier" status with Chrysler and Ford.
The Company has been awarded Chrysler's PentaStar quality award, the highest
quality award for a single plant supplier and Ford's Q-1 supplier award, an
award that has historically been given to suppliers who manufacture parts and
assemblies, rather than suppliers of tooling and equipment. The Company was the
first tool and die supplier to be awarded the Q-1 status by Ford.
By transferring design information electronically ("EDI"), the Company
communicates directly with the OEMs' design and development centers regarding
specific product and manufacturing information necessary to develop a custom
manufacturing system for each respective part. This digital data base is
incorporated in each phase of the design, manufacture and inspection process for
both the prototype and production tooling systems, ensuring high quality
repeatable processes. Electronically linking the Company to the OEMs' design and
development centers enables significant reductions in product development lead
time and cost. The Company intends to use a portion of the proceeds of this
Offering to enhance its technical capabilities and competitive position by
acquiring advanced 3-dimensional design software known generally as "relational
data based software" and integrating it with high-speed precision machining
centers. Relational data base software systems can significantly reduce design
lead time and the high-speed precision machining centers are designed to nearly
double the through-put capacity of each machine on a semi-automated basis at
approximately half the cost of traditional computerized machining centers.
The Company has adopted a strategy that includes (i) single source program
management from concept to completion which involves the coordination of design,
manufacture of prototype and final dies, tryout and final inspection, all at a
single location; (ii) accomplishing each of the foregoing using the same
electronic data; (iii) simultaneous engineering of product and process, see
"Business -- Products and Services;" and (iv) maintaining ongoing continuous
improvement programs enabling it to improve its products and services in
response to technological advances and the changing requirements of its
customers.
The Company was originally acquired by the purchase of the assets of an
existing tool and die business on December 19, 1967 and was incorporated in its
present form in 1988 under the laws of the State of Michigan
3
<PAGE> 6
to provide an investment vehicle for Motor Wheel Corporation, an Ohio
corporation, which currently owns 50% of the Company's common stock. Since that
time the business has been operating as the wholly-owned and only subsidiary of
the Company. Prior to this Offering the operating subsidiary was merged into the
Company, which now operates the business. Since the financial statements for the
business have been audited and reported on a consolidated basis since 1988, this
merger had no effect on the substance of the financial statements of the
business. See Note 1 of Notes to Financial Statements -- Nature of Business and
Significant Accounting Policies -- Reporting Entity. Its executive offices and
manufacturing facility are located at 5460 Executive Parkway, Grand Rapids,
Michigan 49512, and its telephone number is (616) 698-2100.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 1,100,000 shares(1)
Common Stock to be outstanding after the
Offering................................... 2,560,000 shares(1)
Use of Proceeds.............................. Reduction of financial institution debt, to
acquire fixed assets, retirement of all
outstanding 8% Cumulative Preferred Stock,
and for general working capital purposes. See
"Use of Proceeds."
AMEX Proposed Symbol......................... "RTC"
</TABLE>
- -------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN 000'S EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Sales................................ $13,207 $18,946 $22,425 $22,225 $18,334 $4,934 $5,480
Gross Profit......................... 1,160 1,788 2,749 4,108 3,398 884 1,085
Income (loss) from Operations........ (311) 318 1,635 2,206 2,043 463 654
Interest Expense..................... 780 856 1,415 1,749 1,670 367 403
Other Income......................... 265 244 139 106 227 37 15
Other Expense(1)..................... 0 2,247 532 0 0 0 0
Income (loss) before income taxes.... (826) (2,541) (173) 563 600 133 267
Income Taxes (Benefits).............. (312) (252) (134) 77 204 45 91
------- ------- ------- ------- ------- ------ ------
Net Income (loss) available for
common shares...................... $ (536) $(2,314) $ (69) $ 450 $ 367 $ 80 $ 172
======= ======= ======= ======= ======= ====== ======
Net Income (loss) per common share,
as adjusted(2)..................... $(.21) $(.90) $(.03) $.18 $.14 $.03 $.07
======= ======= ======= ======= ======= ====== ======
Supplementary Net Income (loss) per
common share, as adjusted(3)....... $.37 $.11
======= ======
OTHER DATA :
Depreciation & amortization.......... 991 993 1,214 1,438 1,272 313 322
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF NOVEMBER 30, 1996
----------------------------------------------- ---------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)(4)
---- ---- ---- ---- ---- ------ -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital
(Deficiency)............... $ 421 $(2,727) $(4,273) $(3,966) $(3,669) $(3,463) $ 6,940
Total Assets................. 20,824 22,927 26,439 21,706 22,928 22,154 22,154
Current Portion of Long-Term
Debt & Capital Leases...... 796 2,935 3,129 2,256 1,336 1,258 650
Revolving Line of Credit..... 5,110 8,127 9,461 6,866 10,242 9,796 1,456
Long-term Capital Leases &
Term Debt, less current
portion.................... 3,173 1,178 2,715 1,830 1,002 738 2,600
Redeemable Preferred Stock... 54 80 109 111 139 91 --
Common Stockholder's
Equity..................... 7,153 4,839 4,770 5,220 5,588 5,760 12,936
</TABLE>
- -------------------------
(1) Other Expense includes the following: For 1993, amount represents loss from
related company as a write-off of $1,687,000 of preferred stock in related
company and write-off of receivable from such entity of $560,000. For 1994,
amount represents $532,000 in costs associated with vacant facility space
formerly leased to the related company. See "Business -- Legal Proceedings."
(2) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby.
(3) See Note 18 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby at an estimated initial public offering price of
$7.50 per share, less applicable underwriting discounts and commissions and
estimated offering expenses payable by the Company and the effect of
restructuring its bank debt. See "Risk Factors -- Debt Covenant Violations."
5
<PAGE> 8
RISK FACTORS
A prospective investor should consider, together with the other information
set forth in this Prospectus, the following:
RELIANCE UPON MAJOR CUSTOMERS
Approximately 25% of the Company's sales during fiscal 1996 and 24% in
fiscal 1995 were made directly to Chrysler Corporation. In addition,
approximately 11% of the Company's sales during fiscal 1996 and 7% during fiscal
1995 were made directly to Ford Motor Company. Ford suppliers represented
approximately 17% and 55% of the Company's sales during fiscal 1996 and 1995,
respectively. General Motors represented approximately 13% of the Company's
sales during fiscal 1996 and 1% during fiscal 1995. For the three months ended
November 30, 1996, Chrysler, Ford, General Motors and their tier one suppliers
accounted for approximately 50%, 35% and 8% of the Company's revenues,
respectively. See "Business -- General."
The loss of the Company's relationship with these customers, or a
significant reduction of their minimum tooling purchases, or a reduction in new
product development due to economic conditions, could have a material adverse
effect upon the Company.
The Company is directly dependent on its customers who directly produce the
end use product. As a result, if the end use producers (Chrysler, Ford and
General Motors) experience difficulties in such critical areas as style, quality
or global competition, the demand for such end use producer's product may be
adversely affected, which may in turn adversely affect the Company.
GENERAL FACTORS: ECONOMIC CLIMATE, INTERNATIONAL MONETARY CYCLES, CHANGING
FACILITIES,
INTER-INDUSTRY DEPENDENCE, AVAILABLE FINANCING
The revenue and value of manufacturing concerns, such as the Company, in
general, may be adversely affected by a number of factors, including: (a) the
international, national, regional and local economic climate -- in particular,
manufacturing intended for large ticket durable consumer goods, which directly
contributes to or adversely affects the work loads of manufacturing concerns
supplying product that will contribute to or be incorporated into end use
consumer products. (b) international monetary cycles -- manufacturing concerns
produce products that contribute to or are otherwise incorporated into retail
consumer end use products that will directly or indirectly be competing on a
global basis. Where price becomes an issue, monetary cycles may contribute to or
detract from competitive positioning. (c) the need to periodically repair,
replace, upgrade and expand existing production capabilities may not prove to be
a profitable endeavor. (d) the dependence on other industries -- manufacturing
concerns that do not produce an end product but contribute to an end product
produced by another manufacturing concern are subject to both the trends of the
end user and the buying practices of the manufacturer that assembles into a
merchantable product. (e) manufacturing concern values are affected by factors
such as changes in interest rates and the availability of financing in capital
- --intensive industries, and in addition, manufacturing concerns do not typically
receive progress payments from their customers.
VOTING CONTROL
Following completion of this Offering, Riviera Holding Company (owned 100%
by Kenneth K. Rieth), a Michigan corporation and Motor Wheel Corporation, an
Ohio corporation located in Lansing, Michigan, will have approximately 23.6% and
28.5, respectively, of the voting power and ownership of the Company (assuming
no exercise of the Underwriters' over-allotment option). Together they will have
effective voting control of the Company, and will be able to elect or remove all
of the Company's Directors, will exercise significant control over the other
affairs of the Company and will be able to block any proposal put to a vote of
the shareholders including proposals which require a supermajority. These two
shareholders have entered into a formal voting agreement. See "Principal
Shareholders."
6
<PAGE> 9
DEPENDENCE ON EXISTING MANAGEMENT
Kenneth K. Rieth and a few key employees have been primarily responsible
for the development of most of the Company's products, processes and business
methods. The loss or interruption of the continued full-time services of any of
them could have a material adverse effect on the Company. The Company maintains
"Key-man" life insurance policies on Kenneth K. Rieth, President, C.E.O. and
Director, and Leonard H. Wood, Vice President, General Manager and Director, for
$2,500,000 and $500,000, respectively. The Company has pledged $1,000,000 of
this insurance on Kenneth K. Rieth to NBD Bank in connection with replacing that
bank as its primary commercial lender. See "Management" and "Management --
Certain Transactions."
COMPETITION AND MARKET CONSOLIDATION
The tooling systems industry is highly competitive, and there can be no
assurance that the Company will be able to compete successfully in the future.
The Company's largest customers, Chrysler and Ford, both have internal die
construction capability; however, the Company believes that such capacity is
insufficient in relationship to their total requirements. The Company believes
that the automobile industry has been going through a tooling systems supplier
consolidation and that there are now fewer quality oriented, full service die
systems suppliers. There is no assurance that the Company will continue to
qualify as a supplier to any of the automobile manufacturers. The loss of any
such qualification would have a material adverse effect on the Company. In
addition, the Company faces competition from foreign manufacturers, particularly
from Japan.
IMMEDIATE AND SUBSTANTIAL DILUTION
After giving effect to the sale by the Company of the 1,100,000 shares of
Common Stock being offered hereby at an estimated public offering price of $7.50
per share (assuming no exercise of the Underwriters' over-allotment option and
application of the net proceeds therefrom), there will be an immediate increase
in the Company's net tangible book value of $1.11 per share and an immediate
dilution of $2.45 per share to investors who purchase Common Stock pursuant to
this Offering. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
The 1,335,000 shares of Common Stock held by Riviera Holding Company, owned
100% by Kenneth K. Rieth, Motor Wheel Corporation and 125,000 shares owned by
NBD Bank after the date of this Prospectus will be eligible for sale in
accordance with Rule 144 under the Securities Act of 1933, as amended, 90 days
following the date of this Prospectus. Under Rule 144, shareholders who have
held fully-paid shares for at least two years may sell them without registration
under certain conditions. The sale of a significant portion of these shares in
the open market could have a material adverse effect on the market price of the
Common Stock. However, Riviera Holding Company and Motor Wheel Corporation have
agreed with the Representative that they will not sell or otherwise dispose of
any Common Stock for two years from the date of this Prospectus without the
consent of the Representative. NBD Bank has agreed with the Representative that
it will not sell or otherwise dispose of any Common Stock for one year from the
date of this Prospectus without the consent of the Representative. See "Shares
Eligible for Future Sale" and "Underwriting."
Riviera Holding Company and Motor Wheel have executed a written
Shareholders Agreement (the "Shareholders Agreement") dated October 31, 1996.
Pursuant to the Shareholders Agreement, Motor Wheel has granted Riviera Holding
Company an option to purchase all shares of stock of the Company held by Motor
Wheel. The purchase price under this option is $3.0 million or $4.11 per share.
This option will lapse on October 31, 1997. Riviera Holding Company has agreed
to assign certain of its rights pursuant to this option to the Company. See
"Principal Shareholders -- Shareholders Agreement" and "Shares Eligible for
Future Sale."
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue, without any
further action on the part of the Company's shareholders, up to 200,000 shares
of preferred stock (the "Preferred Stock") in one or more series with such
designations, preferences, limitations and other rights, including voting
rights, as are
7
<PAGE> 10
determined by the Board of Directors from time to time. The issuance of such
shares of preferred stock could result in the dilution of the voting power of
the shares on Common Stock purchased in this Offering and could have a dilutive
effect on earnings per share. See "Description of Capital Stock."
ABSENCE OF PRIOR MARKET FOR COMMON STOCK
There has been no public market for the Common Stock of the Company prior
to this Offering. There can be no assurance that an active public market for the
shares will develop or be sustained after this Offering or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price of the Common Stock offered hereby was
determined by negotiations between the Company and the Representative and may
not be indicative of the market price of the Common Stock in the future. See
"Underwriting." The trading price of the Company's Common Stock in the future
could be subject to wide fluctuations in response to quarterly variations in
operating results of the Company or its competitors, changes in analysts'
estimates of the Company's financial performance, regulatory developments,
general industry conditions, worldwide economic and financial conditions, and
other factors. During certain periods, the stock markets have experienced
extreme price and volume fluctuations. In addition, securities sold in initial
public offerings have been especially susceptible to price volatility. These
broad market fluctuations and other factors may adversely affect the market
price of the Company's Common Stock.
DEBT COVENANT VIOLATIONS
In connection with the Company's revolving line of credit and notes payable
to bank the Company has agreed to certain covenants. The agreements require the
Company to maintain working capital and net worth at specified levels, do not
permit the debt-to-equity ratio to exceed a specified amount, and prohibit the
payment of cash dividends. The Company presently is not in compliance with
certain of these covenants. As a consequence the bank could (but to date has
chosen not to) pursue collection of all amounts due which could result in the
liquidation of the Company. After application of the proceeds of this Offering,
the Company expects to be in compliance with all such covenants then applicable.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,100,000 shares of Common Stock offered hereby at an estimated public offering
price of $7.50 per share are estimated to be $7,177,500 ($8,254,126 if the
Underwriters' over-allotment option is exercised in full). The Company intends
to apply the net proceeds to reduce financial institution debt which was
incurred for fixed asset acquisition (approximately $1,557,119) and repay
working capital borrowed for its sales growth (approximately $5,620,381). The
unused credit on the Company's revolving line of credit available to the Company
may be used to acquire additional fixed assets, retire all outstanding 8%
cumulative preferred stock and for working capital and other general corporate
purposes, including accommodating growth and future production through the
addition of plant and equipment acquisitions and payment of a preferential
dividend previously declared (see "Dividend Policy"). As of the date of this
Prospectus, there are no agreements or understandings with respect to specific
acquisitions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The fixed asset
acquisition debt bears interest at the annual interest rate of 12.25% ($256,962
due February 28, 1997), 9.9% ($995,019 due March 1, 1999) and 7.0% ($305,138 due
September 1, 1998). The working capital borrowing ($9,795,585) bears annual
interest at the rate of prime plus 4% and is due February 28, 1997. Upon
completion of this Offering and application of the proceeds therefrom, the
Company intends to restructure its bank debt into a $8.0 million revolving line
of credit, of which approximately $600,000 will be drawn upon closing, and a
$3.25 million, 5 year term loan bearing annual interest at the rate of prime
plus 1%. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." The Company believes
that this line of credit, the lower cost of such funds and internally generated
cash flow will be sufficient to cover anticipated cash needs through 1997.
8
<PAGE> 11
DILUTION
As of November 30, 1996, the net tangible book value per share of Common
Stock of the Company was $3.94. "Net tangible book value per share" represents
the book value of the Company's tangible assets less the amount of its
liabilities, divided by the number of shares of Common Stock outstanding. Upon
completion of this Offering, 2,560,000 shares of Common Stock will be
outstanding with a pro forma net tangible book value per share of $5.05. As a
result of this Offering, there will be an immediate dilution to new investors of
approximately $2.45 per share. "Dilution" represents the difference between the
price per share paid by new investors in this Offering and the pro forma net
tangible book value per share as of November 30, 1996, after giving effect to
this Offering. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $7.50
Net tangible book value per share before this Offering.... $3.94
Increase in net tangible book value per share attributable
to new investors....................................... 1.11
Pro forma net tangible book value per share after this
Offering.................................................. 5.05
-----
Dilution per share to new investors......................... $2.45
=====
</TABLE>
The following table summarizes, as of the completion of this Offering, the
differences between the effective cash contributions paid by the existing
shareholders of the Company and the new investors with respect to the number of
shares purchased from the Company, the total consideration paid, and the average
price per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- -----------------------------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders....................... 1,460,000 57.0% $ 4,693,150 36.2% $3.21
New investors(1)............................ 1,100,000 43.0% 8,250,000 63.8% 7.50
--------- ----- ----------- ----- -----
Total................................ 2,560,000 100.0% $12,943,150 100.0%
========= ===== =========== =====
</TABLE>
- -------------------------
(1) Assumes the sale of 1,100,000 shares of Common Stock at an initial public
offering price of $7.50 per share.
DIVIDEND POLICY
The Company has never paid dividends on its common stock and currently
intends to retain future earnings in order to provide funds for the operation
and expansion of its business and, accordingly, does not anticipate paying cash
dividends in the foreseeable future. Furthermore, the Company's current lending
arrangement with its principal commercial lender prohibits the payment of common
stock dividends without the consent of the lender and the Company anticipates
that any future lending facilities will include similar restrictions. Such
restrictions could limit the Company's ability to pay common stock dividends in
the future.
Pursuant to the Shareholder Agreement dated October 31, 1996 between Motor
Wheel and Riviera Holding Company, the Company has declared a preferential
dividend of approximately $170,000 on the shares of Common Stock of the Company
owned by Riviera Holding to pay the income tax payable by Riviera Holding
Company as a result of the lapse of options by Motor Wheel to purchase common
stock owned by Riviera Holding Company and as a result of the dividend itself.
This dividend has been consented to by all directors and both existing
shareholders of the Company. The dividend cannot be paid until consented to by
the Company's primary commercial lender. The Company expects to receive such
consent upon completion of this Offering.
9
<PAGE> 12
CAPITALIZATION
The following table sets forth the actual short-term debt and
capitalization of the Company at November 30, 1996. Also set forth is such data,
pro forma, to give effect to the sale by the Company of the 1,100,000 shares of
Common Stock offered hereby and the application of the estimated net proceeds
therefrom.
<TABLE>
<CAPTION>
NOVEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Notes Payable and Capital Leases -- Current(2).............. $11,053 $ 650
======= =======
Long-term Debt Obligations, less current portions(2)........ $ 738 $ 4,056
Long-term Capital Leases, less current portions(2).......... -- --
Preferred Stock, no par value, 200,000 shares authorized and
none outstanding.......................................... -- --
8% Cumulative Preferred Stock, $5 par value, $100
redemption value -- 1,425 shares authorized and
outstanding............................................... 91 --
Common Stockholder's Equity:
Common Stock, no par value --
9,798,575 shares authorized, 1,460,000 shares outstanding,
2,560,000 as adjusted..................................... 4,393 11,569
Retained Earnings........................................... 1,367 1,367
------- -------
Total Stockholder's Equity........................... 5,760 12,936
------- -------
Total Capitalization........................................ $ 6,589 $16,992
======= =======
</TABLE>
- -------------------------
(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(2) See Notes 5 and 10 of Notes to Financial Statements.
10
<PAGE> 13
SELECTED FINANCIAL DATA
The following selected financial data for each of the five fiscal years in
the period ended August 31, 1996 is derived from financial statements which have
been audited by Plante & Moran LLP, independent public accountants, and should
be read in conjunction with the Financial Statements and Notes thereto included
elsewhere herein. The Statement of Operation Data for the three months ended
November 30, 1996 and 1995, and the Balance Sheet Data at November 30, 1996, are
derived from unaudited financial statements of the Company that include all
adjustments, consisting of only normal recurring adjustments, that the Company
considers necessary for a fair presentation of its results of operations for
such periods. The results of operations for the three months ended November 30,
1996 are not necessarily indicative of results to be expected for the entire
year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31, NOVEMBER 30,
----------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN 000'S EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Sales.................................. $13,207 $18,946 $22,425 $22,225 $18,334 $4,934 $5,480
Gross Profit........................... 1,160 1,788 2,749 4,108 3,398 884 1,085
Income (loss) from Operations.......... (311) 318 1,635 2,206 2,043 463 654
Interest Expense....................... 780 856 1,415 1,749 1,670 367 403
Other Income........................... 265 244 139 106 227 37 15
Other Expense(1)....................... 0 2,247 532 0 0 0 0
Income (loss) before income taxes...... (826) (2,541) (173) 563 600 133 267
Income Taxes (Benefits)................ (312) (252) (134) 77 204 45 91
------- ------- ------- ------- ------- ------ ------
Net Income (Loss) available for common
shares............................... $ (536) $(2,314) $ (69) $ 450 $ 367 $ 80 $ 172
======= ======= ======= ======= ======= ====== ======
Income (loss) from Operations per
share, as adjusted(2)................ $ (.12) $.12 $.64 $.86 $.80 $.18 $.26
======= ======= ======= ======= ======= ====== ======
Net Income (loss) per common share,
as adjusted(2)....................... $(.21) $(.90) $(.03) $.18 $.14 $.03 $.07
======= ======= ======= ======= ======= ====== ======
Supplementary Net Income (loss) per
common share, as adjusted(3)......... $.37 $.11
======= ======
OTHER DATA:
Depreciation & amortization............ 991 993 1,214 1,438 1,272 313 322
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF NOVEMBER 30, 1996
----------------------------------------------- ---------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(3)(4)
---- ---- ---- ---- ---- ------ -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)..... $ 421 $(2,727) $(4,273) $(3,966) $(3,669) $(3,463) $ 6,940
Total Assets..................... 20,824 22,927 26,439 21,706 22,928 22,154 22,154
Current Portion of Long-term Debt
& Capital Leases............... 796 2,935 3,129 2,256 1,336 1,258 650
Revolving Line of Credit......... 5,110 8,127 9,461 6,866 10,242 9,796 1,456
Long-term Capital Leases & Term
Debt, less current portion..... 3,173 1,178 2,715 1,830 1,002 738 2,600
Redeemable Preferred Stock....... 54 80 109 111 139 91 --
Common Stockholder's Equity...... 7,153 4,839 4,770 5,220 5,588 5,760 12,936
</TABLE>
- -------------------------
(1) Other Expense includes the following: For 1993, amount represents loss from
related company as a write-off of $1,687,000 of preferred stock in related
company and write-off of receivable from such entity of $560,000. For 1994,
amount represents $532,000 in costs associated with vacant facility space
formerly leased to a related company. See "Business -- Legal Proceedings."
(2) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby.
(3) See Note 18 of Notes to Financial Statements.
(4) Adjusted to give effect to the sale by the Company of 1,100,000 shares of
Common Stock offered hereby at an initial price of $7.50 per share, less
applicable underwriting discounts and commissions and estimated offering
expenses payable by the Company and the effect of restructuring its bank
debt. See "Risk Factors -- Debt Covenant Violations."
11
<PAGE> 14
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 statements of operations as a percentage of sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED AUGUST 31, NOVEMBER 30,
------------------------------------------------ ---------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION DATA:
Net Sales............................. 100% 100% 100% 100% 100% 100% 100%
Gross Margin.......................... 9 9 12 18 19 18 20
Income from Continuing Operations..... (2) 2 7 10 11 9 12
Interest Expense...................... 6 5 6 8 9 7 7
Other Income.......................... 2 1 1 1 1 1 --
Other Expense......................... -- 12 2 -- -- -- --
Income (loss) before income taxes..... (6) (13) -- 3 3 3 5
Federal Income Tax (Benefit).......... (2) (1) -- 1 1 1 2
--- --- --- --- --- --- ---
Net Income (Loss)..................... (4)% (12)% --% 2% 2% 2% 3%
=== === === === === === ===
OTHER DATA:
Depreciation and Amortization......... 8% 5% 5% 6% 7% 6% 6%
</TABLE>
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1996 AND NOVEMBER 30, 1995
Revenue. Total Revenue increased by 11% from approximately $4.9 million for
the quarter ended November 30, 1995, to approximately $5.5 million for the
quarter ended November 30, 1996. This increase was due to the timing of
contracts in process in the comparative periods. As of November 30, 1995 the
Company's contracts in process was $5.2 million as compared to $4.9 million as
of November 30, 1996 which resulted in the increase in revenue during the
quarter ended November 30, 1996.
Cost of Goods Sold. Cost of goods sold decreased from 82% of total revenue
for the quarter ended November 30, 1995 to 80% for the quarter ended November
30, 1996. This decrease was largely due to lower direct labor expense (28% of
total revenue for the quarter ended November 30, 1995 as compared to 23% of
total revenue for the quarter ended November 30, 1996).
Selling, General and Administrative Expense. Selling, general and
administrative expense was approximately $422,000 for the quarter ended November
30, 1995 as compared to $430,000 for the quarter ended November 30, 1996. As a
percentage of total revenue, selling, general and administrative expense
decreased to 7% for the quarter ended November 30, 1996 as compared to 8% for
the quarter ended November 30, 1995.
Interest Expense. Interest expense was approximately $367,000 for the
quarter ended November 30, 1995 as compared to $403,000 for the quarter ended
November 30, 1996. This increase was due to the higher revolving line of credit
balance during these comparative periods ($9.8 million as of November 30, 1996
as compared to $9.2 million as of November 30, 1995).
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1996 AND AUGUST 31, 1995
Revenue. Total revenue decreased by 17% from approximately $22.2 million
for the year ended August 31, 1995 ("Fiscal 1995"), to approximately $18.4
million for the year ended August 31, 1996 ("Fiscal 1996"). This decrease was
due to the timing of contracts in process and the Company's contract backlog.
Contracts in process as of August 31, 1996 was approximately $2.2 million higher
than as of August 31, 1995
12
<PAGE> 15
(an increase of 69%) and the Company's backlog as of August 31, 1996 was $6.4
million higher than as of August 31, 1995. This backlog will reasonably be
reflected in revenue during 1997.
Cost of Goods Sold. Cost of goods sold decreased from $18.1 million in
Fiscal 1995 to $14.9 million in Fiscal 1996. This was due to the decrease in
revenue when comparing the same periods. As a percentage of total revenue, cost
of goods sold remained consistent at 81.5% for Fiscal 1996 from Fiscal 1995.
Selling, General and Administrative Expense. Selling, general and
administrative expense was approximately $1.3 million for Fiscal 1996, a
decrease of 32% from approximately $1.9 million for Fiscal 1995. As a percentage
of total revenue, selling, general and administrative expense decreased from
8.8% in 1995 to 7.0% for Fiscal 1996. This decrease was largely due to legal and
professional (a decrease of $134,000), amortization (a decrease of $47,000), and
administrative salaries (a decrease of $128,000).
Interest Expense. Interest expense was approximately $1.7 million for
Fiscal 1996, a decrease of 5% from approximately $1.8 million for Fiscal 1995.
As a percentage of total revenue, interest expense increased from 8% for Fiscal
1995 to 9% for Fiscal 1996. This was primarily due to the increase in average
short-term outstanding debt of $11.1 million in Fiscal 1996 as compared to $10.7
million in Fiscal 1995.
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1995 AND AUGUST 31, 1994
Revenue. Total revenue decreased by 1% from approximately $22.4 million for
the year ended August 31, 1994 ("Fiscal 1994"), to approximately $22.2 million
for the year ended August 31, 1995 ("Fiscal 1995"). The Company must finance its
construction-in-process and accounts receivable. Due to the nature of this
process, each dollar of annual sales volume requires approximately $.50 of
working capital financing. The inability of the Company to obtain additional
working capital has therefore restricted its ability to increase sales.
Cost of Goods Sold. Cost of goods sold decreased from $19.7 million for
Fiscal 1994 to $18.1 million for the year ended August 31, 1995. As a percentage
of total revenue, cost of goods sold decreased from 88% for the year ended
August 31, 1994 to 82% for the year ended August 31, 1995. This decrease was
largely due to the Company subcontracting less of its machining requirements
(decrease of $124,000), outside pattern services (decrease of $327,000) and
outside engineering services (decrease of $290,000).
Selling, General and Administrative Expense. Selling, general and
administrative expense was approximately $1.9 million for Fiscal 1995, an
increase of 73% from approximately $1.1 million for Fiscal 1994. As a percentage
of total revenue, selling, general and administrative expense increased to 9%
for Fiscal 1995 as compared to 5% for Fiscal 1994, primarily due to an increase
in legal expense ($81,000), State of Michigan Single Business Tax ($158,000) and
during Fiscal 1994, the Company received final information on dividends from its
workers compensation and health insurance carrier which resulted in refunds of
$102,000 and $159,000, respectively, which were recorded in Fiscal 1994 as a
reduction to the appropriate expense. For 1995, no dividends were received from
the workers compensation insurance carrier and a $65,000 refund was received
from the Company's health insurance carrier.
Interest Expense. Interest expense was approximately $1.7 million for
Fiscal 1995, an increase of 24% from approximately $1.4 million for Fiscal 1994.
As a percentage of total revenue, interest expense increased from 6% for Fiscal
1994 to 8% for Fiscal 1995, primarily due to increased short-term borrowing
levels (the average short-term borrowings outstanding during Fiscal 1995 was
$1.6 million higher than Fiscal 1994), increase in the interest rate charged by
the Company's primary lender on outstanding debt (an increase of 2.55%) bank
fees of $173,000 paid to its primary lender in extending its revolving line of
credit and term debt, and the Company incurred additional long-term debt of $2.5
million in the fourth quarter of 1994 for the acquisition of capital assets
which resulted in an additional $208,000 of interest expense in Fiscal 1995.
13
<PAGE> 16
COMPARISON OF FISCAL YEARS ENDED AUGUST 31, 1994 AND AUGUST 31, 1993
Revenue. Total revenue increased by 18% from approximately $18.9 million
for the year ended August 31, 1993, to approximately $22.4 million for the year
ended August 31, 1994 primarily due to increase in amount of contracts with
Chrysler Corporation and Ford Motor Company.
Cost of Goods Sold. Cost of goods sold increased from $17.2 million for the
year ended August 31, 1993 to $19.7 million for the year ended August 31, 1994.
As a percentage of total revenue, cost of goods sold decreased from 91% for the
year ended August 31, 1993 to 88% for the year ended August 31, 1994. The
increase in cost of sales (an increase in labor of $1.6 million and $1.0 million
in direct materials) was largely due to an increase of 18% in revenue for the
year ended August 31, 1994 over the prior year.
Selling, General and Administrative Expense. Selling, general and
administrative expense was approximately $1.1 million for the year ended August
31, 1994, a decrease of 23% from approximately $1.5 million for the year ended
August 31, 1993. As a percentage of total revenue, selling, general and
administrative expense decreased to 5% in 1994 as compared to 8% for 1993. This
decrease was largely due to dividends received from the Company's workers
compensation and health insurance carriers in 1994 (a total of $261,000 as
compared to $0 in 1993) and a decrease in the State of Michigan Single Business
Tax (a decrease of $173,000 as compared to 1993).
Interest Expense. Interest expense was approximately $1.4 million for the
year ended August 31, 1994, a increase of 65% from approximately $856,000 for
the year ended August 31, 1993. As a percentage of total revenue, interest
expense increased from 5% for the year ended August 31, 1993 as compared to 6%
for the year ended August 31, 1994, primarily due to increased borrowing levels
necessary to finance growth in revenue (average outstanding short-term debt
increased from $6.3 million in 1993 to $9.1 million in 1994) and an increase in
the interest rate (3% per annum) the Company's primary lender charged on
outstanding debt.
Other Expense. In July of 1992, the Company contributed machinery,
equipment, inventory, work-in-process and receivables related to the business of
building plastic injection molds to a joint venture that then became known as
Leap Technologies, Inc. The Company contributed assets valued at $5.4 million
and Leap Technologies, Inc. assumed debts in the amount of $3.7 million, and the
Company received $1.7 million of preferred stock. In Fiscal 1993, Leap
Technologies, Inc. was liquidated and the Company wrote-off its preferred stock
in Leap Technologies, Inc. ($1,687,000) and accounts receivable from the related
company ($560,000). During the year ended August 31, 1994, the Company absorbed
the cost of the unleased Leap Technologies, Inc. facility space ($532,000) and
then leased such space to an unrelated company.
FEDERAL INCOME TAX.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. A current tax liability or asset
is recognized for the estimated taxes payable or refundable on tax returns for
the year. Deferred tax liabilities or assets are recognized for the estimated
future tax effects of temporary differences between book and tax accounting and
operating loss and tax credit carryforwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
As of November 30, 1996, the Company had approximately $3.8 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 does
not expire.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's needs for capital have been extensive over the period
presented. Bank borrowings have increased primarily to acquire fixed assets and
to finance the increase in trade accounts receivable and contracts in process,
as the OEMs typically do not make progress payments on tooling contracts. The
Company has financed these needs through internally generated funds, bank
financing, and various capital and operating leases. Cash provided from (used
by) operating activities was $183,926 in 1994, $4,991,021 in 1995,
14
<PAGE> 17
($977,133) in 1996 and $942,680 for the quarter ended November 30, 1996. The
capital used by operations in 1996 was primarily due to changes in the Company's
Accounts Receivable, Contracts in Process, and current liabilities accounts and
for the quarter ended November 30, 1996, the primary change was the decrease in
Contracts in Process.
The Company utilized $3,005,247, $575,401, $319,308 and $50,808 of Cash
Flows from Investing Activities in 1994, 1995, 1996 and the quarter ended
November 30, 1996, respectively. In 1994 and 1995 the most significant items
were the acquisition of $2,849,684 and $585,248 of capital assets, respectively.
From Financing Activities in 1994 the Company incurred additional long-term
debt for the acquisition of capital assets. In 1995, the reduction of short-term
debt was a result of the decrease in accounts receivable and application of such
proceeds to the revolving line of credit. For 1996, the increase in the
short-term debt resulted from the increase in Contracts in Process and decrease
in Accounts Payable accounts, and the Company incurred $333,325 of costs in
connection with this Offering which have been capitalized. These capitalized
costs will be expensed or charged to paid in capital upon completion of this
Offering. For the quarter ended November 30, 1996 the Company decreased
short-term debt which resulted from the decrease in Contracts in Process and
increase in Accounts Payable.
In connection with the Company's line of credit and note payable to bank as
of November 30, 1996, the Company has agreed to certain covenants. The agreement
requires the Company to maintain minimum working capital and net worth of
$200,000 and $6,000,000, respectively, to keep its combined debt-to-equity ratio
at less than 3 to 1, and prohibits the payment of cash dividends. As of November
30, 1996 the Company had working capital deficit of ($3,463,183), net worth of
$5,759,602, and a debt-to-equity ratio of 2.85 to 1. As a result, the Company
has classified those debt obligations as current liabilities. Although the bank
has extended the terms of the obligations to February 28, 1997, it has not
waived its rights under the agreement. See "Risk Factors -- Debt Covenant
Violations."
After application of the proceeds from this Offering, the Company's
adjusted total bank debt as of November 30, 1996 would be $4,706,000, of which
$650,000 would be short-term and the balance long-term. See "Use of Proceeds."
The Company has received a commitment from LaSalle National Bank, to restructure
its bank debt into a $8,000,000 line of credit and a $3,250,000, 5 year term
loan, with amortization commencing the first month after closing. The Company is
also exploring the possibility of issuing up to $10.0 million of publicly traded
debt securities in place of the term loan portion of the bank debt. The Company
believes that the unused portion of this credit line and the lower cost of such
funds, together with funds generated from operations, will be sufficient to
cover anticipated cash needs through 1997. However, depending on the level of
future sales, an expanded credit line may be necessary to finance increases in
trade accounts receivable and contracts in process. The Company believes it will
be able to obtain such expanded credit line, if required, on generally the same
terms as the proposed new credit line.
The LaSalle commitment to restructure the Company's bank debt calls for an
interest rate equal to the bank's floating prime rate plus 1% on the credit line
and term loan. This compares to rates of 4% in excess of prime rate on the
Company's present bank debt. The $3,250,000 long-term portion of the
restructured debt would be repayable in equal monthly installments over five
years. The credit line utilization is based on a formula of 80% of eligible
accounts receivable, and 40% of contracts in process. Under this formula,
substantially all of the credit line would be available to the Company. The
entire restructured bank debt would be secured by substantially all of the
Company's assets, as is the case with the existing bank debt.
INFLATION.
The Company has no long-term, fixed price contracts. Historically, the
Company has been able to reflect increases in the prices of labor and material
in its selling prices. The Company expects that this will continue to be the
case.
15
<PAGE> 18
BUSINESS
GENERAL
The Company is a leading manufacturer of large scale, complex stamping die
systems used to form sheet metal parts. Most of the stamping die systems sold by
the company are used in the production of automobile and truck body parts such
as doors, door frames, structural components and bumpers. The following table
indicates the Company's sales (in thousands) and percentage of total sales by
customer for each of the last five fiscal years for the period ended August 31
and the three months ended November 30, 1995 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------- ------------- ------------- ------------- -------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chrysler Corporation...... $ 2,912 22% $ 8,949 47% $ 6,885 31% $ 5,291 24% $ 4,622 25%
Suppliers of Chrysler
Corporation............. 2,129 16 0 * 0 * 0 * 0 *
Ford Motor Company........ 1,342 10 231 1 1,852 8 1,511 7 2,061 11
Suppliers of Ford Motor
Company................. 4,120 31 7,610 40 6,951 31 12,172 55 3,042 17
General Motors Corp. ..... 2,449 18 0 * 0 * 225 1 2,297 13
Suppliers of General
Motors Corp. ........... 0 * 0 * 0 * 140 * 1,560 9
Other auto and truck
manufacturers and
their suppliers......... 255 3 2,156 12 6,737 30 2,886 13 4,752 25
------- --- ------- --- ------- --- ------- --- ------- ---
Total Sales(1)(2)..... $13,207 100% $18,946 100% $22,425 100% $22,225 100% $18,334 100%
======= === ======= === ======= === ======= === ======= ===
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
---------------------------
1995 1996
------------ ------------
AMOUNT % AMOUNT %
------ - ------ -
(UNAUDITED)
<S> <C> <C> <C> <C>
Chrysler Corporation...... $ 493 10% $2,605 48%
Suppliers of Chrysler
Corporation............. 0 * 124 2
Ford Motor Company........ 298 6 794 14
Suppliers of Ford Motor
Company................. 1,288 26 1,131 21
General Motors Corp. ..... 1,214 25 461 8
Suppliers of General
Motors Corp. ........... 488 10 0 *
Other auto and truck
manufacturers and
their suppliers......... 1,153 23 365 7
------ --- ------ ---
Total Sales(1)(2)..... $4,934 100% $5,480 100%
====== === ====== ===
</TABLE>
- -------------------------
* Less than 1.0% of the Company's total sales.
(1) Sales to Motor Wheel Corporation were $6.9, $2.7, $2.5, $2.8, $2.0, $.7 and
$.2 million for fiscal years 1992 through 1996 and the three months ended
November 30, 1995 and 1996, respectively, and are all included above.
Included in sales to Motor Wheel Corporation sales are die construction
contract underutilization charges (see "Certain Transactions") of $62,472,
$462,543, $110,744, $246,011, $72,245, $72,245 and $0 for fiscal years 1992
through 1996 and the three months ended November 30, 1995 and 1996,
respectively.
(2) In conjunction with the Shareholders Agreement between Riviera Holding
Company and Motor Wheel Corporation dated October 31, 1996, a die
construction contract was terminated retroactive to December 31, 1995 and no
underutilization charges are included in sales thereafter. See "Certain
Transactions" and "Principal Shareholders -- Shareholders Agreement."
INDUSTRY TRENDS
Several significant trends within the North American automotive industry
have had, and are likely to continue to have, an impact on the Company's
business. Over the past several years, the industry has required that its tool
suppliers utilize advanced computer integrated technology. This has required
significant capital investment. In some cases, being unable or unwilling to make
this investment, many independent tooling suppliers have exited the business.
This has decreased the available domestic tooling capacity and has resulted in
fewer qualified suppliers.
The automotive industry's trend towards shorter product life cycles and
introduction of a greater number of vehicle models will create growing demand
for the Company's complex tooling systems. In accordance with this trend, the
OEMs are forming alliances with select suppliers which have the technological
capability to successfully perform simultaneous engineering of product and
manufacturing processes from concept to completion at the supplier level and
utilizing computer data based design, manufacturing and validation processes.
The OEMs have formed "Platform" teams which provide the organizational structure
for this simultaneous engineering process, and have included their critical or
key suppliers in these teams. This simultaneous engineering concept allows model
changes to be implemented more quickly and cost-effectively. By involving the
ultimate tool and die manufacturer early in the design process, the OEMs are
better able to design-in more cost-effective manufacturing processes, improve
product quality, and avoid costly changes downstream. Chrysler and Ford are
currently operating Platform teams and management believes that General Motors
will implement this concept within the near future.
16
<PAGE> 19
The emphasis on designing and manufacturing more fuel efficient vehicles as
the result of federal Corporate Average Fuel Economy ("C.A.F.E.") regulation has
produced many new vehicle designs. In addition, automobile manufacturers are
utilizing light-weight, high strength steels and aluminum in new model designs
in order to decrease the weight of the vehicle and increase fuel efficiency.
Therefore, suppliers will be required to have the ability to work with these
types of materials in order to remain competitive. The Company has established
an expertise in manufacturing dies used in the production of structural
components made of light-weight, high strength steels and aluminum.
Chrysler, Ford and General Motors have developed "cash accumulation
policies." These policies entail the establishing and maintaining of cash
reserves to fund new model development during industry downturns. These policies
should create increased and more stable demand for the Company's products and
services in the future. As of September 30, 1996, Chrysler had accumulated $7.5
billion and Ford $13.0 billion for such development during future industry
downturns.(1) General Motors reported cash accumulation reaching $13.0 billion
- -- or $18.4 billion on a consolidated basis, and stated that "This will enable
us to weather the next industry down cycle without sacrificing any of our
product programs, which is critical for long-term success".(2)
Efforts by OEMs and their suppliers to reduce labor and other manufacturing
costs have resulted in their tending to combine common parts into a single
stamping press and reduce the number of "hits" required to manufacture a part.
In addition, utilization of transfer presses has increased demand for transfer
dies to reduce labor cost at the OEMs and their suppliers. The Company believes
that it is one of only a few North American independent suppliers that have the
capability to both design and produce large complex transfer dies.
Management believes these industry trends will continue with emphasis on
simultaneous engineering and manufacturing processes centered around the
utilization of fully computer integrated technologies. This should increase the
Company's customer relationships with and importance to the OEMs and their tier
one suppliers of sheet metal stamped parts and assemblies.
PRODUCTS AND SERVICES
Dies. The Company's dies are used in the high speed production of sheet
metal stamped parts and assemblies. Production of such parts is a multiple step
process involving a series of dies. Typically, the first die is used to cut the
appropriate size metal blank from a sheet or coil of steel. The next die draws
the metal blank into its primary shape and subsequent dies are used to bend
edges or corners, create flanges, trim off excess metal and pierce assembly
holes. A customer usually orders only one series of dies for each separate part.
Normally, the dies do not require replacement due to usage because the life of
well maintained dies is sufficient to carry production to the point when styling
changes dictate production of new dies. The dies manufactured by the Company
generally include automation features, adding to the complexity of design and
construction. These automation features facilitate rapid introduction and
removal of the work piece or raw material into and out of the die, thereby
increasing production speeds and reducing labor cost. A set of stamping dies
manufactured by the Company generally sells for between $250,000 and $2,000,000
depending upon size and complexity.
Simultaneous Engineering of Product and Process. The OEMs are developing
organizational structures involving internal design and engineering personnel as
well as supplier representatives which they are using to develop new car models.
These organizations are called "Platform" teams. This allows full implementation
of simultaneous engineering -- the application of the product engineering and
process engineering functions simultaneously and early in the process. The
Company utilizes advanced Computer Aided Design/Computer Aided Manufacturing
("CAD/CAM") technology to design and manufacture its complex stamping dies. Due
to this advanced computer capability, the Company is able to work very closely
with its customers and is often assigned to these Platform teams early. Its
process engineering input facilitates the teams' goals of introducing new models
rapidly and efficiently. The Company has invested significantly to ensure that
it remains one of the
- -------------------------
(1) Source: Ward's Autoworld, December, 1996.
(2) Source: General Motors Corporation, 1996 Midyear Report to Shareholders,
dated September 10, 1996.
17
<PAGE> 20
few domestic tool and die firms with advanced technology capabilities and is one
of only a few independent suppliers capable of receiving and working directly
from complex mathematical data received from its OEM customers. Although several
of its competitors also utilize CAD/CAM technology, Management believes the
Company is one of only a few suppliers who have successfully integrated
mathematical data into their on-site design, manufacturing and validation
processes across their product line. Management's investment in, and commitment
to, advanced technology has solidified its quality reputation with its customers
and helped the Company advance to tier one status.
Prototype Tooling and Parts. With the advent of Platform team and
simultaneous engineering methods, the Company has become responsible for the
design and manufacture of both the prototype tooling, the final production
tooling and specifies the final production process. Prototype tooling and parts
are utilized during the design phase of new models which the automobile
manufacturers use to validate the fit and function of the respective components
and assemblies and the repeatability of the respective production processes. The
parts manufactured from prototype tools are also often used in crash testing.
Typically, prototype tools associated with the primary metal forming
operations are manufactured from an alloy casting or mild steel and subsequently
machined using the mathematical data base and related Computer Numerically
Controlled ("CNC") programs. After machining, the prototype tools are assembled
and tested to validate the integrity and repeatability of the final
manufacturing process. The results of the validation process are incorporated
into the mathematical data base which will then be used to manufacture the final
production tools. After testing the primary forming operations, prototype parts
are manufactured using special means such as computerized laser cutting machines
to trim off excess scrap and to incorporate various slots and holes. These parts
are then sent to the automobile manufacturers for further testing and
evaluation. The results of this testing and evaluation may require the
incorporation of additional design and manufacturing process modifications.
MANUFACTURING
Traditionally, the die manufacturing process was comprised of various
manual steps performed by craftsmen. After being awarded a contract, the Company
would be presented with a wooden model of the part to be produced. From the
model, plaster tooling aids were constructed. The plaster tooling aids were then
traced and cut into steel. The steel was then ground, usually quite extensively,
by hand to fit. Validation was also done by hand by measuring specific points on
the die face and comparing these to the original design blueprints. Today, with
the Company's technology, the design and most of the manufacturing process is
computer-driven, which increases accuracy and reduces the time required to
produce a set of stamping dies. The process starts when the Company is assigned
to a new Platform team and simultaneous engineering begins. An electronic
"model" of the part to be produced is transmitted directly to the Company via
EDI or sent on computer disk represented as a mathematical database. Company
engineers use the mathematical database to generate computer-aided die designs
and die face cutter path programs. These cutter path programs are used by the
tool makers and machinists to manufacture the inner workings of the tool. Most
material is removed and the cutting is done by CNC machine tools which utilize
the computer-generated cutter path programs. Depending on the complexity of the
tool, a prototype may be manufactured to prove-out the manufacturing process or
to provide actual parts for crash testing and to test fit and function. Finally,
after the die is constructed, it is evaluated statistically for process
repeatability and dimensional validation on the Company's Coordinate Measuring
Machine, or CMM. The Company believes, based upon experience and customer
discussions, that it is one of a very few North American die suppliers and
manufacturers that are able to routinely, and across their product line,
completely computer integrate the mathematical database throughout the entire
die design, manufacture and validation process at their own facilities. During
this automated validation process, the tool is statistically compared to the
mathematical database. Having the optimum size and quantity of tryout presses is
an important aspect of the construction and validation process, and the Company
has therefore invested heavily to ensure its capability in this area.
On average, 10 months elapse from the time the Company is awarded a
contract until the final set of dies is shipped to the customer. The OEMs are
facing growing pressure to reduce the time required to introduce a new car
model. For example, Chrysler has historically needed three years, on average, to
introduce a new
18
<PAGE> 21
model. However, the last small car introduced by Chrysler was introduced in only
31 months. To meet shorter timeframes, OEMs are relying more heavily on
simultaneous engineering and integrating suppliers more closely into the design
process. This trend helps the Company by requiring more direct relationships
between the OEMs and its suppliers such as the Company.
The steel, castings and other components utilized by the Company in the
manufacturing process are available from many different sources and the Company
is not dependent on any single source.
MARKETING AND SALES
The Company's marketing emphasis is on Chrysler, Ford and General Motors
and their tier one suppliers. The Company maintains excellent relationships with
Chrysler and Ford which directly accounted for about 36% of the Company's
revenues in 1996. For the year ended August 31, 1996, Chrysler, Ford, General
Motors and their tier one suppliers accounted for approximately 75% of the
Company's revenues. For the three months ended November 30, 1995 and 1996,
Chrysler, Ford, General Motors and their tier one suppliers accounted for
approximately 77% and 93% of the Company's revenues, respectively.
With the growing use of simultaneous engineering, the Company's marketing
goal is to be assigned early to the new model Platforms. As one of only a few
technically proficient suppliers assigned to a Platform, the Company's
opportunity to win business for a new model is greatly enhanced. The Company
works to achieve preferred supplier status with its customers to further
increase its chances of being assigned to new model Platforms. The Company
currently maintains Preferred Supplier status with Chrysler Corporation and Ford
Motor Company. The Company was recently awarded Chrysler's PentaStar quality
award, the highest quality award for a single plant supplier, and Ford Motor
Company's Q-1 supplier award, an award that has been historically given to
suppliers who manufacture parts and assemblies, not to suppliers of tooling. The
Company is the first tool and die firm to be awarded the Q-1 status by Ford
Motor Company.
Sales efforts are conducted primarily by Company's President, senior
management and project management personnel. Frequent contact is made with the
domestic automobile manufacturers and their purchasing agents, Platform managers
and tier one suppliers. When the Company has been assigned to a new model
Platform Team, the Platform Team manager is contacted to determine those parts
and assemblies that will be assigned to various required suppliers. During the
design phase, the Company recommends process and design changes to improve the
cost and quality of the product. Generally, when the Company is assigned to the
Platform Team, orders are obtained directly and without a formal bid process.
The Company maintains a comprehensive computer database with historical
information regarding dies it has previously manufactured. This assists the
Company in quoting prices for dies and enables it to respond to most quotation
requests quickly. If the customer decides to accept the Company's quotation, a
purchase order is issued subject to price adjustments for engineering changes
requested by the customer. Where no Platform Team is assembled, the Company bids
on specific tooling assignments, and bids are awarded on a competitive basis
among a small group of qualified suppliers.
For business done with tier one suppliers, the Company's sales process
follows a more traditional process. The Company typically receives a package or
request for quotation from the tier one supplier and is less involved in the
design process of the part to be manufactured. Bids are generally awarded based
on technological capability, price, quality and past performance.
BACKLOG AND SEASONALITY
The Company's backlog of awarded contracts, of which all are believed to be
firm, was approximately $13.5 million and $8.8 million as of December 31, 1996
and December 31, 1995, respectively. Of the December 31, 1996 contract backlog,
the Company expects all backlog contracts will be reflected in sales during
fiscal year ended August 31, 1997. The Company's sales of stamping dies do not
follow a seasonal pattern: however, the timing of new model introductions and
existing model restyling ("facelifts" and "redos") tooling programs are
dependent on Chrysler, Ford and General Motors and their strategy of
accelerating the introduction of new models.
19
<PAGE> 22
COMPETITION
Large, complex automotive stamping dies are manufactured primarily by three
supplier groups: a) domestic independent tool and die manufacturers, b) foreign
independent tool and die manufacturers, and c) captive or in-house tool and die
shops owned and operated by the OEMs.
The independent (both domestic and foreign) tool and die manufacturers have
experienced a significant reorganization over the past five years as the
industry has consolidated. Management believes that during this period, the
independent domestic supplier base (those with sales of at least $15 million)
was reduced significantly and that fewer than 6 such independent domestic
suppliers remain today. Management believes that these 6 competitors have begun
to utilize portions of the technology utilized by the Company. Further,
significant barriers to entry reduce competition in the large-scale die market.
The industry is highly capital intensive and technically complex. Attracting and
retaining employees skilled in the use of advanced design and manufacturing
technology is a multi-year process. Finally, a new competitor would most likely
lack much of the credibility and historical customer relationships that can take
years to develop.
Based upon the responses of 94 sheet metal die manufacturing companies to a
1995 survey by the National Tooling and Machining Association, the annual
domestic independent production of tools and dies exceeds $528,000,000. Of those
respondents only 12 reported average annual sales in excess of $10.0 million.
Based upon the study and the Company's independent knowledge of its direct
competitors, the Company believes it is among the 6 largest independent
suppliers and that no one supplier is dominant.
Finally, the OEMs maintain in-house, captive tool and die capacity to meet
a portion of their needs. General Motors maintains the largest captive capacity
and, based on estimates from various trade publications, supplies an estimated
75-80% of its own die construction needs. Ford produces approximately 50% and
Chrysler 25% of their own respective needs. Independent suppliers like the
Company tend to have a competitive advantage over the OEMs' in-house die shops
due to the OEMs' higher cost structure.
EMPLOYEES
The Company's work force consists of approximately 139 full-time employees,
of which approximately 35 are salaried managerial and engineering personnel. The
balance are hourly employees engaged in manufacturing and indirect labor
support. Included among these hourly workers are approximately 104 skilled
tradesmen who are either journeymen tool and die makers or machinists. None of
the Company's employees are covered by a collective bargaining agreement. The
Company has not experienced any work stoppages and considers its relations with
its employees to be good. The Company has a discretionary contribution 401K
plan. The Company has no contingent pension liabilities arising from any defined
benefit plan. See "Retirement Savings Plan."
PROPERTIES
The Company's facilities are located in Grand Rapids, Michigan and consist
of approximately 178,000 square feet of space of which 28,000 square feet is
utilized for office, engineering and employee service functions, 98,000 square
feet is dedicated to the Company's tooling production and 52,000 square feet is
under a four-year sublease to an unaffiliated tenant. Constructed in 1989, the
facility is leased with a lease term of 20 years. The facility lease provides
for annual payments of $934,500 plus an escalation of base rent of 1% for each
of the first ten years and 2% for each of the second ten years. The Company has
a purchase option on the building at the fair market value beginning in November
1996. The sublease requires annual lease payments of $216,000 commencing August
1, 1994 through July 1, 1996 with annual lease payments of $224,724 commencing
August 1, 1996 through July 1, 1998. The sublease has two options for two years
each with annual lease payments of $231,468 and $238,412, respectively. The
sublease also requires the subtenant to pay 33.7% of common operating expenses
of the facility. The facilities were designed and constructed specifically to
the Company's manufacturing requirements. The Company believes that its
facilities are modern, well maintained, adequately insured and will be adequate
and suitable for their present and intended uses.
20
<PAGE> 23
LEGAL PROCEEDINGS
The Company is a plaintiff in an action against Fred Borsini, Herbert
Keeler and Durametallic Corporation, a Delaware corporation, with Kenneth K.
Rieth, Arlene Morris and Riviera Holding Company, a Michigan corporation wholly
owned by Kenneth K. Rieth, as co-plaintiffs, filed July 22, 1994, in the Kent
County Circuit Court, Grand Rapids, Michigan, Case No. 94-2809-CZ. In July of
1992, the Company contributed machinery, equipment, inventory, work-in-process
and receivables related to the business of building plastic injection molds to a
joint venture that then became known as Leap Technologies, Inc. Defendants in
this action contributed all of the stock of a mold builder then known as Leap
Technologies, Inc. The Company contributed assets valued at $5.4 million, the
new entity assumed debts in the amount of $3.7 million, and the Company received
$1.7 million of preferred stock in the new entity. The Company alleges that the
status of the business contributed by the defendants was fraudulently
represented to it and the defendants are therefore liable to the Company for all
losses sustained as a result of the failure of the venture. The Company is
asking for return of its investment plus the additional damages it incurred in
the process of liquidating the venture. Management believes that approximately
$3,000,000 of damages has been identified, however, the complete damage
evaluation is incomplete. One defendant has counterclaimed for breach of
representations by the Company without specifying any amount of damages. The
Company is not currently involved in other legal proceedings other than ordinary
or routine proceedings incidental to its operations. In the opinion of
management, no existing proceedings, including the matter involving Leap
Technologies, Inc., would have a significant effect on the financial condition,
results of operations and cash flows of the Company if determined against the
Company.
21
<PAGE> 24
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth the names of and certain other information
concerning the executive officers, directors and key employees of the Company.
The Company currently has five directors, Messrs. Rieth, Wood, Collins, Kinstler
and Kennedy. Mr. Highley has been selected and has agreed to become a director
of the Company subject to the completion of the Offering made hereby, at which
time the Company's Board of Directors will be increased in number from five to
six directors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS SINCE
---- --- -------- ----- --------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Kenneth K. Rieth(1)............... 37 President, Chief Executive Officer and III 1980
Director
Leonard H. Wood(1)................ 54 Vice President -- General Manager and II 1988
Director
Peter C. Canepa................... 37 Chief Financial Officer, Secretary and -- --
Treasurer
John C. Kennedy(1)................ 37 Director I 1991
Thomas R. Collins(2).............. 53 Director II 1995
John H. Kinstler(2)............... 47 Director III 1988
Thomas H. Highley(3).............. 55 Director Nominee I --
</TABLE>
- -------------------------
(1) Designated by Kenneth K. Rieth pursuant to Voting Agreement. See "Principal
Shareholders -- Shareholders Agreement."
(2) Designated by Motor Wheel Corporation pursuant to Voting Agreement. See
"Principal Shareholders -- Shareholders Agreement."
(3) Nominated by Agreement of Motor Wheel Corporation and Riviera Holding
Company. See "Principal Shareholders -- Shareholders Agreement."
The Board of Directors is divided into three classes: Class I, Class II and
Class III. The initial terms of office of directors in Class I, Class II and
Class III end following the annual meetings in 1997, 1998, and 1999
respectively. Thereafter directors in each class will serve for three year
terms. Executive officers serve at the discretion of the Company's Board of
Directors. The Company pays each director who is not a Company employee or an
employee of a 10% or more shareholder a fee of $5,000 per year.
Kenneth K. Rieth -- Mr. Rieth has been a principal owner and President of
Riviera Die & Tool since 1980. Mr. Rieth serves as a Director of Autocam
Corporation, a designer and manufacturer of close tolerance, specialty metal
alloy components for the automotive, electronic and computer industries since
1991.
Leonard H. Wood -- Mr. Wood has been a Vice President of the Company since
1985 and a Director since 1988. Prior to that time, he was Project Manager with
American Motors Corporation.
Peter C. Canepa -- Mr. Canepa has been with the Company since March of 1994
as the Chief Financial Officer, Secretary and Treasurer. Prior to that time, he
was Chief Financial Officer, Treasurer and Director of Frost, Incorporated, a
Michigan corporation, a manufacturer of material handling systems components,
for more than three years. Mr. Canepa graduated in 1980 with a Bachelor of
Science in Accounting and Finance degree from Ohio Wesleyan University.
John C. Kennedy -- Mr. Kennedy has been a principal owner, Director and
President of Autocam Corporation, a designer and manufacturer of close
tolerance, specialty metal alloy components for the automotive, electronic and
computer industries since 1988.
Thomas R. Collins -- Mr. Collins has been Controller of the Automotive
Brake Division of Hayes Wheels International, Inc., the Parent Company of Motor
Wheel Corporation (see "Principal Shareholders"), since July, 1996. Prior to
that time, he was Vice President, Treasurer and Chief Financial Officer of Motor
22
<PAGE> 25
Wheel Corporation, a designer and producer of wheels and brakes for the
automotive and commercial highway markets, since 1991. Prior to 1991, he was
Comptroller and held other various positions at Motor Wheel Corporation.
John H. Kinstler -- Mr. Kinstler has been Vice President of Engineering of
the Fabricated Wheel Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel Corporation (see "Principal Shareholders"), since May,
1996. Prior to that time, he was Vice President of Manufacturing of Motor Wheel
Corporation since 1992. He was Executive Vice President of Engineering and
Quality from 1989 through 1992 and Vice President of Engineering from 1985
through 1989 of Motor Wheel Corporation.
Thomas H. Highley -- Mr. Highley has been President and C.E.O. of The
Empire Company, Inc., a distributor of residential and commercial millwork
products, since 1991.
AUDIT COMMITTEE
The Board of Directors has agreed to form an Audit Committee within 60 days
of the completion of this Offering. The Audit Committee will review the results
and scope of audits of the Company and other accounting matters. A majority of
the members of the Audit Committee will be independent Directors.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total compensation earned by each
executive officer during the fiscal years ended August 31, 1996, 1995, and 1994
for services rendered to the Company in all capacities during such years.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
NAME AND PRINCIPAL -------------------
POSITION AT AUGUST 31, 1996 YEAR SALARY BONUS OTHER(2)
--------------------------- ---- ------ ----- --------
<S> <C> <C> <C> <C>
Kenneth K. Rieth......................................... 1996 $150,800 $-0- $ -0-
President, CEO and Director 1995 150,800 -0- -0-
1994 150,800 -0- -0-
Leonard H. Wood.......................................... 1996 $124,800 $-0- $7,291
Vice President, General Manager and Director 1995 124,800 -0- 7,291
1994 124,000 -0- 7,291
Peter C. Canepa.......................................... 1996 $110,500 $-0- $ -0-
Secretary, Treasurer and CFO 1995 110,500 -0- -0-
1994 51,150(3) -0- -0-
</TABLE>
- -------------------------
(1) Does not include any value that might be attributable to job-related
personal benefits, the annual value of which has not exceeded the lesser of
10% of annual salary plus bonus or $50,000 for each executive officer.
(2) Represents the dollar value of the premiums paid by the Company for life
insurance policy maintained in respect of a deferred compensation plan
discussed below in "Other Benefits."
(3) Mr. Canepa joined the Company on March 21, 1994.
The Company's Board of Directors has given Mr. Rieth the authority to set
the compensation for Senior Management. Mr. Rieth's salary has been set by the
Board of Directors since 1991.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by the shareholders on October 31, 1996. The
purpose of the Option Plan is to make options available to employees of the
Company to give them a greater personal interest in the success of the Company
and an added incentive to continue their employment. Riviera Holding Company,
Kenneth K. Rieth and Motor Wheel Corporation are not eligible to participate in
the Option Plan. 250,000 shares of Common Stock are reserved for issuance under
the Option Plan and the options are intended to qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended.
23
<PAGE> 26
The Option Plan is administered by members of the Board of Directors who
are not eligible to participate in the Option Plan, or if designated, a
committee comprised of such directors. Options granted under the Option Plan are
not transferable by the optionee other than by will or the laws of descent and
distribution and each option is exercisable during the lifetime of the optionee,
and so long as the employee does not engage in activity in competition with or
contrary to the interests of the Company. No options may be granted under the
Option Plan after August 31, 2006.
The exercise price of options granted under the Plan cannot be less than
the fair market value of the underlying shares on the option date grant. The
terms of each option and the manner in which it may be exercised will be
determined by the administrator subject to the requirement that no option may be
exercisable more than ten years after the option grant date. With respect to any
option granted to a participant who owns, or is deemed to own, stock possessing
more than 10% of the voting rights of the Company's outstanding capital stock at
the option grant date, the exercise price of the option must be at least equal
to 110% of the fair market value on the date of grant and the option may not be
exercisable more than five years after option grant date. Under the terms of the
Option Plan, the aggregate fair market value of the Common Stock (determined at
the date of the option grant) underlying options granted to any employee and
exercisable in any single year may not exceed $100,000.
RETIREMENT SAVINGS PLAN
The Company has a profit-sharing plan that covers substantially all
employees (the "Plan"). The Plan includes a 401(k) deferred compensation option.
It is the Company's policy to fund profit-sharing costs accrued on an annual
basis. The Plan, as established, allows for discretionary contribution as
determined annually by the Company's Board of Directors. No discretionary
contribution has been made for 1993, 1994 or 1995.
Part of the Plan includes a retirement savings plan qualified under
Internal Revenue Code Section 401(k) in which all full-time employees may
participate. Contributions are made to the plan by participants electing to
defer portions of their regular compensation. Amounts elected to be deferred
within certain statutory limits (currently $9,500 per year) are not taxable to
the participant. The Company matches and contributes up to 15% of the employee's
contribution to the 401(k) Plan, up to 2% of the employee's annual wage.
The Company's 8% Cumulative Preferred Stock is all owned by the Plan. A
dividend of $8.00 per share is payable on each July 31 to the holder of each
share of such stock and no other dividends can be paid until all such dividends
have been paid for all periods the 8% Cumulative Preferred Stock is outstanding.
No other dividends are payable in respect of the 8% Cumulative Preferred Stock.
The outstanding 8% Cumulative Preferred Stock may be redeemed at any time by the
Board of Directors for the price of $100 per share and the remaining 475 shares
must be redeemed on July 1, 1997. Upon redemption, all unpaid dividends must
also be paid on a pro rata basis through date of redemption. In the event of
liquidation of the Company, the holders of shares of 8% Cumulative Preferred
Stock are entitled to receive, prior to the holders of shares of all other stock
of the Company, ratably an amount up to $100 per share plus all unpaid and
accrued dividends to the date of payment. The shares of 8% Cumulative Preferred
Stock currently outstanding are duly authorized, validly issued, fully paid, and
nonassessable. Holders of 8% Cumulative Preferred Stock have no conversion
rights and are not entitled to any preemptive or subscription rights.
Under the Plan, benefits are payable in a lump sum upon termination of
employment with the Company for any reason.
OTHER BENEFITS
The Company has an Executive Deferred Compensation Plan agreement with Mr.
Wood. This Agreement provides that upon death, disability or retirement from
service after reaching age 65, the employee or his heir and assigns will receive
$50,000 per year for five consecutive years. For each year that employment with
the Company is terminated, for any reason, prior to September 1, 1999, the
benefit will be reduced by 10% or $5,000 per year. Mr. Wood is age 54.
24
<PAGE> 27
The Company has an Employment Agreement with Kenneth K. Rieth. Pursuant to
which Mr. Rieth will continue to serve as the Chief Executive Officer and
President of the Company. The term of the agreement is for a period of three
years beginning September 1, 1996. Pursuant to the agreement with Mr. Rieth, the
Company will pay Mr. Rieth a base salary of $150,800 and a bonus of not less
than 3.5% of the Company's income before taxes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1996 the Board of Directors, then consisting of Directors
Kennedy, Wood, Kinstler, Collins and Rieth, had the responsibility of setting
executive compensation. Mr. Rieth serves as President and Chief Executive
Officer of the Company and serves on the Board of Directors of Autocam
Corporation, where Mr. Kennedy is President, Chief Executive Officer and also a
member of the Board of Directors. Mr. Rieth also served on the Compensation
Committee of Autocam Corporation until August 1995.
CERTAIN TRANSACTIONS
The Company previously had a contract with Motor Wheel Corporation ("Motor
Wheel"), an Ohio corporation, located in Okemos, Michigan, relating to the
performance of engineering for and construction of dies to be purchased by Motor
Wheel. This contract was terminated October 14, 1996 effective December 31,
1995. Mr. Kinstler, a director of the Company, is Vice President of the
Fabricated Wheel Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel. Mr. Collins, a director of the Company, is Controller of
the Automotive Brake Division of Hayes Wheels International, Inc., the Parent
Company of Motor Wheel. Motor Wheel owns 50% of the outstanding common stock of
the Company and, assuming no exercise of the Underwriters' overallotment option,
will own 28.5% of the Company's Common Stock after the sale of the shares
described by this Prospectus. This contract provided that the Company would
quote such services to Motor Wheel at hourly rates not greater than it had on
file with or was actually quoting to any automobile manufacturer. Motor Wheel
was required to purchase not less than 155,000 hours of such work, as defined by
the contract, or, if less, 85% of its entire domestic consumption of such
services if domestic consumption was less than 182,500 hours in any year. In
that event, Motor Wheel was required to purchase its foreign consumption of such
services from the Company if the Company was competitive in price, quality and
delivery. Motor Wheel paid to the Company $72,245 and $246,011 during fiscal
1996 and 1995, respectively, resulting from its having used less than the
155,000 hours minimum. The contract was to terminate on December 31, 1998 and
could have been extended for two additional five year terms by Motor Wheel.
Pursuant to the Shareholders Agreement between Motor Wheel and Riviera Holding
Company dated October 31, 1996, such die construction supply contract was
terminated effective December 31, 1995. As a result, no under utilization
charges will be received by the Company for any period after December 31, 1995.
See "Principal Shareholders -- Shareholders Agreement."
In connection with the Shareholders Agreement dated October 31, 1996
between Motor Wheel and Riviera Holding Company, the Company has declared a
preferential dividend on the shares of common stock of the Company 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 to purchase common stock
owned by Riviera Holding Company and as a result of the dividend itself. The
Company has estimated this dividend to be approximately $170,000.
Riviera Holding Company, owned 100% by Kenneth K. Rieth, had pledged all of
its shares of the Company to NBD Bank in connection with commercial lending
arrangements not related to the Company. The pledge was terminated effective on
the date of this Prospectus pursuant to a settlement agreement between Riviera
Holding Company, NBD Bank and Kenneth K. Rieth. Under such settlement agreement,
NBD Bank received 125,000 shares of the Common Stock of the Company from Riviera
Holding Company, owned 100% by Kenneth K. Rieth, a pledge of co-plaintiffs
Kenneth K. Rieth, Arlene Morris, Riviera Holding Company and the Company of all
proceeds of the legal action against Fred Borsini, Herbert Keeler and
Durametallic Corporation, and a pledge by the Company of $1,000,000 of existing
Key Man life insurance on Kenneth K. Rieth. See "Business -- Legal Proceedings"
and "Risk Factors -- Dependence on Existing Management." The Company has
received no monetary consideration for the pledges by the Company.
25
<PAGE> 28
Pursuant to the settlement agreement, Kenneth K. Rieth individually has agreed
to pay $250,000 to NBD Bank and has guaranteed that NBD Bank will receive an
additional $1,000,000 from the aggregate proceeds of the 125,000 shares of
Common Stock and the pledges.
The Company believes that the transactions described above were at prices
and terms which were no less favorable to the Company than would have been
available in similar transactions with unaffiliated third parties. The policy of
the Company is that, in the future, proposed transactions with affiliates of the
Company must have the prior approval of a majority of the disinterested members
of the Board of Directors and be made on terms no less favorable to the Company
than could be obtained from unaffiliated parties.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's articles of incorporation and bylaws provide for
indemnification of directors and officers. The Company believes that such
indemnification will assist the Company in continuing to attract and retain
talented directors and officers in light of the growing risk of litigation
directed against directors and officers of publicly held corporations. The
Company's articles of incorporation and bylaws provide that the Company shall
indemnify each person who may serve or who has served at any time as director or
officer, or who at the request of the Board of Directors of the Company may
serve or at any time have served as director or officer of another corporation
or enterprise, and his or her respective heirs, administrators, successors and
assigns, against any and all expenses, including amounts paid upon judgments,
counsel fees, and amounts paid in settlement (before and after suit is
commenced), actually and necessarily incurred by such person in connection with
the defense or settlement of any claim, action, suit, or proceeding in which he
or she are made parties, or are a party, or which may be asserted against them
or any event, by reason of being or having been director or officer or a
director or officer of the Company or any such other corporation or enterprise,
if he or she acted in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Company, or its
shareholders, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was not unlawful. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, by-law, agreement, vote of
Shareholders or otherwise.
The Michigan Business Corporation Act permits Michigan corporations to
limit the personal liability of directors for a breach of their fiduciary duty.
The Company's articles of incorporation limit liability to the maximum extent
permitted by law. The Company's articles of incorporation provide that a
director of the Company shall not be personally liable to the Company or its
shareholders for monetary damages for breach of the director's fiduciary duty.
However, it does not eliminate or limit the liability of a director for any of
the following: (1) a breach of the director's duty of loyalty to the Company or
its shareholders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) a transaction from
which the director derives an improper personal benefit; (4) making an unlawful
loan to a director, officer or employee of the Company; and (5) declaring an
unlawful dividend or distribution to shareholders. As a result of this
provision, shareholders of the Company may be unable to recover monetary damages
against directors for actions taken by them which constitute negligence or gross
negligence or which are in violation of their fiduciary duties, although it may
be possible to obtain injunctive or other equitable relief with respect to such
actions. If equitable remedies are found not to be available to shareholders in
any particular case, shareholders may not have any effective remedy against the
challenged conduct.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
26
<PAGE> 29
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock and 8% Cumulative Preferred Stock as of
November 30, 1996 by (i) persons known by the Company to own more than 5% of the
Company's Common Stock; (ii) directors and officers of the Company; and (iii)
all officers and directors of the Company as a group. Beneficial ownership
includes both voting and investment power.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL AMOUNT OF BENEFICIAL
OWNERSHIP PRIOR TO OFFERING OWNERSHIP AFTER OFFERING
----------------------------------------- -----------------------------------------
COMMON STOCK 8% PREFERRED STOCK COMMON STOCK 8% PREFERRED STOCK
NAME OF BENEFICIAL OWNER OFFICER, ------------------- ------------------- ------------------- -------------------
DIRECTORS & 5% SHAREHOLDERS: SHARES % TOTAL SHARES % TOTAL(1) SHARES % TOTAL SHARES % TOTAL(1)
- --------------------------------- ------ ------- ------ ---------- ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth K. Rieth(2)(3)(4)(7)..... 1,335,000 91.4% * * 1,335,000 52.1% * *
Motor Wheel Corporation(5)(7).... 730,000 50% -- -- 730,000 28.5% -- --
NBD Bank(6)(7)................... 125,000 8.6% -- -- 125,000 4.9% -- --
Leonard H. Wood(2)............... -- -- -- -- -- -- -- --
Peter C. Canepa(2)............... -- -- -- -- -- -- -- --
John C. Kennedy.................. -- -- -- -- -- -- -- --
--------- ---- ---- -- --------- ---- ---- --
All officers and directors as a
group (6 persons)(1)(3)(4)(5)
(7)............................ 1,335,000 91.4% * * % 1,335,000 52.1% * * %
========= ==== ==== == ========= ==== ==== ==
</TABLE>
- -------------------------
* Beneficial ownership of less than 1% of the class.
(1) Beneficial ownership determined on the basis of the ratio of account balance
to total plan assets in Riviera Tool Company Cash or Deferred Compensation
Plan, owner of all the outstanding 8% Cumulative Preferred Stock of the
Company.
(2) The business address for Messrs. Rieth, Canepa and Wood is 5460 Executive
Parkway SE, Grand Rapids, MI 49512.
(3) Riviera Holding Company, 100% owned by Kenneth K. Rieth, owns the Common
Stock of Riviera Tool Company.
(4) Includes beneficial ownership of 730,000 shares of common stock owned by
Motor Wheel Corporation and subject to purchase by Riviera Holding Company
under the Shareholders Agreement and related Stock Option Agreement dated
October 31, 1996. Riviera Holding Company has agreed to assign certain of
its rights pursuant to the Stock Option Agreement to the Company. See
"Principal Shareholders -- Shareholders Agreement" and "Shares Eligible for
Future Sale."
(5) John R. Kinstler and Thomas R. Collins are directors of the Company and are
Vice President of the Fabricated Wheel Division and Controller of Automotive
Brake Division, respectively, of Hayes Wheels International, Inc. Mr.
Kinstler owns less than 1% of the common stock of such company. The business
address for Mr. Collins and Mr. Kinstler is 38481 Huron River Drive,
Romulus, Michigan 48174.
(6) The business address for NBD Bank is 701 First National Building, Detroit,
Michigan 48226.
(7) In the event the Company does not exercise its rights under the assignment
from Kenneth K. Rieth, see fn (4) above, the option to purchase from Motor
Wheel Corporation will revert to Mr. Rieth. The shares owned by NBD Bank
could be returned to Mr. Rieth pro rata according to the amount of recovery
by NBD Bank pursuant to a pledge of certain litigation and life insurance
proceeds. See "Management -- Certain Transactions."
SHAREHOLDERS AGREEMENT
Riviera Holding Company and Motor Wheel have executed a written
Shareholders Agreement (the "Shareholders Agreement") which provides that they
will unconditionally and irrevocably vote their respective shares of common
stock jointly in structuring the Company's Board of Directors into a board
consisting of seven members divided into three classes, two classes consisting
of two members and one class consisting of three members. Under such agreement
Riviera Holding Company will be entitled to designate three directors and Motor
Wheel to designate two directors. Both parties agree unconditionally and
irrevocably to vote all of their respective shares of common stock in favor of
the persons so designated by each party as directors. The remaining members of
the Board of Directors (two directors) may be nominated by any person however,
Motor Wheel and Riviera Holding Company have agreed to vote together on nominees
for these positions. Voting on all other matters is in the sole discretion of
the shareholder.
Pursuant to the Shareholders Agreement, Motor Wheel has granted Riviera
Holding Company an option to purchase all the shares of the Company owned by
Motor Wheel. The option is exercisable at a purchase price of $3.0 million, or
$4.11 per share, payable within 30 days after notice of exercise. This stock
option will
27
<PAGE> 30
lapse on October 31, 1997. Riviera Holding Company has agreed to assign certain
of its rights pursuant to this option to the Company. Such assignment is
conditioned upon effectiveness of this offering and will be subject to Riviera
Holding Company's continued right to exercise its option upon notice to the
Company and expiration of a ten-day option period without exercise of the option
by the Company.
Under the Shareholders Agreement Motor Wheel has certain registration
rights. Motor Wheel, Riviera Holding Company and the Company have agreed not to
register, sell, contract to sell or otherwise dispose of any shares of Common
Stock for a period of two years after the date of this Prospectus (the "Lock-Up
Period") without the prior written consent of the Representative. Motor Wheel
has a demand registration right which is exercisable at any time after the
expiration of the "Lock-Up" period. In connection with any Company registration
after the expiration of the "Lock-Up" period Motor Wheel has "piggyback
registration rights" for all of their shares. However, if in the reasonable
opinion of the lead underwriter who is expected to market the securities covered
by such registration statement, to the extent the inclusion of such Motor Wheel
shares shall be impractical and inadvisable, Motor Wheel shares to be included
in such registration shall be reduced pro rata (pro-rata reduction of all shares
of selling shareholders included in such registration statement), but only as to
such registration statement.
Under the Shareholders Agreement both Motor Wheel and Riviera Holding
Company have specific rights under a proposed sale of the shares of the Company
held by either one. Under such provision if either Motor Wheel or Riviera
Holding Company proposes to directly or indirectly transfer its shares in the
Company, it shall give the other party the right to purchase such shares at the
same price, terms and conditions as the proposed transfer. Alternatively, at the
election of the other party, the seller must arrange for the purchaser or
purchasers to purchase at least identical percentages of the Company shares
owned by each of Motor Wheel and Riviera Holding Company immediately prior to
such proposed transfer. If such proposed purchaser is purchasing only a given
number of shares, then the total number of shares to be sold in such transfer by
each of Motor Wheel and Riviera Holding Company shall be reduced pro rata so as
to total such given amount.
This Shareholders Agreement will terminate when one of the parties no
longer holds shares of Common Stock.
28
<PAGE> 31
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000 shares of
Preferred Stock, none of which have been issued, and 1,425 shares of 8%
Cumulative Preferred Stock, 475 of which are outstanding and owned by the
Riviera Tool Company Cash or Deferred Compensation Plan, a qualified retirement
plan maintained by the Company for its employees, and 9,798,575 shares of Common
Stock, of which 1,460,000 shares are currently issued and outstanding. See
"Principal Shareholders." Pursuant to Michigan corporate law, the capital stock
of the Company has no par value.
PREFERRED STOCK
The terms of the Preferred Stock, or any series thereof, may be determined
from time to time by the Board of Directors. Such shares may be convertible into
Common Stock and may be superior to the Common Stock in the payment of
dividends, liquidation, voting and other rights, preferences and privileges.
Shares of Preferred Stock may be issued from time to time by authorization of
the Board of Directors of the Company without the vote of holders of the Common
Stock. The issuance of such Preferred Stock could be used, for example, in
certain circumstances to render more difficult or to discourage a merger, tender
offer or proxy contest or a removal of incumbent management. The Company has no
present plans to issue any shares of Preferred Stock.
8% CUMULATIVE PREFERRED STOCK
Holders of the 8% Cumulative Preferred Stock vote only on such matters
where voting as a class is required by law to authorize an action. All
outstanding shares of this stock are owned by the Company's qualified retirement
plan. A dividend of $8.00 per share is payable on each July 31 to the holder of
each share of such stock and no other dividends can be paid until all such
dividends have been paid for all periods during which the 8% Cumulative
Preferred Stock is outstanding. No other dividends are payable in respect of the
8% Cumulative Preferred Stock. The outstanding 8% Cumulative Preferred Stock may
be redeemed at any time by the Board of Directors for the price of $100 per
share and the remaining 475 shares must be redeemed on July 1, 1997. Upon
redemption, all unpaid dividends must also be paid on a pro rata basis through
date of redemption. The Company has not paid dividends for 1996. In the event of
liquidation of the Company, the holders of shares of 8% Cumulative Preferred
Stock are entitled to receive, prior to the holders of shares of all other stock
of the Company, ratably an amount up to $100 per share plus all unpaid and
accrued dividends to the date of payment. The shares of 8% Cumulative Preferred
Stock currently outstanding are duly authorized, validly issued, fully paid, and
nonassessable. Holders of 8% Cumulative Preferred Stock have no conversion
rights and are not entitled to any preemption or subscription rights.
COMMON STOCK
Holders of Common Stock have one vote per share and a ratable right to the
net assets of the Company in liquidation after payment of all amounts due to
creditors and any holders of preferred stock. After payment of dividends or
distributions to the holders of preferred stock, if any, holders of Common Stock
participate ratably in dividends and distributions as may be declared by the
Board of Directors from funds legally available therefor. See "Dividend Policy."
Holders of Common Stock have no conversion rights and are not entitled to any
preemptive or subscription rights. The shares of Common Stock currently
outstanding are, and the shares to be issued pursuant to this Offering will be,
duly authorized, validly issued, fully paid and nonassessable.
VOTING ON DIRECTORS
The Company's by-laws provide that the Board of Directors is divided into
three classes with each class elected for a three year term. The Board currently
consists of five members and will be expanded to six members upon completion of
the Offering made hereby. Shareholders do not have cumulative voting rights in
the election of directors. Riviera Holding Company and Motor Wheel have an
agreement with respect to the
29
<PAGE> 32
voting of their shares on Directors which provides that they will vote in
concert to elect three members designated by Riviera Holding Company, two
members designated by Motor Wheel and two additional members as they agree upon.
Only one member has been agreed upon. A seventh member has not been proposed by
either of them, but may be added in the future.
OTHER PROVISIONS
Chapter 7A of the Michigan Business Corporation Act. Under Chapter 7A of
the Michigan Business Corporation Act (the "MBCA"), "business combinations"
(defined to include, among other transactions, mergers, consolidations, certain
dispositions of assets or shares, and certain recapitalizations) between certain
corporations or their domestic subsidiaries and an "interested Shareholder"
(defined as the direct or indirect beneficial owner of at least 10% of the
voting power of a covered corporation's outstanding shares or an affiliate of
the corporation which had such 10% ownership within the preceding two years) can
only be consummated if approved by at least 90% of the votes of each class of
the corporation's shares entitled to vote thereon and by at least two-thirds of
such votes not held by the interested Shareholder or its affiliates, unless
certain price and other conditions imposed by Chapter 7A are satisfied. The
Board of Directors may elect to exempt business combinations with a particular
interested shareholder from the requirements of Chapter 7A at any time before
the interested shareholder attains that status.
Chapter 7B of the Michigan Business Corporation Act. Under Chapter 7B of
the MBCA, "control shares" (defined to mean shares, which when added to all
other shares of the corporation owned by a person or with respect to which that
person may exercise or direct the exercise of voting power, would entitle that
person, immediately after the acquisition of the shares, to exercise or direct
the exercise of voting power in the election of directors in excess of threshold
levels of 20%, 33 1/2% or a majority of all voting power) acquired in a "control
share acquisition" (defined to include the acquisition, directly or indirectly,
by any person of ownership of or the power to exercise the voting power with
respect to, issued and outstanding control shares) have the same voting rights
as were accorded the shares before the control share acquisition only to the
extent granted by resolution approved by the Shareholders of the corporation. To
have such a resolution considered by the shareholders of the corporation, the
acquiring person must deliver an "acquiring person statement" to the corporation
and the Michigan Department of Commerce, Corporation and Securities Bureau. To
be approved by the shareholders, the resolution must be approved by a majority
of the votes cast by the holders of the common stock and a majority of the votes
cast by the holders of shares of each class or series entitled to vote thereon,
excluding "interested shares" (defined to include shares held by the acquiring
person or member of his group, an officer of the corporation and any director
who is also an employee of the corporation). The practical effect of Chapter 7B
of the MBCA is to require that a person making a tender offer for shares of a
corporation condition the offer on shareholder approval of the person's right to
vote the shares to be acquired.
If authorized by the corporation's articles of incorporation or bylaws,
control shares acquired in a control share acquisition with respect to which no
acquiring person statement has been filed may be redeemed by the corporation at
any time more than 60 days after the end of the control share acquisition at
"fair value." If authorized by the corporation's articles of incorporation or
bylaws, control shares acquired in a control share acquisition which are not
accorded full voting rights may be redeemed by the corporation at "fair value."
Unless otherwise provided in the corporation's articles of incorporation or
bylaws, in the event that control shares acquired in a control share acquisition
are accorded full voting rights and the acquiring person has acquired a majority
of all voting power of the corporation, the Shareholders of the corporation,
other than the acquiring person, have dissenters' rights. "Fair value" means a
value not less than the highest price paid per share by the acquiring person in
the control share acquisition.
The provisions of Chapter 7B automatically apply to the Company, although
the Board of Directors or the Shareholders may elect to remove the Company from
the application of Chapter 7B. The Board has no plans to elect to remove such
application and is not aware of any plans or proposals to do so. Further, none
of the provisions discussed above has been included in the Company's Articles of
Incorporation or Bylaws.
The foregoing discussion concerning the provisions of the MBCA is qualified
in its entirety by reference to such MBCA provisions.
30
<PAGE> 33
SHAREHOLDER PROPOSALS
Any proposal intended to be presented by a shareholder at a meeting of the
Company's shareholders must be presented in writing to the Secretary of the
Company at least 60 days prior to the date of the meeting for consideration by
the shareholders at such meeting.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of Common Stock of the
Company is Continental Stock Transfer & Trust Company. Its telephone number is
(212) 509-4000.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following the completion of this Offering, approximately
1,460,000 shares of Common Stock will be held by three existing shareholders,
Riviera Holding Company, Motor Wheel and NBD Bank. Such shares of Common Stock
(herein referred to as "Restricted Shares") may not be sold unless they are
registered under the Securities Act of 1933, are sold pursuant to an applicable
exemption from registration, or sold within the volume limitations established
by Rule 144 promulgated under the Act. Rule 144 restricts Riviera Holding
Company, Motor Wheel and NBD Bank to sales via brokers' transactions or to
market-makers in an amount in any three months not in excess of the greater of
1% of the number of shares of Common Stock then outstanding or the average
weekly trading volume for a four-week period prior to each such sale. In
connection with this Offering, Riviera Holding Company and Motor Wheel have
agreed not to sell any of their Restricted Shares for a period of two years
after the date of this Prospectus without the consent of the Representative. NBD
Bank, the holder of 125,000 shares of Common Stock, has agreed not to sell any
of its Restricted Shares for a period of one year after the date of this
Prospectus without the consent of the Representative.
Motor Wheel and Riviera Holding Company have entered into a Shareholders
Agreement which provides for certain "demand" and "piggyback registration
rights" for Motor Wheel, an option for Riviera Holding Company to purchase Motor
Wheel shares in the Company for a period ending October 31, 1997, coordination
of voting for directors and certain other rights should either one of them
propose a sale of shares in the Company to a third party without registration.
See "Principal Shareholders -- Shareholder Agreement."
No predictions can be made as to the effect, if any, that market sales of
Common Stock or the availability of Common Stock for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market could adversely affect prevailing
market prices.
31
<PAGE> 34
UNDERWRITING
In the Underwriting Agreement, the Underwriters, represented by the
Representative, have agreed, severally, subject to the terms and conditions
therein set forth to purchase from the Company, and the Company has agreed to
sell them, the number of shares of Common Stock, totaling 1,100,000 shares, set
forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
National Securities Corporation.............................
---------
Total.................................................. 1,100,000
=========
</TABLE>
The Underwriters propose to initially offer the shares to the public at the
public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to select dealers who are members of the National
Association of Securities Dealers, Inc. a concession not exceeding $
per share and any Underwriter may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
this Offering, the public offering price and concession and discounts may be
changed by the Representative.
The Company has granted an option to the Underwriters, exercisable during
the 45-day period after the date of this Prospectus, to purchase up to an
additional 165,000 shares of Common Stock at the same price per share as the
initial shares purchased from the Company. The Underwriters may exercise such
option only to cover over-allotments in the sale of shares that the Underwriters
have agreed to purchase. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase the same percentage of the total option shares as the
number of shares to be purchased and offered by that Underwriter in the table
above bears to the total.
The Company has agreed to indemnify, or to contribute to payments made by,
the Underwriters and certain of their controlling persons with respect to
certain civil liabilities, including certain civil liabilities under the
Securities Act of 1933.
The Company and each existing common stockholder have agreed not to
register, sell, contract to sell or otherwise dispose of any shares of Common
Stock for a period of two years after the date of this Prospectus without the
prior written consent of the Representative.
Prior to this Offering, there has been no public market for the Company's
Common Stock. Consequently, the offering price has been determined through
negotiation between the Company and the Representative. Such price has been
based upon on a number of factors, including estimates of the business potential
of the Company, its earning history and prospects, the present state of the
Company's development, an assessment of the Company's management, the
consideration of the above factors in relation to market valuations of
comparable companies and the current condition of the industry and the economy
as a whole.
The Company has agreed to pay the Representative a non-accountable expense
allowance of 3% of the gross proceeds from the sale of the Common Stock offered
hereby, $25,000 of which has been paid as of the date of this Prospectus. In
addition, upon completion of this Offering, the Company will issue the
Representative's Warrant to the Representative entitling the Representative to
purchase up to 110,000 shares of Common Stock. The Representative's Warrant is
exercisable beginning one year from the effective date of this Prospectus,
expires five years from the date of this Prospectus, and may not be transferred,
assigned or hypothecated for a period of one year following the effective date
of this Prospectus, but may thereafter be assigned into any successor, officer
or partner of the Representative. The Representative's Warrant will be
32
<PAGE> 35
exercisable in whole or in part for a period of four years thereafter at a price
per share equal to 150% of the initial public offering price set forth on the
cover page of this Prospectus. The Representative's Warrant provides for
adjustment in the exercise price of the Representative's Warrant in the event of
certain mergers, acquisitions, stock dividends and capital changes. The
Representative's Warrant grants to the holders thereof certain rights with
respect to the registration under the Act of the securities issuable upon
exercise of the Representative's Warrant. In the event of the exercise of the
Representative's Warrants, the Company has the right to redeem such warrants.
The Company has agreed that for a period of five years after the date of
this Prospectus, if requested by the Representative, it will use its best
efforts to nominate one person designated by the Representative for election to
the Company's Board of Directors. In lieu thereof, the Representative may
designate a person to receive all notices of meeting by the Company's Board of
Directors and all other correspondence and communications sent by the Company to
its Board of Directors and to attend all meetings of the Company's Board of
Directors. The Company has agreed to reimburse the Representative's designee for
out-of-pocket expenses incurred in connection with attending meetings of the
Company's Board of Directors. No person has yet been designated by the
Representative for nomination for election to the Company's Board of Directors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Dickinson, Wright, Moon, Van Dusen & Freeman, Grand Rapids, Michigan.
Certain legal matters will be passed upon for the Underwriters by Camhy
Karlinsky & Stein LLP, New York City, New York.
EXPERTS
The financial statements as of August 31, 1996, and for each of the three
years in the period ended August 31, 1996 included in this Prospectus and the
related financial statement schedules included elsewhere in the Registration
Statement containing this Prospectus (the "Registration Statement") have been
audited by Plante & Moran, LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the Registration Statement and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Act, as amended, with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the shares of Common
Stock offered by this Prospectus reference is made to such Registration
Statement and exhibits. Statements made in this Prospectus referring to a
document filed as an exhibit to the Registration Statement are qualified by
reference to the exhibit for a complete statement of its terms and conditions.
Copies of the Registration Statement together with exhibits thereto may be
obtained from the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the charges prescribed by the Commission
or may be examined without charge at the public reference facilities maintained
at the principal office of the Commission. The Company is an electronic filer,
and the Commission maintains a web site that contains reports, proxy and
information statements and other information regarding the Company at
www.sec.gov/edgarhp.htm.
33
<PAGE> 36
RIVIERA TOOL COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORT LETTER............................................... F-2
FINANCIAL STATEMENTS
Balance Sheet............................................. F-3
Statement of Operations................................... F-4
Statement of Common Stockholders' Equity.................. F-5
Statement of Cash Flows................................... F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Riviera Tool Company
We have audited the accompanying balance sheet of Riviera Tool Company, as
of August 31, 1994, 1995 and 1996, and the related statements of operations,
common stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Riviera Tool Company at
August 31, 1994, 1995 and 1996, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
PLANTE & MORAN, LLP
Grand Rapids, Michigan
November 22, 1996
F-2
<PAGE> 38
RIVIERA TOOL COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30,
--------------------------------------- ------------
NOTE 1994 1995 1996 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................. $ -- $ 3,188 $ -- $ --
Accounts receivable:
Trade............................... 7,377,345 4,433,129 4,924,305 5,000,094
Related party....................... 12 930,967 1,111,282 344,892 319,953
Costs and estimated gross profit in
excess of billings on contracts in
process............................. 2 4,293,596 3,279,489 5,549,823 4,942,372
Inventories........................... 3 727,102 561,710 445,473 445,473
Prepaid expenses and other current
assets.............................. 329,124 284,678 250,210 291,584
----------- ----------- ----------- -----------
Total current assets........... 13,658,134 9,673,476 11,514,703 10,999,476
PROPERTY, PLANT AND EQUIPMENT, NET...... 4 11,664,882 10,906,099 9,785,639 9,547,695
PERISHABLE TOOLING...................... 704,613 836,360 759,258 720,068
OTHER ASSETS............................ 1 411,551 290,197 868,832 886,827
----------- ----------- ----------- -----------
Total assets................... $26,439,180 $21,706,132 $22,928,432 $22,154,066
=========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable......................... 5 9,460,669 6,866,170 10,241,503 9,795,585
Current portion of long-term debt..... 5 2,395,545 1,631,629 926,861 819,391
Current portion of capitalized lease
obligations......................... 10 733,400 624,561 409,225 438,250
Accounts payable...................... 4,718,369 3,953,522 2,913,878 2,605,972
Accrued liabilities................... 623,209 563,931 692,271 803,461
----------- ----------- ----------- -----------
Total current liabilities...... 17,931,192 13,639,813 15,183,738 14,462,659
CAPITALIZED LEASE OBLIGATIONS........... 10 699,946 397,412 118,805 --
LONG-TERM DEBT.......................... 5 2,015,442 1,433,033 882,989 737,728
DEFERRED GAINS.......................... 7 359,144 210,342 61,540 46,153
ACCRUED LEASE EXPENSE................... 9 437,457 502,870 558,935 570,617
DEFERRED TAX LIABILITY.................. 6 116,700 191,700 395,700 486,300
PREFERRED STOCK -- no par value,
$100 mandatory redemption value:
Authorized -- 5,000 shares
Issued and outstanding -- 950 shares
at November 30, 1996 and 1,425
shares at August 31, 1996, 1995
and 1994......................... 11, 13 109,249 110,537 139,072 91,007
PREFERRED STOCK -- no par value,
Authorized -- 200,000
Issued and outstanding -- none...... -- -- -- --
COMMON STOCKHOLDERS' EQUITY.............
Common stock -- No par value:
Authorized -- 9,798,575 shares
Issued and outstanding -- 1,460,000
shares........................... 4,392,752 4,392,752 4,392,752 4,392,752
Retained earnings..................... 377,298 827,673 1,194,901 1,366,850
----------- ----------- ----------- -----------
Total common stockholders'
equity...................... 4,770,050 5,220,425 5,587,653 5,759,602
----------- ----------- ----------- -----------
Total liabilities and stockholders'
equity................................ $26,439,180 $21,706,132 $22,928,432 $22,154,066
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 39
RIVIERA TOOL COMPANY
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31 NOVEMBER 30
--------------------------------------- -----------------------
NOTE 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
SALES
Trade....................... $19,885,808 $19,429,894 $16,379,909 $4,201,240 $5,310,295
Related party............... 12 2,538,919 2,794,829 1,954,184 733,180 169,918
----------- ----------- ----------- ---------- ----------
TOTAL SALES................... 22,424,727 22,224,723 18,334,093 4,934,420 5,480,213
COST OF SALES................. 19,675,967 18,116,301 14,936,514 4,050,170 4,395,263
----------- ----------- ----------- ---------- ----------
GROSS PROFIT.................. 2,748,760 4,108,422 3,397,579 884,250 1,084,950
SELLING AND ADMINISTRATIVE
EXPENSES.................... 1,113,185 1,902,044 1,354,112 421,683 430,531
----------- ----------- ----------- ---------- ----------
INCOME FROM OPERATIONS........ 1,635,575 2,206,378 2,043,467 462,567 654,419
OTHER INCOME (EXPENSE)
Interest expense............ (1,415,290) (1,749,447) (1,670,414) (367,221) (402,645)
Gain on asset sales......... 7 138,695 105,632 226,710 37,202 15,387
Loss from related company... 15 (532,242) -- -- -- --
----------- ----------- ----------- ---------- ----------
TOTAL OTHER EXPENSE -- NET.... (1,808,837) (1,643,815) (1,443,704) (330,019) (387,258)
----------- ----------- ----------- ---------- ----------
INCOME (LOSS) -- BEFORE TAXES
ON INCOME................... (173,262) 562,563 599,763 132,548 267,161
INCOME TAX EXPENSE (CREDIT)... 6 (133,500) 76,700 204,000 45,066 90,600
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS)............. (39,762) 485,863 395,763 87,482 176,561
DIVIDENDS AND ACCRETION ON
PREFERRED STOCK............. 13 29,636 35,488 28,535 7,134 4,612
----------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) AVAILABLE
FOR COMMON SHARES........... $ (69,398) $ 450,375 $ 367,228 $ 80,348 $ 171,949
=========== =========== =========== ========== ==========
NET INCOME (LOSS) PER COMMON
SHARE....................... 1 $(.05) $.31 $.25 $.06 $.12
=========== =========== =========== ========== ==========
COMMON SHARES OUTSTANDING..... 1 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000
=========== =========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 40
RIVIERA TOOL COMPANY
STATEMENT OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
----------------------- RETAINED STOCKHOLDERS'
SHARES(1) AMOUNT EARNINGS EQUITY
--------- ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE -- AUGUST 31, 1993..................... 1,460,000 $4,392,752 $ 446,696 $4,839,448
Increase to redeemable preferred stock (Note
13).......................................... -- -- (29,636) (29,636)
Net loss....................................... -- -- (39,762) (39,762)
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1994..................... 1,460,000 4,392,752 377,298 4,770,050
Increase to redeemable preferred stock (Note
13).......................................... -- -- (35,488) (35,488)
Net income..................................... -- -- 485,863 485,863
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1995..................... 1,460,000 4,392,752 827,673 5,220,425
Increase to redeemable preferred stock (Note
13).......................................... -- -- (28,535) (28,535)
Net income..................................... -- -- 395,763 395,763
--------- ---------- ---------- ----------
BALANCE -- AUGUST 31, 1996..................... 1,460,000 4,392,752 1,194,901 5,587,653
========= ========== ========== ==========
Increase to redeemable preferred stock (Note
13).......................................... -- -- (4,612) (4,612)
Net Income (Unaudited)......................... -- -- 176,561 176,561
--------- ---------- ---------- ----------
BALANCE -- NOVEMBER 30, 1996 (UNAUDITED)....... 1,460,000 $4,392,752 $1,366,850 $5,759,602
========= ========== ========== ==========
</TABLE>
- -------------------------
(1) See Notes to Financial Statement, Note 1 -- Nature of Business and
Significant Accounting Policies, Reporting Entity
See Notes to Financial Statements.
F-5
<PAGE> 41
RIVIERA TOOL COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED AUGUST 31 NOVEMBER 30
--------------------------------------- -----------------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ (39,762) $ 485,863 $ 395,763 $ 87,482 $ 176,561
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation and amortization..... 1,213,516 1,438,403 1,272,366 313,295 321,523
Loss (gain) on sale of machinery
and equipment.................. 10,107 43,170 (77,908) -- --
Amortization of deferred gain..... (148,802) (148,802) (148,802) (37,202) (15,387)
Deferred taxes.................... (130,000) 75,000 204,000 45,066 90,600
Bad debt expense.................. -- -- 175,000 -- --
(Increase) decrease in assets:
Accounts receivable............ (2,602,273) 2,763,901 100,214 (179,572) (50,850)
Costs and estimated gross
profit in excess of billings
on contracts in process...... 1,134,689 1,014,107 (2,270,334) (1,833,012) 607,451
Inventories.................... 579,924 165,392 116,237 -- --
Perishable Tooling............. (704,613) (131,747) 77,102 -- 39,190
Prepaid expenses and other
current assets............... 105,788 44,446 34,468 59,685 (41,374)
Increase (decrease) in
liabilities:
Accounts payable............... 614,845 (764,847) (1,039,644) (266,242) (307,906)
Accrued lease expense.......... 74,761 65,413 56,065 14,016 11,682
Accrued liabilities............ 75,746 (59,278) 128,340 259,363 111,190
----------- ----------- ----------- ----------- ---------
Net cash provided by (used
in) operating activities... 183,926 4,991,021 (977,133) (1,537,121) 942,680
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of machinery and
equipment........................... 36,000 80,000 205,800 -- --
Increase in other assets.............. (191,563) (70,153) (342,448) -- --
Additions to property, plant and
equipment........................... (2,849,684) (585,248) (182,660) (72,892) (50,808)
----------- ----------- ----------- ----------- ---------
Net cash used in investing
activities................. (3,005,247) (575,401) (319,308) (72,892) (50,808)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments of)
short-term debt..................... 1,334,149 (2,594,499) 3,375,333 2,319,027 (445,918)
Principal payments under capital lease
obligations......................... (501,113) (437,408) (493,943) (101,145) (89,780)
Proceeds from issuance of long-term
debt................................ 2,584,294 -- -- -- --
Principal payments on long-term
debt................................ (704,909) (1,346,325) (1,254,812) (386,926) (252,731)
Redemption of Preferred stock......... -- -- -- -- (47,500)
Capitalized refinancing costs......... -- -- (333,325) -- (50,766)
Dividends paid........................ -- (34,200) -- -- (5,177)
----------- ----------- ----------- ----------- ---------
Net cash provided by (used
in) financing activities... 2,712,421 (4,412,432) 1,293,253 1,830,956 (891,872)
----------- ----------- ----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH......... (108,900) 3,188 (3,188) 220,943 --
CASH -- Beginning of Period............. 108,900 -- 3,188 3,188 --
----------- ----------- ----------- ----------- ---------
CASH -- End of Period................... $ -- $ 3,188 $ -- $ 224,131 $ --
=========== =========== =========== =========== =========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 42
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business -- The Company is a manufacturer of medium- to
large-scale, complex stamping dies that are sold to automobile manufacturers and
their suppliers for the production of automobile and truck parts. The nature of
the Company's business is such that a limited number of customers comprise a
majority of its business in any given year, even though the specific customers
will differ from year to year. The following table summarizes the Company's
sales to those customers which represent more than 10% of the annual sales of
the Company:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31, NOVEMBER 30,
--------------------------------------------- ---------------------------
CUSTOMER: 1994 % 1995 % 1996 % 1995 % 1996 %
--------- ---- - ---- - ---- - ---- - ---- -
(IN 000'S) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Chrysler
Corporation......... $ 6,885 31% $ 5,291 24% $ 4,622 25% $ 493 10% $2,605 48%
Ford Motor Company.... 1,852 8 1,511 7 2,061 11 298 6 794 14
General Motors........ -- -- 225 1 2,297 13 1,214 25 461 8
Mayflower Vehicle
Systems............. 2,617 12 6,211 28 2,678 15 294 6 -- --
American Bumper &
Manufacturing
Co. ................ 3,949 18 3,170 14 -- -- -- -- -- --
Motor Wheel
Corporation......... 2,539 11 2,795 13 1,954 11 733 15 170 3
Dana-Parish........... -- -- 2,684 12 984 5 393 8 521 10
Others................ 4,583 20 338 1 3,738 20 1,509 30 929 17
------- --- ------- --- ------- --- ------ --- ------ ---
Total Sales...... $22,425 100% $22,225 100% $18,334 100% $4,934 100% $5,480 100%
======= === ======= === ======= === ====== === ====== ===
</TABLE>
Reporting Entity -- In October 1996, the Company executed an agreement and
plan of merger. Under the provisions of the agreement, Riviera Die & Tool, Inc.,
merged with and into Riviera Tool Company, owner of 100% of its common stock, as
the survivor corporation. Concurrently with such merger, the By-Laws and
Articles of Incorporation have been amended to provide updated language on
officer and director indemnification and the authorized capital stock of the
Company was amended to increase the availability of unissued shares of common
and preferred stock. The following two classes of preferred stock exists after
the merger:
- Redeemable Preferred Stock -- no par value, authorized 1,425 shares,
1,425 shares issued and outstanding.
- Non-Redeemable Preferred Stock -- no par value, authorized 200,000
shares, no shares issued and outstanding.
These two entities have been reported on a consolidated basis for more than
five years prior to the merger. Therefore the merger has no effect on the
balance sheet, statement of operations, statement of common stockholders' equity
or cash flows. The stockholders' equity section of this report reflects the
impact of this merger on authorized, issued and outstanding shares of stock.
Cash -- In connection with its cash management efforts, the Company
periodically issues checks in excess of cash balances. These checks issued in
excess of cash balances, which amounted to $378,853, $232,777, $590,075 and
$42,745 in 1994, 1995, 1996 and November 30, 1996, respectively, are included in
accounts payable.
Net Income (Loss) per Common Share -- Net Income (Loss) per common share is
based on net income available for common stockholders divided by the weighted
average number of common shares outstanding
F-7
<PAGE> 43
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
during the period. The number of common shares outstanding has been adjusted to
reflect the impact of the merger and recapitalization as referred to in
Reporting Entity above.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Significant Estimates -- The most significant estimates made by the Company
are in the determination and recognition of revenue on contracts in process at
year end. Management's best estimate of costs to complete is based on costs
incurred subsequent to year end, engineers' cost projections and other analyses.
Although management's estimates are not expected to materially change in the
near term, the costs the Company will ultimately incur could differ from the
amounts estimated based on the various factors.
Revenue Recognition -- The Company recognizes revenue on time and material
contracts, utilizing the completed-contract method. Revenue is recognized on all
other contracts, utilizing the percentage-of-completion method. Under the
completed-contract method, the contract is considered complete when all costs
except for insignificant items have been incurred and the project has been
approved by the customer. Under the percentage-of-completion method estimated
contract earnings are based on total estimated contract profits multiplied by
the ratio of labor hours incurred to total estimated labor hours on the
contract. Provisions for estimated losses on contracts in process are recognized
in the period such losses are determined. Changes in job performance, conditions
and estimated profitability may result in revisions to costs and income and are
recognized in the period such revisions are determined.
Accounts Receivable -- The Company established a reserve for uncollectible
accounts receivable of $175,000 as of August 31, 1996 and November 30, 1996. For
the years ended August 31, 1994 and 1995 all accounts receivable were considered
to be fully collectible; accordingly, no allowance for doubtful accounts was
provided.
Inventories -- Inventories are recorded at the lower-of-cost (first-in,
first-out) method, or market.
Property, Plant and Equipment -- Property, plant and equipment are recorded
at cost. Depreciation is computed principally using the straight-line method
over the useful life of the asset for financial reporting purposes and
accelerated methods for tax purposes.
Perishable Tooling -- Certain perishable tools are gradually used up over
extended periods of time. These inventory items, which are reported as
non-current assets in the balance sheet, are recorded at cost less a valuation
allowance to reflect the loss in value resulting from gradual use.
Other Assets -- Included in other assets are deferred debt issuance costs
that are being amortized over the related debt term. Amortization expense for
the years ended August 31, 1994, 1995 and 1996, was $60,991, $191,507 and
$97,138, respectively and $0 for the three months ended November 30, 1996. As of
August 31, 1996 costs incurred totaling $333,325 in connection with the planned
public offering of common stock have been deferred and classified as other
assets. The Company has incurred additional costs of $50,766 in connection with
the planned public offering of common stock since August 31, 1996. These costs
have also been deferred and classified as other assets. As of November 30, 1996,
total costs incurred with the planned public offering of common stock total
$384,091. Such costs will be expensed or charged to paid-in capital depending
upon whether the public offering of common stock is consummated.
F-8
<PAGE> 44
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Income Taxes -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. A current tax
liability or asset is recognized for the estimated taxes payable or refundable
on tax returns for the year. Deferred tax liabilities or assets are recognized
for the estimated future tax effects of temporary differences between book and
tax accounting and operating loss and tax credit carryforwards. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Reclassifications -- Certain reclassifications have been made in the 1994
and 1995 financial statements to conform to the classifications used in 1996.
NOTE 2 -- COSTS AND BILLINGS ON CONTRACTS IN PROCESS
Costs and billings on contracts in process are as follows:
<TABLE>
<CAPTION>
AUGUST 31
------------------------------------- NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Costs incurred on contracts in process under
the percentage-of-completion method....... $8,168,619 $8,217,497 $10,844,647 $12,364,776
Estimated gross profit...................... 527,445 98,355 900,375 375,125
---------- ---------- ----------- -----------
Total.................................. 8,696,064 8,315,852 11,745,022 12,739,901
Less progress payments received and progress
billings to date.......................... 4,809,173 5,438,504 6,353,779 7,890,476
Plus costs incurred on contracts in process
under the completed contract method....... 406,705 402,141 158,580 92,947
---------- ---------- ----------- -----------
Costs and estimated gross profit in
excess of billings on contracts in
process........................... $4,293,596 $3,279,489 $ 5,549,823 $ 4,942,372
========== ========== =========== ===========
</TABLE>
Included in estimated gross profit for 1994, 1995, 1996 and November 30,
1996 are jobs with losses accrued of $95,471, $266,860, $441,301 and $264,890,
respectively.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
AUGUST 31
------------------------------ NOVEMBER 30
1994 1995 1996 1996
---- ---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Raw material stock $216,866 $143,454 $149,006 $149,006
Small tools and supplies........................... 510,236 418,256 296,467 296,467
-------- -------- -------- --------
Total......................................... $727,102 $561,710 $445,473 $445,473
======== ======== ======== ========
</TABLE>
F-9
<PAGE> 45
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
AUGUST 31
----------------------------------------- NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land and leasehold improvements........... $ 1,441,401 $ 1,501,624 $ 1,553,206 $ 1,553,206
Office furniture and fixtures............. 536,373 289,142 186,909 186,909
Machinery and equipment................... 16,234,857 15,722,397 14,704,396 14,755,204
Transportation equipment.................. 86,148 78,881 99,935 99,935
----------- ----------- ----------- -----------
Total cost........................... 18,298,779 17,592,044 16,544,446 16,595,254
Accumulated depreciation and
amortization............................ 6,633,897 6,685,945 6,758,807 7,047,559
----------- ----------- ----------- -----------
Net carrying amount.................. $11,664,882 $10,906,099 $ 9,785,639 $ 9,547,695
=========== =========== =========== ===========
Annual depreciation expense............... 981,496 951,848 1,081,680 241,023
Annual amortization expense............... 171,029 295,048 93,548 47,729
----------- ----------- ----------- -----------
Annual depreciation and amortization
expense................................. $ 1,152,525 $ 1,246,896 $ 1,175,228 $ 288,752
=========== =========== =========== ===========
</TABLE>
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT
The Company's notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
AUGUST 31
--------------------------------------- NOVEMBER 30
1994 1995 1996 1996
---- ---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NOTES PAYABLE
Revolving bank credit line, collateralized by
substantially all assets of the Company. The
agreement provides for borrowings, subject to
certain collateral requirements of up to
$10,000,000, and bears interest at 4% above
the bank's prime rate at November 30, 1996
and August 31, 1996 and 3% above the bank's
prime rate at August 31, 1995 and 1994 (an
effective rate of 12.25%, 12.25%, 11.75% and
10.25%, respectively). The agreement is
subject to certain loan covenants (discussed
below) and requires a commitment fee of .375%
per annum on the average daily unused portion
of the revolving credit line, and a facility
fee of .125% per annum on the revolving
credit line. Subsequent to August 31, 1996,
the bank extended the line-of-credit
agreement to February 28, 1997, and increased
the borrowing limit to $10,500,000 until
February 28, 1997. .......................... $9,460,669 $6,866,170 $10,241,503 $9,795,585
========== ========== =========== ==========
</TABLE>
F-10
<PAGE> 46
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT -- CONTINUED
<TABLE>
<CAPTION>
AUGUST 31
------------------------------------ NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
LONG-TERM DEBT
Note payable to bank, payable in monthly
installments of $40,000 plus interest of 4%
over the bank's prime rate at November 30,
1996 and August 31, 1996 and 3% above the
bank's prime rate at August 31, 1995 and 1994,
(effective rates of 12.25%, 12.25%, 11.75% and
10.25%, respectively), collateralized by
substantially all assets of the Company. This
agreement is subject to certain covenants
discussed below. Subsequent to August 31,
1996, the bank extended the note's maturity
date to February 28, 1997. ................... 1,336,962 856,962 376,962 256,962
Note payable to financial institution, payable
in monthly installments of $39,945 including
interest at 9.9%, collateralized by specific
assets of the Company with a carrying value of
$2,050,304 at August 31, 1996, due March 1,
1999.......................................... 1,858,170 1,441,051 1,088,532 995,019
Note payable to bank, payable in monthly
installments of $15,000 including interest at
7%, collateralized by specific assets of the
Company with a carrying value of $2,050,304 at
August 31, 1996, due September 1, 1998........ 595,341 494,432 344,356 305,138
Other......................................... 620,514 272,217 -- --
---------- ---------- ---------- ----------
Total long-term debt........................ 4,410,987 3,064,662 1,809,850 1,557,119
Less current portion........................ 2,395,545 1,631,629 926,861 819,391
---------- ---------- ---------- ----------
Long-term debt -- Net....................... $2,015,442 $1,433,033 $ 882,989 $ 737,728
========== ========== ========== ==========
</TABLE>
Minimum scheduled principal payments on long-term debt to maturity as of
August 31, 1996, are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 926,861
1998........................................................ 601,834
1999........................................................ 281,155
2000........................................................ --
2001........................................................ --
----------
Total..................................................... $1,809,850
----------
</TABLE>
In connection with the line of credit and notes payable to certain banks as of
November 30, 1996, August 31, 1996, 1995 and 1994, the Company has agreed to
certain covenants. The agreements require the Company to maintain minimum
working capital and net worth of $200,000 and $6,000,000, respectively, to not
let its combined debt-to-equity ratio exceed 3 to 1, and prohibit the payment of
cash dividends. The Company presently is not in compliance and was not in
compliance at November 30, 1996, August 31, 1996, 1995 and 1994, with certain
covenants and, therefore, has reclassified those debt obligations to banks as
current liabilities. Although the banks have extended the terms of the
obligations to February 28, 1997, they have not waived their rights under the
agreements.
F-11
<PAGE> 47
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 6 -- FEDERAL INCOME TAXES
The provision for federal income taxes (benefit) is as follows:
<TABLE>
<CAPTION>
AUGUST 31
------------------------------ NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current expense (benefit)............................... $ (3,500) $ 1,700 $ -- $ --
Deferred expense (benefit).............................. (130,000) 75,000 204,000 90,600
--------- ------- -------- -------
Total tax expense (benefit)........................ $(133,500) $76,700 $204,000 $90,600
========= ======= ======== =======
</TABLE>
The difference between the federal statutory tax rate and the Company's
effective rate was:
<TABLE>
<CAPTION>
AUGUST 31
-------------------- NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Federal statutory tax rate.............................. (34.0)% 34.0% 34.0% 34.0%
Increase (reduction) in income taxes relating to:
Effect of recording and changing valuation
allowance........................................ (59.9) (23.3) -- --
Effect of providing for deferred taxes at rates
less than statutory rates and other items........ 16.8 2.9
----- ----- ---- ----
Effective tax rate............................ (77.1)% 13.6% 34.0% 34.0%
===== ===== ==== ====
</TABLE>
The details of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
AUGUST 31
----------------------------------------- NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Depreciation........................... $(1,821,000) $(2,158,000) $(2,137,000) $(2,120,400)
----------- ----------- ----------- -----------
Deferred tax assets:
Net operating loss carryforward........ 1,517,000 1,637,200 1,438,000 1,306,700
Investment tax credit carryforward..... 246,700 246,700 246,700 246,700
Alternative minimum tax credit
carryforward........................ 40,000 40,000 40,000 40,000
Accrued lease expense.................. 131,000 170,900 190,000 194,000
Deferred gains and other items......... 147,300 118,200 73,300 93,400
----------- ----------- ----------- -----------
Total deferred tax assets........... 2,082,000 2,213,000 1,988,000 1,880,800
Valuation allowance recognized for
deferred tax assets.................... (377,700) (246,700) (246,700) (246,700)
----------- ----------- ----------- -----------
Net deferred tax liability.......... $ (116,700) $ (191,700) $ (395,700) $ (486,300)
=========== =========== =========== ===========
</TABLE>
F-12
<PAGE> 48
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 6 -- FEDERAL INCOME TAXES -- CONTINUED
The details of the deferred tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
AUGUST 31
---------------------------------- NOVEMBER 30,
1994 1995 1996 1996
---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net operating loss carryforward................. $(129,600) $(120,200) $199,200 $130,500
Accrued lease................................... (22,200) (39,900) (19,100) (4,000)
Depreciation.................................... 97,000 337,000 (21,000) (17,000)
Deferred compensation........................... (7,200) (9,400) (5,000) (1,500)
Deferred revenue................................ 44,600 36,200 51,000 5,000
Other items..................................... (2,900) 3,900 (1,100) (22,400)
Change in valuation allowance................... (103,800) (131,000) -- --
Investment tax credit........................... (6,700) -- -- --
Alternative minimum tax credit.................. 800 (1,600) -- --
--------- --------- -------- --------
Deferred tax expense (reduction)........... $(130,000) $ 75,000 $204,000 $ 90,600
========= ========= ======== ========
</TABLE>
As of August 31, 1996, the Company had the following applicable
carryforwards to be applied against future taxable income:
<TABLE>
<CAPTION>
NET OPERATING
LOSS INVESTMENT
EXPIRATION CARRYFORWARD TAX CREDITS
---------- ------------- -----------
<S> <C> <C>
1998........................................................ $ -- $ 32,800
1999........................................................ -- 46,400
2000........................................................ -- 19,600
2001........................................................ -- 22,400
2002........................................................ -- 28,000
2003........................................................ -- 97,500
2004........................................................ -- --
2005........................................................ -- --
2006........................................................ 1,323,000 --
2007........................................................ 2,199,900 --
2008........................................................ 486,000 --
2009........................................................ 220,100 --
---------- --------
Total.................................................. $4,229,000 $246,700
========== ========
</TABLE>
The Company also has approximately $40,000 of alternative minimum tax
credits that do not expire.
NOTE 7 -- DEFERRED GAINS
In prior years, the Company sold and subsequently leased back machinery and
equipment. The gain on these assets is being recognized over five years and
seven years, the respective lives of the leases. Gains recognized for each of
the years ended August 31, 1994, 1995 and 1996, amounted to $84,515. Gains
recognized for the three months ended November 30, 1995 and 1996, amounted to
$21,815 and $4,822, respectively.
During the year ended August 31, 1994, the Company restructured three
operating leases. The transaction involved machinery and equipment operating
leases. Machinery and equipment were purchased at
F-13
<PAGE> 49
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 7 -- DEFERRED GAINS -- CONTINUED
$2,611,000 with proceeds from long-term debt totaling $2,584,294. The gain that
had been previously deferred on these assets as a result of a prior
sale/leaseback will continue to be recognized over the remaining lives of the
original lease terms. Gains for each of the years ended August 31, 1996, 1995
and 1994, related to these assets, amounted to $64,287. Gains recognized for the
three months ended November 30, 1995 and 1996 amounted to $10,565.
NOTE 8 -- CASH FLOWS
Cash paid or refunded during the years ended August 31, 1994, 1995, 1996
and the three months ended November 30, 1995 and 1996, for interest and income
taxes is summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
-------------------------------------- --------------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest paid......................... $1,361,879 $1,701,065 $1,572,292 $357,406 $309,113
Income taxes refunded................. 20,974 -- -- -- --
</TABLE>
Noncash investing activities for the years ended August 31, 1994, 1995,
1996 and the three months ended November 30, 1996 consisted of the acquisition
of machinery and equipment and leasehold improvements of $352,884, $26,030, $0
and $0, respectively, through capital leases.
NOTE 9 -- OPERATING LEASES
The Company has entered into a noncancellable operating lease agreement for
manufacturing and office facilities with a lease term that expires in October
2009. The agreement provides for annual lease payments plus an escalation of the
base rent of 1 percent in each of the first 10 years and 2 percent in each of
the second 10 years. The Company has an option to renew this lease for two
additional 10-year terms at a rate to be negotiated and has an option to acquire
the facility at fair market value, commencing November 1996. The current annual
rent is $988,239. Generally accepted accounting principles require that rent
expense related to this type of lease be recognized ratably over the term of the
lease. The difference between the rent payments made and the amount of expense
recognized has been recorded as accrued lease expense (a liability). For the
years ended August 31, 1994, 1995 and 1996, accrued lease expense exceeded cash
payments made by $74,761, $65,413 and $56,065, respectively and $14,016 and
$11,682 for the three months ended November 30, 1995 and 1996, respectively.
On May 25, 1994, the Company entered into a sublease agreement with an
unrelated company. The agreement commenced August 1, 1994, and terminates on
July 31, 1998. The agreement provides for annual lease payments ranging from
$216,000 to $224,724. The agreement also contains two options to renew the lease
for up to five years, with annual lease payments ranging from $231,468 to
$268,332. In addition, the agreement requires the tenant to pay a pro-rata share
(33.7 percent) of the facility's operating costs.
The Company has various operating leases, including the noncancellable
operating lease noted above, for facilities and equipment that expire during the
next 15 years. Rent expense under these leases for the year ended August 31,
1994, 1995 and 1996 amounted to $1,349,400, $1,117,023 and $1,164,855,
respectively and $289,383 and $286,613 for the three months ended November 30,
1995 and 1996, respectively.
F-14
<PAGE> 50
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 9 -- OPERATING LEASES -- CONTINUED
The following is a schedule of future minimum rent payments and
noncancellable sublease income required under operating leases that have initial
or remaining noncancellable lease terms in excess of one year as of August 31,
1996:
<TABLE>
<CAPTION>
LEASE SUB-LEASE NET LEASE
PAYMENTS RECEIVABLE PAYMENT
-------- ---------- ---------
<S> <C> <C> <C>
1997..................................................... $ 1,169,931 $220,320 $ 949,611
1998..................................................... 1,067,330 224,724 842,606
1999..................................................... 1,031,486 -- 1,031,486
2000..................................................... 1,034,180 -- 1,034,180
2001..................................................... 1,052,870 -- 1,052,870
2002 and after........................................... 9,296,718 -- 9,296,718
----------- -------- -----------
Total minimum payments required..................... $14,652,515 $445,044 $14,207,471
=========== ======== ===========
</TABLE>
NOTE 10 -- CAPITAL LEASES
The Company has entered into a number of capital leases. At August 31,
1994, 1995, 1996 and November 30, 1996, included in machinery and equipment and
accumulated depreciation and amortization are assets with a total cost of
$3,039,735, $3,065,770, $3,065,770, $3,065,770 and accumulated amortization of
$680,184, $975,232 and $1,068,780, $1,116,509, respectively, acquired through
capital lease transactions. The following is a schedule of future minimum lease
payments under capital leases together with the present value of the net minimum
lease payments as of August 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
1995....................................................... $ 851,807 $ -- $ --
1996....................................................... 374,611 705,210 --
1997....................................................... 294,152 302,666 439,614
1998....................................................... 104,723 119,723 119,723
---------- ---------- --------
Total minimum lease payments............................. 1,625,293 1,127,599 559,337
Less amount representing interest.......................... 191,947 105,626 31,307
---------- ---------- --------
Present value of net minimum lease payments.............. 1,433,346 1,021,973 528,030
Less amount representing current portion................... 733,400 624,561 409,225
---------- ---------- --------
Noncurrent portion....................................... $ 699,946 $ 397,412 $118,805
========== ========== ========
</TABLE>
NOTE 11 -- RETIREMENT PLANS
The Company has a profit-sharing plan that covers substantially all
employees. The plan includes a 401(k) deferred-compensation option. The
Company's policy is to fund profit-sharing costs accrued on an annual basis. The
plan, as established, allows for discretionary contributions as determined
annually by the Company's Board of Directors. No discretionary contribution was
made for the years ended August 31, 1994, 1995 and 1996.
The Company also matches and contributes up to 15 percent of the employees'
contributions, up to 2% of the employee's annual wage, to the 401(k)
deferred-compensation plan. The Company's contributions to the plan for the
years ended August 31, 1994, 1995 and 1996, amounted to $84,887, $92,575 and
$80,438, respectively, and $17,514 and $18,990 for the three months ended
November 30, 1995 and 1996, respectively.
F-15
<PAGE> 51
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 11 -- RETIREMENT PLANS -- CONTINUED
The plan owns 100 percent of the Company's redeemable preferred stock.
NOTE 12 -- RELATED-PARTY TRANSACTIONS
The Company had a contract with a corporation that owns 50 percent of the
Company's common stock. The contract related to the performance of engineering
services and construction of dies to be purchased by the stockholder
corporation. The contract provided that the stockholder corporation was required
to purchase not less than 155,000 hours of work, as defined by the contract, or,
if less, 85 percent of its entire domestic consumption. In the event the total
hours of work were less than the required amount, the stockholder corporation
paid an underutilization fee, based on a formula, to the Company. Under the plan
of merger between Riviera Die and Tool, Inc and Riviera Tool Company dated
October 31, 1996, and related shareholders agreement, such contract was
terminated retroactive to December 31, 1995 and no such underutilization fees
were received or recorded for periods thereafter. Sales to the stockholder
corporation (including underutilization fees for periods prior to December 31,
1995) for the fiscal years ended August 31, 1994, 1995 and 1996, amounted to
$2,538,919, $2,794,829, and $1,954,184, respectively, and $733,180 and $169,918
for the three months ended November 30, 1995 and 1996, respectively.
NOTE 13 -- REDEEMABLE PREFERRED STOCK
The Company has issued and outstanding 950 shares of mandatory redeemable
preferred stock at November 30, 1996. The Company had 1,425 shares issued and
outstanding as of August 31, 1996. The stock bears an $8 per year cumulative
dividend preference over common stock of the Company. All outstanding shares of
this stock are owned by the Company's retirement plan. According to the terms of
the redemption agreement, 475 shares of the stock was to be redeemed at $100 per
share, plus unpaid dividends on July 31, 1995, 1996, and 1997. The July 1995
redemption however, did not occur until after August 31, 1996 but prior to
quarter ended November 30, 1996. As of November 30, 1996, the July 1996
redemption had not yet occurred.
The carrying amount of the preferred stock is being increased by periodic
accretions, using the interest method, so that the carrying amount will equal
the mandatory redemption amount on the redemption date. The carrying amount is
also being increased by unpaid dividends. Increases in the preferred stock are
being effected by charges against retained earnings. The following schedule
summarizes activity in the preferred stock:
<TABLE>
<CAPTION>
AUGUST 31 NOVEMBER 30
-------------------------------- -----------
1994 1995 1996 1996
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Beginning balance.................................. $ 79,613 $109,249 $110,537 $139,072
Accretion.......................................... 18,236 24,088 17,135 1,762
Cumulative dividend preference..................... 11,400 11,400 11,400 2,850
Preferred stock redeemed........................... -- -- -- (47,500)
Dividends paid..................................... -- (34,200) -- (5,177)
-------- -------- -------- --------
Ending balance................................ $109,249 $110,537 $139,072 $ 91,007
======== ======== ======== ========
</TABLE>
NOTE 14 -- LEGAL PROCEEDINGS AND CLAIMS
The Company is a plaintiff and counter-defendant in an action against two
individuals and a corporation, with the owners of the Company and a related
corporation affiliated through common ownership as co-plaintiffs, filed July 22,
1994. In July 1992, the Company contributed machinery, equipment, inventory,
work in process and receivables that were related to the business of building
plastic injection molds to a joint venture that then operated as a mold builder
and injection molder. The Company contributed assets valued at
F-16
<PAGE> 52
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 14 -- LEGAL PROCEEDINGS AND CLAIMS -- CONTINUED
$5.4 million, assigned debts in the amount of $3.7 million, and received $1.7
million of preferred stock in the new entity. Defendants in this action
contributed all of the stock of a mold builder then known as Leap Technologies,
Inc. In November 1993, the joint venture was liquidated, and the Company's
preferred stock in the entity was written off as were receivables from Leap
Technologies, Inc., of $559,653. These write-offs were reflected in the
financial statements for the year ended August 31, 1993. The Company alleges
that the status of the business contributed by the defendants was fraudulently
represented, and the defendants are, therefore, liable to the Company for all
losses sustained as a result of the failure of the venture. The Company is
asking for the return of its investment plus additional damages it incurred in
the process of liquidating the venture. One defendant has counterclaimed for
breach of representations by the Company without specifying any amount of
damages. The Company is not currently involved in other legal proceedings other
than ordinary and routine proceedings incidental to its operations. In the
opinion of management, no existing proceedings, including the matter involving
Leap Technologies, Inc., would have a significant effect on the financial
condition, results of operations and cash flows of the Company if determined
against the Company.
NOTE 15 -- OTHER NONOPERATING EXPENSE
YEAR ENDED AUGUST 31, 1994:
The Company formally subleased a portion of the facility, charging annual
rent payments of $462,012 in accordance with a month-to-month lease agreement
with a related company having some shareholders in common. During the year ended
August 31, 1994, the sublease was discontinued and no sublease revenue was
received. As a result of the discontinuance of the sublease, the Company was
unable to recover $532,242 of rent and related expenses, which has been charged
to other expense in 1994.
NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at August 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------------------- -------------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash...................................... $ 3,188 $ 3,188 $ -- $ --
Accounts receivable -- Trade and related
party.................................. 5,544,411 5,544,411 5,269,167 5,269,167
Costs and estimated gross profit in excess
of billings on contracts in process.... 3,279,489 3,279,489 5,549,823 5,549,823
FINANCIAL LIABILITIES
Accounts payable.......................... 3,953,522 3,953,522 2,913,878 2,913,878
Notes payable............................. 6,866,170 6,866,170 10,241,503 10,241,503
Long-term debt............................ 3,064,662 2,967,775 1,809,850 1,763,716
</TABLE>
Short-Term Financial Instruments -- The fair value of short-term financial
instruments, including cash, trade accounts receivable and payable, and costs
and earnings in excess of billings on uncompleted contracts, approximates their
carrying amounts in the financial statements due to the short maturity of such
instruments.
Notes Payable -- The estimated fair value of the Company's notes payable
approximates its carrying amount because the interest rate fluctuates with
market rates.
F-17
<PAGE> 53
RIVIERA TOOL COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED
Long-Term Debt -- The estimated fair value of the Company's long-term debt
is calculated based on expected cash flows discounted using interest rates
currently available for debt with similar terms and remaining maturities.
NOTE 17 -- MANAGEMENT'S PLAN
As discussed in Note 5, the Company is presently not in compliance with
certain loan covenants, and the current bank agreements expire on February 28,
1997. As a result of the covenant violations, the bank could pursue collection
of all amounts due. Management is in the process of finalizing an initial public
offering, the proceeds of which are to be used principally to retire bank debt.
Management believes that it is more likely than not that the public
offering will be successful, and that as a result the Company will be in
compliance with all covenants then applicable. If the offering is not
successful, and the bank pursues collection, there will be a significant near
term effect on the Company's ongoing operations.
NOTE 18 -- SUPPLEMENTARY NET INCOME PER SHARE
Supplementary net income per share is based on the number of shares
outstanding assuming the sale by the Company of 1,100,000 shares of common stock
in Note 1 and the Company's outstanding debt at the then stated interest rate of
such debt (12.25%) as if it had occurred at the beginning of the period. The net
income available for common shares for the year ended August 31, 1996 would
increase by $580,381, and net income per share would increase by .12 cents per
share to .37 cents per share, and as of November 30, 1996 net income available
for common shares would increase by $96,033, and net income per share would
increase by .04 cents per share to .11 cents per share, as a result of such
calculations.
F-18
<PAGE> 54
[RIVIERA LOGO]
- --------------------------------------------------------------------------------
Riviera's tryout
presses offer the
capacity for final
adjustment on any
customer project.
The Company's
comprehensive
evaluation and
inspection process
ensures maximum
die performance.
[PHOTO]
Precision machining
is performed by
our highly-skilled
operators. Riviera's
computer numerically
controlled machining
capabilities offer the
exact metal removal
process necessary
to meet customer
quality specifications.
[PHOTO]
<PAGE> 55
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE ON CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 8
Dilution............................... 9
Dividend Policy........................ 9
Capitalization......................... 10
Selected Financial Data................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 12
Business............................... 16
Management............................. 22
Principal Shareholders................. 27
Description of Capital Stock........... 29
Shares Eligible for Future Sale........ 31
Underwriting........................... 32
Legal Matters.......................... 33
Experts................................ 33
Additional Information................. 33
Index to Financial Statements.......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
RIVIERA LOGO
RIVIERA TOOL COMPANY
1,100,000 SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
NATIONAL SECURITIES CORPORATION
FEBRUARY , 1997
======================================================
<PAGE> 56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock being registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 3,387
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 11,325
Printing Expenses........................................... 130,000
Transfer Agent and Registrar Fees........................... 3,500
Accounting Fees and Expenses................................ 90,000
Legal Fees and Expenses (not including Blue Sky)............ 125,000
Blue Sky Fees and Expenses.................................. 14,125
Miscellaneous Expenses...................................... 50,000
--------
Total.................................................. $427,337
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 561 through 571 of Michigan Business Corporation Act ("MBCA") set
forth the conditions and limitations governing the indemnification of officers,
directors and other persons. In this regard, the MBCA provides for
indemnification of directors and officers acting in good faith and in a manner
they reasonably believe to be in, or not opposed to, the best interest of the
Company or its shareholders (and, with respect to a criminal proceeding, if they
have no reasonable cause to believe their conduct to be unlawful). Such
indemnification may be made against (a) expenses (including attorney's fees),
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit or proceeding (other than an action by, or in the right of, the
Company) arising by reason of the fact that they were serving as a director,
officer, employee or agent of the Company (or some other entity at the Company's
request), and (b) expenses (including attorney's fees) and amounts paid in
settlement actually and reasonably incurred in connection with a threatened,
pending or completed action or suit by, or in the right of, the Company, unless
the director or officer is found liable to the Company and an appropriate court
does not determine that he or she is nevertheless fairly and reasonably entitled
to indemnification. The MBCA requires indemnification for expenses to the extent
that a director or officer is successful in defending against any such action,
suit or proceeding, and otherwise requires in general that the indemnification
provided for in (a) and (b) above be made only on a determination by a majority
vote of a quorum of the Board of Directors comprised of members who were not
parties to or threatened to be made parties to such action. In certain
circumstances, the MBCA further permits advances to cover such expenses before a
final determination that indemnification is permissible, upon receipt of (i) a
written affirmation by the director or officer of his or her good faith belief
that he or she has met the applicable standard of conduct set forth in the MBCA,
and (ii) a written undertaking by or on behalf of the director or officer to
repay such amounts unless it shall ultimately be determined that he or she is
entitled to indemnification and a determination that the facts then known to
those making the advance would not preclude indemnification.
References made to Article IX of the Registrant's Articles of
Incorporation, a copy of which is filed as Exhibit 3(a), and to Article VI of
the Registrant's Bylaws, a copy of which is filed as Exhibit 3(b), which provide
for indemnification of directors and officers of the Registrant and authorize
the Board to extend such indemnity to others to the full extent permitted by the
aforesaid Sections of the Michigan Business Corporation Act.
II-1
<PAGE> 57
Section 9 of Article VI of the Bylaws also authorizes the Registrant to
purchase and maintain insurance on behalf of any officer, director, employee or
agent of the Company against any liability asserted against or incurred by them
in such capacity or arising out of their status as such whether or not
Registrant would have the power to indemnify such officer, director, employee or
agent of the Company against any liability under the provisions of such Article
or Michigan law.
Reference is made to Section of the Underwriting Agreement, a copy of which
is filed as part of Exhibit 1 to the Registration Statement, for information
concerning indemnification arrangements among the Registrant and the
Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities of the Registrant have been issued or sold by the Registrant
within the past three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are files herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
<S> <C>
1 Proposed form of Underwriting Agreement.
*3(a) Amended and Restated Articles of Incorporation of the
Registrant.
*3(b) Bylaws of the Registrant.
*4(a) Specimen Common Stock of Registrant.
4(b) Form of Representative's Warrant Agreement, including form
of Warrant.
5 Opinion and consent of Dickinson, Wright, Moon, Van Dusen &
Freeman as to the legality of the Common Stock being
Registered.
*9 Shareholder Agreement and related Stock Option Agreement
between Riviera Holding Company and Motor Wheel Corporation.
*10(a) 1996 Incentive Stock Option Plan of Registrant.
*10(b) Employment Agreement of Kenneth K. Rieth.
*10(c) Promissory Note dated March 31, 1994 between Registrant and
Heller Financial, Inc. covering various manufacturing
machinery and equipment.
*10(d) Promissory Note dated April 1, 1994 between Registrant and
Banc One Equipment Finance, Inc. covering various
manufacturing machinery and equipment.
*10(e) Lease Agreement dated November 1, 1988 between Registrant
and Greenbrook Limited Partners/Riviera regarding industrial
facilities at 5460 Executive Parkway SE, Grand Rapids,
Michigan.
10(f) Commitment from LaSalle National Bank.
10(g) NBD Bank Credit Agreement
10(h) Assignment of Stock Option between Riviera Holding Company
and Registrant.
23(a) Consent of Plante & Moran LLP (contained at page S-1 of this
Registration Statement).
23(b) Consent of Dickinson, Wright, Moon, Van Dusen & Freeman
(contained in the opinion of such firm filed as Exhibit 5
hereto).
*24(a) Power of Attorney (contained on Page II-5, the signature
page)
*24(b) Consent of Director Nominees
*27 Financial Data Schedule
-------------------------
* Previously filed.
</TABLE>
II-2
<PAGE> 58
(b) Financial Statement Schedules
<TABLE>
<S> <C> <C> <C>
V -- Property, Plant and Equipment.
Accumulated Depreciation, Depletion and Amortization of
VI -- Property, Plant and
Equipment.
IX -- Short-term Borrowings.
X -- Supplementary Income Statement Information.
</TABLE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the Michigan Business
Corporation Act and the documents referred to in Item 14 or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or together,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) That, for determining liability under the Securities Act, treat
each as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the end of the
offering.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(5) That for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(6) That for purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 59
(7) That insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant, pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(8) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
II-4
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or Amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Grand
Rapids, Michigan and State of Michigan on the 24th day of February, 1997.
RIVIERA TOOL COMPANY
By: /s/ KENNETH K. RIETH
------------------------------------
Kenneth K. Rieth, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities indicated and on the 24th day of February, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ KENNETH K. RIETH President (Principal Executive Officer)
- --------------------------------------------- Shareholder and Director
Kenneth K. Rieth
/s/ PETER C. CANEPA Secretary, Treasurer, and Chief Financial
- --------------------------------------------- Officer (Principal Financial Officer and
Peter C. Canepa Principal Accounting Officer)
/s/ LEONARD H. WOOD* Vice President-General Manager and Director
- ---------------------------------------------
Leonard H. Wood
/s/ JOHN C. KENNEDY* Director
- ---------------------------------------------
John C. Kennedy
Director
- ---------------------------------------------
John H. Kinstler
Director
- ---------------------------------------------
Thomas R. Collins
*By /s/ PETER C.CANEPA
----------------------------------------
Peter C. Canepa, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 61
INDEPENDENT AUDITORS' CONSENT AND REPORT OF SCHEDULES
Riviera Tool Company:
We consent to the use in this Registration Statement on Form S-1 of Riviera
Tool Company of our report dated November 22, 1996, appearing in the Prospectus,
which is a part of this Registration Statement, and to the references to us
under the headings "Selected Financial Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedules of Riviera Tool Company.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based upon our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
PLANTE & MORAN, LLP
Grand Rapids, Michigan
February 24, 1997
S-1
<PAGE> 62
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ----------------------------------- ----------- ---------- ---------- -------------- -----------
BALANCE OTHER CHANGES- BALANCES AT
BEGINNING ADDITIONS ADD (DEDUCT)- END OF
DESCRIPTION OF PERIOD AT COST RETIREMENT DESCRIBE PERIOD
----------- ----------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1994
Land and leasehold
improvements.................. $ 1,435,958 $ 5,443 $ -- $-- $ 1,441,401
Office furniture and fixtures.... 431,161 105,212 -- -- 536,373
Machinery and equipment.......... 13,203,152 3,084,905 53,200 -- 16,234,857
Transportation................... 69,880 16,268 -- -- 86,148
----------- ---------- ---------- --- -----------
Totals........................ $15,140,151 $3,211,828 $ 53,200 $-- $18,298,779
=========== ========== ========== === ===========
1995
Land and leasehold
improvements.................. $ 1,441,401 $ 65,201 $ 4,978 $-- $ 1,501,624
Office furniture and fixtures.... 536,373 16,349 263,580 -- 289,142
Machinery and equipment.......... 16,234,857 483,314 995,774 -- 15,722,397
Transportation................... 86,148 30,469 37,736 -- 78,881
----------- ---------- ---------- --- -----------
Totals........................ $18,298,779 $ 595,333 $1,302,068 $-- $17,592,044
=========== ========== ========== === ===========
1996
Land and leasehold
improvements.................. $ 1,501,624 $ 51,582 $ -- $-- $ 1,553,206
Office furniture and fixtures.... 289,142 -- 102,233 -- 186,909
Machinery and equipment.......... 15,722,397 313,652 1,331,653 -- 14,704,396
Transportation................... 78,881 51,838 30,784 -- 99,935
----------- ---------- ---------- --- -----------
Totals........................ $17,592,044 $ 417,072 $1,464,670 $-- $16,544,446
=========== ========== ========== === ===========
NOVEMBER 30, 1996 (UNAUDITED)
Land and leasehold
improvements.................. $ 1,553,206 $ -- $ -- $-- $ 1,553,206
Office furniture and fixtures.... 186,909 -- -- -- 186,909
Machinery and equipment.......... 14,704,396 50,808 -- -- 14,755,204
Transportation................... 99,935 -- -- -- 99,935
----------- ---------- ---------- --- -----------
Totals........................ $16,544,446 $ 50,808 $ -- $-- $16,595,254
=========== ========== ========== === ===========
</TABLE>
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Land and leasehold improvements......................... 15 years
Office furniture and fixtures........................... 7 years
Machinery and equipment................................. 10-20 years
Transportation.......................................... 5 years
</TABLE>
S-2
<PAGE> 63
SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------- ------------ ---------------- ---------- -------------- -----------
BALANCE ADDITIONS OTHER CHANGES- BALANCES AT
BEGINNING OF CHARGED TO COSTS ADD (DEDUCT) END OF
DESCRIPTION PERIOD AND EXPENSES RETIREMENT DESCRIBE PERIOD
----------- ------------ ---------------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1994
Land and leasehold
improvements................. $ 280,514 $ 157,832 $ -- $-- $ 438,346
Office furniture and fixtures... 389,448 25,130 -- -- 414,578
Machinery and equipment......... 4,744,978 975,163 7,093 -- 5,713,048
Transportation.................. 64,265 3,660 -- -- 67,925
---------- ---------- ---------- --- ----------
Totals....................... $5,479,205 $1,161,785 $ 7,093 $-- $6,633,897
========== ========== ========== === ==========
1995
Land and leasehold
improvements................. $ 438,346 $ 125,688 $ 4,977 $-- $ 559,057
Office furniture and fixtures... 414,578 27,519 263,580 -- 178,517
Machinery and equipment......... 5,713,048 1,087,276 888,555 -- 5,911,769
Transportation.................. 67,925 6,413 37,736 -- 36,602
---------- ---------- ---------- --- ----------
Totals....................... $6,633,897 $1,246,896 $1,194,848 $-- $6,685,945
========== ========== ========== === ==========
1996
Land and leasehold
improvements................. $ 559,057 $ 131,621 $ -- $-- $ 690,678
Office furniture and fixtures... 178,517 25,175 102,233 -- 101,459
Machinery and equipment......... 5,911,769 1,005,643 969,527 -- 5,947,885
Transportation.................. 36,602 12,788 30,605 -- 18,785
---------- ---------- ---------- --- ----------
Totals....................... $6,685,945 $1,175,227 $1,102,365 $-- $6,758,807
========== ========== ========== === ==========
NOVEMBER 30, 1996 (UNAUDITED)
Land and leasehold
improvements................. $ 690,678 $ 29,405 $ -- $-- $ 720,083
Office furniture and fixtures... 101,459 4,616 -- -- 106,075
Machinery and equipment......... 5,947,885 250,609 -- -- 6,198,494
Transportation.................. 18,785 4,122 -- -- 22,907
---------- ---------- ---------- --- ----------
Totals....................... $6,758,807 $ 288,752 $ -- $-- $7,047,559
========== ========== ========== === ==========
</TABLE>
S-3
<PAGE> 64
SCHEDULE IX
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------ ----------- ------------- ----------------- -------------------- --------------------
BALANCE WEIGHTED MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
CATEGORY OF AGGREGATE AT END OF AVERAGE OUTSTANDING OUTSTANDING DURING INTEREST RATE DURING
SHORT-TERM BORROWINGS PERIOD INTEREST RATE DURING THE PERIOD THE PERIOD(1) THE PERIOD(1)
--------------------- --------- ------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
Amounts payable to banks
for borrowings
1994............... $11,856,214 9.71% $13,467,407 $ 9,142,077 9.92%
1995............... 8,497,799 10.84 12,010,593 10,707,897 10.95
1996............... 11,168,364 10.92 11,924,641 11,131,436 10.69
November 30,
1996............. 10,614,976 10.48 11,788,501 11,172,342 10.35
</TABLE>
- -------------------------
(1) Based on the average amount outstanding during the year and the interest
rate each month end.
S-4
<PAGE> 65
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
COL. A COL. E NOVEMBER 30,
- -------------------------------------- -------------------------------------- --------------------
ITEM 1994 1995 1996 1995 1996
---- ---------- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Maintenance and repairs............... $ 212,412 $ 220,984 $ 145,420 $ 22,292 $ 51,229
Depreciation and amortization......... 1,213,516 1,438,403 1,272,366 313,295 321,523
Property tax.......................... 221,832 266,689 96,835 42,789 23,627
Advertising........................... 2,807 3,231 720 224 1,947
</TABLE>
S-5
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
<S> <C>
1 Proposed form of Underwriting Agreement.
*3(a) Amended and Restated Articles of Incorporation of the
Registrant.
*3(b) Bylaws of the Registrant.
*4(a) Specimen Common Stock of Registrant.
4(b) Form of Representative's Warrant Agreement, including form
of Warrant.
5 Opinion and consent of Dickinson, Wright, Moon, Van Dusen &
Freeman as to the legality of the Common Stock being
Registered.
*9 Shareholder Agreement and related Stock Option Agreement
between Riviera Holding Company and Motor Wheel Corporation.
*10(a) 1996 Incentive Stock Option Plan of Registrant.
*10(b) Employment Agreement of Kenneth K. Rieth.
*10(c) Promissory Note dated March 31, 1994 between Registrant and
Heller Financial, Inc. covering various manufacturing
machinery and equipment.
*10(d) Promissory Note dated April 1, 1994 between Registrant and
Banc One Equipment Finance, Inc. covering various
manufacturing machinery and equipment.
*10(e) Lease Agreement dated November 1, 1988 between Registrant
and Greenbrook Limited Partners/Riviera regarding industrial
facilities at 5460 Executive Parkway SE, Grand Rapids,
Michigan.
10(f) Commitment from LaSalle National Bank.
10(g) NBD Bank Credit Agreement
10(h) Assignment of Stock Option between Riviera Holding Company
and Registrant.
23(a) Consent of Plante & Moran LLP (contained at page S-1 of this
Registration Statement).
23(b) Consent of Dickinson, Wright, Moon, Van Dusen & Freeman
(contained in the opinion of such firm filed as Exhibit 5
hereto).
*24(a) Power of Attorney (contained on Page II-5, the signature
page)
*24(b) Consent of Director Nominees
*27 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed.
<PAGE> 1
EXHIBIT 1
DRAFT 2/18/97
1,100,000 SHARES OF COMMON STOCK
RIVIERA TOOL COMPANY
UNDERWRITING AGREEMENT
Grand Rapids, Michigan
February __, 1997
National Securities Corporation
As Representative of the Several Underwriters
1001 Fourth Avenue, Suite 2200
Seattle, Washington 98154
Ladies and Gentlemen:
Riviera Tool Company, a Michigan corporation (the "Company"), hereby
agrees with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom National is acting as representative (in such capacity,
National shall hereinafter be referred to as "you" or the "Representative") with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective amount of shares set forth in said
Schedule A of the Company's common stock, no par value (the "Common Stock")
which aggregate to 1,100,000 shares (the "Shares"). Upon your request, as
provided in Section 2(b) of this Agreement, the Company shall also issue and
sell to the Underwriters, acting severally and not jointly, up to an additional
aggregate of 165,000 shares of Common Stock for the purpose of covering
over-allotments, if any. Such shares of Common Stock are hereinafter referred
to as the "Option Shares." The Company also proposes to issue and sell to you
warrants (the "Representative's Warrants") pursuant to the Representative's
Warrant Agreement (the "Representative's Warrant Agreement") for the purchase of
an additional 110,000 shares of Common Stock. The shares of Common Stock
issuable upon exercise of the Representative's Warrants are hereinafter referred
to as the "Representative's Shares." The Shares, Option Shares, the
Representative's Warrants, and the Representative's Shares are more fully
described in the Registration Statement and the Prospectus referred to below.
<PAGE> 2
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form 1 (No. 333-14187), including any
related preliminary prospectus (the "Preliminary Prospectus"), for the
registration of the Shares, the Option Shares, the Representative's Warrants,
and the Representative's Shares (collectively, hereinafter referred to as the
"Registered Securities") under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus and no proceedings for a stop order
suspending the effectiveness of the Registration Statement have been instituted,
or, to the Company's knowledge, are threatened. Each of the Preliminary
Prospectus, the Registration Statement and the Prospectus at the time of filing
thereof conformed in all material respects with the requirements of the Act and
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or the Prospectus at the time of filing thereof contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined in Section 2(c)
hereof) and each Option Closing Date (as defined in Section 2(b) hereof), if
any, and during such longer period as the
-2-
<PAGE> 3
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus, as
amended or supplemented as required, will contain all statements which are
required to be stated therein in accordance with the Act and the Regulations,
and will conform in all material respects to the requirements of the Act and
the Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto.
(d) The Company and each of its subsidiaries have been
duly organized and are validly existing as corporations in good standing under
the laws of the respective states of their incorporation. The Company does not
own or control, directly or indirectly, any corporation, partnership, trust,
joint venture or other business entity other than the subsidiaries listed in
Exhibit 21 of the Registration Statement. Each of the Company and its
subsidiaries is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing (except those jurisdictions in which the failure to not qualify will
not, in the aggregate, have a material adverse effect on the Company). Each of
the Company and its subsidiaries has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters),
to own or lease its properties and conduct its business as described in the
Prospectus; the Company and each of its subsidiaries have been doing business
in compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of its
subsidiaries have received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the business
affairs, operations, properties, or results of operations of the Company and
its subsidiaries, taken as a whole. The disclosures in the Registration
Statement concerning the effects of federal, state, local, and foreign laws,
rules and regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the
-3-
<PAGE> 4
Option Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in the
Prospectus. The Registered Securities and all other securities issued or
issuable by the Company conform or, when issued and paid for, will conform, in
all material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding shares
of capital stock of each subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as disclosed
in or contemplated by the Prospectus and the financial statements of the
Company and the related notes thereto included in the Prospectus, neither the
Company nor any subsidiary has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder as set forth in the Prospectus
conforms in all material respects with the requirements of the Act. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and the holders thereof have no
rights of rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
(f) The Registered Securities are not and will not be
subject to any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable and will
conform in all material respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Registered Securities has been duly and validly taken;
and the certificates representing the Registered Securities will be in due and
proper form. Upon the issuance and delivery pursuant to the terms hereof of
the Registered Securities to be sold by the Company hereunder, the Underwriters
or the Representative, as the case may be, will acquire good and marketable
title to such Registered Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect, or other restriction or equity
of any kind whatsoever. No stockholder of the Company has any right which has
not been waived in writing to require the Company to register the sale of any
shares owned by such stockholder under the Act in the public offering
contemplated by this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Shares, the Option Shares and the Representative's
Warrants to be sold by the Company as contemplated herein.
(g) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and
-4-
<PAGE> 5
the Prospectus fairly present the financial position, changes in stockholders'
equity and the results of operations of the Company at the respective dates and
for the respective periods to which they apply and such financial statements
have been prepared in conformity with generally accepted accounting principles
and the Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the
business, affairs, operations, properties, or results of operation of the
Company and its subsidiaries taken as a whole whether or not arising in the
ordinary course of business since the date of the financial statements included
in the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and its
subsidiaries taken as a whole conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus. Financial information set forth in the Prospectus under the
headings "Prospectus Summary - Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(h) The Company (i) has paid all federal, state, local,
franchise, and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(i) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Registered Securities, (ii) the purchase by the
Underwriters of the Registered Securities from the Company and the purchase by
the Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) There is no action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
businesses of, the Company which (i) questions the validity of the capital
stock of the Company, this Agreement or the Representative's Warrant Agreement,
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Representative's Warrant Agreement, (ii)
is required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) might materially
and adversely affect the condition, financial or otherwise, or the business,
affairs, position, stockholders' equity,
-5-
<PAGE> 6
operation, properties, or results of operations of the Company and its
subsidiaries taken as a whole.
(k) The Company has the corporate power and authority to
authorize, issue, deliver, and sell the Registered Securities and to enter into
this Agreement and the Representative's Warrant Agreement, and to consummate
the transactions provided for in such agreements; and this Agreement and the
Representative's Warrant Agreement have each been duly and properly authorized,
executed, and delivered by the Company. Each of this Agreement and the
Representative's Warrant Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its respective terms (except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the issue and sale of the Registered Securities, execution by
the Company, delivery or performance of this Agreement and the Representative's
Warrant Agreement, the consummation by the Company of the transactions
contemplated herein and therein, or the conduct of the Company's businesses as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the terms of (i)
the articles of incorporation or by-laws of the Company, as amended and
restated, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit agreement
or any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which its properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company of any of their activities or properties.
(l) No consent, approval, authorization or order of, and
no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of
any preemptive, first refusal or other rights that any entity or person may
have for the issue and/or sale of any of the Registered Securities, except such
as have been or may be obtained under the Act or may be required under state
securities or Blue Sky laws in connection with the Underwriters' purchase and
distribution of the Registered Securities to be sold by the Company hereunder.
-6-
<PAGE> 7
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application
of equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). The
descriptions in the Registration Statement of such agreements, contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form 1, and there are
no contracts or other documents which are required by the Act to be described
in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required, and the exhibits which
have been filed are complete and correct copies of the documents of which they
purport to be copies.
(n) Since the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as described
in or specifically contemplated by the Prospectus (i) the Company has not
incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with its business
or properties from fire, flood, windstorm, accident or other calamity, whether
or not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock (other than upon the sale of the Shares, the Option Shares and the
Representative's Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) of, or indebtedness material to, the
Company (other than in the ordinary course of business); (v) the Company has
not issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money; and (vi) there has not been any material
adverse change in the condition (financial or otherwise), business, properties,
results of operations, or prospects of the Company.
(o) Except as disclosed in or specifically contemplated
by the Prospectus, (i) the Company has sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals and governmental authorizations
to conduct its business as now conducted; (ii) the expiration of any
trademarks, trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect on the
condition (financial or otherwise), business, results of operations or
prospects of the Company; (iii) the Company has no knowledge of any
infringement by it or its subsidiaries of trademark, trade name rights, patent
rights, copyrights, licenses, trade secret or other similar rights of others;
and (iv) there
-7-
<PAGE> 8
is no claim being made against the Company regarding trademark, trade name,
patent, copyright, license, trade secret or other infringement which could have
a material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
(p) No default exists in the due performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement other
than as a result of defaults in the borrowing arrangements with NBD Bank, or
any other material agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which the
property or assets (tangible or intangible) of the Company is subject or
affected.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or to its knowledge threatened against or involving the
Company. No representation question exists respecting the employees of the
Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, the Company
does not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan
(or any trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, which
could subject the Company to any tax penalty on prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
all material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
-8-
<PAGE> 9
(s) None of the Company, nor any of its employees,
directors, stockholders, or affiliates (within the meaning of the Regulations)
of any of the foregoing has taken or will take directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Registered Securities.
(t) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear
of all liens, charges, claims, encumbrances, pledges, security interests, or
other restrictions or equities of any kind whatsoever other than those referred
to in the Prospectus and liens for taxes not yet due and payable.
(u) Plante & Moran, L.L.P. ("Plante & Moran"), whose
report is filed with the Commission as a part of the Registration Statement,
are independent certified public accountants as required by the Act and the
Regulations.
(v) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all persons or entities
that directly or beneficially own Common Stock, as of the effective date of the
Registration Statement, have agreed not to, directly or indirectly, offer,
offer to sell, sell, grant any option for the sale of, transfer, assign,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into Common Stock, exercisable or exchangeable
for or evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Regulations or otherwise) or dispose
of any interest therein for a period from the date of the Prospectus until
twenty-four (24) months following the date that the Registration Statement
becomes effective, without the prior written consent of National (the "Lock-up
Agreements"). The Company will cause the Transfer Agent (as defined herein) to
place "stop transfer" orders on the Company's stock ledgers in order to effect
the Lock-up Agreements.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Registered
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of its officers,
directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the Commission and the National
Association of Securities Dealers, Inc. (the "NASD").
(x) The Registered Securities have been approved for quotation on the American
Stock Exchange.
(y) Neither the Company nor any of its officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
-9-
<PAGE> 10
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign). The Company's internal accounting controls
are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Regulations) of any
of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company, or (B) purchases from or sells or furnishes
to the Company any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, principal shareholder (as such term is used
in the Prospectus) of the Company, or any affiliate or associate of any of the
foregoing persons or entities.
(aa) The Company is not, and does not intend to conduct
its business in a manner in which it would become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(ab) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to the Underwriters' Counsel (as
defined in Section 4(d) herein) shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby.
(ac) The minute books of the Company have been made
available to the Underwriters and contain a complete summary of all meetings
and actions of the directors and stockholders of the Company, since the time of
its incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ad) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares in this offering other than the Prospectus,
the Registration Statement and the other materials permitted by the Act.
Except as described in the Prospectus, no holders of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company have the right to include any securities issued by
the Company as part of the Registration Statement
-10-
<PAGE> 11
or to require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any securities
of the Company.
(ae) Each of the Company and its subsidiaries maintains
insurance by insurers of recognized financial responsibility of the types and
in the amounts as are prudent, customary and adequate for the business in which
it is engaged, including, but not limited to, insurance covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect. The
Company has no reason to believe that it will not be able to renew existing
insurance coverage with respect to the Company as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business, in either case, at a cost that would not have a
material adverse effect on the financial condition, operations, business,
assets or properties of the Company. The Company has not failed to file any
claims, has no material disputes with its insurance company regarding any
claims submitted under its insurance policies, and has complied with all
material provisions contained in its insurance policies.
2. Purchase, Sale and Delivery of the Registered Securities.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
and each Underwriter, severally and not jointly agrees to purchase from the
Company, at a price equal to $_______________ per share, that number of Shares
set forth in Schedule A opposite the name of such Underwriter, subject to such
adjustment as the Representative in its discretion shall make to eliminate any
sales or purchases of fractional shares, plus any additional numbers of Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares at a price equal to $_______________ per share. The option
granted hereby will expire 45 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on Rule
430A under the Regulations, or (ii) the date of this Agreement if the Company
has elected to rely upon Rule 430A under the Regulations, and may be exercised
in whole or in part from time to time (but not on more than two (2) occasions)
only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Shares upon notice by the
Representative to the Company setting forth the number of Option Shares as to
which the several Underwriters are then exercising the option and the time and
date of payment and delivery for any such Option Shares. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than three full business days after the
exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative
-11-
<PAGE> 12
and the Company. Nothing herein contained shall obligate the Underwriters to
exercise the over-allotment option described above. No Option Shares shall be
delivered unless the Shares shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of National, at 1001
Fourth Avenue, Suite 2200, Seattle, Washington, or at such other place as shall
be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 11:00 a.m. (New York time) on ______________, 1997, or
at such other time and date as shall be agreed upon by the Representative and
the Company, but no more than four (4) business days after the date hereof
(such time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Shares shall be made at the above mentioned
office of National or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates
for the Shares and the Option Shares, if any, shall be made to the Underwriters
against payment by the Underwriters, of the purchase price for the Shares and
the Option Shares, if any, by wire transfer to the Company. In the event such
option is exercised, each of the Underwriters, acting severally and not
jointly, shall purchase that proportion of the total number of Option Shares
then being purchased which the number of Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Shares,
subject in each case to such adjustments as the Representative in their
discretion shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Shares and the Option Shares, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least three (3) business days prior to Closing Date or
the relevant Option Closing Date, as the case may be. The certificates for the
Shares and the Option Shares, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and
sell to the Representative Representative's Warrants at a purchase price of
$0.0001 per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 110,000 shares of Common Stock. The Representative's
Warrants shall expire five (5) years after the effective date of the
Registration Statement and shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement
at a price equaling one hundred fifty percent (150%) of the initial public
offering price of the Shares. The Representative's Warrant Agreement and form
of Warrant Certificate shall be substantially in the form filed as Exhibit 4(b)
to the Registration Statement. Payment for the Representative's Warrants shall
be made on the Closing Date.
-12-
<PAGE> 13
3. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representative deems advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representative, in its sole discretion, deems
advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public
offering.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representative and confirm the
notice in writing, (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement
becomes effective, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Registered Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission
or any state securities commission authority shall enter a stop order or
suspend such qualification at any time, the Company will use its best efforts
to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) in accordance with the
requirements of the Act.
-13-
<PAGE> 14
(d) The Company will give the Representative notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Registered
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether or
not such revised prospectus is required to be filed pursuant to Rule 424(b) of
the Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement to which the Representative or Camhy Karlinsky & Stein LLP
("Underwriters' Counsel") shall reasonably object.
(e) The Company shall endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Registered Securities for offering
and sale under the securities laws of such jurisdictions as the Representative
may reasonably designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or become subject to service of
process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agree that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may reasonably be required by the laws of such jurisdiction to continue
such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Registered Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the
Registered Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
-14-
<PAGE> 15
(g) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations,
which statement need not be audited unless required by the Act, covering a
period of at least 12 consecutive months after the effective date of the
Registration Statement.
(h) During a period of five (5) years after the date
hereof, the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and will make available to its stockholders unaudited quarterly
reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the
Company for each quarter in the form furnished to the
Company's stockholders;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the Company as
at the end of the preceding fiscal year, together with
statements of operations, stockholders' equity, and cash flows
of the Company for such fiscal year, accompanied by a copy of
the certificate thereon of independent certified public
accountants;
(iii) as soon as they are available, copies
of all reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the Nasdaq National Market or any securities
exchange;
(v) every press release and every material news
item or article of interest to the financial community in
respect of the Company or its affairs which was released or
prepared by or on behalf of the Company; and
(vi) any additional information of a public
nature concerning the Company (and any future subsidiaries) or
its businesses which the Representative may reasonably
request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of
-15-
<PAGE> 16
the Company and its subsidiaries are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(i) The Company will maintain a transfer agent (the
"Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a registrar (which may be the same entity as the transfer agent)
for the Common Stock and the Representative's Warrants.
(j) The Company will furnish to the Representative or on
the Representative's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two of
which copies will be signed and will include all financial statements and
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of
duly executed, legally binding and enforceable Lock-up Agreements. On or
before the Closing Date, the Company shall deliver instructions to the Transfer
Agent authorizing it to place appropriate stop transfer orders on the Company's
ledgers.
(l) The Company shall use its best efforts to cause its
officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the
sale of the Registered Securities substantially in the manner, and subject to
the conditions, set forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports,
forms or other documents as may be required (including, but not limited to, a
Form SR as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Regulations, and all such
reports, forms and documents filed will comply as to form and substance with
the applicable requirements under the Act, the Exchange Act, and the
Regulations.
(o) The Company shall cause the Registered Securities to
be quoted on the American Stock Exchange, and for a period of two (2) years
from the date hereof shall use its best efforts to maintain the quotation of
the Registered Securities to the extent outstanding.
-16-
<PAGE> 17
(p) For a period of two (2) years from the Closing Date,
the Company shall furnish to the Representative, at the Company's sole expense,
daily consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective
date of the Registration Statement the Company shall, at the Company's sole
expense, take all necessary and appropriate actions to further qualify the
Company's securities in all jurisdictions of the United States in order to
permit secondary sales of such securities pursuant to the Blue Sky laws of
those jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Moody's OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of nine (9)
months following the effective date of the Registration Statement it will not,
without the prior written consent of National, offer, issue, sell, contract to
sell, grant any option for the sale of or otherwise dispose of any Common
Stock, or securities convertible into Common Stock, except for the issuance of
the Option Shares, the Representative's Warrants, and shares of Common Stock
issued upon the exercise of currently outstanding warrants or options issued
under any stock option plan in effect on the Closing Date, shares of Common
Stock automatically granted pursuant to any stock option plan in effect on the
Closing Date, or shares of Common Stock issued pursuant to any employee stock
purchase plan in effect on the Closing Date.
(t) Until the completion of the distribution of the
Registered Securities, the Company shall not without the prior written consent
of National or Underwriters' Counsel, issue, directly or indirectly any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent
with past practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5)
years from the date hereof, and (ii) the sale to the public of the
Representative's Shares, the Company will not take any action or actions which
may prevent or disqualify the Company's use of Form 1 (or other appropriate
form) for the registration under the Act of the Representative's Shares.
(v) The Company agrees that it shall use its best
efforts, which shall include, but shall not be limited to, the solicitation of
proxies, to elect one (1) designee of National to
-17-
<PAGE> 18
the Company's Board of Directors for a period of five (5) years following the
Closing, provided that such designee is reasonably acceptable to the Company.
(w) The Company agrees that within forty-five (45) days
after the Closing it shall retain a public relations firm which is acceptable
to National. The Company shall keep such public relations firm, or any
replacement, for a period of three (3) years from the Closing. Any replacement
public relations firm shall be retained only with the consent of National.
(x) The Company agrees that any and all future
transactions between the Company and its officers, directors, principal
stockholders and the affiliates of the foregoing persons will be on terms no
less favorable to the Company than could reasonably be obtained in arm's length
transactions with independent third parties, and that any such transactions
also be approved by a majority of the Company's outside independent directors
disinterested in the transaction.
(y) The Company shall prepare and deliver, at the
Company's sole expense, to National within the one hundred and twenty (120) day
period after the later of the effective date of the Registration Statement or
the latest Option Closing Date, as the case may be, one bound volume containing
all correspondence with regulatory officials, agreements, documents and all
other materials in connection with the offering as requested by the
Underwriters' Counsel.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and each Option Closing Date (to the extent not previously paid)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection
with the preparation, duplication, printing, filing, delivery and mailing
(including the payment of postage with respect thereto) of the Registration
Statement and the Prospectus and any amendments and supplements thereto and the
duplication, mailing (including the payment of postage with respect thereto)
and delivery of this Agreement, the Agreement Among Underwriters, the Selected
Dealers Agreements, the Powers of Attorney, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the certificates representing the Registered Securities, (iv) the qualification
of the Registered Securities under state or foreign securities or "Blue Sky"
laws and determination of the status of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and reasonable disbursements and fees of counsel in connection
-18-
<PAGE> 19
therewith, (v) advertising costs and expenses, including but not limited to the
costs and expenses incurred by the Company and the Representative in connection
with the "road show," information meetings and presentations, bound volumes and
prospectus memorabilia and "tombstone" advertisement expenses, (vi) experts,
(vii) fees and expenses of the transfer agent and registrar, (viii) the fees
payable to the Commission and the NASD, (ix) issue and transfer taxes, if any
and (x) the fees and expenses incurred in connection with the listing of the
Common Stock on the Nasdaq National Market or any other market or exchange.
(b) If this Agreement is terminated by the Underwriters
in accordance with the provisions of Section 6, Section 10(a) or Section 12,
the Company shall reimburse and indemnify the Representative for all of its
actual out-of-pocket expenses on an accountable basis, including the fees and
disbursements of Underwriters' Counsel, less any amounts already paid pursuant
to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Shares, $25,000 of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Representative on
the Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing
Date, as the case may be; the accuracy on and as of the Closing Date or Option
Closing Date, if any, of the statements of officers of the Company made
pursuant to the provisions hereof; and the performance by the Company on and as
of the Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York City time, on the date of this
Agreement or such later date and time as shall be consented to in writing by
the Representative, and, at Closing Date and each Option Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied with
to the reasonable satisfaction of
-19-
<PAGE> 20
Underwriters' Counsel. If the Company has elected to rely upon Rule 430A of
the Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the Regulations within the prescribed time period, and prior to
Closing Date the Company shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Regulations.
(b) The Representative shall not have advised the
Company that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material,
or omits to state a fact which, in the Representative's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Representative's reasonable
opinion, is material, or omits to state a fact which, in the Representative's
reasonable opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriters
shall have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Registered
Securities, the Registration Statement, the Prospectus and other related
matters as the Representative may request and Underwriters' Counsel shall have
received from the Company such papers and information as they request to enable
them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have
received the favorable opinion of Dickinson, Wright, Moon, Van Dusen & Freeman
("Dickinson, Wright"), counsel to the Company, dated the Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (B)
is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character
of its operations requires such qualification or
licensing, and (C) to the best of such counsel's
knowledge, has all requisite corporate power and
authority and has obtained any and all necessary
authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all
governmental or regulatory officials and bodies
(including, without limitation, those having
jurisdiction over environmental or similar matters), to
own or lease its properties and conduct its business as
described in the Prospectus.
-20-
<PAGE> 21
(ii) except as described in the Prospectus, and
to the best of such counsel's knowledge after reasonable
investigation, the Company does not own an interest in
any corporation, limited liability company, partnership,
joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued
and outstanding capitalization as set forth in the
Prospectus, and any amendment or supplement thereto,
under "Capitalization" and "Description of Capital
Stock," and to the knowledge of such counsel, the
Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other
securities, except for this Agreement, the
Representative's Warrant Agreement, and as described in
the Prospectus. The Registered Securities and all other
securities issued or issuable by the Company conform in
all material respects to the statements with respect
thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of
the Company have been duly authorized and validly issued
and are fully paid and nonassessable; the holders
thereof are not subject to personal liability by reason
of being such holders; and none of such securities were
issued in violation of the preemptive rights of any
holders of any security of the Company. The Registered
Securities to be sold by the Company hereunder and under
the Representative's Warrant Agreement are not and will
not be subject to any preemptive or other similar rights
of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with their
terms, will be validly issued, fully paid and
nonassessable and will conform in all material respects
to the description thereof contained in the Prospectus;
the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to
be taken for the authorization, issue and sale of the
Registered Securities has been duly and validly taken;
and the certificates representing the Registered
Securities are in due and proper form. The
Representative's Warrants constitute valid and binding
obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and
type of securities of the Company called for thereby
(except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or
contribution may be limited by applicable law). Upon
the issuance and delivery pursuant to this Agreement of
the Registered Securities to be sold by the Company, the
Company will convey, against payment therefor as
provided herein, to the Underwriters and the
Representative, respectively, good and marketable title
-21-
<PAGE> 22
to the Registered Securities free and clear of all liens
and other encumbrances;
(iv) the Registration Statement is effective
under the Act, and, if applicable, filing of all pricing
information has been timely made in the appropriate form
under Rule 430A, and no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement
or Prospectus or any part of any thereof or suspending
the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such
counsel's knowledge, threatened or contemplated under
the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the
financial statements and other financial and statistical
data included therein as to which no opinion need be
rendered) comply as to form in all material respects
with the requirements of the Act and the Regulations.
Such counsel shall state that such counsel has
participated in conferences with officers and other
representatives of the Company and the Representative
and representatives of the independent public
accountants for the Company, at which conferences the
contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and any amendments or
supplements thereto were discussed, and, although such
counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus,
and any amendments or supplements thereto, on the basis
of the foregoing, no facts have come to the attention of
such counsel which lead them to believe that either the
Registration Statement or any amendment thereto, at the
time such Registration Statement or amendment became
effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such
opinion contained any untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading (it being understood that such
counsel need express no opinion with respect to the
financial statements and schedules and other financial
and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus,
and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge
after reasonable investigation, (A) there are no
agreements, contracts or other documents required by the
Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than
-22-
<PAGE> 23
those described in the Registration Statement and the
Prospectus and filed as exhibits thereto; (B) the
descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company
is a party or by which it is bound are accurate in all
material respects and fairly represent the information
required to be shown by Form S-1; (C) there is not
pending or threatened against the Company any action,
arbitration, suit, proceeding, litigation, governmental
or other proceeding (including, without limitation,
those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened
against the Company which (x) is required to be
disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all
material respects), (y) questions the validity of the
capital stock of the Company or this Agreement, or the
Representative's Warrant Agreement, or of any action
taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; and (D) there is
no action, suit or proceeding pending or threatened
against the Company before any court or arbitrator or
governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which
may result in a material adverse change in the financial
condition, business, affairs, stockholders' equity,
operations, properties, business or results of
operations of the Company, which could adversely affect
the present or prospective ability of the Company to
perform its obligations under this Agreement or the
Representative's Warrant Agreement or which in any
manner draws into question the validity or
enforceability of this Agreement or the Representative's
Warrant Agreement;
(vii) the Company has the corporate power and
authority to enter into each of this Agreement and the
Representative's Warrant Agreement and to consummate the
transactions provided for therein; and each of this
Agreement and the Representative's Warrant Agreement has
been duly authorized, executed and delivered by the
Company. Each of this Agreement and the
Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other
party thereto, constitutes a legal, valid and binding
obligation of the Company enforceable against the
Company in accordance with its terms (except as the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or
affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none
of the Company's execution, delivery or performance of
this Agreement and the Representative's Warrant
Agreement, the consummation by the Company of the
-23-
<PAGE> 24
transactions contemplated herein or therein, or the
conduct of the Company's business as described in the
Registration Statement, the Prospectus, and any
amendments or supplements thereto conflicts with or
results in any breach or violation of any of the terms or
provisions of, or constitutes a default under, or result
in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the
Company pursuant to the terms of (A) the articles of
incorporation or by-laws of the Company, as amended, (B)
any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or
instrument known to such counsel to which the Company is
a party or by which it is bound, or (C) any federal,
state or local statute, rule or regulation applicable to
the Company or any judgment, decree or order known to
such counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or
body (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company
or any of its activities or properties;
(viii) no consent, approval, authorization or
order, and no filing with, any court, regulatory body,
government agency or other body (other than such as may
be required under Blue Sky laws, as to which no opinion
need be rendered or under federal securities laws, as to
which no opinion need be rendered pursuant to this
subsection (viii) is required in connection with the
issuance of the Registered Securities pursuant to the
Prospectus, and the Registration Statement, the
performance of this Agreement and the Representative's
Warrant Agreement, and the transactions contemplated
hereby and thereby;
(ix) to the best of such counsel's knowledge
after reasonable investigation, the properties and
business of the Company conform in all material respects
to the description thereof contained in the Registration
Statement and the Prospectus;
(x) to the best knowledge of such counsel, and
except as disclosed in Registration Statement and the
Prospectus, the Company is not in breach of, or in
default under, any term or provision of any license,
contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement,
stockholders' agreement, note, loan or credit agreement
or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which
the Company is bound or to which the property or assets
-24-
<PAGE> 25
(tangible or intangible) of the Company is subject; and
the Company is not in violation of any term or provision
of its articles of incorporation or by-laws, as amended,
and to the best of such counsel's knowledge after
reasonable investigation, not in violation of any
franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
(xi) the statements in the Prospectus under
"Dividend Policy," "Description of Capital Stock," and
"Shares Eligible for Future Sale" have been reviewed by
such counsel, and insofar as they refer to statements of
law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all
material respects;
(xii) the Common Stock has been accepted for
quotation on the American Stock Exchange;
(xiii) to the best of such counsel's knowledge
and based upon a review of the outstanding securities
and the contracts furnished to such counsel by the
Company, no person, corporation, trust, partnership,
association or other entity has the right to include
and/or register any securities of the Company in the
Registration Statement, require the Company to file any
registration statement or, if filed, to include any
security in such registration statement;
(xiv) assuming due execution by the parties
thereto other than the Company, each Lock-up Agreement
is a legal, valid and binding obligation of the party
thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by
applicable law);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Michigan, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if
-25-
<PAGE> 26
requested. The opinion of such counsel shall state that knowledge shall not
include the knowledge of a director or officer of the Company who is affiliated
with such firm in his or her capacity as an officer or director of the Company.
The opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Dickinson, Wright, counsel to the
Company, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of such
Option Closing Date the statements made by Dickinson, Wright in their opinion
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the
Option Closing Date, if any, Underwriters' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require for
the purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness which default has not been waived; (iv) the Company
shall not have issued any securities (other than the Registered Securities) or
declared or paid any dividend or made any distribution in respect of its
capital stock of any class and there has not been any change in the capital
stock, or any material increase in the debt (long or short term) or liabilities
or obligations of the Company (contingent or otherwise); (v) no material amount
of the assets of the Company shall have been pledged or mortgaged, except as
set forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
respective properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except
as set forth in the Registration Statement and Prospectus; and (vii) no stop
order shall have been issued under the Act and no proceedings therefor shall
have been initiated, threatened or contemplated by the Commission.
-26-
<PAGE> 27
(g) At each of the Closing Date and each Option Closing
Date, if any, the Underwriters shall have received a certificate of the Company
signed on behalf of the Company by the principal executive officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be, to
the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if
made on and as of the Closing Date or the Option Closing
Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be
performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness
of the Registration Statement or any part thereof has
been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each
of such person's knowledge after due inquiry, are
contemplated or threatened under the Act;
(iii) The Registration Statement and the
Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and
information required by the Act to be included therein,
and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein not misleading
and neither the Preliminary Prospectus or any
supplement, as of their respective dates, thereto
included any untrue statement of a material fact or
omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading; and
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement
and the Prospectus, (a) the Company has not incurred up
to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has
not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has
not entered into any transactions not in the ordinary
course of business; (d) there has not been any change in
the capital stock or material increase in long-term debt
or any increase in the short-term borrowings (other than
any increase in the short-term borrowings in the
ordinary course of business) of the Company, (e) the
Company has not sustained any loss or damage to its
property or assets, whether or not
-27-
<PAGE> 28
insured, (f) there is no litigation which is pending or
threatened (or circumstances giving rise to same) against
the Company or any affiliated party of any of the
foregoing which is required to be set forth in an amended
or supplemented Prospectus which has not been set forth,
and (g) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has
not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(i) At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' Counsel, from Plante &
Moran:
(i) confirming that they are independent
certified public accountants with respect to the Company
within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the
Company included in the Registration Statement comply as
to form in all material respects with the applicable
accounting requirements of the Act and the Regulations
thereunder and that the Representative may rely upon the
opinion of Plante & Moran with respect to the financial
statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited
review which included a reading of the latest available
unaudited interim financial statements of the Company
(with an indication of the date of the latest available
unaudited interim financial statements), a reading of
the latest available minutes of the stockholders and
board of directors and the various committees of the
board of directors of the Company, consultations with
officers and other employees of the Company responsible
for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the
unaudited financial statements and supporting schedules
of the Company included in the Registration Statement,
if any, do not comply as to form in all material
respects with the applicable accounting requirements of
the Act and the
-28-
<PAGE> 29
Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited
financial statements of the Company included in the
Registration Statement, or (B) at a specified date not
more than five (5) days prior to the effective date of
the Registration Statement, there has been any change in
the capital stock or material increase in long-term debt
of the Company, or any material decrease in the
stockholders' equity or net current assets or net assets
of the Company as compared with amounts shown in the
November 30, 1996 balance sheet included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there
was any change or decrease, setting forth the amount of
such change or decrease.
(iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of
revenues and earnings, statements and other financial
information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be
derived from the general accounting records, including
work sheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the
results obtained from the application of specified
readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards)
set forth in the letter and found them to be in
agreement; and
(v) statements as to such other material matters
incident to the transaction contemplated hereby as the
Representative may reasonably request.
(j) At the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received from Plante & Moran a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (iv).
(k) On each of Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Registered Securities.
-29-
<PAGE> 30
(l) No order suspending the sale of the Registered
Securities in any jurisdiction designated by the Representative pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(m) On or before the Closing Date, the Company shall
have executed and delivered to the Representative, (i) the Representative's
Warrant Agreement, substantially in the form filed as Exhibit 4(b), to the
Registration Statement, in final form and substance satisfactory to the
Representative, and (ii) the Representative's Warrants in such denominations
and to such designees as shall have been provided to the Company.
(n) On or before Closing Date, the Common Stock shall
have been duly approved for quotation on American Stock Exchange.
(o) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or the relevant
Option Closing Date, as the case may be, is not so fulfilled, the
Representative may terminate this Agreement or, if the Representative so elect,
they may waive any such conditions which have not been fulfilled or extend the
time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 7 "Underwriters" shall
include the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, from and against any and
all loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); or (B) in any application or other document or communication (in
this Section 7 collectively called "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company in any jurisdiction in order to qualify the Registered
-30-
<PAGE> 31
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, The Nasdaq Stock Market, Inc. or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers, agents and counsel of the Company who has signed the
Registration Statement, and each other person, if any, who controls the
Company, within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company to the Underwriters but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter or the Representative expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this Offering. The Company acknowledges that the statements with respect to
the public offering of the Registered Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters or the
Representative for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 7, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise or which it may
have under this Section 7, except to the extent that it has been prejudiced in
any material respect by such failure). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the
-31-
<PAGE> 32
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of one additional counsel shall be borne by the indemnifying parties.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of this Section 7 provide for indemnification
in such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Registered Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Registered Securities (before deducting expenses other than
underwriting discounts and commissions) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth in
the table on the Cover Page of the
-32-
<PAGE> 33
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Registered Securities
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, the Company, any controlling person of
either the Underwriter or the Company, and shall survive termination of this
Agreement or the issuance and delivery of the Registered Securities to the
Underwriters and the Representative, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m.,
New York City time, on the date hereof. For purposes of this Section 9, the
Registered Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the
-33-
<PAGE> 34
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Registered
Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representative's reasonable opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery of
the Registered Securities; or (viii) if there shall have been such a material
adverse change in the prospects or conditions of the Company, or such material
adverse change in the general market, political or economic conditions, in the
United States or elsewhere as in the Representative's judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the
Registered Securities.
(b) If this Agreement is terminated by the
Representative in accordance with any of the provisions of Section 6, Section
10(a) or Section 12, the Company shall promptly reimburse and indemnify the
Underwriters pursuant to Section 5(b) hereof. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Registered Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed
-34-
<PAGE> 35
upon and upon the terms herein set forth. If, however, the Representative
shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the total number of Shares to be purchased on such date, this Agreement shall
terminate without liability on the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve
any defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result
in a termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Registered Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section
7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, 1001 Fourth Avenue, Suite
2200, Seattle, Washington 98154, Attention: Steven A. Rothstein, with a copy,
which shall not constitute notice, to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attention: Alan I. Annex, Esq.
Notices to the Company shall be directed to the Company at Riviera Die & Tool,
Inc., 5460 Executive Parkway SE, Grand Rapids, Michigan 49512, Attention:
Kenneth K. Keith, with a copy, which shall not constitute notice, to Dickinson,
Wright, Moon, Van Dusen & Freeman, 200 Ottowa Avenue, N.W., Suite 900, Grand
Rapids, Michigan 49503, Attention: Stuart F. Cheney, Esq.
-35-
<PAGE> 36
14. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Registered Securities from any
Underwriter shall be deemed to be a successor by reason merely of such
purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof.
This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
-36-
<PAGE> 37
If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
RIVIERA TOOL COMPANY
By:________________________________________
Name: Kenneth K. Rieth
Title: President
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:_____________________________________________________
Name: Steven A. Rothstein
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A
hereto.
-37-
<PAGE> 38
SCHEDULE A
NUMBER OF SHARES
NAME OF UNDERWRITERS TO BE PURCHASED
National Securities Corporation
TOTAL . . . . . . . . . . . . . . . . . .
SCH. A-1
<PAGE> 1
EXHIBIT 4(b)
DRAFT 2/10/97
RIVIERA TOOL COMPANY
AND
NATIONAL SECURITIES CORPORATION
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF FEBRUARY ___, 1997
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT dated as of February ___, 1997, between
RIVIERA TOOL COMPANY, a Michigan corporation (the "Company"), and NATIONAL
SECURITIES CORPORATION and its assignees or designees (each hereinafter
referred to variously as a "Holder" or "Representative").
W I T N E S S E T H :
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") between the Representative and the
Company, to act as the representative of the several underwriters listed
therein (the "Underwriters") in connection with the Company's proposed public
offering of 1,100,000 shares of common stock of the Company, no par value, (the
"Common Stock"), at a public offering price of $_____ per share (the "Public
Offering").
WHEREAS, pursuant to the Underwriting Agreement, the Company proposes to
issue warrants to the Representative to purchase up to an aggregate of 110,000
shares of Common Stock (the "Representative's Warrants").
WHEREAS, the Representative's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the Underwriters' compensation in connection with, the
Representative acting as the representative pursuant to the Underwriting
Agreement.
<PAGE> 3
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of Eleven dollars ($11.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Representative is hereby collectively granted the right to
purchase, at any time from February ___, 1998 until 5:30 p.m., New York time,
on February ___, 2002 (5 years from the Effective Date of the registration
statement and any supplement thereto, on Form S-1, No. 333-14187), at which
time the Representative's Warrants expire, up to an aggregate 110,000 shares of
Common Stock (subject to adjustment as provided in Section 8 hereof), at an
initial exercise price (subject to adjustment as provided in Section 11 hereof)
of $____ (150% of the Public Offering price) (the "Exercise Price").
2. Representative's Warrant Certificates. The Representative's warrant
certificates (the "Warrant Certificates") delivered and to be delivered
pursuant to this Agreement shall be in the form set forth in Exhibit A,
attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted by this
Agreement.
3. Registration of Warrant. The Representative's Warrants shall be
numbered and shall be registered on the books of the Company when issued.
-2-
<PAGE> 4
4. Exercise of Representative's Warrant.
4.1 Method of Exercise. The Representative's Warrants initially are
exercisable at the Exercise Price (subject to adjustment as provided in Section
11 hereof) per Representative's Warrant set forth in Section 8 hereof payable
by certified or official bank check in New York Clearing House funds. Upon
surrender of a Representative's Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Exercise Price
for the shares of Common Stock purchased at the Company's principal offices in
Michigan (presently located at 5460 Executive Parkway S.E., Grand Rapids,
Michigan 49512) the registered holder of a Representative's Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Representative's Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to fractional
shares of Common Stock underlying the Representative's Warrants). In the case
of the purchase of less than all of the shares of Common Stock purchasable
under any Representative's Warrant Certificate, the Company shall cancel said
Representative's Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Representative's Warrant Certificate of like tenor
for the balance of the shares of Common stock purchasable thereunder.
4.2 Exercise by Surrender of Representative's Warrant. In addition to the
method of payment set forth in Section 4.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Representative's Warrants shall have
the right at any time and from time to time to exercise the Representative's
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 4.1 in exchange for the number of shares of Common
Stock equal to the product of (x) the number of shares of Common Stock as to
which the Representative's Warrants are being exercised, multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined in Section
9.3(e) hereof) of the shares of Common Stock minus the Exercise Price of the
shares of Common Stock and the denominator of which is the Market Price per
share of Common Stock. Solely for the purposes of this Section 4.2, Market
Price shall be calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Company pursuant to Section
15 hereof ("Notice Date") or (ii) as the average of the Market Price for each of
the five trading days immediately preceding the Notice Date, whichever of (i) or
(ii) results in a greater Market Price.
5. Issuance of Certificates. Upon the exercise of the Representative's
Warrant, the issuance of certificates for shares of Common Stock, properties or
rights underlying such
-3-
<PAGE> 5
Representative's Warrant shall be made forthwith (and in any event within five
(5) business days thereafter) without charge to the Holder thereof including,
without limitation, any tax, other than income taxes which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 7 and 9 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in
a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Representative's Warrant Certificates and the certificates
representing the shares of Common Stock or other securities, property or rights
issued upon exercise of the Representative's Warrant shall be executed on
behalf of the Company by the manual or facsimile signature of the then present
President or any Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the
then present Secretary or any Assistant Secretary of the Company.
Representative's Warrant Certificates shall be dated the date of execution by
the Company upon initial issuance, division, exchange, substitution or
transfer.
6. Transfer of Representative's Warrant. The Representative's Warrant
shall be transferable only on the books of the Company maintained at its
principal office, where its
-4-
<PAGE> 6
principal office may then be located, upon delivery thereof duly endorsed by
the Holder or by its duly authorized attorney or representative accompanied by
proper evidence of succession, assignment or authority to transfer. Upon any
registration transfer, the Company shall execute and deliver the new
Representative's Warrant to the person entitled thereto.
7. Restriction On Transfer of Representative's Warrant. The Holder of a
Representative's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Representative's Warrant is being acquired as an investment and
not with a view to the distribution thereof, and that the Representative's
Warrant may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for the term of the Representative's Warrant,
except to officers or partners of the Underwriters, or by operation of law.
8. Exercise Price and Number of Securities. Except as otherwise provided
in Section 10 hereof, each Representative's Warrant is exercisable to purchase
one share of Common Stock at an initial exercise price equal to the Exercise
Price. The Exercise Price and the number of shares of Common Stock for which
the Representative's Warrant may be exercised shall be the price and the number
of shares of Common Stock which shall result from time to time from any and all
adjustments in accordance with the provisions of Section 11 hereof.
9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each
Representative's Warrant Certificate and each certificate representing shares
of Common Stock and any of the other securities issuable upon exercise of the
Representative's Warrant (collectively, the
-5-
<PAGE> 7
"Warrant Shares") shall bear the following legend unless (i) such
Representative's Warrant or Warrant Shares are distributed to the public or
sold to the underwriters for distribution to the public pursuant to Section 9
hereof or otherwise pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company has
received an opinion of counsel, in form and substance reasonably satisfactory
to counsel for the Company, that such legend is unnecessary for any such
certificate:
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND
THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, (II) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH
ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT
REPRESENTED BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
REPRESENTATIVE'S WARRANT AGREEMENT REFERRED TO HEREIN.
9.2 Piggyback Registration. If, at any time commencing after the
effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the
Act (other than in connection with a merger or pursuant to Form S-4 or Form
S-8 or successor form thereto it will give written notice by registered mail, at
least thirty (30) days
-6-
<PAGE> 8
prior to the filing of each such registration statement, to the Holders of the
Warrant Shares of its intention to do so. If any of the Holders of the Warrant
Shares notify the Company within twenty (20) days after mailing of any such
notice of its or their desire to include any such securities in such proposed
registration statement, the Company shall afford such Holders of the Warrant
Shares the opportunity to have any such Warrant Shares registered under such
registration statement. In the event that the managing underwriter for said
offering advises the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without causing a diminution in the offering
price or otherwise adversely affecting the offering, the Company will include
in such registration (a) first, the securities the Company proposes to sell,
(b) second, the Securities held by Motor Wheel Corporation subject to a
Shareholder Agreement dated October 31, 1996, (c) third, the securities held by
the entities that made the demand for registration, (d) fourth, the
Representative's Warrants and/or Warrant Shares requested to be included in
such registration which in the opinion of such underwriter can be sold, pro
rata among the Holders of Representative's Warrants and/or Warrant Shares on
the basis of the number of Representative's Warrants and/or Warrant Shares
requested to be registered by such Holders, and (e) fifth, other securities
requested to be included in such registration.
Notwithstanding the provisions of this Section 9.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 9.2 (irrespective of whether a written request for inclusion of any
such securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but
-7-
<PAGE> 9
prior to the effective date thereof.
9.3 Demand Registration.
(a) At any time commencing one (1) year after the effective date of the
Registration Statement and expiring five (5) years from the effective date of
the Registration Statement, the Holders of the Representative's Warrants and/or
Warrant Shares representing a "Majority" (as hereinafter defined) of the
Representative's Warrants and/or Warrant Shares shall have the right (which
right is in addition to the registration rights under Section 9.2 hereof),
exercisable by written notice to the Company, to have the Company prepare and
file with the Securities and Exchange Commission (the "Commission"), on one
occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale by such Holders and any other
Holders of the Representative's Warrant and/or Warrant Shares who notify the
Company within fifteen (15) days after the Company mails notice of such request
pursuant to Section 9.3(b) hereof (collectively, the "Requesting Holders") of
their respective Warrant Shares for the earlier of (i) six (6) consecutive
months or (ii) until the sale of all of the Warrant Shares requested to be
registered by the Requesting Holders.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Representative's Warrants and/or Warrant Shares
to all other registered Holders of the
-8-
<PAGE> 10
Representative's Warrants and the Warrant Shares within ten (10) days from the
date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 9.2 and
subsection (a) of this Section 9.3, at any time commencing one (1) year after
the effective date of the Registration Statement and expiring five (5) years
from the effective date of the Registration Statement, the Holders of a
Majority of the Representative's Warrants and/or Warrant Shares shall have the
right on one occasion, exercisable by written request to the Company, to have
the Company prepare and file with the Commission a registration statement so as
to permit a public offering and sale by such Holders of their respective
Warrant Shares for the earlier of (i) six (6) consecutive months or (ii) until
the sale of all of the Warrant Shares requested to be registered by such
Holders; provided, however, that the provisions of Section 9.4(b) hereof shall
not apply to any such registration request and registration and all costs
incident thereto shall be at the expense of the Holder or Holders making such
request. If the Holders have exercised their rights under Section 9.3(a) then
the Holders may not exercise their rights under Section 9.3(c) for a period of
six (6) months following the effective date of any registration statement filed
pursuant to Section 9.3(a).
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Shares
within the time period specified in Section 9.4(a) hereof pursuant to the
written notice specified in Section 9.3(a) of the Holders of a Majority of the
Representative's Warrants and/or Warrant Shares, the
-9-
<PAGE> 11
Company, at its option, may repurchase (i) any and all Warrant Shares at the
higher of the Market Price (as defined in Section 9.3(e)) per share of Common
Stock on (x) the date of the notice sent pursuant to Section 9.3(a) or (y) the
expiration of the period specified in Section 9.4(a) and (ii) any and all
Representative's Warrant at such Market Price less the Exercise Price of such
Representative's Warrant. Such repurchase shall be in immediately available
funds and shall close within two (2) days after the later of (i) the expiration
of the period specified in Section 9.4(a) or (ii) the delivery of the written
notice of election specified in this Section 9.3(d).
(e) Definition of Market Price. As used herein, the phrase "Market
Price" at any date shall be deemed to be the last reported sale price, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Units or
Common Stock is listed or admitted to trading, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the average
closing sale price as furnished by the NASD through The Nasdaq Stock Market,
Inc. ("Nasdaq") or similar organization if Nasdaq is no longer reporting such
information, or if the Common Stock is not quoted on Nasdaq, as determined in
good faith by resolution of the Board of Directors of the
-10-
<PAGE> 12
Company, based on the best information available to it.
9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within ninety (90) days of receipt of any demand therefor, and to
have any registration statements declared effective at the earliest possible
time, and shall furnish each Holder desiring to sell Warrant Shares such number
of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions, and excluding
roadshow expenses if the only shares to be registered in such registration
statement are Warrant Shares), fees and expenses in connection with all
registration statements filed pursuant to Sections 9.2 and 9.3(a) hereof
including, without limitation, the Company's legal and accounting fees,
printing expenses, blue sky fees and expenses. The Holder(s) will pay all
costs, fees and expenses (including those of the Company) in connection with
the registration statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Shares included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws
-11-
<PAGE> 13
of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Shares
to be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify each of the Underwriters contained in Section 7 of the
Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense
or liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the Underwriting
Agreement pursuant to which the Underwriters have agreed to
-12-
<PAGE> 14
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Representative's Warrant prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Warrant Shares to be included in any registration statement filed
pursuant to Section 9.3 hereof, or permit any other registration statement to
be or remain effective during the effectiveness of a registration statement
filed pursuant to Section 9.3 hereof (other than registration statements, filed
prior to an exercise of registration rights by a Holder of Representative's
Warrants and/or Warrant Shares pursuant to Section 9.2 hereof), without the
prior written consent of National Securities Corporation or as otherwise
required by the terms of any existing registration rights granted prior to the
date of this Agreement by the Company to the holders of any of the Company's
securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
-13-
<PAGE> 15
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(i) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall enter into an underwriting agreement with the
managing underwriters (in the case of registration rights exercised pursuant to
Section 9.3 hereof), selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting,
which may be the Representative. Such agreement shall be satisfactory in form
and substance to the Company, each Holder and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of that type used
by the managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
-14-
<PAGE> 16
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders and their
intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in reference to
the Representative's Warrants or Warrant Shares, shall mean in excess of fifty
percent (50%) of the then outstanding Representative's Warrants or Warrant
Shares that (i) are not held by the Company, an affiliate, officer, creditor,
employee or agent thereof or any of their respective affiliates, members of
their family, persons acting as nominees or in conjunction therewith or (ii)
have not been resold to the public pursuant to a registration statement filed
with the Commission under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding themselves, the
Warrant Shares held by them, the intended method of sale or other disposition
of such securities, the identity of and compensation to be paid to any
underwriters proposed to be employed in connection with such sale or other
disposition, and such other information as may reasonably be required to effect
the registration of their Warrant Shares.
-15-
<PAGE> 17
(b) Notify the Company, at any time when a prospectus relating to the
Warrant Shares covered by a registration statement is required to be delivered
under the Act, of the happening of any event with respect to such selling
Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
11. Adjustments to Exercise Price and Number of Securities. The Exercise
Price in effect at any time and the number and kind of securities purchased
upon the exercise of the Representative's Warrant shall be subject to
adjustment from time to time only upon the happening of the following events:
11.1 Stock Dividend, Subdivision and Combination. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares
of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
-16-
<PAGE> 18
number of shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed above
shall occur.
11.2 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 11, the number of
Warrant Shares issuable upon the exercise at the adjusted Exercise Price of
each Representative's Warrant shall be adjusted to the nearest number of whole
shares of Common Stock by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Representative's Warrant immediately prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
11.3 Definition of Common Stock. For the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to the Holder a supplemental warrant
agreement providing that the Holder of each Representative's
-17-
<PAGE> 19
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Representative's Warrant) to receive, upon
exercise of such Representative's Warrant, the kind and amount of shares of
stock and other securities and property receivable upon such consolidation or
merger by a holder of the number of shares of Common Stock for which such
Representative's Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant agreement
shall provide for adjustments which shall be identical to the adjustments
provided in Section 11. The above provision of this subsection shall similarly
apply to successive consolidations or mergers.
11.5 No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's Warrant or the
Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any other security
convertible, exercisable, or exchangeable into shares of Common Stock) upon the
direct or indirect conversion, exercise, or exchange of any options, rights,
warrants, or other securities or indebtedness of the Company outstanding as of
the date of this Agreement or granted pursuant to any stock option plan of the
Company in existence as of the date of this Agreement, pursuant to the terms
thereof; or
(c) If the amount of said adjustment shall be less than two cents
-18-
<PAGE> 20
($.02) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least two
cents ($.02) per Representative's Warrant.
11.6 Exchange and Replacement of Representative's Warrant Certificates.
Each Representative's Warrant Certificate is exchangeable, without expense,
upon the surrender thereof by the registered Holder at the principal executive
office of the Company for a new Representative's Warrant Certificate of like
tenor and date representing in the aggregate the right to purchase the same
number of Warrant Shares in such denominations as shall be designated by the
Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Representative's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Representative's Warrant, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
12. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Representative's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by
-19-
<PAGE> 21
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
13. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Representative's Warrant,
such number of shares of Common Stock or other securities, properties or rights
as shall be issuable upon the exercise thereof. Every transfer agent
("Transfer Agent") for the Common Stock and other securities of the Company
issuable upon the exercise of the Representative's Warrant will be irrevocably
authorized and directed at all times to reserve such number of authorized
shares of Common Stock and other securities as shall be requisite for such
purpose. The Company will keep a copy of this Agreement on file with every
Transfer Agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Representative's Warrant. The Company will
supply every such Transfer Agent with duly executed stock and other
certificates, as appropriate, for such purpose. The Company covenants and
agrees that, upon exercise of the Representative's Warrant and payment of the
Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Representative's Warrant shall be outstanding, the Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Representative's Warrant to be listed (subject to official
notice of issuance) on all securities exchanges on which the Common Stock
issued to the public in connection herewith may then be listed and/or quoted on
Nasdaq SmallCap Market.
-20-
<PAGE> 22
14. Notices to Representative's Warrant Holders. Nothing contained in
this Agreement shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the expiration of the Representative's Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
-21-
<PAGE> 23
then in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
15. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder of the Representative's Warrant,
to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in Section 4
hereof or to such other address as the Company may designate by notice to the
Holders.
16. Supplements; Amendments; Entire Agreement. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) contains the
-22-
<PAGE> 24
entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly
signed by the party against whom enforcement of the modification or amendment
is sought. The Company and the Representative may from time to time supplement
or amend this Agreement without the approval of any holders of Representative's
Warrant Certificates (other than the Representative) in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the
Company and the Representative may deem necessary or desirable and which the
Company and the Representative deem shall not adversely affect the interests of
the Holders of Representative's Warrant Certificates.
17. Successors. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
18. Survival of Representations and Warranties. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be
-23-
<PAGE> 25
representations and warranties hereunder. Notwithstanding any investigations
made by or on behalf of the parties to this Agreement, all representations,
warranties and agreements made by the parties to this Agreement or pursuant
hereto shall survive.
19. Governing Law. This Agreement and each Representative's Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Michigan and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
20. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Representative's
Warrant Certificates or Warrant Shares any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriters and any other Holder(s)
of the Representative's Warrant Certificates or Warrant Shares.
-24-
<PAGE> 26
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS OF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
ATTEST: RIVIERA TOOL COMPANY
By:
- -------------------- ------------------------------------
Peter C. Canepa Name: Kenneth K. Rieth
Secretary Title: President
NATIONAL SECURITIES CORPORATION
By:
------------------------------------
Name: Steven A. Rothstein
Title: Chairman
-25-
<PAGE> 27
EXHIBIT A
[FORM OF REPRESENTATIVE'S WARRANT CERTIFICATE]
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, FEBRUARY ___, 2002
Representative's Warrant No.
__________ Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________, or registered assigns,
is the registered holder of Warrants to purchase initially, at any time from
February ___, 1998 until 5:30 p.m., New York time on ____________, 2002
("Expiration Date"), up to _______ shares of fully-paid and non-assessable
common stock, no par value (the "Common Stock") of Riviera Tool Company, a
Michigan corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events, of $_____ per share of Common Stock (the
"Exercise Price") upon surrender of this Representative's Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Representative's Warrant
Agreement dated as of February ___, 1997 among the Company and National
Securities Corporation (the "Warrant Agreement"). Payment of the Exercise
Price shall be made by certified or official bank check in New York Clearing
House funds payable to the order of the Company.
EXH. A-1
<PAGE> 28
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Representative's Warrant evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Representative's Warrant evidenced by this Warrant Certificate are
part of a duly authorized issue of Representative's Warrant issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Representative's Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Representative's
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Representative's Warrant shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Representative's Warrant
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Representative's Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
EXH. A-2
<PAGE> 29
This Warrant Certificate does not entitle any holder thereof to any of the
rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of February ____, 1997.
ATTEST: RIVIERA TOOL COMPANY
By:
- ------------------- ---------------------------
Peter C. Canepa Name: Kenneth K. Rieth
Secretary Title: President
EXH. A-3
<PAGE> 30
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase __________ shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Riviera Tool
Company (the "Company") in the amount of $_____, all in accordance with the
terms of Section 4.1 of the Representative's Warrant Agreement dated as of
February ____, 1997 among the Company and National Securities Corporation. The
undersigned requests that a certificate for such securities be registered in
the name of ________________, whose address is _____________________ and that
such certificate be delivered to ___________________, whose address is
_________________, and if said number of shares shall not be all the shares
purchasable hereunder, that a new Warrant Certificate for the balance of the
shares purchasable under the within Warrant Certificate be registered in the
name of the undesigned warrantholder or his assignee as below indicated and
delivered to the address stated below.
Dated:
----------------
(Signature must conform in
all respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:
--------
----------------------------
--------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:
----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-4
<PAGE> 31
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER
DESIRES TO TRANSFER THE WARRANT CERTIFICATE.)
FOR VALUE RECEIVED ______________ here sells, assigns and transfers unto
[NAME OF TRANSFEREE] this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
____________ Attorney, to transfer the within Warrant Certificate on the books
of the within-named Company, with full power of substitution.
Dated:
-------------
Signature:
-------------------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant
Certificate.)
Address:
-------
------------------------------
----------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:
----------------------------------------------------------
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
EXH. A-5
<PAGE> 32
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.2]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase _________ Shares all in accordance with
the terms of Section 4.2 of the Underwriter's Warrant Agreement dated as of
February ____, 1997 between Riviera Tool Company and National Securities
Corporation. The undersigned requests that certificates for such securities
be registered in the name of ______________ whose address is _________________
and that such certificates be delivered to _______________ whose address
is _________________.
Dated:
Signature______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
Address:_______________________________
_______________________________________
_______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
EXH. A-6
<PAGE> 1
EXHIBIT 5
[DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMEN LETTERHEAD]
February 24, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Riviera Tool Company Registration Statement
on Form S-1 Registration No. 333-14187
Ladies and Gentlemen
We are acting as counsel for Riviera Tool Company, a Michigan
corporation ("Riviera"), in connection with its initial public offering (the
"Offering"), of its common stock, without par value (the "Common Stock"),
pursuant to the above-captioned registration statement (the "Registration
Statement").
In preparation for rendering our opinions expressed below, we have
examined the originals or copies, certified to our satisfaction, of such
corporate records and other documents and certificates as we deemed
necessary.
Based upon the foregoing, we are of the opinion that:
1. Riviera is a corporation duly organized and validly existing
under and pursuant to the laws of the State of Michigan.
2. The shares of Riviera's Common Stock covered by the
Registration Statement, when issued and sold pursuant to the Offering, will be
duly authorized, fully paid and nonassessable.
Exhibits 5 and 23(b)
<PAGE> 2
Securities and Exchange Commission
February 24, 1997
Page 2
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and to the use of our firm name under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
DICKINSON, WRIGHT, MOON,
VAN DUSEN & FREEMAN
SFC/jle
<PAGE> 1
EXHIBIT 10(f)
[LASALLE BANKS LETTERHEAD]
February 7, 1997
Mr. Peter Canepa
Chief Financial Officer
Riviera Tool Company
5460 Executive Parkway SE
Grand Rapids, MI 49512
Dear Pete:
On behalf of LaSalle National Bank (the "Bank"), I am pleased to present this
proposal to Riviera Tool Company (the "Company").
1. Revolving Line of Credit
Amount: Up to $8,000,000.00 (Eight Million Dollars),
availability subject to advance formula
(see below).
Maturity: December 1, 1998
Repayment: Interest - Monthly on the first of each month,
for Prime based options, commencing
the first of the month following
closing.
For LIBOR priced options, interest
shall be due at the maturity of the
tenor chosen
Principal - Revolving, in full at December 1,
1998.
<PAGE> 2
February 7, 1997
Mr. Peter Canepa
Page 3
Interest Rate: Company's opinion of Bank Prime Rate
plus 1% or the yield on U.S. Treasury
Notes Maturing 5-years from date of
closing plus 250 Basis Points.
Commitment Fee: 1%, ($32,500.00) payable at closing.
Purpose: To pay off existing bank debt.
III. Collateral: First lien position on all assets of
Company.
IV. Guaranty: Company shall cause Kenneth Rieth to
provide an unconditional guaranty of
$2,000,000.
V. General Conditions
* Company's deposit accounts, including a lockbox into
which all collections of receivables shall be deposited
and applied to the outstanding principal balance of the
line of credit, shall be maintained at Bank.
* Company shall enter into a Loan Agreement containing
usual and customary general and financial covenants,
approved by Bank's Legal Counsel.
At a minimum, financial covenant requirements would be as
follows:
<TABLE>
<CAPTION>
8/31/97 8/31/98 8/31/99
------- ------- -------
<S> <C> <C> <C>
Current Ratio Minimum 4.0 to 1.0 4.0 to 1.0 4.0 to 1.0
Tangible Net Worth (000) $12,000 $13,250 $14,500
EBITDA/Total Debt Service >3.0 to 1.0 Same Same
Maximum Total Unsub Liabilities/ 1.5 to 1.0 1.45 to 1.0 1.40 to 1.0
Tangible Net Worth
Minimum Working Capital (000) $ 7,000 $ 7,000 $ 7,000
Minimum EBITDA/Interest >2.75 to 1.0 Same Same
Capital Expenditure Limitation $1,000,000 Same Same
</TABLE>
* Company shall pay all of Banks usual and customary fees
and expenses incurred in conducting its due diligence
and in documenting the transaction, including but not
limited to legal fees, field audit fees, closing fees,
etc.
<PAGE> 3
February 7, 1997
Mr. Peter Canepa
Page 2
Interest Rate: Beginning March 1, 1998, at Company's option
based on the following schedule:
EBIT* Prime LIBOR
<$500,000 +1.0 +300 b.p.
>$500,000 & <$1,500,000 +.375 +250 b.p.
>$1,500,000 -.25 +200 b.p.
* as measured for each six month period ending February 28 and
August 31. Through February 28, 1998 line of credit borrowings
shall bear interest at Prime + 1.00% or LIBOR +300 Basis
Points. LIBOR borrowings must be in minimums of $1,000,000.
Fee: 1/2% on unused portion, payable quarterly in
arrears.
Advance Formula: Availability under the line would be
governed by the Advance Formula which shall
be equal to 80% of Eligible accounts
receivable and 40% of Eligible unbilled
contracts in process and inventory
(with a maximum advance against unbilled
contracts in process and inventory of
$2,000,000).
Purpose: Accounts receivable and contracts in process
financing.
II. Term Loan
Amount: Up to $3,250,000 (Three Million Two Hundred
and Fifty Thousand Dollars), not to exceed
80% of Forced Liquidation Value of appraised
value of equipment.
Repayment: Six monthly principal installments of
$54,167.00 each, plus interest, on the first
of each month, commencing on the first of the
month following closing.
<PAGE> 4
February 7, 1997
Mr. Peter Canepa
Page 4
* Eligible accounts receivable shall be defined as those remaining
unpaid 90 days or less from date of original invoice, are not due
from a related entity and which have less than 25% of the total
amount due from any single customer over 90 days;
* Eligible contracts in process shall exclude the amount
attributable to selling, general, administrative and interest
expenses;
* Company must complete its Initial Public Offering with minimum
net proceeds to the Company of $7,175,000 simultaneously with or
prior to Bank funding;
* At the end of each week, Company shall provide to Bank a
Borrowing Base Certificate which provides, at a minimum, an
accounts receivables aging, the listing of any accounts subject
to the "25%" rule, inventory, Contracts in Process and,
borrowings outstanding, etc;
* Company shall provide Bank with monthly internally prepared
financial statements and annual audited statements prepared by
an independent certified public accounting firm acceptable to the
Bank;
* Company shall pay and provide evidence of payment to LaSalle,
within 10-days of closing:
1) Any delinquent or currently due taxes.
2) All past due rents.
3) Sufficient accounts payable to bring all payables within
stated terms.
* Company shall cause First Chicago NBD to:
1) Enter into a "Blocked Account" agreement which must clearly
state that any collections of accounts receivable or other
funds that are received by First Chicago NBD are collateral
of LaSalle National Bank and are to be remitted directly to
LaSalle to be applied to any outstanding balance of the line
of credit.
2) Release the pledge of Company's stock pledged to First
Chicago NBD.
<PAGE> 5
February 7, 1997
Mr. Peter Canepa
Page 5
3) Agree at or before closing to release the Company, Riviera
Holding Company or Ken Rieth of any and all liabilities to
First Chicago NBD.
Please indicate your acceptance of this offer by signing below and returning the
original of this letter to LaSalle by February 14, 1997. If the original of
the letter is not received in our office by 5:00 P.M. on that day, this offer
shall be null and void.
We are ready to proceed quickly to close these credit facilities based on the
foregoing. We intend to begin preparation of closing documents immediately.
In the event that funding does not occur, it shall be our mutual understanding
that the Company shall pay all costs and expenses incurred by the Bank in
connection with this commitment.
Please let us know how you would like to proceed. We look forward to working
with you, Ken and Riviera.
Sincerely,
/s/ David W. Edwards
David W. Edwards
Vice President
DWE/dmo
RIVIERA TOOL COMPANY
Accepted and agreed to this 7th day of February, 1997
By: /s/ Kenneth K. Rieth
--------------------------
Kenneth K. Rieth
Its: President
<PAGE> 1
EXHIBIT 10(g)
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated April 20, 1988
- --------------------------------------------------------------------------------
R.D.T., INC.
AND
NBD GRAND RAPIDS, N.A.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C>
I. DEFINITIONS ................................................. 1
II. WORKING CAPITAL REVOLVING CREDIT ............................ 4
2.1 Loan ................................................... 4
2.2 Use of Proceeds ........................................ 5
2.3 Payment of Working Capital Revolving Credit Note ....... 5
2.4 Interest ............................................... 5
2.5 Arrangement Fee and Commitment Fee ..................... 5
2.6 Facility Fee ........................................... 5
III. FIXED ASSET REVOLVING CREDIT ................................ 6
3.1 Loan ................................................... 6
3.2 Use of Proceeds ........................................ 6
3.3 Payment of Fixed Asset Revolving Credit Note ........... 6
3.4 Interest ............................................... 6
3.5 Commitment Fee ......................................... 7
3.6 Conversion to Term Loan ................................ 7
IV. SECURITY .................................................... 7
V. WARRANTIES AND REPRESENTATIONS .............................. 8
5.1 Corporate Existence and Power .......................... 8
5.2 Subsidiaries ........................................... 8
5.3 Corporate Authority .................................... 8
5.4 Binding Effect ......................................... 9
5.5 Litigation ............................................. 9
5.6 Consents, Etc .......................................... 9
5.7 Taxes .................................................. 9
5.8 Title to Properties .................................... 9
5.9 Financial Condition .................................... 9
5.10 Use of Loan Proceeds ................................... 10
5.11 Other Agreements ....................................... 10
5.12 Employee Retirement Income Security Act ................ 10
VI. COVENANTS ................................................... 11
6.1 Affirmative Covenants ................................. 11
(a) Preservation of Corporate Existence ............... 11
(b) Maintenance and Access to Books and Records ....... 11
(c) Compliance with Laws, Etc ......................... 11
(d) Maintenance of Insurance .......................... 11
(e) Reporting Requirements ............................ 11
6.2 Negative Covenants ..................................... 13
(a) Indebtedness ...................................... 13
(b) Liens ............................................. 13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
(c) Sale or Purchase of Assets; Merger, Etc......... 13
(d) Advances........................................ 14
(e) Tangible Net Worth.............................. 14
(f) Leverage Ratio.................................. 14
(g) Working Capital................................. 14
(h) Dividend Distributions, Etc..................... 14
(i) Conduct of Business; Management................. 15
(j) Repayment of Advances from Riviera.............. 15
VII. CONDITIONS PRECEDENT......................................... 15
7.1 Conditions for Disbursements of Initial Loan............ 15
7.2 Conditions for Disbursement of Each Loan................ 17
VIII. DEFAULT...................................................... 18
8.1 Events of Default....................................... 18
8.2 Remedies................................................ 20
IX. MISCELLANEOUS................................................ 21
9.1 Amendments.............................................. 21
9.2 No Waiver; Cumulative Remedies.......................... 21
9.3 Notices................................................. 21
9.4 Expenses................................................ 22
9.5 Reliance on and Survival of Various Provisions.......... 22
9.6 Successors and Assigns.................................. 22
9.7 Governing Law........................................... 22
9.8 Interest Rate Limitation................................ 22
9.9 Integration and Severability............................ 23
9.10 Table of Contents and Headings.......................... 23
EXHIBITS
- --------
Working Capital Revolving Credit Note A
Fixed Asset Revolving Credit Note B
Term Note C
Permitted Liens, Security Interests and Indebtedness D
</TABLE>
-ii-
<PAGE> 4
CREDIT AGREEMENT
THIS AGREEMENT is made this 20th day of April, 1988 between R.D.T., INC.,
a Michigan corporation (hereinafter referred to as "Borrower"), having its
principal offices at 3859 Roger B. Chaffee Drive, S.E., Grand Rapids, Michigan
49508 and NBD GRAND RAPIDS, N.A., a National Banking Association, having its
principal offices at 200 Ottawa Avenue, N.W., Grand Rapids, Michigan 49503
(hereinafter referred to as the "Bank").
WITNESSETH:
WHEREAS the Borrower desires to obtain revolving bank credits in the
aggregate original principal sum not to exceed $7,900,000 in order to repay
existing indebtedness and to provide funds for the Borrower's corporate
purposes; and
WHEREAS the Bank is willing to establish such credit facilities in favor
of the Borrower on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained the parties hereto agree as follows:
ARTICLE I
Definitions
As used herein, the following terms shall have the following meanings:
"Acceptable Accounts Receivable" shall mean those trade accounts
receivable of the Borrower, valued at the face amount thereof, other than those
accounts receivable that are (a) more than 120 days past due, (b) due from any
Affiliate of the Borrower, except that for periods during which an agreement
pursuant to Section 7.1(j) hereof is in effect, accounts receivable from Motor
Wheel Corporation shall not be excluded by reason of this subsection (b), (c)
subject to any known offset, (d) related to goods or services sold which have
been rejected or with respect to which the amount is in dispute, (e) payable by
any person located outside the United States or Canada, or (f) reasonably
deemed by the Bank to be otherwise unacceptable.
"Acceptable Inventory" shall mean inventory of Borrower, valued at the
lower of cost or market, other than inventory that is (a) not readily saleable
or usable in the business of the Borrower, (b) located outside the United
States or Canada, or (c) reasonably deemed by the Bank to be otherwise
unacceptable.
-1-
<PAGE> 5
"Value of Acceptable Contracts in Progress" shall mean the costs incurred
by the Borrower that, in accordance with generally accepted accounting
principles, are allocable to tool and die projects in progress for which there
are binding purchase orders issued to the Borrower by an automotive
manufacturing company, an accepted supplier thereof, or another manufacturing
company acceptable to the Bank, other than projects (a) for or on behalf of an
Affiliate of the Borrower, except that (i) for periods during which an
agreement pursuant to Section 7.1(j) hereof is in effect, purchase orders from
Motor Wheel Corporation shall not be excluded by reason of this subsection (a)
and (ii) purchase orders from Riviera Plastic Products Company shall not be
excluded hereunder where Riviera Plastic Products Company has a binding
purchase order from its customer for said tooling; (b) which have been rejected
or are in dispute; (c) the accounts receivable with respect to which is payable
by any person located outside the United States or Canada; or (d) that are
reasonably deemed by the Bank to be otherwise unacceptable.
"Affiliate" when used with respect to any person, shall mean (a) any
person which, directly or indirectly, controls or is controlled by or is under
common control with such person; (b) any person owning or controlling 10% or
more of the outstanding voting securities of such person; or (c) any officer or
director of such person. For purposes of this definition, "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), with respect to any person, shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise. For purposes of this definition, Motor Wheel
Corporation and Riviera Plastics Products Company shall be considered
Affiliates of the Borrower.
"Borrowing Base" shall mean the sum of (a) 85% of Acceptable Accounts
Receivable; (b) 50% of Acceptable Inventory; and (c) 50% of the Value of
Acceptable Contracts in Progress, but in no event shall this component exceed
$2,000,000.
"Cumulative Net Income" shall mean the net income after taxes of the
Borrower for the period commencing on September l, 1987 through the end of the
most recently completed fiscal year of the Borrower, taken as one accounting
period, all as determined in accordance with generally accepted accounting
principles.
"Current Assets" and "Current Liabilities" shall mean all assets or
liabilities, respectively, which in accordance with generally accepted
accounting principles, should be classified as current assets or current
liabilities, respectively, on a balance sheet.
"Event of Default" shall mean any of the events or conditions described in
Section 8.1.
-2-
<PAGE> 6
"Fixed Asset Revolving Credit Commitment" shall mean the commitment of the
Bank to lend pursuant to Section 3.1.
"generally accepted accounting principles" shall mean generally accepted
accounting principles applied on a basis consistent with that reflected in the
financial statements referred to in Section 5.8.
"Indebtedness" of the Borrower shall mean, as of any date, (a) all
obligations of the Borrower for borrowed money, (b) all obligations which are
secured by any lien or encumbrance existing on property owned by the Borrower
whether or not the obligation secured thereby shall have been assumed by the
Borrower, (c) all obligations as lessee under any lease which, in accordance
with generally accepted accounting principles, is or should be capitalized on
the books of the lessee, (d) the deferred purchase price for goods, property or
services acquired by the Borrower, and all obligations of the Borrower to
purchase goods, property or services where payment therefor is required
regardless of whether or not delivery of such goods or property or the
performance of such services is ever made or tendered, (e) all obligations of
the Borrower to advance funds to, or to purchase property or services from, any
other person in order to maintain the financial condition of the Borrower, (f)
liabilities in respect of unfunded vested benefits under any Plan of the
Borrower, and (g) all obligations of others for which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or in any other capacity, or
in respect of which obligations the Borrower assures a creditor against loss or
agrees to take any action to prevent any such loss (other than endorsements of
negotiable instruments for collection in the ordinary course of business).
"Leverage Ratio" shall mean the ratio of Total Liabilities to Tangible Net
Worth.
"Loan" or "Loans" shall mean any borrowing under Section 2.1 or Section
3.1.
"Notes" shall mean the promissory notes of the Borrower evidencing the
Loans, in substantially the form of Exhibits A, B and C attached hereto, as
amended or modified from time to time together with any promissory note or
notes issued in exchange or replacement therefor. "Note" shall mean any one of
the Notes.
"person" shall include an individual, a corporation, an association, a
partnership, a trust or estate, a joint stock company, an unincorporated
organization, a joint venture, a government (foreign or domestic), and any
agency or political subdivision thereof, or any other entity.
"Plan" shall mean any employee benefit or other plan maintained by the
Borrower for its employees and covered by Title IV of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended from time to time or to which
Section 412 of the Internal Revenue Code of 1986, as amended, applies.
-3-
<PAGE> 7
"Prime Rate" shall mean that rate of interest per annum announced by the
Bank from time to time as its prime rate, regardless of the rates of interest,
including the lowest rate of interest, actually charged to any of its
customers. The Prime Rate shall change simultaneously with any change in such
"prime rate."
"Riviera" shall mean Riviera Die and Tool, Inc. (formerly known as New 3,
Inc.), a Michigan corporation, the owner of all of the issued and outstanding
capital stock of the Borrower.
"Tangible Net Worth" shall mean, as of any date, (a) the amount of any
capital stock or similar ownership liability plus (or minus in the case of a
deficit) capital surplus and retained earnings, less (b) the net book value of
all items of the following character which are included in the assets: (i)
goodwill, (ii) organization or experimental expenses, (iii) unamortized debt
discount and expense, (iv) stock discount and expense, (v) patent, trademark,
trade names and copyrights, (vi) treasury stock, (vii) franchises, licenses and
permits, and (viii) other assets which are deemed intangible assets under
generally accepted accounting principles.
"Total Liabilities" shall mean, as of any date, all obligations which are
or should be classified as liabilities on a balance sheet in accordance with
generally accepted accounting principles.
"Working Capital" shall mean, as of any date, the amount, if any, by
which the sum of the Current Assets and the unused available credit under the
Fixed Assets Revolving Credit Commitment exceeds the sum of the Current
Liabilities and the then outstanding principal balance of borrowings under the
Working Capital Revolving Credit Commitment.
"Working Capital Revolving Credit Commitment" shall mean the commitment of
the Bank to lend pursuant to Section 2.1.
ARTICLE II
Working Capital Revolving Credit
2.1 Loan. Subject to all of the terms and conditions hereof, the Bank
agrees to lend to the Borrower from time to time through the third anniversary
date of this Agreement or termination of the Bank's obligation to lend under
this Agreement, whichever is the first to occur, such sums in multiples of
Twenty-Five Thousand Dollars ($25,000.00) as may be requested from time to time
by the Borrower in a manner specified by the Bank, provided that the aggregate
principal amount outstanding at any time pursuant to the provisions of this
Section 2.1 shall not exceed the lesser of Four Million Five Hundred Thousand
Dollars ($4,500,000.00) (the "Working Capital Revolving Credit") or the
Borrowing Base. In the event the principal amount outstanding at any time shall
exceed the lesser of said amounts, the Borrower shall forthwith pay to the Bank
an
-4-
<PAGE> 8
amount sufficient to eliminate such excess. Subject to the terms and conditions
of this Agreement, the Borrower may borrow, prepay pursuant to Section 2.3, and
reborrow under this Section 2.1. Upon the execution of this Agreement, Borrower
shall execute and deliver to the Bank a revolving note in the form of Exhibit A
attached hereto (the "Working Capital Revolving Credit Note"), the terms of
which are incorporated herein by reference. All commitments by the Bank on
behalf of the Borrower by way of instrument certification, letter of credit or
similar device shall be considered loans pursuant to this Section 2.1.
2.2 Use of Proceeds. The proceeds of the loans pursuant to this Article
II shall be used to refinance existing revolving credit debt and to assist with
the working capital needs of the Borrower.
2.3 Payment of Working Capital Revolving Credit Note; Prepayment. Except
as payment of part or all of the principal amount of the loans outstanding
pursuant to this Article II is sooner required to be made under Section 2.1 or
Article VIII hereof, the full principal amount of the loans outstanding under
this Article II and all accrued interest thereon shall be paid by Borrower on
or before the third anniversary date of this Agreement. The Borrower may prepay
all or any part of the indebtedness under Section 2.1 at any time without
penalty provided any prepayment shall be in a multiple of One Thousand Dollars
($1,000.00).
2.4 Interest. Except as provided in Article VIII hereof, the Working
Capital Revolving Credit Note shall bear interest at the annual rate of
three-quarters of one percent (3/4%) over the Prime Rate. Interest shall be
computed daily on the basis of a Three Hundred Sixty (360) day year and shall
be billed to the Borrower monthly based upon the principal balance outstanding
and the actual number of days in the preceding month. Interest shall be due and
payable no later than the first day of each month.
2.5 Arrangement Fee and Commitment Fee. The Borrower agrees to pay to the
Bank upon the execution of this Agreement a one-time, non-refundable loan
arrangement fee of Fifty Thousand Dollars ($50,000.00). The Borrower also
agrees to pay to the Bank a Commitment Fee at a rate equal to three-eighths of
one percent (3/8%) per annum on the average daily unused portion of the Working
Capital Revolving Credit for the period from the date of this Agreement to and
including the third anniversary date of this Agreement, and thereafter until
full payment of the Working Capital Revolving Credit Note. Accrued commitment
fees shall be payable quarterly in arrears on the 1st day of each January,
April, July and October commencing on the first such day after the date of this
Agreement.
2.6 Facility Fee. The Borrower agrees to pay to the Bank a facility fee
at a rate equal to one-eighth of one percent (1/8%) per annum on the Working
Capital Revolving Credit, whether used or
-5-
<PAGE> 9
unused, for the period from the date of this Agreement to and including the
third anniversary date of this Agreement, and thereafter until payment of the
Working Capital Revolving Credit Note. The facility fee shall be payable
quarterly in arrears on the 1st day of each January, April, July and October
commencing on the first such day after the date of this Agreement.
ARTICLE III
Fixed Asset Revolving Credit
3.1 Loan. Subject to all of the terms and conditions hereof, the Bank
agrees to lend to the Borrower from time to time through the first anniversary
date of Agreement or termination of the Bank's obligation to lend under this
Agreement, whichever is the first to occur, such sums in multiples of
Twenty-Five Thousand Dollars ($25,000.00) as may be requested from time to time
by the Borrower in a manner specified by the Bank, provided that the aggregate
principal amount outstanding at any time pursuant to the provisions of this
Section 3.1 shall not exceed Three Million Four Hundred Thousand Dollars
($3,400,000.00). In the event the principal amount outstanding at any time
shall exceed the said amount, the Borrower shall forthwith pay to the Bank an
amount sufficient to eliminate such excess. Subject to the terms and conditions
of this Agreement, the Borrower may borrow, prepay and reborrow under this
Section 3.1. Upon the execution of this Agreement, the Borrower shall execute
and deliver to the Bank a revolving credit note of even date herewith in the
form of Exhibit B attached here (the "Fixed Asset Revolving Credit Note"), the
terms of which are incorporated herein by reference.
3.2 Use of Proceeds. The proceeds of the loans pursuant to this Article
III shall be used to repay existing Indebtedness of the Borrower and to
purchase machinery and equipment.
3.3 Payment of Fixed Asset Revolving Credit Note. Except as payment of
part or all of the principal amount of the loans outstanding is sooner required
under Section 3.1 or Article VIII, the full principal amount of the loans
outstanding under this Article III and all accrued interest thereon shall be
paid by the Borrower on the first anniversary date of this Agreement, at which
time the then outstanding principal balance of the loans under Section 3.1
shall automatically be converted to a term loan pursuant to Section 3.6 below,
whereupon the provisions of Section 3.1 concerning the extensions of loans
shall terminate.
3.4 Interest. Except as provided in Article VIII hereof, the Fixed Asset
Revolving Credit Note shall bear interest at the annual rate of one and
one-quarter percent (1 1/4%) over the Prime Rate. Interest shall be computed
daily on the basis of a Three
-6-
<PAGE> 10
hundred Sixty (360) day year and shall be billed to the Borrower monthly based
upon the principal balance outstanding and the actual number of days in the
preceding month. Interest shall be due and payable no later than the first day
of each month.
3.5 Commitment Fee. The Borrower agrees to pay to the Bank a commitment
fee on the average daily unused portion of the Fixed Asset Revolving Credit
Commitment for the period from the date of this Agreement to and including the
first anniversary date of this Agreement, at a rate equal to three-eighths of
one percent (3/8%) per annum. Accrued commitment fees shall be payable
quarterly in arrears on the 1st day of each January, April, July and October
commencing on the first such day after the date of this Agreement.
3.6 Conversion to Term Loan. Subject to the terms and conditions of this
Agreement, on the first anniversary date of this Agreement, the then
outstanding principal balance of the loans under Section 3.1, up to Three
Million Four Hundred Thousand Dollars ($3,400,000.00), shall automatically be
converted to a five-year term loan (the "Term Loan"). The Term Loan shall be
evidenced by a term note in substantially the form of Exhibit C attached (the
"Term Note"), which shall be executed by the Borrower as of the first
anniversary date of this Agreement and, except as provided in Article VIII
hereof, shall bear interest at a rate of one and one-quarter percent (1 1/4%)
per annum over the Prime Rate. Interest on the Term Note shall be computed
daily on the basis of a Three Hundred Sixty (360) day year and shall be billed
and payable quarterly based upon the principal balance outstanding and the
actual number of days in the preceding quarter. The principal of the Term Note
shall be paid in 20 equal quarterly installments in an amount equal to five
percent (5%) of the original principal balance of the Term Note, commencing on
the first (1st) day of the third (3rd) month after the date of Term Note and
continuing on the first (1st) day of each third (3rd) month thereafter. The
Borrower may prepay the principal portion of the Term Note in whole or in part
at any time and from time to time without penalty only after the first
anniversary date of the Term Note.
ARTICLE IV
Security
The Notes shall be secured by:
4.1 A first and fully perfected security interest in all of the Borrower's
tangible and intangible personal property of any kind or nature, now owned or
hereafter acquired, including without limitation, all accounts receivable,
accounts, contract rights, instruments, chattel paper, general intangibles,
inventory, machinery, equipment, fixtures, leasehold improvements, furnishings,
vehicles, tools and dies, and all additions, substitutions and
-7-
<PAGE> 11
replacements thereto and all proceeds thereof, "which security interest shall be
evidenced by separate Security Agreements (the "Security Agreements") of even
date between the Borrower and the Bank covering the several types of collateral
described above, except that the Bank shall have a second and fully perfected
security interest in those assets of the Borrower listed in Exhibit D
subordinate only to the permitted security interests and permitted indebtedness
of the Borrower identified therein.
4.2 A collateral assignment of a life insurance policy or policies in the
face amount of $2,500,000 insuring the life of Kenneth Rieth, which assignment
shall be evidenced by a separate assignment of even date herewith between the
Borrower as the owner of the policy or policies and the Bank. The policy or
policies shall contain an appropriate provision prohibiting borrowing against
the policy.
4.3 The unconditional guaranty of payment by Riviera, which guaranty shall
be evidenced by a separate Guaranty of even date herewith between Riviera and
the Bank (the "Guaranty").
ARTICLE V
Warranties and Representations
The Borrower represents and warrants to the Bank that:
5.1 Corporate Existence and Power. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and is duly qualified to transact business in each additional
jurisdiction where such qualification is necessary under applicable law. The
Borrower has all requisite corporate power to own its properties and to carry
on its business as now being conducted and as proposed to be conducted, and to
execute and deliver this Agreement and the Notes and to engage in the
transactions contemplated by this Agreement.
5.2 Subsidiaries. The Borrower is a wholly-owned subsidiary of Riviera.
The Borrower owns no shares of stock of any corporation and has no ownership or
other interest in any partnership, joint venture or other legal entity.
5.3 Corporate Authority. The execution, delivery and performance of this
Agreement and the Notes by the Borrower are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate action and are not
in contravention of any law, rule or regulation, or any judgment, decree, writ,
injunction, order or award of any arbitrator, court or governmental authority,
or of the terms of the Articles of Incorporation or bylaws of the Borrower, or
of any contract or undertaking to which the Borrower is a party or by which the
Borrower or its property may be bound or affected.
-8-
<PAGE> 12
5.4 Binding Effect. This Agreement is, and the Notes when delivered
hereunder will be, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relative to or affecting the enforcement of creditors'
rights generally.
5.5 Litigation. There are no actions, suits or proceedings pending or, to
the best of the Borrower's knowledge, threatened against or affecting the
Borrower before any court, governmental authority, or arbitrator which, if
adversely decided, might result, either individually or collectively, in any
material adverse change in the business, properties, operations or conditions,
financial or otherwise, of the Borrower and, to the best of the Borrower's
knowledge, there is no basis for any such action, suit or proceeding.
5.6 Consents, Etc. No consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental person or entity, including without limitation any creditor or
stockholder of the Borrower is required on the part of the Borrower in
connection with the execution, delivery and performance of this Agreement and
the Notes or the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of this Agreement or the Notes.
5.7 Taxes. The Borrower has filed all tax returns (federal, state and
local) required to be filed and has paid all taxes shown thereon to be due,
including interest and penalties, or has established adequate financial
reserves on its books and records for payment thereof.
5.8 Title to Properties. The Borrower has good and marketable title to,
and a valid indefeasible ownership interest in, all of its respective
properties and assets, free and clear of any lien, charge, security interest or
other encumbrance of any kind, except such liens, charges, security interests
or encumbrances as are listed in Exhibit D attached hereto.
5.9 Financial Condition. The balance sheet of the Borrower and the
statements of income, retained earnings and changes in financial position of
the Borrower for the fiscal year ended August 31, 1987, certified by Plante,
Moran & Co., independent certified public accountants, and the balance sheet of
the Borrower as of February 29, 1988 and the related statements of income,
retained earnings and changes in financial position for the six-month period
ended February 29, 1988, unaudited but certified as correct by a financial
officer of the Borrower, copies of which have been furnished to the Bank,
fairly present the financial condition of the Borrower as at the date thereof,
and the results of operations of the Borrower for the periods indicated, all in
-9-
<PAGE> 13
accordance with generally accepted accounting principles consistently applied.
There has been no material adverse change in the business, properties,
operations, or condition, financial or otherwise of the Borrower since February
29, 1988.
5.10 Use of Loan Proceeds. None of the proceeds of the loans hereunder
shall be used for the purpose of purchasing or carrying any margin stock as
defined in Regulation U of the Board of Governors of the Federal Reserve
System.
5.11 Other Agreements. The Borrower is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any material contract, agreement or instrument to which the
Borrower is a party or by which the Borrower or its property may be bound or
affected.
5.12 Employee Retirement Income Security Act. The Borrower is in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974 (ERISA), as amended, and the
regulations and published interpretations thereunder. Neither a Reportable
Event as set forth in Section 4043 of ERISA or the regulations thereunder
("Reportable Event") nor a prohibited transaction as set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, has
occurred and is continuing with respect to any employee benefit or other plan
established, maintained, or to which contributions have been made by the
Borrower or any trade or business (whether or not incorporated) which together
with the Borrower would be treated as a single employer under Section 4001 of
ERISA ("ERISA Affiliate") for its employees which is covered by Title IV of
ERISA ("Plan"); no notice of intent to terminate a Plan has been filed nor has
any Plan been terminated; no circumstances exist that constitute grounds under
Section 4042 of ERISA entitling the Pension Benefit Guaranty Corporation (PBGC)
to institute proceedings to terminate, or appoint a trustee to administrate, a
Plan, nor has the PBGC instituted any such proceedings; neither the Borrower
nor any ERISA Affiliate has completely or partially withdrawn under Sections
4201 or 4204 of ERISA from any Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any ERISA Affiliate ("Multiemployer
Plan"); and the Borrower and each ERISA Affiliate have met their minimum
funding requirements under ERISA with respect to all of their Plans and the
present value of all Plan assets exceeds the present value of all vested
benefits under each Plan as determined on the most recent valuation date of the
Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Borrower or any ERISA
Affiliate to the PBGC or the Plan under Title IV of ERISA; and neither the
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
-10-
<PAGE> 14
ARTICLE VI
Covenants
6.1 Affirmative Covenants. The Borrower covenants and agrees that until
payment in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Borrower under this Agreement,
unless the Bank shall otherwise consent in writing, the Borrower shall:
(a) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, privileges, licenses, franchises and permits and
qualify and remain qualified as a validly existing corporation in good standing
in each jurisdiction in which such qualification is necessary under applicable
law.
(b) Maintenance of and Access to Books and Records. Maintain and keep
adequate and accurate records and books of account in which complete entries
will be made in accordance with generally accepted accounting principles
consistently applied reflecting all financial transactions of the Borrower.
Permit the Bank or any of its agents or representatives at any reasonable time
and from time to time to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of the Borrower and
to discuss the affairs, finances and accounts of the Borrower with its officers
and employees.
(c) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders of any governmental authority
(such compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property), except to the extent that compliance with any of the
foregoing is then being contested in good faith by appropriate legal
proceedings and with respect to which adequate financial reserves have been
established on the books and records of the Borrower.
(d) Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties similarly situated, payable to the Bank as its
interest may appear, and deliver to the Bank evidence satisfactory to the Bank
that such insurance has been so procured.
(e) Reporting Requirements. Furnish to the Bank the following:
(i) Promptly and in any event within three (3) calendar days after
becoming aware of the occurrence of any Event of Default or any event or
condition which, with notice or lapse of time, or both, would constitute an
Event of Default, a statement of
-11-
<PAGE> 15
the President or chief financial officer of the Borrower setting forth the
details thereof and the action which the Borrower has taken and proposes to
take with respect thereto;
(ii) Promptly after the end of each month and in any event within
ten (10) days thereafter, an aged accounts receivable trial balance as of the
last day of such month.
(iii) Promptly after the end of each month and in any event within
ten (10) days thereafter, a summary of the Borrower's inventory as of the last
day of such month in such detail as the Bank may from time to time request.
(iv) Promptly after the end of each month and in any event within
ten (10) days thereafter, a summary of the Borrower's Value of Acceptable
Contracts in Progress as of the last day of such month in such detail as the
Bank may from time to time request.
(v) As soon as available and in any event within 30 days after the
end of each of the first three quarters of each fiscal year of the Borrower, a
balance sheet of the Borrower as of the end of such quarter, a statement of
income and retained earnings of the Borrower for the period beginning at the
end of the previous fiscal year and ending with the end of such quarter, and a
statement of change in financial position of the Borrower for the portion
of the fiscal year ended with the last day of such quarter, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the previous fiscal year, and all prepared in
accordance with generally accepted accounting principles consistently applied.
Each quarterly financial report shall be accompanied by a certificate of the
President or chief financial officer of the Borrower stating that the report
has been prepared in accordance with generally accepted accounting principles
consistently applied and fairly presents the financial condition of the
Borrower as of the date of said balance sheet and of the results of operations
for the year-to-date period then ended and that to the best of his knowledge,
the Borrower has observed and performed each and every covenant and agreement
applicable to it which is contained herein or in any instrument contemplated by
this Agreement to which it is a party, except as specifically indicated.
(vi) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, an audited balance sheet of the
Borrower as of the end of such fiscal year and the related audited statements
of income and retained earnings and changes in financial position for such
fiscal year certified to by independent certified public accountants, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the prior fiscal year, all prepared in
accordance with generally accepted accounting principles consistently applied
and accompanied by an unqualified
-12-
<PAGE> 16
opinion thereon by independent certified public accountants selected by the
Borrower and acceptable to the Bank. The Borrower shall furnish the Bank with
the certificate described in Section 6.1(d)(v).
(vii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, affecting the Borrower
which, if determined adversely to the Borrower, could be in an amount in excess
of $50,000 or otherwise have a material adverse effect on the financial
condition, properties or operations of the Borrower.
(viii) Promptly, such other information respecting the business,
properties or the condition or operations, financial or otherwise, of the
Borrower as the Bank may from time to time reasonably request.
6.2 Negative Covenants. Until payment in full of the principal of and
accrued interest on the Notes and the performance of all other obligations of
the Borrower under this Agreement, the Borrower agrees that, unless the Bank
shall otherwise consent in writing, the Borrower shall not:
(a) Indebtedness. Create, incur, assume, guaranty or suffer to exist
any Indebtedness other than (i) Indebtedness described in the financial
statements referred to in Section 5.8 hereof, without renewal or extension;
(ii) the Loans; and (iii) Indebtedness attributable to permitted sale and
leaseback arrangements described in Exhibit D.
(b) Liens. Create, incur, assume or suffer to exist any liens
(including without limitation any pledge, assignment, mortgage, title retaining
contract, purchase money security interest or other type of security
interest) on or in any of the property, real, personal or mixed, tangible or
intangible, now owned or hereafter acquired by the Borrower other than: (i)
liens described in the financial statements referred to in Section 5.8 hereof
or on Exhibit D hereto; (ii) liens for taxes not delinquent or being contested
in good faith by appropriate proceedings and as to which adequate reserves have
been established on its books and records; and (iii) liens not delinquent
created by statute in connection with workmen's compensation, unemployment
insurance and social security and similar obligations.
(c) Sale or Purchase of Assets; Merger, Etc. Sell, lease, transfer or
otherwise dispose of all or in excess of ten percent (10%) of its assets or
business to any person other than such sales, leases, transfers and
dispositions of assets relating to permitted sale and leaseback arrangements
described in Exhibit D; nor purchase or otherwise acquire all or a substantial
portion of any assets of any person, or all or a substantial
-13-
<PAGE> 17
portion of the shares of stock of or other ownership interest in any other
person, or otherwise acquire any capital stock, obligations or other securities
of, make any capital contribution to, or otherwise invest in, or acquire an
interest in, any person; nor merge or consolidate with any other person; nor
make any substantial change in the nature of its respective businesses; nor
become or remain an obligee with respect to any obligation of any other person
if the obligation of such person would constitute Indebtedness of such person.
(d) Advances. Make, extend or renew any loan or advance to any person
or entity, provided, however, nothing herein shall (i) require the repayment of
any such loans or advances described in the financial statements referred to in
Section 5.8 prior to their scheduled maturity dates other than the repayments
required by Section 7.1(k) hereof or (ii) prohibit any loan or advance of less
than $1,000 to employees of the Borrower provided the total outstanding loans
or advances to any one employee does not exceed $1,000 and the total of such
loans or advances to all its employees does not exceed $50,000.
(e) Tangible Net Worth. Permit or suffer the Tangible Net Worth of
Riviera and the Borrower, determined on a consolidated basis, to be less than
$6,500,000 on the date of this Agreement; to be less than $6,500,000 plus 80%
of the consolidated Cumulative Net Income at any time thereafter; or, in any
event, be less than $7,500,000 at August 31, 1989 or be less than $8,500,000 at
August 31, 1990, and at all times thereafter.
(f) Leverage Ratio. Permit or suffer the Leverage Ratio of Riviera and
the Borrower, determined on a consolidated basis, at any time to be greater
than 1.5 to 1.0.
(g) Working Capital. Permit or suffer the Working Capital of Riviera
and the Borrower, determined on a consolidated basis, to be less than (i)
$3,000,000 between the date of this Agreement and August 31, 1988; (ii)
$3,250,000 between August 31, 1988 and August 31, 1989; (iii) $3,500,000
between August 31, 1989 and August 31, 1990; or (iv) $5,200,000 from and after
August 31, 1990.
(h) Dividend Distributions, Etc. Make, pay, declare or authorize any
dividend, distribution or other payment in respect of any class of its capital
stock (other than dividends, distributions and other such payments to the
extent payable solely in shares of the capital stock of the Borrower), or any
payment in connection with the redemption, purchase, retirement or other
acquisition, directly or indirectly, of any shares of its capital stock, to the
extent that such amounts, in the aggregate, would exceed $150,000 in any one
fiscal year of the Borrower.
-14-
<PAGE> 18
(i) Conduct of Business; Management. No material change will be made
in the manner in which the business of the Borrower is conducted or in the
management of the Borrower.
(j) Repayment of Advance From Riviera. Repay all or any portion of the
$1,900,000 cash advance made to the Borrower by Riviera.
ARTICLE VII
Conditions Precedent
7.1 Conditions for Disbursement of Initial Loan. The obligation of the
Bank to make the initial Loan hereunder is subject to receipt by the Bank, in
form and substance satisfactory to it, of all of the following:
(a) Copy of the Articles of Incorporation and all amendments thereto of
the Borrower and Riviera on file with the Corporation and Securities Bureau of
the Michigan Department of Commerce, certified as of a recent date by such
office and certified as true and correct as of the date of this Agreement by a
duly authorized officer of the Borrower or Riviera, respectively, and a
certificate of recent date of the Director of the Department of Commerce of the
State of Michigan as to the good standing and corporate existence of the
Borrower and Riviera in the State of Michigan.
(b) Copy of the by-laws of the Borrower and Riviera and all amendments
thereto certified as true and correct as of the date of this Agreement by a
duly authorized officer of the Borrower and Riviera, respectively.
(c) All authorizing resolutions and evidence of other corporate action
taken by the Borrower to authorize the execution, delivery and performance by
the Borrower of this Agreement and the Notes and the consummation of the
transactions contemplated hereby, each certified as true and correct as of the
date of this Agreement by a duly authorized officer of the Borrower.
(d) Certificate of Incumbency of the Borrower containing and attesting
to the genuineness of the signatures of those officers authorized to act on
behalf of the Borrower in connection with this Agreement and the Notes, and the
consummation by the Borrower of the transactions contemplated hereby, certified
by a duly authorized officer of the Borrower as true and correct as of the date
of this Agreement.
(e) All authorizing resolutions and evidence of other corporate action
taken by Riviera to authorize the execution, delivery and performance by
Riviera of the Guaranty, certified as true and correct as of the date of this
Agreement by a duly authorized officer of Riviera.
-15-
<PAGE> 19
(f) The Notes, Security Agreements and related financing statements and
collateral assignment of life insurance policies duly executed on behalf of the
Borrower and the Guaranty duly executed on behalf of Riviera.
(g) The favorable written opinion of Hecht & Cheney, counsel for the
Borrower, with respect to each of the matters set forth in Sections 5.1,
5.2, 5.3, 5.4, 5.5, 5.6, 5.8, 5.11 and 5.12 of this Agreement and as to such
other matters as the Bank may reasonably request.
(h) Documentary evidence satisfactory to the Bank evidencing, aggregate
capital contributions to Riviera by Motor Wheel Corporation of at least
$4,683,000, including without limitation, fair market value appraisals
acceptable to the Bank to the extent such capital contributions are of tangible
personal property other than cash.
(i) Documentary evidence satisfactory to the Bank evidencing the
existence of a long-term agreement between the Borrower and Motor Wheel
Corporation providing for the supply by the Borrower of tool and die design,
manufacturing and repair work and the purchase by Motor Wheel Corporation of a
minimum number of shop hours per year from the Borrower.
(j) If accounts receivable from Motor Wheel Corporation are to be
considered eligible as Acceptable Accounts Receivable under Article I or
purchase orders from Motor Wheel Corporation are to be considered eligible for
determining the Value of Acceptable Contracts in Progress under Article I, an
Agreement between Motor Wheel Corporation and the Bank providing that until
payment in full of the principal of and accrued interest on the Notes and the
performance of all other obligations of the Borrower under this Agreement,
Motor Wheel Corporation shall not offset any sums it owes to the Borrower
against sums due it by the Borrower.
(k) Documentary evidence that Riviera Holding Company, a Michigan
corporation has, (i) redeemed for $121,000 cash its preferred stock held by
Riviera and (ii) has repaid in cash approximately $68,000 of indebtedness to
Riviera.
(l) Original paid policies of fire and extended coverage hazard
insurance and comprehensive public liability insurance insuring the Borrower
against bodily injury and property damage, and including the Bank as a named
insured as its interest may appear and requiring no less than 30 days' written
notice to the Bank before any material modification or a cancellation or
nonrenewal.
(m) The favorable written opinion of Hecht & Cheney, counsel for
Riviera, stating:
(1) Riviera is a corporation duly organized, validly existing and
in good standing under the laws of the State of Michigan and is duly qualified
to transact business in each
-16-
<PAGE> 20
additional jurisdiction where such qualification is necessary under applicable
law. Riviera has all requisite corporate power to own its property and to
carry on its business as now being conducted and as proposed to be conducted,
and to execute and deliver the Guaranty and the other instruments and
agreements related thereto.
(2) The execution, delivery and performance of the Guaranty by
Riviera are within Riviera's corporate powers, have been duly authorized by
all necessary corporate action and are not in contravention of any law, rule or
regulations, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of the Articles of
Incorporation or by-laws of Riviera, or of any contract or undertaking to which
Riviera is a party or by which Riviera or its property may be bound or
affected.
(3) When delivered, the Guaranty will be the legal, valid and
binding obligation of Riviera enforceable against Riviera in accordance with
its terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relative to or affecting the
enforcement of creditors' rights generally.
(4) There are no actions, suits or proceedings pending or, to the
best of such counsel's knowledge, threatened against or affecting Riviera
before any court, governmental authority, or arbitrator which, if adversely
decided, might result, either individually or collectively, in any material
adverse change in the business, properties, operations or conditions, financial
or otherwise, of Riviera and, to the best of such counsel's knowledge, there is
no basis for any such action, suit or proceeding.
(5) No consent, approval or authorization of or declaration,
registration or filing with any governmental authority or any nongovernmental
person or entity, including without limitation any creditor or stockholder of
Riviera is required on the part of Riviera in connection with the execution,
delivery and performance of the Guaranty or the transactions contemplated
thereby or as a condition to the legality, validity or enforceability of the
Guaranty.
(6) Riviera has good and marketable title to, and a valid
indefeasible ownership interest in, all of its respective properties and
assets, free and clear of any lien, charge, security interest or other
encumbrance of any kind, including, without limitation, the machinery and
equipment having an appraised fair market value of approximately $2,783,000
contributed to Riviera by Motor Wheel Corporation.
7.2 Conditions for Disbursement of Each Loan. The obligation of the Bank
to make any Loan (including the initial Loan) is subject to the satisfaction of
all of the following conditions precedent:
-17-
<PAGE> 21
(a) The representations and warranties contained in Article V hereof
shall be true and correct on and as of the date such Loan is made as if such
representations and warranties were made on and as of such date.
(b) The Borrower is in full compliance with all covenants and
agreements to be performed on its part under Article VI hereof.
(c) No Event of Default and no event or condition which might become
such an Event of Default with notice or lapse of time, or both, shall exist or
shall have occurred and be continuing on the date such Loan is made.
The Borrower shall make a certification to the Bank at the time of the
making of each Loan to the effect as set forth in this Section 7.2.
ARTICLE VIII
Default
8.1 Events of Default. The occurrence of any of the following events or
conditions shall be deemed an "Event of Default" hereunder unless waived
pursuant to Section 9.1:
(a) Default in any payment of principal of or interest on the Notes
or any fees or any other amount payable hereunder within five (5) days after
it is due.
(b) The Borrower shall fail to perform or observe any term, covenant or
agreement contained in Article VI hereof.
(c) The Borrower shall fail to perform or observe any term, covenant or
agreement required to be performed or observed on its part contained in this
Agreement or any other document in connection herewith and such failure shall
remain unremedied for ten (10) calendar days after notice thereof shall have
been given to the Borrower by the Bank.
(d) Any representation or warranty made by the Borrower in Article V
hereof or in any other document or certificate furnished by or on behalf of the
Borrower in connection with this Agreement shall prove to have been incorrect
in any material respect when made.
(e) The Borrower shall (i) fail to pay any Indebtedness (other than the
Loans) or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness; or (ii) fail
-18-
<PAGE> 22
to perform or observe any term, covenant, or condition on its part to be
performed or observed under any agreement or instrument relating to any such
Indebtedness, when required to be performed or observed, and such failure shall
not be waived and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such failure to
perform or observe is to accelerate, or permit the acceleration of, with the
giving of notice if required, the maturity of such Indebtedness, or any such
Indebtedness shall be declared due and payable or be required to be prepaid
prior to the stated maturity thereof.
(f) The Borrower (i) shall generally not pay, or shall be unable to
pay, or shall admit in writing its inability to pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors, or
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or for a substantial part of its assets; or (iii) shall
commence any proceeding under any bankruptcy, reorganization,
arrangements, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had
any such petition or application filed or any such proceeding commenced against
it in which an order for relief is entered or an adjudication or appointment is
made, and which remains undismissed for a period of sixty (60) days or more; or
(v) shall indicate, by any act or omission, its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver or trustee for all or any
substantial part of its properties; or (vi) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged for a
period of sixty (60) days or more.
(g) A judgment or order for the payment of money, which together with
such other judgments or orders exceeds the aggregate amount of $50,000 shall be
rendered against the Borrower and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order and such judgment or
order shall have remained unstayed for a period of 30 consecutive days, or (ii)
for a period of 20 consecutive days such judgment or order shall have remained
unsatisfied and a stay of enforcement thereof, by reason of pending appeal or
otherwise, shall not have been in effect.
(h) Any change in the stock ownership of the Borrower, Riviera or
Riviera Holding Company, other than a change in stock ownership among those
persons who are shareholders of Riviera or Riviera Holding Company as of the
date of this Agreement.
(i) The occurrence of any "Reportable Event," as defined in ERISA,
which could constitute grounds for termination by the PBGC of any Plan
maintained by or on behalf of the Borrower or
-19-
<PAGE> 23
any trade or business (whether or not incorporated) which together with the
Borrower would be treated as a single employer under Section 4001 of ERISA or
for the appointment by the appropriate United States District Court of a
trustee to administer such Plan and such reportable event is not corrected and
such determination is not revoked with thirty (30) days after notice thereof
has been given to the administrator of such Plan or to the Borrower or such
trade or business, as the case may be; or the institution of proceedings by the
PBGC to terminate any such Plan or to appoint a trustee to administer such
Plan; or the appointment of a trustee by the appropriate United States District
Court to administer any such Plan.
(j) The incurrence by Riviera of any indebtedness or liability of any
kind or nature, including without limitation, any indebtedness to trade
creditors, other than indebtedness to the Bank.
(k) The Borrower fails to deliver to the Bank a duly executed
collateral assignment of life insurance policy or policies described in Section
4.2 hereof within thirty (30) days from the date of this Agreement.
8.2 Remedies.
(a) Upon the occurrence and during the continuance of any Event of
Default, the Bank may by notice to the Borrower terminate the Working Capital
Revolving Credit Commitment and the Fixed Asset Revolving Credit Commitment or
declare the outstanding principal of, and accrued interest on, the Notes and
all other amounts due under this Agreement to be immediately due and payable,
or both, whereupon the said commitments shall terminate forthwith and all such
amounts shall become immediately due and payable, or both, as the case may be,
provided that in the case of any event or condition described in Section 8.1(f)
with respect to the Borrower the Working Capital Revolving Credit Commitment
and the Fixed Asset Revolving Credit Commitment shall automatically terminate
forthwith and all such amounts shall automatically become immediately due and
payable without notice and without demand, presentment, protest, diligence,
notice of dishonor or other formality, all of which are hereby expressly
waived. Upon the occurrence and during the continuance of any Event of
Default, the Bank may charge interest on the principal amount outstanding on
the Notes from time to time at a rate of three percent (3%) per annum in excess
of the rate specified in the respective Note or the maximum legal rate,
whichever is lower.
(b) Upon the occurrence and during the continuance of such Event of
Default, the Bank may, in addition to the other remedies provided in this
Section 8.2, enforce its rights either by suit in equity, or by action at law,
or by other appropriate proceedings, whether for the specific performance (to
the extent
-20-
<PAGE> 24
permitted by law) of any covenant or agreement contained in this Agreement, the
Notes, one or more Security Agreements executed in connection herewith or in
aid of the exercise of any power granted in this Agreement, the Notes or the
Security Agreements, and may enforce the payment of the Notes and any of its
other rights available at law or in equity.
(c) Upon the occurrence and during the continuance of any Event of
Default hereunder, the Bank is hereby authorized at any time and from time to
time, without notice to the Borrower (any requirement for such notice being
expressly waived by the Borrower) to set off and apply against any and all of
the obligations of the Borrower now or hereafter existing under this Agreement
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by the Bank to or for
the credit or the account of the Borrower and any property of the Borrower from
time to time in possession of the Bank, regardless of whether or not the Bank
shall have made any demand hereunder and although such obligations may be
contingent and unmatured. The rights of the Bank under this Section 8.2(c) are
in addition to other rights and remedies (including, without limitation, other
rights of setoff) which the Bank may have.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments. No provision of this Agreement may be modified, waived or
amended except by an instrument or instruments signed by the Borrower and the
Bank.
9.2 No Waiver; Cumulative Remedies. No failure or delay on the part of
the Bank in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and not exclusive of any rights or remedies
provided by law. Every right and remedy given by this Agreement or by
applicable law to the Bank may be exercised from time to time as often as may
be deemed expedient by the Bank.
9.3 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered or sent to the Borrower or
the Bank at the addresses set forth below or to such other address as may be
designated by the Borrower or the Bank by written notice to the other party.
All notices, requests, consents and other communications shall be deemed to have
been given when received if hand delivered, or if mailed by certified or
registered mail, postage prepaid, on the first day
-21-
<PAGE> 25
after such mailing, in both cases, addressed to the respective address set
forth below or as may otherwise be designated in accordance herewith.
If to the Borrower: R.D.T., Inc.
3859 Roger B. Chaffee
Boulevard, S.E.
Grand Rapids, Michigan 49508
Attention: President
If to the Bank: NBD Grand Rapids, N.A.
200 Ottawa Avenue, N.W.
Grand Rapids, Michigan 49503
Attention: John H. Schaff
9.4 Expenses. The Borrower agrees to pay and save the Bank harmless from
liability for the payment of the reasonable fees and expenses of the Bank,
including those of its legal counsel, in connection with the preparation,
execution and delivery of this Agreement and the Notes and the consummation of
the transactions contemplated hereby, and in connection with any amendments,
waivers or consents in connection therewith, and all reasonable costs and
expenses of the Bank (including reasonable fees and expenses of counsel) in
connection with any Event of Default or the enforcement of this Agreement or
the Notes.
9.5 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of the Borrower made herein or in any
certificate or other document delivered pursuant hereto shall be deemed to be
material and to have been relied upon by the Bank, notwithstanding any
investigation heretofore or hereafter made by the Bank or on the Bank's behalf.
9.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided that the Borrower may not, without the prior written consent
of the Bank, assign its rights or obligations hereunder or under any Note and
the Bank shall not be obligated to make any Loan hereunder to any entity other
than the Borrower.
9.7 Governing Law. This Agreement is being executed and delivered and is
intended to be performed in the State of Michigan and shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws thereof.
9.8 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement or the Notes, in no event shall the amount of interest paid or agreed
to be paid by the Borrower exceed an amount computed at the highest rate of
interest permissible under applicable law and any interest which so exceeds
such maximum rate of interest shall automatically be applied to the payment of
principal of the Notes outstanding to the extent of such excess.
-22-
<PAGE> 26
9.9 Integration and Severability. This Agreement embodies the entire
agreement and understanding between the Borrower and the Bank, and supersedes
all prior agreements and understandings, relating to the subject matter hereof.
In case any one or more of the obligations of the Borrower under this
Agreement or any Note shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Borrower shall not in any way be affected or impaired
thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of the
obligations of the Borrower under this Agreement or any Note in any other
jurisdiction. In the event that any of the terms and conditions of this
Agreement conflicts with any of the terms and conditions of one or more of the
Security Agreements, then the provisions of this Agreement shall govern to the
extent of such conflict.
9.10 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of
reference only and shall in no way modify any of the terms or provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the day and year first above written.
R.D.T., INC.
By Kenneth K. Rieth
---------------------------------
Kenneth K. Rieth
Its President
NBD GRAND RAPIDS, N.A.
By John H. Schaff
---------------------------------
John H. Schaff
Its Second Vice President
-23-
<PAGE> 27
EXHIBIT D
PERMITTED LIENS, SECURITY INTERESTS AND INDEBTEDNESS
1. The properties and assets of the Borrower are subject to the
liens, security interests and encumbrances evidenced by the 48 financing
statements (consisting of 228 pages) identified in the attached financing
statement search dated as of January 27, 1988, as updated as of March 1, 1988
and further updated as of March 25, 1988 performed by the Michigan Department
of State, provided, however:
(a) The security interest represented by financing statement
B856982 filed as of October 17, 1986 by Circle Business Credit, Inc. has been
partially released to reflect that Circle Business Credit, Inc. claims no
security interest in other equipment, inventory, accounts, contract rights,
chattel paper or instruments other than the items specifically enumerated in
the financing statement.
(b) The security interests held by Comerica Bank-Detroit
represented by the following financing statements filed by Comerica Bank-
Detroit or Comerica Bank-Kentwood will be terminated and the related
indebtedness of the Borrower will be paid off in full in connection with the
funding of the first advance hereunder:
<TABLE>
<S> <C> <C>
B869059 B869060 B754072
B868614 B754343 B750324
B754341 B754073 B516941
B754340 B868615 B392718
B754071 B754342 B102872
B754070
</TABLE>
2. During the period beginning with the date of the Credit
Agreement and ending on the first anniversary date thereof, the Borrower may
sell and then lease back the items of machinery and equipment specified below
on the condition that the Fixed Asset Revolving Credit Commitment shall be
reduced by 80% of the total forced liquidation value of all such items of
machinery and equipment sold as set forth below opposite such items, and to the
extent the outstanding principal balance of the Fixed Asset Revolving Credit
Note at the time of such sale exceeds the amount of the reduced Fixed Asset
Revolving Credit Commitment, the Borrower shall prepay the amount of such
excess.
<TABLE>
<CAPTION>
Forced
Machinery and Equipment Liquidation Value
----------------------- -----------------
<S> <C>
Cincinnati Milacron Boring Mill
#51-S900M15F-280 $140,000
Pratt & Whitney Wolverine #1970-0559 450,000
Donley 1000 Ton Press #69280022 250,000
Lucas Boring Mill #30C0202 115,000
Clearing 1200 Ton Press #45-11015 175,000
</TABLE>
<PAGE> 28
EXHIBIT D
(continued)
3. The Borrower is obligated to purchase but has not yet
purchased from Le Blond Makino Machine Tool Co. the Le Blond Makino Die
Manufacturing System (as described in the attached agreement regarding Motor
Wheel Purchase Order No. C06158 to Le Blond Makino Machine Tool Co. dated April
15, 1988). The Borrower intends to enter into a sale and leaseback
transaction with a third-party lessor with respect to the system.
<PAGE> 29
AGREEMENT REGARDING MOTOR WHEEL
PURCHASE ORDER NO. C06158
TO LE BLOND MAKINO MACHINE TOOL CO.
This Agreement ("Agreement") regarding Motor Wheel Purchase Order No.
C06158 to Le Blond Makino Machine Tool Co. ("EDM Purchase Order") is made
this 15th day of April, 1988, by and between Motor Wheel Corporation ("Motor
Wheel") and New 3, Inc. ("New 3").
In consideration of the mutual promises and other consideration
provided for herein, in the Incorporation Agreement dated March 11, 1988 among
Motor Wheel, R.D.T., Inc. and Riviera Holding Corporation and in the other
Related Agreements (as defined in the Incorporation Agreement), the undersigned
agree as follows:
1. The EDM Purchase Order. Attached hereto as Exhibit 1 is a
copy of the EDM Purchase Order, which is dated December 22, 1987. Attached
hereto as Exhibit 2 is a summary, as of March 17, 1988, relating to payments
made by Motor Wheel in relation to the EDM Purchase Order as of that date
($226,891.81) and an estimate of the timing and amounts of remaining payments
to be made under the EDM Purchase Order. Further details regarding the EDM
Purchase Order, including the details regarding deliveries to date to Motor
Wheel under the EDM Purchase Order as well as copies of the correspondence
referred to in the EDM Purchase Order, are and will continue to be made
available by Motor Wheel to New 3. Total payments required under the EDM
Purchase Order are presently estimated to be $579,673.30, plus $4,200.00
shipping, as set forth in Exhibit 2.
2. Sale and Assignment by Motor Wheel. New 3 hereby agrees to
purchase from Motor Wheel, and Motor Wheel hereby agrees to sell and assign to
New 3, all of Motor Wheel's right, title and interest as of the closing under
this Agreement ("Closing") in the
<PAGE> 30
die manufacturing system, or any part thereof, which is the subject of the EDM
Purchase Order, and in the EDM Purchase Order itself, including the benefit of
all payments theretofore made by Motor Wheel pursuant to the terms of the EDM
Purchase Order ($226,891.81 as of the closing, see Schedule 2 hereto).
3. Payments by New 3, Inc.
(a) At Closing, New 3, Inc. shall pay to Motor Wheel in cash or
immediately available funds an amount equal to all payments made by Motor Wheel
pursuant to the EDM Purchase Order as of the Closing hereunder, including
shipping, delivery and other related expenses.
(b) New 3, Inc. shall assume any and all of Motor Wheel's duties,
responsibilities and liabilities under the EDM Purchase Order, and forever
indemnify and hold harmless Motor Wheel from any claims by or through seller
under the EDM Purchase Order.
4. Motor Wheel is transferring its right, title and interest as
of the closing under this Agreement ("Closing") in the die manufacturing
system, or any part thereof, which is the subject of the EDM Purchase Order,
and in the EDM Purchase Order itself, as is and where is, without any
representations or warranties of any kind from Motor Wheel, either express or
implied, including any representations or warranties regarding merchantability
or suitability or fitness for any use. Motor Wheel, however, assigns any and
all representations and warranties of which Motor Wheel is or would be the
beneficiary in connection with the EDM Purchase Order, represents that it has
not breached the EDM Purchase Order and agrees that it will cooperate with New
3 in any claims by or on behalf of New 3 relating to such representations and
warranties, or otherwise relating in any way to the EDM Purchase Order.
5. The Closing hereunder shall occur at the earlier of the
following dates: (i) promptly following New 3 arranging certain financing
which it plans to put in place to purchase the
<PAGE> 31
equipment covered by the EDM Purchase Order, or (ii) 30 days after the date of
this Agreement as set forth above.
MOTOR WHEEL CORPORATION
By: Richard L. Tuley
------------------------------
Vice President and Controller
NEW 3, INC.
By: Kenneth K. Reith
------------------------------
President
<PAGE> 32
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS AGREEMENT is made this 30th day of January, 1990 between RIVIERA
DIE & TOOL, INC. (formerly known as R.D.T., Inc.), a Michigan corporation, with
offices at 5460 Executive Drive, S.E., Grand Rapids, Michigan 49512
(hereinafter called the "Borrower") and NBD GRAND RAPIDS, N.A., a National
Banking Association, having its principal offices at 200 Ottawa Avenue, N.W.,
Grand Rapids, Michigan (hereinafter called the "Bank").
W I T N E S S E T H :
WHEREAS the Borrower and the Bank entered into a Credit Agreement
dated April 20, 1988, as amended by a First Amendment to Credit Agreement dated
August 31, 1988, and a Second Amendment to Credit Agreement dated January 30,
1989 (the "Credit Agreement") by which the Bank has made certain credit
facilities available to the Borrower upon the terms and subject to the
conditions set forth in the Credit Agreement; and
WHEREAS the Borrower has requested an increase in the amount and an
extension of the term of the revolving credit facility described in Article II
of the Credit Agreement; and
WHEREAS the Borrower and the Bank desire to amend certain financial
covenants contained in the Credit Agreement; and
WHEREAS the Bank is willing to increase and extend the revolving
credit facility only upon the terms and subject to the conditions set forth in
the Credit Agreement, as amended by this Third Amendment.
NOW THEREFORE, in consideration of the premises, and the mutual
covenants set forth below, the Borrower and the Bank agree as follows:
1. Amendment to Definitions.
(a) The definition of "Borrowing Base" in Article I of the
Credit Agreement is hereby amended to read as follows:
"'Borrowing Base' shall mean the sum of (a) 85% of Acceptable
Accounts Receivable; (b) 50% of Acceptable Inventory; and (c) 50% of
the Value of Acceptable Contracts in Progress, but in no event shall
this component exceed $5,000,000."
(b) The definition of "Leverage Ratio" in Article I of
the Credit Agreement is hereby amended to read as follows:
<PAGE> 33
"'Leverage Ratio' shall mean the ratio of Total Liabilities to
Total Capital Funds."
(c) A new definition of "Total Capital Funds" shall be added
to Article I of the Credit Agreement as follows:
"'Total Capital Funds' shall mean, as of any date, the amount
of any capital stock or similar ownership liability plus (or minus in
the case of a deficit) capital surplus or additional paid-in capital,
retained earnings, debt subordinated in payment to the Loans and
deferred income."
(d) The definition of "Working Capital" in Article I of the
Credit Agreement is hereby amended to read as follows:
"'Working Capital' shall mean, as of any date, the amount, if
any, by which the Current Assets exceeds the sum of Current
Liabilities and the then outstanding principal balance of borrowings
under the Working Capital Revolving Credit Commitment."
2. Amendment to Revolving Credit Facility.
(a) Section 2.1 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank agrees to lend to the Borrower from time to time until
January 31, 1992 or termination of the Bank's commitment to lend
under this Agreement, whichever is the first to occur, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified by
the Bank, provided that the aggregate principal amount outstanding at
any time pursuant to the provisions of this Section 2.1 shall not
exceed the lesser of Ten Million Dollars ($10,000,000.00) or the
Borrowing Base. In the event the principal amount outstanding at any
time shall exceed the lesser of said amounts, the Borrower shall
forthwith pay to the Bank an amount sufficient to eliminate such
excess. Subject to the terms and conditions of this Agreement, the
Borrower may borrow, prepay pursuant to Section 2.3 and reborrow
under this Section 2.1. Upon the execution of this Agreement,
Borrower shall execute and deliver to the Bank an amended and
restated revolving credit demand note in the form of Exhibit A
attached hereto (the "Revolving Credit Note"), the terms of which
are incorporated herein by reference. All commitments by the Bank on
behalf of the Borrower by way of instrument certification, letter of
credit or similar device shall be considered loans pursuant to this
Section 2.1."
-2-
<PAGE> 34
(b) Section 2.3 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"2.3 Payment of Working Capital Revolving Credit
Note; Prepayment. Except as payment of part or all of the
principal amount of the loans outstanding pursuant to this
Article II is sooner required to be made under Section 2.1 or
Article VIII hereof, the full principal amount of the loans
outstanding under this Article II and all accrued interest
thereon shall be paid by Borrower on or before January 31,
1992. The Borrower may prepay all or any part of the
indebtedness under Section 2.1 at any time without penalty
provided any prepayment shall be in a multiple of One Thousand
Dollars ($1,000.00)."
3. Amendment to Certain Negative Covenants.
(a) Section 6.2(e) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(e) Tangible Net Worth. Permit or suffer the
Tangible Net Worth of Riviera and the Borrower, determined on
a consolidated basis, to be less than $7,000,000 plus 80% of
the consolidated Cumulative Net Income at any time after
August 31, 1989; or, in any event, be less than $8,000,000 at
August 31, 1990 and at all times thereafter."
(b) Section 6.2(f) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(f) Leverage Ratio. Permit or suffer the
Leverage Ratio of Riviera and the Borrower, determined on a
consolidated basis, at any time to be greater than 1.75 to
1.0."
(c) Section 6.2(g) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(g) Working Capital. Permit or suffer the
Working Capital of Riviera and the Borrower, determined on a
consolidated basis, to be less than (i) $4,200,000 between
August 31, 1989 and August 31, 1990; or (ii) $5,000,000 from
and after August 31, 1990."
-3-
<PAGE> 35
4. No Waiver of Default. The execution of this Third Amendment to
Credit Agreement by the Bank does not represent or constitute a waiver by the
Bank of any default or event of default by the Borrower under the Credit
Agreement.
5. Ratification of Credit Agreement. Except as specifically provided
herein, the terms and conditions of the Credit Agreement, as previously
amended, shall remain in full force and effect and are hereby ratified and
confirmed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to Credit Agreement to be executed and delivered on the day and year
first written above.
RIVIERA DIE & TOOL, INC., a
Michigan corporation
By Kenneth K. Rieth
-----------------------------
Its President
NBD GRAND RAPIDS, N.A.,
a National Banking Association
By Thomas P. Lomonaco
-----------------------------
Thomas P. Lomonaco
Its Second Vice President
-4-
<PAGE> 36
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT ("Fourth Amendment") is made this 16th day of
May, 1991, between RIVIERA DIE & TOOL, INC. (formerly known as R.D.T., Inc.), a
Michigan corporation, with offices at 5460 Executive Drive, S.E., Grand Rapids,
Michigan 49512 (hereinafter called the "Borrower") and NBD BANK, N.A.
(formerly known as NBD Grand Rapids, N.A.), a National Banking Association,
having offices at 200 Ottawa Avenue, N.W., Grand Rapids, Michigan 49503
(hereinafter called the "Bank").
W I T N E S S E T H :
WHEREAS the Borrower and the Bank entered into a Credit Agreement
dated April 20, 1988, as amended by a First Amendment to Credit Agreement dated
August 31, 1988, a Second Amendment to Credit Agreement dated January 30, 1989,
and a Third Amendment to Credit Agreement dated January 30, 1990 (the "Credit
Agreement") by which the Bank has made certain credit facilities available to
the Borrower upon the terms and subject to the conditions set forth in the
Credit Agreement; and
WHEREAS the Borrower has requested an extension of the term of the
revolving credit facility described in Article II and an increase in the
amount and an extension of the term of the term loan described in Article III
of the Credit Agreement; and
WHEREAS the Borrower and the Bank desire to amend certain financial
covenants contained in the Credit Agreement; and
WHEREAS the Bank is willing to extend the term of the revolving credit
facility and to increase the amount and to extend the term of the term loan
only upon the terms and subject to the conditions set forth in the Credit
Agreement, as amended by this Fourth Amendment.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants set forth below, the Borrower and the Bank agree as follows:
1. Amendment to Definitions.
(a) The definition of "Borrowing Base" in Article I of
the Credit Agreement is hereby amended in its entirety to read as follows:
"'Borrowing Base' shall mean the sum of (a)
eighty-five percent (85%) of Acceptable Accounts Receivable;
(b) forty percent (40%) of Acceptable Inventory, but in no
event shall this component exceed $400,000; and (c) fifty
percent
<PAGE> 37
(50%) of the Value of Acceptable Contracts in Progress, but in
no event shall this component exceed $5,000,000."
(b) The definition of "Notes" in Article I of the
Credit Agreement is hereby amended in its entirety to read as follows:
" 'Notes' shall mean the Working Capital Revolving
Credit Note and the Term Note, as amended, modified or
restated from time to time together with any promissory note
or notes issued in exchange or replacement thereof. 'Note'
shall mean one of the Notes."
(c) A new definition of "Term Note" shall be
added to Article I of the Credit Agreement as follows:
" 'Term Note' shall mean the note executed by the
Borrower payable to the order of the Bank to evidence the loan
pursuant to Article III hereof, as the same may be modified,
amended or restated from time to time after execution and
delivery thereof, together with any promissory note issued in
exchange or replacement thereof."
(d) A new definition of "Working Capital
Revolving Credit Note" shall be added to Article II of the Credit Agreement as
follows:
" 'Working Capital Revolving Credit Note, shall mean
the note executed by the Borrower payable to the order of the
Bank to evidence the loans pursuant to Article II hereof, as
the same may be modified, amended or restated from time to time
after execution and delivery thereof, together with any
promissory note issued in exchange or replacement thereof."
2. Amendment to Working Capital Revolving Credit
Facility.
(a) Section 2.1 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"2.1 Loan. Subject to all of the terms and
conditions hereof, the Bank agrees to lend to the Borrower
from time to time until January 31, 1993 or termination of the
Bank's commitment to lend under this Agreement, whichever is
the first to occur, such sums in multiples of Twenty-Five
-2-
<PAGE> 38
Thousand Dollars ($25,000.00) as may be requested from time to time by
the Borrower in a manner specified by the Bank, provided that the
aggregate principal amount outstanding at any time pursuant to the
provisions of this Section 2.1 shall not exceed the lesser of Ten
Million Dollars ($10,000,000.00) or the Borrowing Base. In the event
the principal amount outstanding at any time shall exceed the lesser
of said amounts, the Borrower shall forthwith pay to the Bank an
amount sufficient to eliminate such excess. Subject to the terms and
conditions of this Agreement, the Borrower may borrow, prepay pursuant
to Section 2.3 and reborrow under this Section 2.1. Upon the
execution of this Agreement, Borrower shall execute and deliver to the
Bank an amended and restated working capital revolving credit note in
the form of Exhibit A attached hereto the ("Working Capital
Revolving Credit Note"), the terms of which are incorporated herein
by reference. All commitments by the Bank on behalf of the Borrower
by way of instrument certification, letter of credit or similar device
shall be considered loans pursuant to this Section 2.1."
(b) Section 2.3 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"2.3 Payment of Working Capital Revolving Credit Note; Prepayment.
Except as payment of part or all of the principal amount of the
loans outstanding pursuant to this Article II is sooner required to be
made under Section 2.1 or Article VIII hereof, the full principal
amount of the loans outstanding under this Article II and all
accrued interest thereon shall be paid by Borrower on or before
January 31, 1993. The Borrower may prepay all or any part of the
indebtedness under Section 2.1 at any time without penalty provided
any prepayment shall be in a multiple of One Thousand Dollars
($1,000.00)."
3. Amendment to Article III.
Article III of the Credit Agreement is hereby amended in its entirety
to read as follows:
-3-
<PAGE> 39
"ARTICLE III
Term Loan
3.1 Loan. Subject to all of the terms and conditions
hereof, the Bank agrees to lend to the Borrower on the date of this
Fourth Amendment the principal sum equal to the lesser of (i) Four
Million Dollars ($4,000,000.00) and (ii) an amount equal to the sum
of seventy-five percent (75%) of the forced sale value, as determined
by an appraiser acceptable to the Bank, of machinery and equipment
owned by the Borrower, excluding fixtures and leasehold improvements,
that is acceptable to the Bank and in which the Bank has a perfected
first security interest or other security interest acceptable to the
Bank in its sole discretion, which loan shall be evidenced by a term
note of such date executed and delivered to the Bank in the form of
Exhibit B attached hereto ('Term Note'), the terms of which are
incorporated herein by reference. If the principal amount outstanding
under this Section 3.1 exceeds the lesser of said amounts as of the
date of this Fourth Amendment, the Borrower shall forthwith pay to the
Bank an amount sufficient to eliminate such excess.
If the amount determined under subparagraph (ii) above is less
than Four Million Dollars ($4,000,000.00) on the date of this Fourth
Amendment and the Bank lends a sum less than Four Million Dollars
($4,000,000.00) to the Borrower under this Section 3.1 on the date of
this Fourth Amendment, the Bank agrees, subject to all of the terms
and conditions of this Agreement, to lend to the Borrower during the
period beginning on the date of this Fourth Amendment and ending
September 15, 1991, an amount up to seventy-five percent (75%) of the
forced sale value, as determined by an appraiser acceptable to the
Bank, of additional machinery and equipment purchased by the Borrower
that is acceptable to the Bank and in which the Bank has a perfected
first security interest or other security interest acceptable to the
Bank in its sole discretion, as the Borrower purchases such additional
items of machinery and equipment, provided that such additional items
of machinery and equipment are not substitutes or replacements of
existing items of machinery and equipment owned by the Borrower. Each
request for
-4-
<PAGE> 40
such additional borrowing hereunder shall be made in a manner
specified from time to time by the Bank and shall be accompanied by
invoices or, other supporting documentation acceptable to the Bank
evidencing the additional machinery and equipment purchased by the
Borrower.
In addition, if the amount determined under subparagraph (ii)
above is less than Four Million Dollars ($4,000,000.00) on the date of
this Fourth Amendment and during the period beginning on the date of
this Fourth Amendment and ending August 31, 1991, the Borrower
presents to the Bank another appraisal that is acceptable to the Bank
in its sole discretion, of the machinery and equipment of the Borrower
described in subparagraph (ii) above, the Bank agrees, subject to all
of the terms and conditions of this Agreement, to lend to the Borrower
through September 15, 1991, an additional amount equal to the
difference between the amount determined under the formula described
in subparagraph (ii) above using the new appraisal and the total
amount previously advanced to the Borrower under this Section 3.1.
In no event shall the Bank lend to the Borrower under this
Section 3.1 a total principal amount greater than $4,000,000.00 and
in no event shall the Bank lend sums to the Borrower under this
Section 3.1 after September 15, 1991. The Borrower may not borrow,
repay and reborrow under this Section. 3.1.
3.2 Use of Proceeds. The proceeds of the loan pursuant
to this Article III shall be used to repay the Borrower's existing
term loan from the Bank and to reduce the outstanding principal
balance of the Working Capital Revolving Credit Note.
3.3 Payment of Term Note; Prepayment. Except as payment
of part or all of the Term Note is sooner required under Section 3.1
or Article VIII, the principal of the Term Note shall be paid in eight
(8) equal quarterly installments of Two Hundred Thousand Dollars
($200,000.00) each on the first day of each January, April, July and
October, commencing July 1, 1992 and continuing thereafter up to and
including April 1, 1994 and a final payment on May 1, 1994 consisting
of the entire remaining outstanding principal balance of,
-5-
<PAGE> 41
all accrued interest on, and all other sums due under the Term Note.
The Borrower may prepay at any time all or any portion of the Term
Note without premium or penalty provided that any prepayments shall be
applied to principal last maturing.
3.4 Interest. Except as provided in Article VIII hereof,
the Term Note shall bear interest at the annual rate of the Prime Rate
plus one and one-quarter percent (1-1/4%). Interest shall be computed
daily on the basis of a Three Hundred Sixty (360) day year and shall
be billed to the Borrower monthly based upon the principal balance
outstanding and the actual number of days elapsed. Interest shall be
billed to the Borrower monthly beginning June 1, 1991 and shall be due
and payable as indicated by such billing. Billings may estimate a
rate and balance for periods between the billing date and the end of
the period which is covered by such billing and if actual rates or
balances vary from the estimate, actual charges shall be adjusted and
reflected in subsequent billings."
4. Amendment to Affirmative Covenants.
(a) Section 6.1(e)(v) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(v) Promptly after the end of each month but in any event not
later than twenty-five (25) days thereafter, a balance sheet of the
Borrower as of the end of such month, and statements of income,
retained earnings and cash flow of the Borrower for the period
beginning at the end of the previous fiscal year and ending with the
end of such month, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in
the previous fiscal year, all prepared in accordance with generally
accepted accounting principles consistently applied. Each monthly
financial report shall be accompanied by a certificate of the
President or chief financial officer of the Borrower stating that the
report has been prepared in accordance with generally accepted
accounting principles consistently applied and fairly presents the
financial condition of the Borrower as of the date of said balance
sheet and the results of operations for the year-to-date period then
ended and that to the best of his knowledge,
-6-
<PAGE> 42
except as specifically otherwise indicated, the Borrower has observed
and performed each and every covenant and agreement applicable to it
which is contained herein or in any instrument or agreement
contemplated by this Agreement to which the Borrower is a party."
(a) A new Section 6.1(e)(ix) is hereby added to the
Credit Agreement as follows:
"(ix) Promptly after the end of each month but in any event
not later than ten (10) days thereafter, a borrowing base certificate
signed by the President or chief financial officer of the Borrower in
the form and detail requested by the Bank stating the amount of the
components of the Borrowing Base as of the last day of the month. The
Borrower represents and warrants to the Bank that the Bank may rely,
in determining which accounts receivable are Acceptable Accounts
Receivable, which inventory is Acceptable Inventory and which
contracts in progress are Acceptable Contracts in Progress, on all
written statements and representations of the Borrower with respect
to any account receivable, inventory item or tool and die project in
progress and, unless otherwise indicated in writing to the Bank, that
(1) every account balance evidenced by an account receivable is in
fact owing; (2) every account receivable is valid and enforceable
without performance of any other act by the Borrower; (3) there are no
known setoffs, counterclaims or defenses against any account
receivable or any fact, event or occurrence known by the Borrower or
any officer thereof which impairs the validity of enforceability
thereof; (4) every item of inventory is stated at the lower of cost or
market and is readily saleable or usable in the course of the
Borrower's business; (5) for every tool and die projects in progress
included in the Borrowing Base there is a valid, binding purchase
order issued to the Borrower by an automotive manufacturing company,
accepted supplier thereof or other manufacturing company whose
identity has been disclosed to and is acceptable to the Bank for
purposes of including in the Borrowing Base; and (6) all costs
allocated to a tool and die projects in progress included in the
Borrowing Base are actual costs incurred by the Borrower that are
allocable to the particular project in
-7-
<PAGE> 43
accordance with generally accepted accounting principles."
5. Amendment to Negative Covenants.
(a) Section 6.2(e) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(e) Tangible Net Worth. Permit or suffer Tangible Net Worth
of Riviera and the Borrower, determined on a consolidated basis, to be
less than: $7,300,000.00 an or at any time after the date of this
Fourth Amendment; $7,600,000.00 on or at any time after August 31,
1991; $8,300,000.00 on or at any time after August 31, 1992; or
$9,250,000.00 on or at any time after August 31, 1993."
(b) section 6.2(f) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(f) Leverage Ratio. Permit or suffer the Leverage
Ratio of Riviera and the Borrower, determined on a consolidated basis,
to be greater than: 2.25 to 1 on or at any time after the date of this
Fourth Amendment; 2.0 to 1 on or at any time after August 31, 1992;
or, 1.75 to 1 on or at any time after August 31, 1993."
(c) Section 6.2(g) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(g) Working Capital. Permit or suffer the Working Capital of
Riviera and the Borrower, determined on a consolidated basis, to be
less than: $4,500,000.00 on or at any time after the date of this
Fourth Amendment; $5,000,000.00 on or at any time after August 31,
1992, or $5,500,000.00 on or at any time after August 31, 1993."
6. No Waiver. The execution of this Fourth Amendment by the Bank
does not represent or constitute a waiver by the Bank of any default or event
of default by the Borrower under the Credit Agreement.
7. Ratification of Credit Agreement. Except as specifically
provided herein, the terms and conditions of the Credit Agreement, as
previously amended, shall remain in full force and effect and are hereby
ratified and confirmed by the parties hereto.
-8-
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to Credit Agreement to be executed and delivered on the day and year
first written above.
RIVIERA DIE & TOOL INC., a Michigan
corporation
By Kenneth K. Rieth
------------------------------
Kenneth K. Rieth
Its President
NBD BANK, N.A., a National Banking
Association
By Thomas P. Lomonaco
-----------------------------
Thomas P. Lomonaco
Its Second Vice President
-9-
<PAGE> 45
EIGHTH AMENDMENT TO CREDIT AGREEMENT
THIS EIGHTH AMENDMENT ("Eighth Amendment") is made this 26th day of
July, 1993, between RIVIERA DIE & TOOL, INC. (formerly known as R.D.T., Inc.),
a Michigan corporation, with offices at 5460 Executive Drive S.E., Grand
Rapids, Michigan 49512 (hereinafter called the "Borrower") and NBD BANK, N.A.
(formerly known as NBD Grand Rapids, N.A.), a National Banking Association,
having offices at 200 Ottawa Avenue, N.W., Grand Rapids, Michigan 49503
(hereinafter called the "Bank").
W I T N E S S E T H:
WHEREAS the Borrower and the Bank entered into a Credit Agreement
dated April 20, 1988, as amended by a First Amendment to Credit Agreement dated
August 31, 1988, a Second Amendment to Credit Agreement dated January 30, 1989,
a Third Amendment to Credit Agreement dated January 30, 1990, a Fourth
Amendment to Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit
Agreement dated July 31, 1992, a Sixth Amendment to Credit Agreement dated
January 31, 1993, and a Seventh Amendment to Credit Agreement dated March 31,
1993 (the "Credit Agreement") by which the Bank has made certain credit
facilities available to the Borrower upon the terms and subject to the
conditions set forth in the Credit Agreement; and
WHEREAS the Borrower has requested that the terms of the revolving
credit facility described in Article II of the Credit Agreement be revised; and
WHEREAS the Borrower and the Bank desire to amend certain financial
covenants contained in the Credit Agreement; and
WHEREAS the Bank is willing to revise the terms of the revolving
credit facility only upon the terms and subject to the conditions set forth in
Credit Agreement, as amended by this Eighth Amendment; and
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants set forth below, the Borrower and the Bank agree as follows:
1. Amendment to Definitions.
(a) The definition of "Value of Acceptable Contracts in
Progress" in Article I of the Credit Agreement is hereby amended in its
entirety to read as follows:
"'Value of Acceptable Contracts in Progress' shall mean the
costs incurred by the Borrower that, in accordance with generally
accepted accounting principles, are allocable to tool and die projects
in progress for
<PAGE> 46
which there are binding purchase orders issued to the Borrower by an
automotive manufacturing company, an accepted supplier thereof, or
another manufacturing company acceptable to the Bank, other than
projects (a) for or on behalf of an Affiliate of the Borrower, except
that (i) for periods during which an agreement pursuant to Section
7.1(j) hereof is in effect, purchase orders from Motor Wheel
Corporation shall not be excluded by reason of this subsection (a),
and (ii) purchase orders from Riviera Plastic Products Company shall
not be excluded hereunder where Riviera Plastic Products Company has a
binding purchase order from its customer for said tooling; (b) which
have been rejected or are in dispute; (c) the accounts receivable with
respect to which is payable by any person located outside the United
States or Canada; (d) which are Construction Signoff Projects; or (e)
that are reasonably deemed by the Bank to be otherwise unacceptable."
(b) The definition of "Borrowing Base" in Article I of the
Credit Agreement is hereby amended in its entirety by the substitution therefor
of the following:
"'Borrowing Base (General)' shall mean the sum of (a)
eighty-five percent (85%) of Acceptable Accounts Receivable; (b) forty
percent (40%) of Acceptable Inventory, but in no event shall this
component exceed Four Hundred Thousand Dollars ($400,000.00); and (c)
fifty percent (50%) of the Value of Acceptable Contracts in Progress,
but in no event shall this component exceed Five Million Dollars
($5,000,000.00)."
"'Borrowing Base (Construction Signoff)' shall mean
eighty-five percent (85%) of Construction Signoff Amounts."
(c) A new definition of "Construction Signoff" shall be added
to Article I of the Credit Agreement as follows:
"'Construction Signoff' shall mean a document in the form
attached as Exhibit D hereto. Except as otherwise indicated herein,
the term 'Construction Signoff' shall apply to such forms whether or
not as yet executed by Chrysler Corporation."
(d) A new definition of "'Construction Signoff Amounts'" shall
be added to Article I of the Credit Agreement as follows:
"'Construction Signoff Amounts' shall mean unpaid amounts which
Chrysler Corporation pursuant to Purchase Order Financing Riders has
agreed to pay on demand to the Bank and for which Chrysler Corporation
has issued
-2-
<PAGE> 47
executed Construction Signoffs in such amounts; provided that,
amounts otherwise included within the term Acceptable Accounts
Receivable shall be excluded from the Construction Signoff Amounts."
(e) A new definition of "Construction Signoff Projects" shall
be added to Article I of the Credit Agreement as follows:
"'Construction Signoff Projects' shall mean those tool and die
projects for which Chrysler Corporation has issued binding purchase
orders coupled with Purchase Order Financing Riders."
(f) The definition of "Loan" or "Loans" in Article I of
the Credit Agreement is hereby amended in its entirety to read as follows:
"'Loan' or 'Loans' shall mean any borrowing under Section 2.1
and its subparagraphs or Section 3.1."
(g) A new definition of "Purchase Order Financing Rider" shall
be added to Article I of the Credit Agreement as follows:
"'Purchaser Order Financing Rider' shall mean a document in
the form attached as Exhibit D hereto, with a Construction Signoff
attached, executed by Chrysler Corporation."
(h) The definition of "Total Capital Funds" in Article I
of the Credit Agreement is hereby amended in its entirety to read as follows:
"'Total Capital Funds' shall mean, as of any date, (a) the
amount of any capital stock or similar ownership liability plus (or
minus in the case of a deficit) capital surplus or additional paid-in
capital, retained earnings, debt subordinated in payment to the Loans
and deferred income; less (b) the net book value of all items of the
following character which are included in the assets: (i) goodwill,
(ii) organization or experimental expenses, (iii) unamortized debt
discount and expense, (iv) stock discount and expense, (v) patent,
trademark, trade names and copyrights, (vi) treasury stock, (vii)
franchises, licenses and permits, (viii) investment in or amounts
receivable from New Leap Corporation and any Affiliates, and (ix)
other assets which are deemed intangible assets under generally
accepted accounting principles."
(i) The definition of "Tangible Net Worth" in Article I
of the Credit Agreement is hereby amended in its entirety to read as follows:
-3-
<PAGE> 48
"'Tangible Net Worth' shall mean, as of any date, (a) the
amount of any capital stock or similar ownership liability plus (or
minus in the case of a deficit) capital surplus and retained earnings,
less (b) the net book value of all items of the following character
which are included in the assets: (i) goodwill, (ii) organization or
experimental expenses, (iii) unamortized debt discount and expense,
(iv) stock discount and expense, (v) patent, trademark, trade names
and copyrights, (vi) treasury stock, (vii) franchises, licenses and
permits, (viii) investment in or amounts receivable from New Leap
Corporation and any Affiliates, and (ix) other assets which are
deemed intangible assets under generally accepted accounting
principles."
(j) The definition of "Working Capital Revolving Credit
Commitment" in Article I of the Credit Agreement is hereby amended in its
entirety to read as follows:
"'Working Capital Revolving Credit Commitment' shall mean the
commitment of the Bank to lend pursuant to Section 2.1 and its
subparagraphs."
(k) The definition of "Working Capital Revolving Credit
Note" in Article I of the Credit Agreement is hereby amended in its entirety to
read as follows:
"'Working Capital Revolving Credit Note' shall mean the note
or notes executed by the Borrower payable to the order of the Bank to
evidence the loans pursuant to Article II hereof and its
subparagraphs, as the same may be modified, amended or restated from
time to time after execution and delivery thereof, together with any
promissory note or notes issued in exchange or replacement thereof."
2. Amendment to Revolving Credit Facility.
(a) Section 2.1 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"2.1 Loan. Subject to all of the terms and conditions
hereof, the Bank agrees to lend to the Borrower from time to time
until December 31, 1993, or termination of the Bank's commitment to
lend under this Agreement, whichever is the first to occur, such sums
in multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified by
the Bank, provided that the aggregate principal amount outstanding at
any time pursuant to the provisions of this Section 2.1 shall not
exceed the aggregate amounts the Bank has agreed to lend under
-4-
<PAGE> 49
subparagraphs (a) and (b) of this Section 2.1. In the event the
principal amount outstanding at any time shall exceed said amount, the
Borrower shall forthwith pay to the Bank an amount sufficient to
eliminate such excess. Subject to the terms and conditions of this
Agreement, the Borrower may borrow, prepay pursuant to Section 2.3 and
reborrow under this Section 2.1 and its subparagraphs. Upon the
execution of this Agreement, the Borrower shall execute and deliver
to the Bank two amended and restated revolving credit demand notes in
the forms of Exhibit A and Exhibit B attached hereto (the 'Revolving
Credit Notes'), the terms of which are incorporated herein by
reference. All commitments by the Bank on behalf of the Borrower by
way of instrument certification, letter of credit or similar device
shall be considered loans pursuant to this Section 2.1.
"(a) Working Capital General Revolving Credit Loan. Subject
to all of the terms and conditions hereof, the Bank agrees to lend to
the Borrower in the manner specified in Section 2.1 an aggregate
principal amount which shall not exceed at any time the lesser of Six
Million Five Hundred Thousand Dollars ($6,500,000.00) or the Borrowing
Base (General).
"(b) Working Capital Construction Signoff Revolving Credit
Loan. Subject to all of the terms and conditions hereof, the Bank
agrees to lend to the Borrower in the manner specified in Section 2.1
an aggregate principal amount which shall not exceed at any time the
lesser of Three Million Five Hundred Thousand Dollars ($3,500,000.00)
or the Borrowing Base (Construction Signoff). In the event that the
Bank shall demand and receive from Chrysler Corporation any payments
pursuant to a Purchase Order Financing Rider, the amount of such
payment shall be applied against the Bank's loan to the Borrower
pursuant to this subparagraph (b), in which event any assets as to
which the Bank has assigned its interest to Chrysler Corporation shall
no longer be considered assets of the Borrower for any purposes of
this Credit Agreement, including, without limitation, the definition
or calculation of Current Assets, Leverage Ratio, Tangible Net Worth,
Total Capital Funds, or Working Capital."
(b) Section 2.3 of the Credit Agreement is hereby amended
in its entirety to read as follows:
"2.3 Payment of Working Capital Revolving Credit Note;
Prepayment. Except as payment of part or all of the principal amount
of the loans outstanding pursuant to this Article II is sooner
required to be made under
-5-
<PAGE> 50
Section 2.1 or Article VIII hereof, the full principal amount of the
loans outstanding under this Article II and all accrued interest
thereon shall be paid by Borrower on or before December 31, 1993. The
Borrower may prepay all or any part of the indebtedness under Section
2.1 at any time without penalty provided any prepayment shall be in a
multiple of One Thousand Dollars ($1,000.00)."
(c) Section 2.4 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"2.4 Interest. Except as provided in Article VIII hereof, the
Working Capital Revolving Credit Note shall bear interest at the
annual rate of one-and-one-half percent (1-1/2%) over the Prime Rate.
Interest shall be computed daily on the basis of a Three Hundred Sixty
(360) day year and shall be billed to the Borrower monthly based upon
the principal balance outstanding and the actual number of days in the
preceding month. Interest shall be due and payable no later than the
first day of each month."
3. Amendment to Affirmative Covenants.
(a) Section 6.1(e)(iv) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(iv) Promptly twice monthly after the fifteenth and last days
of each month and in any event within ten (10) days thereafter, a
summary in such detail as the Bank may from time to time request of
the Borrower's: (a) Value of Acceptable Contracts in Progress as of the
last day of such twice-monthly period; and (b) similar information
concerning Construction Signoff Projects in progress."
(b) Section 6.1(e)(ix) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(ix) Promptly twice monthly after the fifteenth and last
days of each month and in any event within ten (10) days thereafter,
a borrowing base certificate signed by the President or chief
financial officer of the Borrower in the form and detail requested by
the Bank stating the amount of the components of the Borrowing Base
(General) and the Borrowing Base (Construction Signoff) as of the last
day of such twice-monthly period. The Borrower represents and
warrants to the Bank that the Bank may rely, in determining which
accounts receivable are Acceptable Accounts Receivable, which
inventory is Acceptable Inventory and which contracts in progress are
Acceptable Contracts in Progress or Construction Signoff
-6-
<PAGE> 51
Projects, on all written statements and representations of the
Borrower with respect to any account receivable, inventory item or
tool and die project in progress and, unless otherwise indicated in
writing to the Bank, that (1) every account balance evidenced by an
account receivable is in fact owing; (2) every account receivable is
valid and enforceable without performance of any other act by the
Borrower; (3) there are no known setoffs, counterclaims or defenses
against any account receivable or any fact, event or occurrence known
by the Borrower or any officer thereof which impairs the validity or
enforceability thereof; (4) every item of inventory is stated at the
lower of cost or market and is readily saleable or usable in the
course of the Borrower's business; (5) for every tool and die project
in progress included in the Borrowing Base (General) or the Borrowing
Base (Construction Signoff) there is a valid, binding purchase order
issued to the Borrower by an automotive manufacturing company,
accepted supplier thereof or other manufacturing company whose
identity has been disclosed to and is acceptable to the Bank for
purposes of including in the Borrowing Base (General) or Borrowing
Base (Construction Signoff); and (6) all costs allocated to a tool and
die project in progress included in the Borrowing Base (General) or
the Borrowing Base (Construction Signoff) are actual costs incurred by
the Borrower that are allocable to the particular project in
accordance with generally accepted accounting principles."
(c) A new Section 6.1(x) is hereby added to the Credit
Agreement as follows:
"(x) Promptly upon receipt, but in any event not later than
ten (10) days thereafter, all new purchase orders from Chrysler
Corporation, all original Purchase Order Financing Riders, and all
original executed Construction Signoffs."
4. Amendment to Negative Covenants:
(a) Section 6.2 (e) of the Credit Agreement is hereby amended
in its entirety to read as follows:
"(e) Tangible Net Worth. Permit or suffer the Tangible Net
Worth of Riviera and the Borrower, determined on a consolidated
basis, to be less than Five Million Three Hundred Thousand Dollars
($5,300,000.00) on or at any time after the date of this Eighth
Amendment, or to be less than Six Million Five Hundred Thousand
Dollars ($6,500,000.00) on or at any time after August 31, 1994."
-7-
<PAGE> 52
(b) Section 6.2 (f) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(f) Leverage Ratio. Permit or suffer the Leverage Ratio of
Riviera and the Borrower, determined on a consolidated basis, to be
greater than 3 to 1 on or at any time after the date of this Eighth
Amendment, or to be greater than 2.25 to 1 on or at any time after
August 31, 1994."
(c) Section 6.2(g) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(g) Working Capital. Permit or suffer the Working Capital of
Riviera and the Borrower, determined on a consolidated basis, to be
less than Two Hundred Thousand Dollars ($200,000.00) on or at any time
after the date of this Eighth Amendment, or to be less than One
Million Dollars ($1,000,000.00) on or at any time after August 31,
1994."
5. Amendment to Events of Default. A new Section 8.1(1) is hereby
added to the Credit Agreement as follows:
"(1) The failure or refusal by Chrysler Corporation within
ten (10) days after written demand therefor by the Bank to pay to
the Bank all or any part of the Construction Signoff Amounts or to
otherwise honor any of Chrysler Corporation's obligations related to
the Construction Signoff Projects, or the occurrence of any event
involving Chrysler Corporation which if it involved the Borrower would
constitute an Event of Default under Section 8.1(f) hereof."
6. No Waiver. The execution of this Eighth Amendment by the Bank
does not represent or constitute a waiver by the Bank of any default or event
of default by the Borrower under the Credit Agreement.
7. Ratification of Credit Agreement. Except as specifically
provided herein, the terms and conditions of the Credit Agreement, as
previously amended, shall remain in full force and effect and are hereby
ratified and confirmed by the parties hereto.
-8-
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have caused this Eighth
Amendment to Credit Agreement to be executed and delivered on the day and year
first written above.
RIVIERA DIE & TOOL, INC., a Michigan
corporation
By Kenneth K. Rieth
-------------------------------
Kenneth K. Rieth
Its President
NBD BANK, N.A., a National Banking
Association
By Thomas P. Lomonaco
------------------------------
Thomas P. Lomonaco
Its Vice President
-9-
<PAGE> 54
NINTH AMENDMENT TO CREDIT AGREEMENT
THIS NINTH AMENDMENT ("Ninth Amendment") is made this 4th day of March,
1994, between Riviera Die & Tool, Inc. (formerly known as R.D.T., Inc.), a
Michigan corporation, with offices at 5460 Executive Drive S.E., Grand Rapids,
Michigan 49512 (hereinafter called the "Borrower") and NBD Bank, N.A. (formerly
known as NBD Grand Rapids, N.A.), a National Banking Association, having
offices at 200 Ottawa Avenue N.W., Grand Rapids, Michigan 49503 (hereinafter
called the "Bank"). Capitalized terms used but not defined in this Ninth
Amendment shall have the respective meanings assigned to them in the Credit
Agreement.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated April
20, 1988, as amended by a First Amendment to Credit Agreement dated August 31,
1988, a Second Amendment to Credit Agreement dated January 30, 1989, a Third
Amendment to Credit Agreement dated January 30, 1990, a Fourth Amendment to
Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement
dated January 31, 1993, a Sixth Amendment to Credit Agreement dated January 31,
1993, a Seventh Amendment to Credit Agreement dated March 31, 1993 and an
Eighth Amendment to Credit Agreement dated July 26, 1993 (collectively, the
"Credit Agreement") by which the Bank has made certain credit facilities
available to the Borrower upon the terms and subject to the conditions set
forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed three (3)
promissory notes: (i) the Seventh Amended and Restated Working Capital
Revolving Credit Note No. I (General) in the original principal amount of
$6,500,000.00 dated July 26, 1993 (the "Working Capital Revolving Credit
Note"); and (ii) Seventh Amended and Restated Working Capital Revolving Credit
Note No. II (Construction Signoff) in the original principal amount of
$3,500,000.00 dated July 26, 1993 (the "Working Capital Construction Signoff
Note"); and (iii) a Term Note in the original principal amount of $4,000,000.00
dated May 16, 1991 (the "Term Note"),
C. In connection with the Credit Agreement, Riviera Tool Company
("Riviera") executed and delivered to the Bank a Guaranty dated April 20, 1988,
pursuant to which, among other things, Riviera guarantied all of the Borrower's
obligations (including the Obligations as defined below) to the Bank, whether
then existing or thereafter arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth and Riviera Holding Company each executed
and delivered a Guaranty and Continuing Pledge Agreement dated July 26, 1993.
<PAGE> 55
E. As of February 9, 1994, there was (i) $6,500,000.00 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note; and (ii) $3,500,000.00 in principal indebtedness owing by the Borrower
pursuant to the Working Capital Construction Signoff Note; and (iii)
$1,456,962.00 in principal indebtedness owing by the Borrower pursuant to the
Term Note. These sums, together with accrued but unpaid interest, costs and
expenses (including attorneys' fees), as well as all other present and future
obligations of the Borrower to the Bank arising under or in connection with the
Credit Agreement or any other document executed in connection therewith or
subsequent thereto by the Borrower in favor of the Bank are hereinafter
referred to as the "Obligations".
F. The Borrower and Riviera acknowledge and agree that (i) the Obligations
are due the Bank without setoff, recoupment, defense or counterclaim, in law or
equity, of any nature or kind; (ii) the Obligations are secured by valid,
perfected, indefeasible, enforceable first priority liens and security
interests (except as permitted by Section 5.8 of the Credit Agreement) in favor
of the Bank in, among other things, (a) all of the Borrower's present and
future personal property, including, without limitation, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof, and (b) all of Riviera's present and future
personal property, including, without limitation, accounts, chattel paper,
general intangibles, documents, instruments, inventory, equipment, fixtures
and all other tangible and intangible personal property and all proceeds and
products thereof, and (c) the collateral described in the Continuing Pledge
Agreements dated July 26, 1993. For convenience, all of the collateral
referred to above together with all other collateral described in and/or
granted in connection with any of the loan documents executed by the Borrower
and Riviera (the "Loan Documents"), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other party's present or future obligations
to the Bank, is collectively referred to as the "Collateral".
G. The Borrower, Riviera and the Bank desire to amend the Credit
Agreement as more particularly set forth herein.
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated
herein as agreements, representations, warranties and covenants with respect to
the parties, as the case may be), and in consideration of the terms and
conditions set forth below, the Borrower, Riviera and the Bank agree as
follows:
1. Amendment to Revolving Credit Facility. The introductory paragraph of
Section 2.1 of the Credit Agreement is hereby amended in its entirety to read
as follows:
"2.1 - Loan. Subject to all of the terms and conditions hereof, the
Bank agrees to lend to the Borrower from time to time until
-2-
<PAGE> 56
March 31, 1994 or termination of the Bank's commitment to lend under
this Agreement, whichever is first to occur, such sums in multiples of
Twenty-Five Thousand Dollars ($25,000.00) as may be requested from
time to time by the Borrower in a manner specified by the Bank,
provided that the aggregate principal amount outstanding at any time
pursuant to the provisions of this Section 2.1 shall not exceed the
aggregate amounts the Bank has agreed to lend under subparagraphs (a)
and (b) of this Section 2.1. In the event the principal amount
outstanding at any time shall exceed said amount, the Borrower shall
forthwith pay to the Bank an amount sufficient to eliminate such
excess. Subject to the terms and conditions of this Agreement, the
Borrower may borrow, prepay pursuant to Section 2.3 and re-borrow
under this Section 2.1 and its subparagraphs. Upon the execution of
this Agreement, the Borrower shall execute and deliver to the Bank two
(2) Amended and Restated Revolving Credit Demand Notes in the forms of
Exhibit A and Exhibit B attached hereto (the "Revolving Credit
Notes"), the terms of which are incorporated herein by reference. All
commitments by the Bank on behalf of the Borrower by way of instrument
certification, letter of credit or similar device shall be considered
loans pursuant to this Section 2.1.
2. Section 2.3 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"2.3 - Payment of Working Capital Revolving Credit Note; Prepayment.
Except as payment of part or all of the principal amount of the loans
outstanding pursuant to this Article II is sooner required to be made
under Section 2.1 or Article VIII hereof, the full principal amount of
the loans outstanding under this Article II and all accrued interest
thereon shall be paid by Borrower on or before March 31, 1994. The
Borrower may prepay all or any part of the indebtedness under Section
2.1 at any time without penalty provided any prepayment shall be in a
multiple of One Thousand Dollars ($1,000,00)."
3. Article IX of the Credit Agreement is hereby amended to add in its
entirety the following Section 9.11:
"9.11 - Dominion of Funds Agreement. All collections of any nature
and kind, including payments and deposits received by NBD and proceeds
subject to the liens and security interests of NBD, including without
limitation, proceeds realized from the Collateral, will be subject to
a Dominion of Funds Agreement in form and substance acceptable to the
Bank."
The form of the Dominion of Funds Agreement is attached hereto and incorporated
herein as Exhibit C and shall be executed and delivered to the Bank by Borrower
simultaneously with the execution of this Ninth Amendment.
-3-
<PAGE> 57
4. Additional Reporting. The Borrower shall provide, pursuant to Section
6.1(e)(viii) promptly by the close of business on Thursday of each week for
the prior week, a collateral activity report in form and substance acceptable
to the Bank.
5. The terms and conditions of the Credit Agreement, the Riviera
Guaranty and the Loan Documents (as previously amended and as amended herein),
remains in full force and effect and is hereby ratified and confirmed by the
parties hereto.
6. All parties executing this Amendment in a representative capacity
warrant that they have the authority to execute this Amendment and legally
bind the entity they represent.
7. As of the date hereof, the Borrower and Riviera represent and warrant
that they are aware of, and possess, no claims or causes of action against the
Bank. Notwithstanding this representation and as further consideration for
the agreements and understandings herein, the Borrower and the Guarantors,
individually, jointly, severally, jointly and severally, each of their
respective employees, agents, executors, successors and assigns, hereby
release the Bank, its officers, directors, employees, agents, attorneys,
affiliates, subsidiaries, successors and assigns, from any liability, claim,
right or cause of action which now exists, or hereafter arises, whether known
or unknown, arising from events occurring prior to and in any way related to
the facts in existence as of the date hereof. By way of example and not
limitation, the foregoing includes any claims in any way related to actions
taken or omitted to be taken by the Bank under the Loan Documents and the
business relationship with the Bank.
8. This Amendment constitutes the entire understanding of the parties
with respect to the subject matter hereof and may only be modified or amended
by a writing signed by the party to be charged. This Amendment is governed by
the internal laws of the State of Michigan (without regard to conflicts of law
principles) and may be executed in counterparts, and facsimile copies of
signatures shall be treated as original signatures for all purposes. If any of
the provisions of this Amendment are in conflict with any applicable statute
or rule of law or are otherwise unenforceable, such offending provision shall
be null and void only to the extent of such conflict or unenforceability and
shall be deemed separate from and shall not invalidate any other provision of
this Amendment and in lieu of such enforceable provision, there shall be
substituted a provision as similar in terms to such unenforceable provision as
may be possible so as to make such provision legal, valid and enforceable.
9. Nothing contained in this Amendment shall be deemed to constitute a
waiver of or shall waive any Events of Default existing as of the date hereof
or any other Event of Default or default which may arise after the date hereof
or any of the Bank's rights or remedies provided in its agreements with any of
the undersigned, including, without limitation, all such rights and remedies
under the Credit Agreement and the Loan Documents,
-4-
<PAGE> 58
and those rights and remedies granted by law, all of which rights and remedies
are preserved or remain in full force and effect.
RIVIERA DIE & TOOL, INC.
a Michigan Corporation
By: /s/ Kenneth K. Rieth
--------------------------
Kenneth K. Rieth
Its President
NBD BANK, N.A.
By: /s/ Joseph C. Giampetroni
---------------------------
Joseph C. Giampetroni
Its Second Vice President
ACKNOWLEDGED AND AGREED BY:
RIVIERA TOOL COMPANY
By: Kenneth K. Rieth
-------------------------
Its: President
------------------------
-5-
<PAGE> 59
EXHIBIT C
DOMINION OF FUNDS AGREEMENT
NBD Bank, N.A.
611 Woodward
Detroit, Michigan 48226
Attention: Joseph C. Giampetroni
Second Vice President
Gentlemen:
To secure all of our present and future indebtedness to you whether joint,
joint and several, or several, we have heretofore or simultaneously herewith
delivered to you certain loan and security documents, including, without
limitation, a Credit Agreement dated April 20, 1988 (collectively, as amended
from time to time, the "Loan Agreement") and, among other security agreements,
Security Agreements dated April 20, 1988 (collectively, as amended from time to
time, the "Security Agreements"), all of which Loan Agreement, loan and
security documents and Security Agreements are incorporated herein by reference
and made a part hereof, pursuant to which we have assigned to you, among other
things, all of our present and future accounts, chattel paper, general
intangibles, inventory and equipment (collectively "Accounts Receivable"), as
those terms are defined and described in the Loan Agreement and the Security
Agreements.
You may notify our Customers at any time to the effect that you have a
security interest in the Accounts Receivable, and collect them directly in your
own name. Until such time, we will collect the Accounts Receivable as a
trustee for you under an express trust for your benefit. You may verify any
Accounts Receivable in any manner, and we shall assist you in any manner you
deem necessary. All full or partial payments of any Accounts Receivable made
directly to us or that otherwise come into our possession shall be received by
us under an express trust for your benefit and we will immediately deposit such
collections into the Cash Collateral Account (as hereinafter defined). We will
furnish to you a report listing the name and amounts of all payments delivered
to us. Such reports shall be in form and substance satisfactory to you.
Similarly, any goods which are returned to us by our Customers or which we
otherwise recover shall also be received in trust for you. We shall advise you
promptly of any such returned goods, and unless you instruct us to deliver them
to you, we shall sell them for you, and the Accounts Receivable so created
shall be part of your security. After you have notified any Customer, you
shall have the right, without our participation, approval or notice, to settle
any disputes between such Customer and us directly with the Customer for any
amounts and upon such terms as you consider advisable.
<PAGE> 60
You shall have authority to endorse in our name any check or similar
instruments payable to us which may come into your hands as payments of or on
the Accounts Receivable. At your option you may collect, sue for, compromise
and receive in your own name any of the Accounts Receivable assigned to you,
but you shall be under no duty or obligation so to do.
All collections of any nature or kind, including payments and deposits
received by you and proceeds subject to your lien and security interests,
specifically including, without limitation, the proceeds of all of the Accounts
Receivable which you shall receive, shall be deposited into and held by you in
a non-interest bearing account in your name at your bank, NBD Bank, N.A.,
designated "cash collateral account", herein called Cash Collateral Account,
which shall, until all of our present and future obligations and liabilities
(collectively, "Obligations") owed to you are fully paid and satisfied, belong
to and be your property, to be applied to the Obligations if you so elect. All
collections as well as all cash and other items that are to be forwarded to you
pursuant hereto are to be deposited in the Cash Collateral Account and any
proceeds of Accounts Receivable in the form of checks or otherwise that are
mailed directly to us shall be stamped with the stamp you provide us and
immediately taken to be deposited in such account. On the second business day
following a deposit into the Cash Collateral Account such deposit shall, at
your election, be applied to the Obligations provided, however, that any
item(s) returned unpaid shall be charged back to us.
If there is an express conflict between the terms hereof and the terms of
the Loan Agreement, the terms of this agreement shall will govern and control.
Terms not defined herein shall have the meaning set forth in the Loan
Agreement.
Very truly yours,
RIVIERA DIE & TOOL, INC.
By: Kenneth K. Rieth
--------------------------------
Name: Kenneth K. Rieth
-------------------------
Title: President
--------------
Dated: March 4 , 1994
---------------------
-2-
<PAGE> 61
TENTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, N.A., successor by merger to the interests of NBD Grand Rapids,
N.A. ("NBD" or the "Bank"), Riviera Die & Tool, Inc. (formerly known as R.D.T.,
Inc.), a Michigan Corporation (the "Borrower"), and Riviera Tool Company, a
Michigan Corporation ("Riviera"), enter into this Amendment and Restated
Forbearance Agreement (the "Agreement") on the 5th day of May, 1994.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated April
20, 1988, as amended by a First Amendment to Credit Agreement dated August 31,
1988, a Second Amendment to Credit Agreement dated January 30, 1989, a Third
Amendment to Credit Agreement dated January 30, 1990, a Fourth Amendment to
Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement
dated July 31, 1992, a Sixth Amendment to Credit Agreement dated January 31,
1993, a Seventh Amendment to Credit Agreement dated March 31, 1993, an Eighth
Amendment to Credit Agreement dated July 26, 1993 and a Ninth Amendment to
Credit Agreement dated March 4, 1994 (collectively, the "Credit Agreement") by
which the Bank has made certain credit facilities available to the Borrower
upon the terms and subject to the conditions set forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed three
(3) promissory notes: (i) the Eighth Amended and Restated Working Capital
Revolving Credit Note No. I (General) in the original principal amount of
$6,500,000.00 dated March 4, 1994 (the "Working Capital Revolving Credit
Note"); and (ii) the Eighth Amended and Restated Working Capital Revolving
Credit Note No. II (Construction Signoff) in the original principal amount of
$3,500,000.00 dated March 4, 1994 (the "Working Capital Construction Signoff
Note"); and (iii) a Term Note in the original principal amount of $4,000,000.00
dated May 16, 1991 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and delivered
to the Bank a Guaranty dated April 20, 1988, pursuant to which, among other
things, Riviera guarantied all of the Borrower's obligations (including the
Obligations as defined below) to the Bank, whether then existing or thereafter
arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth ("Rieth") and Riviera Holding Company
("Holding"; collectively, Rieth and Holding may be hereinafter referred to as
the "Limited Guarantors") each executed and delivered Guaranties and Continuing
Pledge Agreements (the "Limited Guaranty Documents") dated August 4, 1992 and
July 26, 1993.
E. As of April 29, 1994, there was (i) $6,351,571.00 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note; and (ii) $3,500,000.00 in principal indebtedness owing by the Borrower
pursuant to the Working Capital Construction Signoff Note; and (iii)
$1,456,962.00 in principal indebtedness owing by the Borrower pursuant
<PAGE> 62
to the Term Note. These sums, together with accrued but unpaid interest, costs
and expenses (including attorneys' fees), as well as all other present and
future obligations of the Borrower to the Bank, including, but not limited to,
obligations arising under or in connection with the Loan Documents (as defined
below) or any other document executed in connection therewith or subsequent
thereto by the Borrower in favor of the Bank are hereinafter referred to as the
"Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment), as amended
by a First Amendment to each of the above-described Security Agreements dated
January 30, 1989 (the "Borrower Security Agreements") wherein Borrower granted
to NBD a valid, perfected, indefeasible and enforceable first priority lien and
security interest in favor of the Bank in all of the Borrower's present and
future personal property, including, but not limited to, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof with the exception of certain property described
in Section 5.8 of the Credit Agreement, For convenience, all of the collateral
referred to in the Borrower Security Agreements, together with all other
collateral described in and/or granted in connection with any of the Loan
Documents (as hereinafter defined), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other parties' present or future
obligations to the Bank, is collectively referred to as the "Borrower
Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a Security
Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment) (the "Riviera
Security Agreements") wherein Riviera granted to NBD a valid, perfected,
indefeasible and enforceable first priority lien and security interest in favor
of the Bank in all of the Riviera's present and future personal property,
including, but not limited to, accounts, chattel paper, general intangibles,
documents, instruments, inventory, equipment, fixtures and all other tangible
and intangible personal property and all proceeds and products thereof. For
convenience, all of the collateral referred to in the Riviera Security
Agreements, together with all other collateral described in and/or granted in
connection with any of the Loan Documents (as hereinafter defined), together
with all collateral heretofore, simultaneously herewith or hereafter granted to
the Bank by Riviera to secure any of Riviera's or any other parties' present or
future obligations to the Bank, is collectively referred to as the "Riviera
Collateral".
H. The Borrower and Riviera acknowledge and agree that (i) the Obligations
are due the Bank without setoff, recoupment, defense or counterclaim, in law or
equity, of any nature or kind; (ii) the Obligations are secured by valid,
perfected, indefeasible, enforceable first priority liens and security
interests (except as permitted by Section 5.8 of the
-2-
<PAGE> 63
Credit Agreement) in favor of the Bank in, among other things, (a) all of the
Borrower's present and future personal property, including, without limitation,
accounts, chattel paper, general intangibles, documents, instruments,
inventory, equipment, fixtures and all other tangible and intangible personal
property and all proceeds and products thereof, and (b) all of Riviera's
present and future personal property, including, without limitation, accounts,
chattel paper, general intangibles, documents, instruments, inventory,
equipment, fixtures and all other tangible and intangible personal property and
all proceeds and products thereof, and (c) the collateral described in the
Limited Guaranty Documents. For convenience, the Credit Agreement, the Working
Capital Revolving Credit Note, the Working Capital Construction Signoff Note,
the Term Note (collectively, the "Notes"), the Borrower Security Agreements,
the Riviera Guaranty, the Riviera Security Agreements, the Limited Guaranty
Documents, the Original Forbearance Agreement (as hereafter defined), this
Agreement and any other document executed therewith or subsequent thereto by
the Borrower in favor of the Bank are hereinafter referred to as the "Loan
Documents". For convenience, all of the Borrower Collateral, the Riviera
Collateral and the collateral referenced in the Limited Guaranty Documents
shall hereinafter be referred to as the "Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations)
owed to NBD, including, but not limited to the Collateral, shall constitute and
serve as collateral for any and all of the obligations and duties of the
Borrower and Riviera to NBD (including the Obligations), whether now existing
or hereafter arising.
K. Borrower and Riviera each acknowledge that prior to May 1, 1994, there
were defaults under the Loan Documents as follows (collectively, the "Existing
Defaults"):
(1) The Leverage Ratio of Riviera and the Borrower, determined on a
consolidated basis, is greater than 3 to 1 (3.35 to 1 as of
March 31, 1994).
(2) The Working Capital of Riviera and the Borrower,
determined on a consolidated basis, is less than $200,000 (minus
$1,101,729.00 as of March 31, 1994).
-3-
<PAGE> 64
(3) The aggregate principal amount outstanding under the
Working Capital Revolving Credit, has in the past and is
projected to, periodically exceed the Borrowing Base (the
"Deficiency") and the Borrower has reported that it may be unable
to pay down the Obligations or otherwise take such action to
rectify any imbalance that may occur during the Forbearance
Period (as hereinafter defined) until additional outside capital
is obtained.
Borrower and Riviera represent and warrant that, to the best of their
knowledge, after due inquiry and investigation, they are unaware of any other
Events of Default (as defined in the Credit Agreement) or defaults under any of
the Loan Documents or this Agreement or of any event that, with the passage of
time, notice, or both, would become an Event of Default or a default under the
Loan Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the Loan
Documents and applicable law.
M. The Borrower and Riviera further acknowledge and agree that the actions
taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. The Borrower and Riviera acknowledge and agree that (i) NBD has fully
performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond November 30, 1994.
O. Borrower, Riviera, and the Bank previously entered into a Forbearance
Agreement on April 14, 1994, effective through April 30, 1994 (the "Original
Forbearance Agreement"). Borrower and Riviera have requested that NBD forbear
from enforcing its rights and remedies under the Loan Documents and applicable
law for an additional period through November 30, 1994, to afford such parties
an opportunity to pursue an infusion of additional equity into the Borrower, to
address the Existing Defaults and attempt to cure, eliminate or mitigate the
Existing Defaults, to improve the operations of Borrower and to take other
steps as are appropriate to return to full compliance with the Loan Documents.
Borrower has represented to the Bank that it will use its best efforts to
acquire a minimum of $3 million in new equity prior to October 31, 1994.
P. Borrower and Riviera have additionally requested that, effective
concurrently with the execution of this Agreement, the Bank consolidate the
Borrower's two current working capital facilities into one facility (the
-4-
<PAGE> 65
"Working Capital Facility") and increase the cap on the Working Capital
Facility temporarily from $10 million to $12.5 million to provide Borrower with
additional needed working capital.
Q. Borrower and Riviera have additionally requested that the Bank extend
the May 1, 1994 maturity date on the Term Note until November 30, 1994.
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated in
this Agreement as and shall constitute representations, warranties and
covenants of the respective parties to this Agreement, as the case may be), and
for other good and valuable consideration, the parties hereto agree as follows:
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
through the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) November 30, 1994
(the "Forbearance Period"):
(a) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Tenth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement, receipt by NBD
of an executed Amended and Restated Term Note in substantially the form
attached hereto as Exhibit 1(b);
(c) Simultaneously with the execution of this Agreement, receipt by NBD
of an executed copy of the Reaffirmation and Release Agreement in
substantially the form attached hereto as Exhibit 1(c);
(d) Simultaneously with the execution of this Agreement, receipt by
NBD of a fully-executed copy of this Agreement acknowledged by counsel to
the Borrower and Riviera;
(e) Simultaneously with the execution of this Agreement, Borrower shall
make all payments currently due under the Loan Documents.
(f) Simultaneously with the execution of this Agreement, receipt by NBD
of a letter agreement with Motor Wheel Corporation in substantially the
form attached hereto as Exhibit 1(f); and
(g) NBD receives such other additional documentation necessary to carry
out the intent and purposes of this Agreement.
2. BORROWING BASE DEFICIENCY. During the period from May 1, 1994 through
June 30, 1994, the Borrowing Base Deficiency under the Working Capital Facility
shall at no time exceed $150,000 (the "Deficiency Limit")
-5-
<PAGE> 66
on a daily basis. Borrower shall, at all times during this period, use its
best efforts to manage the Borrowing Base Deficiency such that it remains at
the lowest possible number and take any and all reasonable steps necessary to
eliminate the Borrowing Base Deficiency at the earliest possible date.
3. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority
lien and security interest in and to all of their respective personal property
(except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its
personal property, including such equipment referenced in the UCC-3 partial
releases.
4. AMENDMENTS TO CREDIT AGREEMENT.
(a) DEFINITIONS.
(i) The definition of "Acceptable Accounts Receivable" in Article
I of the Credit Agreement is hereby amended in its entirety to read as
follows:
"'Acceptable Accounts Receivable' shall mean those trade
accounts receivable of the Borrower, valued at the face
amount thereof, other than those accounts receivable that
are (a) more than 120 days past due, (b) due from any
Affiliate of the Borrower, except that for periods during
which an agreement pursuant to Section 7.1(j) hereof is in
effect, accounts receivable from Motor Wheel Corporation
shall not be excluded by reason of this subsection (b), (c)
subject to any known offset, (d) related to goods or
services sold which have been rejected or with respect to
which the amount is in dispute, (e) payable by any person
located outside the United States or Canada, or (f)
reasonably deemed by the Bank to be otherwise acceptable.
Notwithstanding the foregoing, the Bank may, upon request by
the Borrower and at the Bank's sole discretion, allow
inclusion of accounts receivable that are more than 120 days
past due as Acceptable Accounts Receivable (the "Extended
Accounts"). In no event shall borrowing availability based
on the Extended Accounts exceed the aggregate amount of
$750,000.00, or include accounts receivable over 180 days
past due. Additionally, a 1% monthly surcharge shall be
-6-
<PAGE> 67
charged on all borrowings against accounts receivable over
120 days past due included in the Borrowing Base, based on an
average daily balance."
(ii) The definitions of "Borrowing Base (General)" and "Borrowing
Base (Construction Signoff)" in Article I of the Credit Agreement are hereby
deleted and amended in their entireties to read as follows:
"'Borrowing Base' shall mean the sum of (a) eighty-five
percent (85%) of Acceptable Accounts Receivable; (b) forty
percent (40%) of Acceptable Inventory, but in no event shall
this component exceed Four Hundred Thousand Dollars
($400,000.00); (c) fifty percent (50%) of the Value of
Acceptable Contracts in Progress, but in no event shall this
component exceed Five Million Dollars ($5,000,000.00); and
(d) eighty-five percent (85%) of Construction Signoff
Amounts, but in no event shall this component exceed Three
Million Five Hundred Thousand Dollars ($3,500,000.00). It is
understood that advances made in reliance upon Construction
Signoff Amounts pursuant to this subparagraph are not
included when calculating the cap on advances in reliance
upon the Value of Acceptable Contracts in Progress referenced
in subparagraph (c) above."
(iii) The definition of "Loan" or "Loans" in Article I of the Credit
Agreement is hereby amended in its entirety to read as follows:
"'Loan' or 'Loans' shall mean any borrowing under Section
2.1 or Section 3.1."
(iv) The definition of "Value of Acceptable Contracts in Progress"
in Article I of the Credit Agreement is hereby amended in its entirety to read
as follows:
"'Value of Acceptable Contracts in Progress' shall mean the
costs incurred by the Borrower that, in accordance with
generally accepted accounting principles, are allocable to
tool and die projects in progress for which there are binding
purchase orders issued to the Borrower by an automotive
manufacturing company,
-7-
<PAGE> 68
an accepted supplier thereof, or another manufacturing
company acceptable to the Bank, other than projects (a) for
or on behalf of an Affiliate of the Borrower, except that for
periods during which an agreement pursuant to Section 7.1(j)
hereof is in effect, purchase orders from Motor Wheel
Corporation shall not be excluded by reason of this
subsection (a);(b) which have been rejected or are in
dispute;(c) the accounts receivable with respect to which is
payable by any person located outside the United States or
Canada; (d) which are Construction Signoff Projects; or (e)
that are reasonably deemed by the Bank to be otherwise
unacceptable."
(v) The definition of "Working Capital Revolving Credit
Commitment" in Article I of the Credit Agreement shall be deleted and in its
place substituted the following:
"'Working Capital Facility' shall mean the discretionary
lending facility established between the Bank and the
Borrower pursuant to Section 2.1 and the Working Capital
Revolving Credit Note."
(vi) The definition of "Working Capital Revolving Credit Note" in
Article I of the Credit Agreement is hereby amended in its entirety to read
as follows:
"'Working Capital Revolving Credit Note' shall mean the note
executed by the Borrower payable to the order of the Bank to
evidence the loans pursuant to Article II hereof, as the same
may be modified, amended or restated from time to time after
execution and delivery thereof, together with any promissory
note or notes issued in exchange or replacement thereof."
(b) Amendment to Revolving Credit Facility.
Article II of the Credit Agreement is hereby amended in its entirety
to read as follows:
"ARTICLE II
Working Capital Revolving Credit Facility
2.1 Loan. Subject to all of the terms and conditions
hereof, the Bank may, in its sole and unfettered discretion, lend
to the Borrower from time to time through November 30,
-8-
<PAGE> 69
1994, such sums in multiples of Twenty-Five Thousand Dollars
($25,000.00) as may be requested from time to time by the
Borrower in a manner specified by the Bank, provided that the
aggregate principal amount outstanding at any time through August
31, 1994, pursuant to the provisions of this Section 2.1 shall
not exceed the lesser of Twelve Million Five Hundred Thousand
Dollars ($12,500,000.00) (the "Working Capital Revolving Credit")
or the Borrowing Base, and that the aggregate principal amount
outstanding at any time between September 1, 1994, and November
30, 1994, pursuant to the provisions of this Section 2.1 shall
not exceed the lesser of Ten Million Dollars ($l0,000,000.00) (the
"Working Capital Revolving Credit") or the Borrowing Base. In the
event the principal amount outstanding at any time shall exceed
said amounts, the Borrower shall forthwith pay to the Bank an
amount sufficient to eliminate such excess. Subject to the terms
and conditions of this Agreement, the Borrower may borrow, prepay
pursuant to Section 2.3, and reborrow under this Section 2.1.
Upon the execution of this Agreement, the Borrower shall execute
and deliver to the Bank a revolving credit demand note in the
form of Exhibit l(a) attached hereto (the "Tenth Amended and
Restated Working Capital Revolving Credit Note"), the terms of
which are incorporated herein by reference. All commitments by
the Bank on behalf of the Borrower by way of instrument
certification, letter of credit or similar device shall be
considered loans pursuant to this Section 2.1.
2.2 Use of Proceeds. The proceeds of the loans pursuant to
this Article II shall be used to refinance existing revolving
credit debt and to assist with the working capital needs of the
Borrower.
2.3 Payment of Working. Capital Revolving Credit Note;
Prepayment. Except as payment of part or all of the principal
amount of the loans outstanding pursuant to this Article II is
sooner required to be made under Section 2.1 or Article VIII
hereof, the full principal amount of the loans outstanding under
this Article II and all accrued interest thereon shall be paid by
Borrower on or before November 30, 1994. The Borrower may prepay
all
-9-
<PAGE> 70
or any part of the indebtedness under Section 2.1 at any time
without penalty provided any prepayment shall be in a multiple of
One Thousand Dollars ($1,000.00).
2.4 Interest. Except as provided in Article VIII hereof,
the Working Capital Revolving Credit Note shall bear interest at
the annual rate of three percent (3%) over the Prime Rate.
Interest shall be computed daily on the basis of a Three Hundred
Sixty (360) day year and shall be billed to the Borrower monthly
based upon the principal balance outstanding and the actual
number of days in the preceding month. Interest shall be due and
payable no later than the first day of each month.
2.5 Availability Fee. The Borrower agrees to pay to the
Bank an Availability Fee at a rate equal to three-eighths of one
percent (3/8%) per annum on the average daily unused portion of
the Working Capital Revolving Credit for the period from the date
of this Agreement to and including November 30, 1994, and
thereafter until full payment of the Tenth Amended and Restated
Working Capital Revolving Credit Note. Accrued availability fees
shall be payable quarterly in arrears on the first day of each
January, April, July and October commencing on the first such day
after the date of this Agreement. It is understood that the
maximum possible Working Capital Revolving Credit is
$12,500,000.00 through August 31, 1994, and $10,000,000.00
thereafter.
2.6 Facility Fee. The Borrower agrees to pay to the Bank a
facility fee at a rate equal to one-eighth of one percent (1/8%)
per annum on the Working Capital Revolving Credit, whether used
or unused, for the period from the date of this Agreement to and
including November 30, 1994, and thereafter until payment of the
Tenth Amended and Restated Working Capital Revolving Credit Note.
The facility fee shall be payable quarterly in arrears on the
first day of each January, April, July and October commencing on
the first such day after the date of this Agreement. It is
understood that the maximum possible Working Capital Revolving
Credit is $12,500,000.00 through August 31, 1994, and
$10,000,000.00 thereafter.
-10-
<PAGE> 71
(c) Amendment to Term Loan.
(i) Section 3.3 of the Credit Agreement is hereby amended in its entirety
as follows:
"3.3 Payment of Term Note; Prepayment. Except as payment of part
or all of the Term Note is sooner required under Section 3.1 or
Article VIII, the principal of the Term Note shall be paid in monthly
installments of $40,000 each on the first day of each month commencing
May 1, 1994, and continuing thereafter up to and including November 1,
1994 and a final payment on November 30, 1994 consisting of the entire
remaining outstanding principal balance of, all accrued interest on,
and all other sums due under the Term Note. The Borrower may prepay at
any time all or any portion of the Term Note without premium or
penalty provided that any prepayments shall be applied to principal
last maturing."
(ii) Section 3.4 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"3.4 Interest. Except as provided in Article VIII hereof, the
Term Note shall bear interest at the annual rate of the Prime Rate
plus three percent (3%). Interest shall be computed daily on the
basis of a Three Hundred Sixty (360) day year and shall be billed to
the Borrower monthly based upon the principal balance outstanding and
the actual number of days elapsed. Interest shall be billed to the
Borrower monthly beginning June 1, 1994 and shall be due and payable
as indicated by such billing. Billings may estimate a rate and
balance for periods between the billing date and the end of the period
which is covered by such billing and if actual rates or balances vary
from the estimate, actual charges shall be adjusted and reflected in
subsequent billings."
(iii) A new Section 3.5 is hereby added to the Credit Agreement as follows:
"3.5 Collateral Value. As soon as practicable, the Borrower
shall deliver to the Bank a list of all equipment securing the Term
Note along with a description of the priority of the Bank's lien in,
and the value of, such
-11-
<PAGE> 72
equipment. Additionally, on or before August 31, 1994, the Borrower
and Riviera shall provide NBD with a new appraisal of all equipment
securing the Term Note."
(d) COVENANTS.
(i) Section 6.1(e)(iv) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(iv) On a weekly basis, a summary in such detail as the Bank may
require of the Borrower's: (a) Value of Acceptable Contracts in
Progress as of the last day of the prior week; (b) similar information
concerning Construction Signoff Projects in progress; (c) an accounts
receivable aging summary; (d) a summary of Chrysler contract executed
sign-offs; (e) a work in progress summary; and (f) a report setting
forth all accounts receivable over 120 days past due along with their
billing dates and a detailed description of any problems or unusual
facts regarding each account. Each of these reports or summaries
shall be accompanied by a certificate of the President or Chief
Financial Officer of the Borrower stating that the report is a fair
and accurate statement of the financial condition of the Borrower."
(ii) Section 6.1(e)(v) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(v) On a monthly basis, a financial statement (including a
balance sheet of the Borrower, a statement of operations, a statement
of cash flows, and a management narrative of the financial statement);
a projected daily cash flow statement covering the next 60 days; a
covenant report; a status report of critical business activities; a
report projecting the daily Borrowing Base over the next 60 days, and
projecting the monthly average Borrowing Base for the following six
months; a written representation by the Borrower that there have been
no material changes in the amount of inventory reported in its daily
Borrowing Base calculation; a statement of income and retained
earnings of the Borrower; and a statement of change in financial
position of the Borrower, all in reasonable detail and stating in
comparative
-12-
<PAGE> 73
form the respective figures for the corresponding date and period in
the previous fiscal year, and all prepared in accordance with
generally accepted accounting principles consistently applied. Each
of these reports shall be accompanied by a certificate of the
President or Chief Financial Officer of the Borrower stating that the
report has been prepared in accordance with generally accepted
accounting principles consistently applied and fairly presents the
financial condition of the Borrower as of the date of said balance
sheet and of the results of operations for the year-to-date period
then ended and that to the best of his knowledge, the Borrower has
observed and performed each and every covenant and agreement
applicable to it which is contained herein or in any instrument
contemplated by this Agreement to which it is a party, except as
specifically indicated."
(iii) Section 6.1(e)(ix) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(ix) No later than 3:00 p.m. on a daily basis, a borrowing base
certificate signed by the President or chief financial officer of the
Borrower in the form and detail requested by the Bank stating the
amount of the components of the Borrowing Base as of the close of
business the prior day. The Borrower represents and warrants to the
Bank that the Bank may rely, in determining which accounts receivable
are Acceptable Accounts Receivable, which inventory is Acceptable
Inventory and which contracts in progress are Acceptable Contracts in
Progress or Construction Signoff Projects, on all written statements
and representations of the Borrower with respect to any account
receivable, inventory item or tool and die project in progress and,
unless otherwise indicated in writing to the Bank, that (1) every
account balance evidenced by an account receivable is in fact owing;
(2) every account receivable is valid and enforceable without
performance of any other act by the Borrower; (3) there are no known
setoffs, counterclaims or defenses against any account receivable or
any fact, event or occurrence known by the Borrower which impairs the
validity or enforceability thereof; (4) every item of inventory is
stated at the lower of
-13-
<PAGE> 74
cost or market and is readily saleable or usable in the course of the
Borrower's business; (5) for every tool and die project in progress
included in the Borrowing Base there is a valid, binding purchase
order issued to the Borrower by an automotive manufacturing company,
accepted supplier thereof or other manufacturing company whose
identity has been disclosed to and is acceptable to the Bank for
purposes of including in the Borrowing Base; and (6) all costs
allocated to a tool and die project in progress included in the
Borrowing Base are actual costs incurred by the Borrower that are
allocable to the particular project in accordance with generally
accepted accounting principles."
(iv) Section 6.2(e) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(v) Tangible Net Worth. Permit or suffer the Tangible Net Worth
of Riviera and the Borrower, determined on a consolidated basis, to be
less than Five Million Three Hundred Thousand Dollars ($5,300,000.00)
on or at any time after the date of the Eighth Amendment to Credit
Agreement, or to be less than Six Million Dollars ($6,000,000.00) on
or at any time after August 31, 1994."
(v) A new Section 6.2(k) is hereby added to the Credit Agreement as
follows:
"(k) Stock. Pledge, hypothecate or otherwise encumber or sell or
otherwise transfer any shares of any class of its capital stock or
make any change in the capital structure of the Borrower, including
issuing any new shares of capital stock, without the prior written
consent of the Bank. Additionally, Riviera shall not pledge,
hypothecate or otherwise encumber or sell or otherwise transfer any
shares of any class of its capital stock or make any change in the
capital structure of the Borrower, including issuing any new shares of
capital stock, without the prior written consent of the Bank."
5. FORBEARANCE FEE. The Borrower shall pay to the Bank a total Forbearance
Fee of $150,000.00. The Forbearance Fee shall be payable in arrears, with
$75,000.00 due on or before August 31, 1994, and $75,000.00 due on or before
October 31, 1994. The October 31, 1994 payment will be
-14-
<PAGE> 75
waived by the Bank if, prior to that date, a minimum of $3 million in new
equity is infused into the Borrower upon terms and conditions reasonably
acceptable to NBD.
6. NEGATIVE COVENANTS. During the Forbearance Period, without the prior
written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or allow to
exist any new, additional or expanded lien upon any property or assets now
owned or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer to
exist, have outstanding or in any manner become liable in respect of any
indebtedness for money other than the Obligations or indebtedness incurred in
the ordinary course of the business of the Borrower for necessary materials and
services.
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition of
capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing for the
leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or suffer to
exist, any transaction or arrangement with any Affiliate, except on terms which
are no less favorable to the Borrower than could be obtained from persons who
are not Affiliates in arm's length transactions.
7. FURTHER INPUT.
(a) Borrower shall continue to use its best efforts to arrange a meeting
between representatives of NBD, representatives of Borrower and appropriate
decision-making representatives of Motor Wheel to meet and discuss the future
direction and plans of Borrower prior to the expiration of the Forbearance
Period;
(b) Borrower shall use its best efforts to obtain a written agreement by
Comerica Bank to subordinate any debt and security interest it may have with
Borrower and/or Riviera, in form and substance acceptable to NBD, by June 6,
1994.
(c) Borrower agrees that it will immediately engage a crisis management
consultant for advisory consulting purposes, which consultant must be
acceptable to NBD if NBD, in its sole discretion, requests Borrower retain such
consultant. Borrower agrees that it will, upon such request by NBD, seek and
recommend the immediate approval and engagement of, a crisis management
consultant with management authority, upon board approval and authorization
(which consultant must be acceptable to NBD) and retain such a consultant.
-15-
<PAGE> 76
8. NO FURTHER FORBEARANCE IMPLIED. Borrower and Riviera acknowledge that
NBD has no obligation to continue making advances under the Working Capital
Facility or otherwise or to extend the term of the Forbearance Period or
forbear from enforcing their respective rights and remedies after the
Forbearance Period, and nothing contained herein or otherwise is intended to be
a promise or agreement to make advances under the Working Capital Facility or
otherwise or to extend the terms of the Forbearance Period beyond November 30,
1994. Furthermore, no future agreement by NBD to make advances to the Borrower
or to extend the term of the Forbearance Period beyond November 30, 1994, or
any other agreement, shall be valid or enforceable unless it is contained in a
written agreement signed by NBD.
9. NO OVERDRAFTS. Borrower and Riviera agree that they will not create any
overdrafts in any accounts at NBD. Furthermore, Borrower and Riviera
acknowledge and agree that NBD shall not, under any circumstances, be required
to honor any checks or other items presented to NBD for payment for which there
are insufficient available funds in Borrower's account at NBD for payment and
NBD may return any such items so presented. In the event that such items are
not returned, this shall not create any right or expectation that such
overdrafts will be tolerated or permitted in the future.
10. TAXES. Borrower and Riviera represent that they are paying all taxes
on a timely basis except as set forth on Exhibit 2 attached hereto.
11. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in any of the Loan Documents (including a
worsening of any of the Existing Defaults for any reason other than the impact
of the restructuring transaction between the Borrower and Heller Financial
Leasing, Inc. and Banc One Leasing Corporation entered into in April of 1994);
(b) if any representation or warranty made by Borrower or Riviera in
this Agreement or in connection with the negotiation hereof is untrue as of the
date made or hereafter becomes untrue;
(c) the Borrower and/or Riviera shall at any time fail to observe,
perform or comply with any Dominion of Funds Agreement with NBD;
(d) the Borrowing Base Deficiency shall at any time exceed the
Deficiency Limit set forth in Paragraph 2 above on any date specified therein;
(e) Any lender, supplier, creditor or lessor shall (i) accelerate any
obligations of the Borrower or Riviera, due to a default by Borrower or Riviera
under any agreement with any creditor in excess of $25,000 to such creditor or
shall otherwise take any action of any kind or nature to enforce
-16-
<PAGE> 77
or begin enforcement of its rights or remedies against Borrower or Riviera by
reason of such default, or (ii) receive from Borrower or Riviera any
prepayments of obligations, any extraordinary payments of outstanding
indebtedness or fees, or fees or interest above the level paid to such creditor
by Borrower or Riviera as of January 1, 1994; and
(f) Any creditor, including, but not limited to, any governmental
taxing authority, shall cause a lien to be filed on any of the Collateral (other
than a lien for taxes not yet due and payable).
12. RELEASE. As of the date hereof, the Borrower and Riviera represent and
warrant that they are aware of, and possess, no claims or causes of action
against the Bank. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Borrower and
Riviera, individually, jointly and severally, and on behalf of each of their
respective officers, directors, employees, agents, executors, successors and
assigns, hereby release NBD, its officers, directors, employees, agents,
attorneys, affiliates, subsidiaries, successors and assigns from any liability,
claim, right or cause of action which now exists or hereafter arises, whether
known or unknown, arising from events occurring prior to and in any way related
to facts in existence as of the date hereof. By way of example and not
limitation, the foregoing includes any claims in any way related to actions
taken or omitted to be taken by NBD under the Loan Documents, or this Agreement
and the business relationship with NBD.
13. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment called
for by the Loan Documents, this Agreement (or any agreement referred to or
incorporated herein) or any other present or future agreements between NBD and
the Borrower and/or Riviera are not paid when and as called for under the terms
of such agreement, then NBD may debit any of such accounts of the Borrower
and/or Riviera at NBD for such amount. In the event of such a debit, NBD will
use its best efforts to notify the Borrower and/or Riviera of such debit within
two (2) business days. The fact that NBD had debited any of the accounts of
the Borrower and/or Riviera at NBD shall in no way whatsoever waive or diminish
any default for failure to make such payments when and as due.
15. SETOFF. Upon the occurrence of a default, NBD is hereby authorized at
any time and from time to time, without notice to the Borrower or Riviera (any
such notice being expressly waived), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NBD to or for the credit or the account
of the Borrower and/or Riviera against any and all of the Obligations, now or
hereafter existing, including those under this Agreement or the Loan Documents
or any of the Notes or any other agreement or instrument, irrespective of
whether or not NBD shall have made any demand under this Agreement or any Note
or otherwise. The Bank agrees to promptly notify the Borrower and/or Riviera
after any such setoff and application provided that the failure to give such
notice shall not affect the validity of such setoff and application and shall
not create any claims or liabilities against NBD. The rights of NBD under this
section shall not
-17-
<PAGE> 78
require maturity of any indebtedness and are in addition to other rights and
remedies (including, without limitation, other rights of setoff) which NBD may
have.
15. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree that
NBD, through its employees or authorized agents, shall be permitted to send a
letter to and otherwise contact each of its respective account debtors to verify
account receivable balances. In addition, NBD, an accountant or accounting firm
retained by NBD and other advisors, representatives or agents of NBD shall be
permitted full and complete access to the Borrower's and Riviera's facilities
and books and records to conduct audits as often as NBD reasonably desires. The
reasonable cost of such audits ("Audit Fees"), whether conducted by NBD (in
which case NBD shall be entitled to make a reasonable charge, plus out-of-pocket
costs and expenses), an accountant or accounting firm retained by NBD or other
advisors, representatives or agents of NBD (including, but not limited to,
Curtis Enterprises Inc.) shall be part of the Obligations and shall be secured
by all of the Collateral.
16. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and Riviera,
jointly and severally, shall be responsible for the payment of all fees and
out-of-pocket disbursements incurred by NBD, including fees of counsel and court
costs, in any way arising from or in connection with this Agreement, any of the
Collateral, any of the Loan Documents, any of the Obligations or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including, without limitation, (a)
Audit Fees; (b) all fees and expenses (including recording fees and insurance
policy fees) of NBD and counsel for NBD for the preparation, examination,
approval, negotiation, execution and delivery of, or the closing of any of the
transactions contemplated by, this Agreement or any of the Loan Documents; (c)
all fees and out-of-pocket disbursements incurred by NBD, including attorneys'
fees and accountants' fees, in any way arising from or in connection with any
action taken by NBD to monitor, advise, administer, enforce or collect any of
the Obligations (including under this Agreement and the Loan Documents) or any
other obligations of the Borrower or Riviera, whether joint, joint and several,
or several, under this Agreement, any of the Loan Documents or any other
existing or future document or agreement, or arising from or relating to the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including any actions to
lift the automatic stay or to otherwise in any way monitor or participate in any
bankruptcy, reorganization or insolvency proceeding of the Borrower or Riviera;
(d) all expenses and fees (including attorneys' fees) incurred in relation to,
in connection with, in defense of and/or in prosecution of any litigation
instituted by any one or more of the Borrower, Riviera, Holding, Rieth, NBD or
any third party against or involving NBD arising from, relating to, or in
connection with any of the Obligations or any Guarantor's obligations, this
Agreement, any of the Collateral, any of the Loan Documents or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including any so-called "lender
liability" action, any claim and delivery or other action for possession of, or
-18-
<PAGE> 79
foreclosure on, any of the Collateral, post-judgment enforcement of any rights
or remedies including enforcement of any judgments, and prosecution of any
appeals (whether discretionary or as of right and whether in connection with
pre-judgment or post-judgment matters); (e) all costs, expenses and fees
incurred by NBD or its agents in connection with appraisals and reappraisals of
all or any of the Collateral (and the Borrower and Riviera shall fully
cooperate with such appraisers and make their property available for appraisal
in connection with as many appraisals as NBD may request); (f) all costs,
expenses and fees incurred by NBD and/or its counsel in connection with
consultants, expert witnesses or other professionals retained by NBD and/or its
counsel in order to assist, advise and/or give testimony with respect to any
matter relating to the Collateral, the Loan Documents, or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand (and the Borrower and Riviera
shall fully cooperate with such consultant, expert witness or other
professional and shall make their premises, books and records, accounting
systems, computer systems and other media for the recordation of information
available to such persons); and (g) all costs, expenses and fees incurred by
NBD in connection with any environmental investigations including but not
limited to Phase I, Phase II and Phase III environmental audits (and the
Borrower and Riviera agree that NBD and/or its agents may enter on their
premises at any time to conduct such environmental investigations). Nothing
contained in this paragraph shall, or is intended to, expand the liability of
Rieth and Holding beyond that contained in the Limited Guaranty Documents.
All of the foregoing costs, expenses and reimbursement obligations,
set forth in this section (the "Costs") shall be part of the Obligations, and
shall be secured by all of the Collateral. The costs shall be paid within 10
days of written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim, action or
cause of action, damage, liability, loss, cost, debt, expense, obligation, tax,
assessment, charge, lawsuit, contract, agreement, undertaking or deficiency, of
any kind or nature, whether known or unknown, fixed, actual, accrued or
contingent, liquidated or unliquidated (including interest, penalties,
attorneys' fees and other costs and expenses incident to proceedings or
investigations relating to any of the foregoing or the defense of any of the
foregoing), whether or not litigation has commenced.
17. OTHER DOCUMENTS. The Borrower and Riviera agree to execute and
deliver any and all documents reasonably deemed necessary or appropriate by NBD
or counsel to NBD to carry out the intent of and/or to implement the Loan
Documents or this Agreement, including, but not limited to, such documentation
necessary to grant NBD a lien, mortgage and/or security interest in any assets
of the Borrower and Riviera presently not subject to a lien, mortgage or
encumbrance in favor of NBD to secure the Obligations.
18. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of this
Agreement shall be considered an event of default, an event of acceleration and
a default under each document and agreement comprising the Loan Documents and
an event of default, an event of acceleration or a
-19-
<PAGE> 80
default under any document or agreement comprising the Loan Documents, (other
than the Existing Defaults), shall be considered an Event of Default under the
terms of this Agreement, and all of the other Loan Documents. Upon the
occurrence of an Event of Default under this Agreement or any event of default,
event of acceleration or default under any document or agreement comprising the
Loan Documents, or any document executed in connection herewith, or referenced
herein, and without prior notice of or an opportunity to cure such event of
default, event of acceleration or default, except as otherwise provided herein,
(a) NBD shall have the right to exercise any rights or remedies provided in
this Agreement, the Loan Documents, or applicable law, (including, without
limitation, the right to offset any accounts of the Borrower or Riviera with
NBD), (b) NBD may deem the Forbearance Period to be expired, and (c) upon NBD's
election, but without further notice, all of the Obligations shall be
immediately due and payable.
19. DOCUMENTS CONTINUE. Except as expressly modified and amended by the
terms of this Agreement, all of the terms and conditions of the Loan Documents
remain in full force and effect and are hereby ratified, confirmed and approved.
If there is an express conflict between the terms of this Agreement and the
terms of the Loan Documents, the terms of this Agreement shall govern and
control.
20. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a conditional
and limited forbearance until November 30, 1994, only, upon the terms and
conditions set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, all of NBD's rights and remedies against the
Borrower, Riviera, third parties, and/or the Collateral and/or any rights of
NBD under the Limited Guaranty Documents are expressly reserved, including,
without limitation, all rights and remedies resulting from, or arising in
connection with, the Existing Defaults. Likewise, nothing herein shall be
deemed to constitute a waiver of any defaults existing as of the date hereof, a
further worsening of the Existing Defaults or new events of default, events of
acceleration or defaults or shall in any way prejudice the rights or remedies
of NBD under the Loan Documents or applicable law. Further, NBD shall have the
right to waive any conditions set forth in this Agreement and/or the Loan
Documents, in its sole and unfettered discretion. And any such waiver shall
not prejudice, waive or reduce any other right or remedy which NBD may have
against the Borrower or Riviera, or any rights of NBD under the Limited
Guaranty Documents. However, the other parties to this Agreement and the Loan
Documents, understand that no waiver by NBD of the rights or any condition of
this Agreement and/or the Loan Documents shall be effective unless the same
shall be contained in writing signed by an authorized agent of NBD.
21. CREDIT INQUIRIES. In the event customers, buyers, potential financing
sources or other parties make inquiry of NBD as to the current lending
relationship between NBD, on the one hand, and the Borrower or Riviera, on the
other hand, the parties agree that NBD may refer such inquiries to the Borrower
or Riviera.
-20-
<PAGE> 81
22. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
23. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and may be modified or amended only by
a writing signed by the party to be charged.
(b) This Agreement is governed by the internal laws of the State of
Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but together they shall constitute one and the same
instrument, and facsimile copies of signatures shall be treated as original
signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and Riviera and
their respective successors and assigns and shall inure to the benefit of NBD
and its successors and assigns.
(e) If any provision of this Agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such offending
provision shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate any
other provision of this Agreement.
(f) Defined terms used in this Agreement without definition shall have
the meanings given to them under the Credit Agreement.
24. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or inducements
which have been made to any signatory hereto to cause such signatory to enter
into this Agreement other than those which are set forth in this Agreement.
25. WAIVER OF JURY TRIAL AND ACKNOWLEDGEMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
-21-
<PAGE> 82
EACH OF THE BORROWER AND RIVIERA ACKNOWLEDGES THAT (1) IT HAS BEEN
GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE
AND, AFTER CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY AND
WITHOUT DURESS, COERCION, 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, (3) IT HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND IS NOT RELYING ON THE OPINIONS OR ADVICE OF NBD
OR ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS AGREEMENT.
26. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
NBD BANK, N.A.
By: Timothy G. Skillman
-------------------------
Its: Vice President
----------------------
RIVIERA DIE & TOOL, INC.
By: Kenneth K. Rieth
---------------------------
Its: President
----------------------
RIVIERA TOOL COMPANY
By: Kenneth K. Rieth
---------------------------
Its: President
---------------------
-22-
<PAGE> 83
TWELFTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, formerly known as NBD Bank, N.A., successor by merger to the
interests of NBD Grand Rapids, N.A. ("NBD" or the "Bank"), Riviera Die & Tool,
Inc. (formerly known as R.D.T., Inc.), a Michigan Corporation (the "Borrower"),
and Riviera Tool Company, a Michigan Corporation ("Riviera") enter into this
Twelfth Amendment to Credit Agreement and Restated Forbearance Agreement (the
"Agreement") effective as of the 1st day of May, 1995.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated April
20, 1988, as amended by a First Amendment to Credit Agreement dated August 31,
1988, a Second Amendment to Credit Agreement dated January 30, 1989, a Third
Amendment to Credit Agreement dated January 30, 1990, a Fourth Amendment to
Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement
dated July 31, 1992, a Sixth Amendment to Credit Agreement dated January 31,
1993, a Seventh Amendment to Credit Agreement dated March 31, 1993, an Eighth
Amendment to Credit Agreement dated July 26, 1993, a Ninth Amendment to Credit
Agreement dated March 4, 1994, a Forbearance Agreement dated April 14, 1994
(the "Original Forbearance Agreement") and a Tenth Amendment to Credit
Agreement and Restated Forbearance Agreement dated May 5, 1994, and an Eleventh
Amendment to Credit Agreement and Restated Forbearance Agreement dated as of
December 1, 1994 (collectively, the "Credit Agreement") by which the Bank has
made certain credit facilities available to the Borrower upon the terms and
subject to the conditions set forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed two (2)
promissory notes: (i) the Tenth Amended and Restated Working Capital Revolving
Credit Note in the original principal amount of $12,500,000.00 dated May 5,
1994 (the "Working Capital Revolving Credit Note"); and (ii) an Amended and
Restated Term Note in the original principal amount of $1,456,962.00 dated May
5, 1994 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and delivered
to the Bank a Guaranty dated April 20, 1988, pursuant to which, among other
things, Riviera guarantied all of the Borrower's obligations (including the
Obligations as defined below) to the Bank, whether then existing or thereafter
arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth ("Rieth") and Riviera Holding Company
("Holding") (collectively, Rieth and Holding may be hereinafter referred to as
the "Limited Guarantors") each executed and delivered Guaranties and Continuing
Pledge Agreements (the "Limited Guaranty Documents") dated August 4, 1992 and
July 26, 1993.
E. As of June 1, 1995, there was (i) $7,940,417.83 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note and (ii) $976,962.00 in principal indebtedness owing by the Borrower
pursuant to the Term Note. These sums, together with accrued but unpaid
interest, costs and expenses (including attorneys' fees), as well as all
<PAGE> 84
other present and future obligations of the Borrower to the Bank, including,
but not limited to, obligations arising under or in connection with the Loan
Documents (as defined below) or any other document executed in connection
therewith or subsequent thereto by the Borrower in favor of the Bank are
hereinafter referred to as the "Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment), as amended
by a First Amendment to each of the above-described Security Agreements dated
January 30, 1989 (the "Borrower Security Agreements") wherein Borrower granted
to NBD a valid, perfected, indefeasible and enforceable first priority lien and
security interest in favor of the Bank in all of the Borrower's present and
future personal property, including, but not limited to, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof with the exception of certain property described
in Section 5.8 of the Credit Agreement. For convenience, all of the collateral
referred to in the Borrower Security Agreements, together with all other
collateral described in and/or granted in connection with any of the Loan
Documents (as hereinafter defined), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other parties' present or future
obligations to the Bank, is collectively referred to as the "Borrower
Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a Security
Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment) (the "Riviera
Security Agreements") wherein Riviera granted to NBD a valid, perfected,
indefeasible and enforceable first priority lien and security interest in favor
of the Bank in all of Riviera's present and future personal property,
including, but not limited to, accounts, chattel paper, general intangibles,
documents, instruments, inventory, equipment, fixtures and all other tangible
and intangible personal property and all proceeds and products thereof. For
convenience, all of the collateral referred to in the Riviera Security
Agreements, together with all other collateral described in and/or granted in
connection with any of the Loan Documents (as hereinafter defined), together
with all collateral heretofore, simultaneously herewith or hereafter granted to
the Bank by Riviera to secure any of Riviera's or any other parties' present or
future obligations to the Bank, is collectively referred to as the "Riviera
Collateral".
H. The Borrower and Riviera acknowledge and agree that (i) the Obligations
are due the Bank without setoff, recoupment, defense or counterclaim, in law or
equity, of any nature or kind; (ii) the Obligations are secured by valid,
perfected, indefeasible, enforceable first priority liens and security
interests (except as permitted by Section 5.8 of the Credit Agreement) in favor
of the Bank in, among other things, (a) all of the Borrower's present and
future personal property, including, without limitation, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof, and (b) all of Riviera's present and future
personal property, including, without limitation, accounts, chattel paper,
general intangibles, documents,
2
<PAGE> 85
instruments,inventory, equipment, fixtures and all other tangible and
intangible personal property and all proceeds and products thereof, and (c) the
collateral described in the Limited Guaranty Documents. For convenience, the
Credit Agreement, the Working Capital Revolving Credit Note, the Term Note
(collectively, the "Notes"), the Borrower Security Agreements, the Riviera
Guaranty, the Riviera Security Agreements, the Limited Guaranty Documents, the
Original Forbearance Agreement, this Agreement and any other document executed
therewith or subsequent thereto by the Borrower in favor of the Bank are
hereinafter referred to as the "Loan Documents". For convenience, all of the
Borrower Collateral, the Riviera Collateral and the collateral referenced in
the Limited Guaranty Documents shall hereinafter be referred to as the
"Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations)
owed to NBD, including, but not limited to the Collateral, shall constitute and
serve as collateral for any and all of the obligations and duties of the
Borrower and Riviera to NBD (including the Obligations), whether now existing
or hereafter arising.
K. Borrower and Riviera each acknowledge that prior to June 1, 1995, there
were defaults under the Loan Documents as follows (collectively, the "Existing
Defaults"):
(1) The Leverage Ratio of Riviera and the Borrower,
determined on a consolidated basis, is greater than 3 to 1
(3.44 to 1 as of March 31, 1995).
(2) The Working Capital of Riviera and the Borrower, determined on a
consolidated basis, is less than $200,000 (minus $3,237,000.00 as
of March 31, 1995.
(3) The Tangible Net Worth of Riviera and Borrower, determined on a
consolidated basis, is less than $6,000,000 from and after
August 31, 1994 ($5,438,000.00 as of March 31, 1995).
(4) The aggregate principal amount outstanding under the Working
Capital Revolving Credit, has in the past periodically exceeded
the Borrowing Base (the "Borrowing Base Deficiency").
Borrower and Riviera represent and warrant that, to the best of their
knowledge, after due inquiry and investigation, they are unaware of any other
Events of Default (as defined in the Credit Agreement) or defaults under any of
the Loan Documents or this Agreement or of any event that,
3
<PAGE> 86
with the passage of time, notice, or both, would become an Event of Default or
a default under the Loan Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the Loan
Documents and applicable law.
M. The Borrower and Riviera further acknowledge and agree that the actions
taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. Borrower and Riviera have requested that NBD continue to forbear from
enforcing its rights and remedies under the Loan Documents and applicable law
for an additional period through August 31, 1995, to afford such parties an
opportunity to obtain alternative financing to satisfy the Obligations in full.
Borrower had previously represented to the Bank that it would use its best
efforts to acquire a minimum of $3 million in new equity prior to October 31,
1994, which infusion the Borrower believed could occur prior to March 31, 1995.
O. Borrower and Riviera had additionally previously requested that the
Bank increase the cap on the Working Capital Facility temporarily from $10
million to $12.5 million to provide Borrower with additional needed working
capital. The period for the temporary increase has expired and the cap is now
$10 million.
P. Borrower and Riviera have additionally requested that the Bank extend
the April 30, 1995 maturity date on the Working Capital Revolving Credit Note
and the Term Note until August 31, 1995.
Q. The Borrower and Riviera acknowledge and agree that (i) NBD has fully
performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond August 31, 1995. NBD HAS INFORMED BORROWER AND RIVIERA THAT IT DOES NOT
INTEND TO EXTEND THE FORBEARANCE PERIOD BEYOND AUGUST 31, 1995, AND THAT THEY
SHOULD PAY NBD IN FULL ON OR BEFORE THAT DATE.
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated in
this Agreement as and shall constitute representations, warranties and
covenants of the respective parties to this Agreement, as the case may be), and
for other good and valuable consideration, the parties hereto agree as follows:
4
<PAGE> 87
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
through the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) August 31, 1995
(the "Forbearance Period"):
(a) Simultaneously with the execution of this Agreement, receipt
by NBD of an executed Twelfth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement, receipt
by NBD of an executed Third Amended and Restated Term Note in substantially the
form attached hereto as Exhibit 1(b);
(c) Simultaneously with the execution of this Agreement, receipt
by NBD of an executed copy of the Reaffirmation and Release Agreement in
substantially the form attached hereto as Exhibit 1(c);
(d) Simultaneously with the execution of this Agreement, receipt
by NBD of a fully-executed copy of this Agreement acknowledged by counsel to
the Borrower and Riviera;
(e) Simultaneously with the execution of this Agreement,
Borrower shall make all payments currently due under the Loan Documents.
(f) NBD receives such other additional documentation necessary to
carry out the intent and purposes of this Agreement.
2. ALL OBLIGATIONS DUE. ALL OF THE OBLIGATIONS INCLUDING, WITHOUT
LIMITATION, OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE WORKING CAPITAL
REVOLVING CREDIT NOTE, THE TERM NOTE AND THIS AGREEMENT SHALL BE DUE AND
PAYABLE ON THE EARLIER OF (i) A DEFAULT, AN EVENT OF DEFAULT OR BREACH OF THE
TERMS AND CONDITIONS OF THIS AGREEMENT, OR (ii) AUGUST 31, 1995.
3. NO FURTHER FORBEARANCE IMPLIED. THE BORROWER AND RIVIERA
ACKNOWLEDGE THAT (a) NBD DOES NOT INTEND, NOR DOES NBD HAVE ANY OBLIGATION, TO
EXTEND LOANS, ADVANCES OR OTHER FINANCIAL ACCOMMODATIONS TO THE PARTIES HERETO
BEYOND AUGUST 31, 1995, (b) NBD DOES NOT INTEND TO FORBEAR FROM ENFORCING ITS
RIGHTS AND REMEDIES AFTER AUGUST 31, 1995, AND NOTHING CONTAINED HEREIN OR
OTHERWISE IS INTENDED TO BE A PROMISE OR AGREEMENT TO MAKE ADVANCES UNDER THE
WORKING CAPITAL REVOLVING CREDIT NOTE AFTER AUGUST 31, 1995 OR TO EXTEND THE
TERMS OF THIS AGREEMENT BEYOND AUGUST 31, 1995, (c) ALL OF
5
<PAGE> 88
THE OBLIGATIONS ARE DUE, ABSENT AN EARLIER DEFAULT UNDER THE LOAN DOCUMENTS, ON
OR BEFORE AUGUST 31, 1995, AND (d) NBD INTENDS TO TAKE ANY STEPS NECESSARY TO
ASSURE SATISFACTION OF THE OBLIGATIONS IN FULL BY AUGUST 31, 1995 OR AS SOON
THEREAFTER AS POSSIBLE. THE BORROWER, RIVIERA, RIETH AND HOLDING HAVE BEEN
ADVISED THAT THEY SHOULD PURSUE ALTERNATIVE FINANCING SOURCES.
4. BORROWING BASE DEFICIENCY. Borrower shall at all times comply
with the terms and conditions of the Working Capital Facility and shall not
permit or cause to exist a Borrowing Base Deficiency.
5. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority
lien and security interest in and to all of their respective personal property
(except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its
personal property, including such equipment referenced in the UCC-3 partial
releases.
6. AMENDMENTS TO CREDIT AGREEMENT.
(a) AMENDMENT TO REVOLVING CREDIT FACILITY.
Article II of the Credit Agreement is hereby amended in its
entirety to read as follows:
"ARTICLE II
Working Capital Revolving Credit Facility
2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank may, in its sole and unfettered discretion, lend to the
Borrower from time to time through August 31, 1995, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified by
the Bank, provided that the aggregate principal amount outstanding at
any time pursuant to the provisions of this Section 2.1 shall not
exceed the lesser of Nine Million Dollars ($9,000,000.00) (the
"Working Capital Revolving Credit") or the Borrowing Base. In the
event the principal amount outstanding at any time shall exceed said
amounts, the Borrower shall forthwith pay to the Bank an amount
sufficient to eliminate such excess.
6
<PAGE> 89
Subject to the terms and conditions of this Agreement, the Borrower may
borrow, prepay pursuant to Section 2.3, and reborrow under this Section
2.1. Upon the execution of this Agreement, the Borrower shall execute and
deliver to the Bank a revolving credit demand note in the form of Exhibit
1(a) attached hereto (the "Twelfth Amended and Restated Working Capital
Revolving Credit Note"), the terms of which are incorporated herein by
reference. All commitments by the Bank on behalf of the Borrower by way of
instrument certification, letter of credit or similar device shall be
considered loans pursuant to this Section 2.1.
2.2 Use of Proceeds. The proceeds of the loans pursuant to this
Article II shall be used to refinance existing revolving credit debt and to
assist with the working capital needs of the Borrower.
2.3 Payment of Working Capital Revolving Credit Note; Prepayment.
Except as payment of part or all of the principal amount of the loans
outstanding pursuant to this Article II is sooner required to be made under
Section 2.1 or Article VIII hereof, the full principal amount of the loans
outstanding under this Article II and all accrued interest thereon shall be
paid by Borrower on or before August 31, 1995. The Borrower may prepay all
or any part of the indebtedness under Section 2.1 at any time without
penalty provided any prepayment shall be in a multiple of One Thousand
Dollars ($1,000.00).
2.4 Interest. Except as provided in Article VIII hereof, the Working
Capital Revolving Credit Note shall bear interest at the annual rate of
three percent (3%) over the Prime Rate. Interest shall be computed
daily on the basis of a Three Hundred Sixty (360) day year and shall be
billed to the Borrower monthly based upon the principal balance outstanding
and the actual number of days in the preceding month. Interest shall be due
and payable no later than the first day of each month.
2.5 Availability Fee. The Borrower agrees to pay to the Bank an
Availability Fee at a rate equal to three-eighths of one percent (3/8%) per
annum on the average daily unused portion of the Working Capital Revolving
Credit for the period from the date of this Agreement to and including
August 31, 1995, and thereafter until full payment of the Eleventh Amended
and Restated Working Capital Revolving Credit Note. Accrued availability
fees shall be payable quarterly in arrears on the first day of each January,
April,
7
<PAGE> 90
July and October commencing on the first such day after the date of
this Agreement.
2.6 Facility Fee. The Borrower agrees to pay to the Bank a facility
fee at a rate equal to one-eighth of one percent (1/8%) per annum on the
Working Capital Revolving Credit, whether used or unused, for the period
from the date of this Agreement to and including August 31, 1995, and
thereafter until payment of the Twelfth Amended and Restated Working
Capital Revolving Credit Note. The facility fee shall be payable quarterly
in arrears on the first day of each January, April, July and October
commencing on the first such day after the date of this Agreement.
(b) AMENDMENT TO TERM LOAN.
(i) Section 3.3 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"3.3 Payment of Term Note; Prepayment. Except as payment of part or
all of the Term Note is sooner required under Section 3.1 or Article VIII,
the principal of the Term Note shall be paid in monthly installments of
$40,000 each on the first day of each month commencing December 1, 1994, and
continuing thereafter up to and including August 1, 1995 and a final payment
on August 31, 1995 consisting of the entire remaining outstanding principal
balance of, all accrued interest on, and all other sums due under the Term
Note. The Borrower may prepay at any time all or any portion of the Term
Note without premium or penalty provided that any prepayments shall be
applied to principal last maturing."
7. NEGATIVE COVENANTS. During the Forbearance Period, without the
prior written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or allow to
exist any new, additional or expanded lien upon any property or assets now
owned or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer to exist,
have outstanding or in any manner become liable in respect of any indebtedness
for money other than the Obligations or indebtedness incurred in the ordinary
course of the business of the Borrower for necessary materials and services.
8
<PAGE> 91
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition of
capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing for the
leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or suffer to
exist, any transaction or arrangement with any Affiliate, except on terms which
are no less favorable to the Borrower than could be obtained from persons who
are not Affiliates in arm's length transactions.
8. FURTHER INPUT.
(a) Borrower shall continue to use its best efforts to arrange a
meeting between representatives of NBD, representatives of Borrower and
appropriate decision-making representatives of Motor Wheel to meet and discuss
the future direction and plans of Borrower prior to the expiration of the
Forbearance Period;
(b) Borrower shall use its best efforts to obtain a written agreement
by Comerica Bank to subordinate any debt and security interest it may have with
Borrower and/or Riviera, in form and substance acceptable to NBD.
(c) Borrower agrees that it will immediately engage a crisis management
consultant for advisory consulting purposes, which consultant must be
acceptable to NBD if NBD, in its sole discretion, requests Borrower retain such
consultant. Borrower agrees that it will, upon such request by NBD, seek and
recommend the immediate approval and engagement of, a crisis management
consultant with management authority, upon board approval and authorization
(which consultant must be acceptable to NBD) and retain such a consultant.
9. NO OVERDRAFTS. Borrower and Riviera agree that they will
not create any overdrafts in any accounts at NBD. Furthermore, Borrower
and Riviera acknowledge and agree that NBD shall not, under any circumstances,
be required to honor any checks or other items presented to NBD for payment for
which there are insufficient available funds in Borrower's account at NBD for
payment and NBD may return any such items so presented. In the event that such
items are not returned, this shall not create any right or expectation that
such overdrafts will be tolerated or permitted in the future.
10. TAXES. Borrower and Riviera represent that they are paying all
taxes on a timely basis except as set forth on Exhibit 2 attached hereto.
9
<PAGE> 92
11. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in any of the Loan Documents
(including a worsening of any of the Existing Defaults for any reason other
than the impact of the restructuring transaction between the Borrower and
Heller Financial Leasing, Inc. and Banc One Leasing Corporation entered into in
April of 1994);
(b) if any representation or warranty made by Borrower or Riviera in
this Agreement or in connection with the negotiation hereof is untrue as of
the date made or hereafter becomes untrue;
(c) the Borrower and/or Riviera shall at any time fail to observe,
perform or comply with any Dominion of Funds Agreement with NBD;
(d) there shall exist at any time a Borrowing Base Deficiency;
(e) Any lender, supplier, creditor or lessor shall (i) accelerate any
obligations of the Borrower or Riviera, due to a default by Borrower or Riviera
under any agreement with any creditor in excess of $25,000 to such creditor or
shall otherwise take any action of any kind or nature to enforce or begin
enforcement of its rights or remedies against Borrower or Riviera by reason of
such default, or (ii) receive from Borrower or Riviera any prepayments of
obligations, any extraordinary payments of outstanding indebtedness or fees, or
fees or interest above the level paid to such creditor by Borrower or Riviera
as of January 1, 1994; and
(f) Any creditor, including, but not limited to, any governmental
taxing authority, shall cause a lien to be filed on any of the Collateral
(other than a lien for taxes not yet due and payable).
12. RELEASE. As of the date hereof, the Borrower and Riviera represent and
warrant that they are aware of, and possess, no claims or causes of action
against the Bank. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Borrower and
Riviera, individually, jointly and severally, and on behalf of each of their
respective officers, directors, employees, agents, executors, successors and
assigns, hereby release NBD, its officers, directors, employees, agents,
attorneys, affiliates, subsidiaries, successors and assigns from any liability,
claim, right or cause of action which now exists or hereafter arises, whether
known or unknown, arising from events occurring prior to and in any way related
to facts in existence as of the date hereof. By way of example and not
limitation, the foregoing includes any claims in any way related to actions
taken or omitted to be taken by NBD under the Loan Documents, or this Agreement
and the business relationship with NBD.
10
<PAGE> 93
13. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment called
for by the Loan Documents, this Agreement (or any agreement referred to or
incorporated herein) or any other present or future agreements between NBD and
the Borrower and/or Riviera are not paid when and as called for under the terms
of such agreement, then NBD may debit any of such accounts of the Borrower
and/or Riviera at NBD for such amount. In the event of such a debit, NBD will
use its best efforts to notify the Borrower and/or Riviera of such debit within
two (2) business days. The fact that NBD had debited any of the accounts of
the Borrower and/or Riviera at NBD shall in no way whatsoever waive or diminish
any default for failure to make such payments when and as due.
14. SETOFF. Upon the occurrence of a default, NBD is hereby authorized at
any time and from time to time, without notice to the Borrower or Riviera (any
such notice being expressly waived), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NBD to or for the credit or the account
of the Borrower and/or Riviera against any and all of the Obligations, now or
hereafter existing, including those under this Agreement or the Loan Documents
or any of the Notes or any other agreement or instrument, irrespective of
whether or not NBD shall have made any demand under this Agreement or any Note
or otherwise. The Bank agrees to promptly notify the Borrower and/or Riviera
after any such setoff and application provided that the failure to give such
notice shall not affect the validity of such setoff and application and shall
not create any claims or liabilities against NBD. The rights of NBD under this
section shall not require maturity of any indebtedness and are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which NBD may have.
15. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree that
NBD, through its employees or authorized agents, shall be permitted to send a
letter to and otherwise contact each of its respective account debtors to
verify account receivable balances. In addition, NBD, an accountant or
accounting firm retained by NBD and other advisors, representatives or agents
of NBD shall be permitted full and complete access to the Borrower's and
Riviera's facilities and books and records to conduct audits as often as NBD
reasonably desires. The reasonable cost of such audits ("Audit Fees"), whether
conducted by NBD (in which case NBD shall be entitled to make a reasonable
charge, plus out-of-pocket costs and expenses), an accountant or accounting
firm retained by NBD or other advisors, representatives or agents of NBD
(including, but not limited to, Curtis Enterprises Inc.) shall be part of the
Obligations and shall be secured by all of the Collateral.
16. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and Riviera,
jointly and severally, shall be responsible for the payment of all fees and
out-of-pocket disbursements incurred by NBD, including fees of counsel and
court costs, in any way arising from or in connection with this Agreement, any
of the Coilateral, any of the Loan Documents, any of the Obligations or the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including, without
limitation, (a) Audit Fees; (b) all fees and expenses (including recording fees
and insurance policy fees) of NBD and counsel for NBD for the preparation,
examination, approval, negotiation, execution and
11
<PAGE> 94
delivery of, or the closing of any of the transactions contemplated by, this
Agreement or any of the Loan Documents; (c) all fees and out-of-pocket
disbursements incurred by NBD, including attorneys' fees and accountants' fees,
in any way arising from or in connection with any action taken by NBD to
monitor, advise, administer, enforce or collect any of the Obligations
(including under this Agreement and the Loan Documents) or any other
obligations of the Borrower or Riviera, whether joint, joint and several, or
several, under this Agreement, any of the Loan Documents or any other existing
or future document or agreement, or arising from or relating to the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including any actions to lift the
automatic stay or to otherwise in any way monitor or participate in any
bankruptcy, reorganization or insolvency proceeding of the Borrower or Riviera;
(d) all expenses and fees (including attorneys' fees) incurred in relation to,
in connection with, in defense of and/or in prosecution of any litigation
instituted by any one or more of the Borrower, Riviera, Holding, Rieth, NBD or
any third party against or involving NBD arising from, relating to, or in
connection with any of the Obligations or any Guarantor's obligations, this
Agreement, any of the Collateral, any of the Loan Documents or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including any so-called "lender
liability" action, any claim and delivery or other action for possession of, or
foreclosure on, any of the Collateral, post-judgment enforcement of any rights
or remedies including enforcement of any judgments, and prosecution of any
appeals (whether discretionary or as of right and whether in connection with
pre-judgment or post-judgment matters); (e) all costs, expenses and fees
incurred by NBD or its agents in connection with appraisals and reappraisals of
all or any of the Collateral (and the Borrower and Riviera shall fully
cooperate with such appraisers and make their property available for appraisal
in connection with as many appraisals as NBD may request); (f) all costs,
expenses and fees incurred by NBD and/or its counsel in connection with
consultants, expert witnesses or other professionals retained by NBD and/or its
counsel in order to assist, advise and/or give testimony with respect to any
matter relating to the Collateral, the Loan Documents, or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand (and the Borrower and Riviera
shall fully cooperate with such consultant, expert witness or other
professional and shall make their premises, books and records, accounting
systems, computer systems and other media for the recordation of information
available to such persons); and (g) all costs, expenses and fees incurred by
NBD in connection with any environmental investigations including but not
limited to Phase I, Phase II and Phase III environmental audits (and the
Borrower and Riviera agree that NBD and/or its agents may enter on their
premises at any time to conduct such environmental investigations). Nothing
contained in this paragraph shall, or is intended to, expand the liability of
Rieth and Holding beyond that contained in the Limited Guaranty Documents.
All of the foregoing costs, expenses and reimbursement obligations, set
forth in this section (the "Costs") shall be part of the Obligations, and shall
be secured by all of the Collateral. The costs shall be paid within 10 days of
written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim, action or cause
of action, damage, liability, loss, cost, debt, expense, obligation, tax,
assessment, charge, lawsuit,
12
<PAGE> 95
contract, agreement, undertaking or deficiency, of any kind or nature, whether
known or unknown, fixed, actual, accrued or contingent, liquidated or
unliquidated (including interest, penalties, attorneys' fees and other costs
and expenses incident to proceedings or investigations relating to any of the
foregoing or the defense of any of the foregoing), whether or not litigation
has commenced.
17. OTHER DOCUMENTS. The Borrower, Riviera, Rieth and Holding agree to
execute and deliver any and all documents reasonably deemed necessary or
appropriate by NBD or counsel to NBD to carry out the intent of and/or to
implement the Loan Documents or this Agreement, including, but not limited to,
such documentation necessary to grant NBD a lien, mortgage and/or security
interest in any assets of the Borrower and Riviera presently not subject to a
lien, mortgage or encumbrance in favor of NBD to secure the Obligations.
18. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of this
Agreement shall be considered an event of default, an event of acceleration and
a default under each document and agreement comprising the Loan Documents and
an event of default, an event of acceleration or a default under any document
or agreement comprising the Loan Documents, (other than the Existing Defaults),
shall be considered an Event of Default under the terms of this Agreement, and
all of the other Loan Documents. Upon the occurrence of an Event of Default
under this Agreement or any event of default, event of acceleration or default
under any document or agreement comprising the Loan Documents, or any document
executed in connection herewith, or referenced herein, and without prior notice
of or an opportunity to cure such event of default, event of acceleration or
default, except as otherwise provided herein, (a) NBD shall have the right to
exercise any rights or remedies provided in this Agreement, the Loan Documents,
or applicable law, (including, without limitation, the right to offset any
accounts of the Borrower or Riviera with NBD), (b) NBD may deem the Forbearance
Period to be expired, and (c) upon NBD's election, but without further notice,
all of the Obligations shall be immediately due and payable. IN ANY EVENT,
FROM AND AFTER THE CLOSE OF BUSINESS ON AUGUST 31, 1995, NBD MAY IMMEDIATELY
TAKE ACTION TO ENFORCE ALL OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS,
THIS AGREEMENT OR APPLICABLE LAW, INCLUDING, BUT NOT LIMITED TO, COLLECTION OF
THE BORROWER'S OBLIGATIONS.
19. DOCUMENTS CONTINUE. Except as expressly modified and amended by the
terms of this Agreement, all of the terms and conditions of the Loan Documents
remain in full force and effect and are hereby ratified, confirmed and
approved. If there is an express conflict between the terms of this Agreement
and the terms of the Loan Documents, the terms of this Agreement shall govern
and control.
20. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a conditional
and limited forbearance until August 31, 1995, only, upon the terms and
conditions set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, all of NBD's rights and remedies against the
Borrower, Riviera, third parties, and/or the Collateral and/or any rights of
NBD under the Limited Guaranty Documents are expressly reserved, including,
without
13
<PAGE> 96
limitation, all rights and remedies resulting from, or arising in connection
with, the Existing Defaults. Likewise, nothing herein shall be deemed to
constitute a waiver of any defaults existing as of the date hereof, a further
worsening of the Existing Defaults or new events of default, events of
acceleration or defaults or shall in any way prejudice the rights or remedies
of NBD under the Loan Documents or applicable law. Further, NBD shall have the
right to waive any conditions set forth in this Agreement and/or the Loan
Documents, in its sole and unfettered discretion. And any such waiver shall
not prejudice, waive or reduce any other right or remedy which NBD may have
against the Borrower or Riviera, or any rights of NBD under the Limited
Guaranty Documents. However, the other parties to this Agreement and the Loan
Documents, understand that no waiver by NBD of the rights or any condition of
this Agreement and/or the Loan Documents shall be effective unless the same
shall be contained in writing signed by an authorized agent of NBD.
21. CREDIT INQUIRIES. In the event customers, buyers, potential financing
sources or other parties make inquiry of NBD as to the current lending
relationship between NBD, on the one hand, and the Borrower or Riviera, on
the other hand, the parties agree that NBD may refer such inquiries to the
Borrower or Riviera.
22. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
23. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and may be modified or amended only
by a writing signed by the party to be charged.
(b) This Agreement is governed by the internal laws of the State of
Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but together they shall constitute one and
the same instrument, and facsimile copies of signatures shall be treated as
original signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and Riviera and
their respective successors and assigns and shall inure to the benefit of NBD
and its successors and assigns.
(e) If any provision of this Agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such
offending provision shall be null and void only to the extent of such conflict
or unenforceability, but shall be deemed separate from and shall not invalidate
any other provision of this Agreement.
14
<PAGE> 97
(f) Defined terms used in this Agreement without definition shall
have the meanings given to them under the Credit Agreement.
24. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or
inducements which have been made to any signatory hereto to cause such
signatory to enter into this Agreement other than those which are set forth in
this Agreement.
25. WAIVER OF JURY TRIAL AND ACKNOWLEDGMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
EACH OF THE BORROWER AND RIVIERA ACKNOWLEDGES THAT (1) IT HAS BEEN GIVEN
THE OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE AND,
AFTER CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY AND
WITHOUT DURESS, COERCION, 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, (3) IT HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS
AND PROVISIONS OF THIS AGREEMENT AND IS NOT RELYING ON THE OPINIONS OR ADVICE
OF NBD OR ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS AGREEMENT.
15
<PAGE> 98
26. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
NBD BANK
By: [SIG]
-------------------------------
It: Vice President
----------------------------
RIVIERA DIE & TOOL, INC.
By: [SIG]
-------------------------------
Its: C.F.O.
---------------------------
Subscribed and sworn to before me this day of June, 1995.
----
- --------------------------
Notary Public, County,
--- ----
My Commission expires:
---------------
RIVIERA TOOL COMPANY
By: [SIG]
-----------------------
Its: C.F.O.
-------------------
Subscribed and sworn to before me this day of June, 1995.
---
- -----------------------
Notary Public, County,
---- ---
My Commission expires:
---
16
<PAGE> 99
THIRTEENTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, formerly known as NBD Bank, N.A., successor by merger to the
interests of NBD Grand Rapids, N.A. ("NBD" or the "Bank"), Riviera Die & Tool,
Inc. (formerly known as R.D.T., Inc.), a Michigan Corporation (the "Borrower"),
and Riviera Tool Company, a Michigan Corporation ("Riviera") enter into this
Thirteenth Amendment to Credit Agreement and Restated Forbearance Agreement
(the "Agreement") effective as of the 1st day of September, 1995.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement
dated April 20, 1988, as amended by a First Amendment to Credit Agreement dated
August 31, 1988, a Second Amendment to Credit Agreement dated January 30, 1989,
a Third Amendment to Credit Agreement dated January 30, 1990, a Fourth
Amendment to Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit
Agreement dated July 31, 1992, a Sixth Amendment to Credit Agreement dated
January 31, 1993, a Seventh Amendment to Credit Agreement dated March 31, 1993,
an Eighth Amendment to Credit Agreement dated July 26, 1993, a Ninth Amendment
to Credit Agreement dated March 4, 1994, a Forbearance Agreement dated April
14, 1994 (the "Original Forbearance Agreement"), a Tenth Amendment to Credit
Agreement and Restated Forbearance Agreement dated May 5, 1994, an Eleventh
Amendment to Credit Agreement and Restated Forbearance Agreement dated as of
December 1, 1994, and a Twelfth Amendment to Credit Agreement and Restated
Forbearance Agreement dated as of May 1, 1995 (collectively, the "Credit
Agreement") by which the Bank has made certain credit facilities available to
the Borrower upon the terms and subject to the conditions set forth in the
Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed two (2)
promissory notes: (i) the Twelfth Amended and Restated Working Capital
Revolving Credit Note in the original principal amount of $9,000,000.00 dated
as of May 1, 1995 (the "Working Capital Revolving Credit Note"); and (ii) a
Third Amended and Restated Term Note in the original principal amount of
$976,962.00 dated as of May 1, 1995 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and
delivered to the Bank a Guaranty dated April 20, 1988, pursuant to which, among
other things, Riviera guarantied all of the Borrower's obligations (including
the Obligations as defined below) to the Bank, whether then existing or
thereafter arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth ("Rieth") and Riviera Holding Company
("Holding") (collectively, Rieth and Holding may be hereinafter referred to as
the "Limited Guarantors") each executed and delivered Guaranties and Continuing
Pledge Agreements (the "Limited Guaranty Documents") dated August 4, 1992 and
July 26, 1993.
E. As of September 7, 1995, there was (i) $7,218,442.81 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note and (ii) $816,962.00 in principal indebtedness owing by the Borrower
pursuant to the Term Note. These sums,
<PAGE> 100
together with accrued but unpaid interest, costs and expenses (including
attorneys' fees), as well as all other present and future obligations of the
Borrower to the Bank, including, but not limited to, obligations arising under
or in connection with the Loan Documents (as defined below) or any other
document executed in connection therewith or subsequent thereto by the Borrower
in favor of the Bank are hereinafter referred to as the "Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment), as amended
by a First Amendment to each of the above-described Security Agreements dated
January 30, 1989 (the "Borrower Security Agreements") wherein Borrower granted
to NBD a valid, perfected, indefeasible and enforceable first priority lien and
security interest in favor of the Bank in all of the Borrower's present and
future personal property, including, but not limited to, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof with the exception of certain property described
in Section 5.8 of the Credit Agreement. For convenience, all of the collateral
referred to in the Borrower Security Agreements, together with all other
collateral described in and/or granted in connection with any of the Loan
Documents (as hereinafter defined), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other parties' present or future
obligations to the Bank, is collectively referred to as the "Borrower
Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment) (the
"Riviera Security Agreements") wherein Riviera granted to NBD a valid,
perfected, indefeasible and enforceable first priority lien and security
interest in favor of the Bank in all of Riviera's present and future personal
property, including, but not limited to, accounts, chattel paper, general
intangibles, documents, instruments, inventory, equipment, fixtures and all
other tangible and intangible personal property and all proceeds and products
thereof. For convenience, all of the collateral referred to in the Riviera
Security Agreements, together with all other collateral described in and/or
granted in connection with any of the Loan Documents (as hereinafter defined),
together with all collateral heretofore, simultaneously herewith or hereafter
granted to the Bank by Riviera to secure any of Riviera's or any other parties'
present or future obligations to the Bank, is collectively referred to as the
"Riviera Collateral".
H. The Borrower and Riviera acknowledge and agree that (i) the
Obligations are due the Bank without setoff, recoupment, defense or
counterclaim, in law or equity, of any nature or kind; (ii) the Obligations are
secured by valid, perfected, indefeasible, enforceable first priority liens and
security interests (except as permitted by Section 5.8 of the Credit Agreement)
in favor of the Bank in, among other things, (a) all of the Borrower's present
and future personal property, including, without limitation, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof, and (b) all of Riviera's present and future
personal
2
<PAGE> 101
property, including, without limitation, accounts, chattel paper, general
intangibles, documents, instruments, inventory, equipment, fixtures and all
other tangible and intangible personal property and all proceeds and products
thereof, and (c) the collateral described in the Limited Guaranty Documents.
For convenience, the Credit Agreement, the Working Capital Revolving Credit
Note, the Term Note (collectively, the "Notes"), the Borrower Security
Agreements, the Riviera Guaranty, the Riviera Security Agreements, the Limited
Guaranty Documents, the Original Forbearance Agreement, this Agreement and any
other document executed therewith or subsequent thereto by the Borrower in
favor of the Bank are hereinafter referred to as the "Loan Documents". For
convenience, all of the Borrower Collateral, the Riviera Collateral and the
collateral referenced in the Limited Guaranty Documents shall hereinafter be
referred to as the "Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations)
owed to NBD, including, but not limited to the Collateral, shall constitute and
serve as collateral for any and all of the obligations and duties of the
Borrower and Riviera to NBD (including the Obligations), whether now existing
or hereafter arising.
K. Borrower and Riviera each acknowledge that prior to June 1, 1995,
there were defaults under the Loan Documents as follows (collectively, the
"Existing Defaults"):
(1) The Leverage Ratio of Riviera and the Borrower, determined
on a consolidated basis, is greater than 3 to 1 (3.44 to 1
as of March 31, 1995).
(2) The Working Capital of Riviera and the Borrower, determined
on a consolidated basis, is less than $200,000 (minus
$3,237,000.00 as of March 31, 1995.
(3) The Tangible Net Worth of Riviera and Borrower, determined
on a consolidated basis, is less than $6,000,000 from and
after August 31, 1994 ($5,438,000.00 as of March 31, 1995).
(4) The aggregate principal amount outstanding under the
Working Capital Revolving Credit, has in the past
periodically exceeded the Borrowing Base (the "Borrowing
Base Deficiency").
Borrower and Riviera represent and warrant that, to the best of their
knowledge, after due inquiry and investigation, they are unaware of any other
Events of Default (as defined in the Credit
3
<PAGE> 102
Agreement) or defaults under any of the Loan Documents or this Agreement or of
any event that, with the passage of time, notice, or both, would become an
Event of Default or a default under the Loan Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the Loan
Documents and applicable law.
M. The Borrower and Riviera further acknowledge and agree that the
actions taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. Borrower and Riviera have requested that NBD continue to forbear
from enforcing its rights and remedies under the Loan Documents and applicable
law for an additional period through November 30, 1995, to afford such parties
an opportunity to consummate a sale of Borrower or its assets which will result
in payment of the Obligations in full. Borrower has represented to NBD that it
has entered into a Letter of Intent with EWI, Inc. dated June 22, 1995; a true
copy of which is attached hereto (which continues in full force and effect as
of the date hereof) to sell substantially all of the assets of Borrower.
Borrower has further represented that it believes this sale will result in
payment in full of the Obligations as well as the known obligations of NBD.
O. Borrower and Riviera had additionally previously requested that the
Bank increase the cap on the Working Capital Facility temporarily from $10
million to $12.5 million to provide Borrower with additional needed working
capital. The period for the temporary increase has expired and the cap is now
$9 million.
P. Borrower and Riviera have additionally requested that the Bank
extend the August 31, 1995 maturity date on the Working Capital Revolving
Credit Note and the Term Note until November 30, 1995.
Q. The Borrower and Riviera acknowledge and agree that (i) NBD has
fully performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond November 30, 1995. NBD HAS INFORMED BORROWER AND RIVIERA THAT IT DOES
NOT INTEND TO EXTEND THE FORBEARANCE PERIOD BEYOND NOVEMBER 30, 1995, AND THAT
THEY SHOULD PAY NBD IN FULL ON OR BEFORE THAT DATE.
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated
in this Agreement as and shall constitute representations, warranties and
covenants of the respective
4
<PAGE> 103
parties to this Agreement, as the case may be), and for other good and valuable
consideration, the parties hereto agree as follows:
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
through the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) November 30, 1995
(the "Forbearance Period"):
(a) Simultaneously with the execution of this Agreement, receipt
by NBD of an executed Thirteenth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement,
receipt by NBD of an executed Fourth Amended and Restated Term Note in
substantially the form attached hereto as Exhibit 1(b);
(c) Simultaneously with the execution of this Agreement,
receipt by NBD of an executed copy of the Reaffirmation and Release
Agreement in substantially the form attached hereto as Exhibit 1(c);
(d) Simultaneously with the execution of this Agreement,
receipt by NBD of a fully-executed copy of this Agreement acknowledged by
counsel to the Borrower and Riviera;
(e) Simultaneously with the execution of this Agreement,
Borrower shall make all payments currently due under the Loan Documents.
(f) NBD receives such other additional documentation necessary
to carry out the intent and purposes of this Agreement.
2. ALL OBLIGATIONS DUE. ALL OF THE OBLIGATIONS INCLUDING, WITHOUT
LIMITATION, OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE WORKING CAPITAL
REVOLVING CREDIT NOTE, THE TERM NOTE AND THIS AGREEMENT SHALL BE DUE AND
PAYABLE ON THE EARLIER OF (i) A DEFAULT, AN EVENT OF DEFAULT OR BREACH OF THE
TERMS AND CONDITIONS OF THIS AGREEMENT, OR (ii) NOVEMBER 30, 1995.
3. NO FURTHER FOBEARANCE IMPLIED. THE BORROWER AND RIVIERA
ACKNOWLEDGE THAT (a) NBD DOES NOT INTEND, NOR DOES NBD HAVE ANY OBLIGATION, TO
EXTEND LOANS, ADVANCES OR OTHER FINANCIAL ACCOMMODATIONS TO THE PARTIES HERETO
BEYOND NOVEMBER 30, 1995, (b) NBD DOES NOT INTEND TO FORBEAR FROM ENFORCING ITS
RIGHTS AND REMEDIES AFTER NOVEMBER 30, 1995, AND NOTHING CONTAINED HEREIN OR
5
<PAGE> 104
OTHERWISE IS INTENDED TO BE A PROMISE OR AGREEMENT TO MAKE ADVANCES UNDER THE
WORKING CAPITAL REVOLVING CREDIT NOTE AFTER NOVEMBER 30, 1995 OR TO EXTEND THE
TERMS OF THIS AGREEMENT BEYOND NOVEMBER 30, 1995, (c) ALL OF THE OBLIGATIONS
ARE DUE, ABSENT AN EARLIER DEFAULT UNDER THE LOAN DOCUMENTS, ON OR BEFORE
NOVEMBER 30, 1995 AND (d) NBD INTENDS TO TAKE ANY STEPS NECESSARY TO ASSURE
SATISFACTION OF THE OBLIGATIONS IN FULL BY November 30, 1995 OR AS SOON
THEREAFTER AS POSSIBLE. THE BORROWER, RIVIERA, RIETH AND HOLDING HAVE BEEN
ADVISED THAT THEY SHOULD PURSUE ALTERNATIVE FINANCING SOURCES.
4. BORROWING BASE DEFICIENCY. Borrower shall at all times comply
with the terms and conditions of the Working Capital Facility and shall not
permit or cause to exist a Borrowing Base Deficiency.
5. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority
lien and security interest in and to all of their respective personal
property (except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its
personal property, including such equipment referenced in the UCC-3 partial
releases.
6. AMENDMENTS TO CREDIT AGREEMENT.
(a) AMENDMENT TO REVOLVING CREDIT FACILITY.
Article II of the Credit Agreement is hereby amended in its
entirety to read as follows:
ARTICLE II
Working Capital Revolving Credit Facility
2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank may, in its sole and unfettered discretion, lend to the
Borrower from time to time through November 30, 1995, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified
by the Bank, provided that the aggregate principal amount
outstanding at any time pursuant to the provisions of this Section
2.1 shall not exceed the lesser of Nine Million Dollars
($9,000,000.00) (the "Working Capital Revolving Credit") or the
6
<PAGE> 105
Borrowing Base. In the event the principal amount outstanding at
any time shall exceed said amounts, the Borrower shall forthwith
pay to the Bank an amount sufficient to eliminate such excess.
Subject to the terms and conditions of this Agreement, the
Borrower may borrow, prepay pursuant to Section 2.3, and reborrow
under this Section 2.1. Upon the execution of this Agreement,
the Borrower shall execute and deliver to the Bank a revolving
credit demand note in the form of Exhibit 1(a) attached hereto
(the "Twelfth Amended and Restated Working Capital Revolving
Credit Note"), the terms of which are incorporated herein by
reference. All commitments by the Bank on behalf of the Borrower
by way of instrument certification, letter of credit or similar
device shall be considered loans pursuant to this Section 2.1.
2.2 Use of Proceeds. The proceeds of the loans pursuant to
this Article II shall be used to refinance existing revolving
credit debt and to assist with the working capital needs of the
Borrower.
2.3 Payment of Working Capital Revolving Credit Note;
Prepayment. Except as payment of part or all of the principal
amount of the loans outstanding pursuant to this Article II is
sooner required to be made under Section 2.1 or Article VIII
hereof, the full principal amount of the loans outstanding under
this Article II and all accrued interest thereon shall be paid by
Borrower on or before November 30, 1995. The Borrower may prepay
all or any part of the indebtedness under Section 2.1 at any time
without penalty provided any prepayment shall be in a multiple of
One Thousand Dollars ($1,000.00).
2.4 Interest. Except as provided in Article VIII hereof, the
Working Capital Revolving Credit Note shall bear interest at the
annual rate of three percent (3%) over the Prime Rate. Interest
shall be computed daily on the basis of a Three Hundred Sixty
(360) day year and shall be billed to the Borrower monthly based
upon the principal balance outstanding and the actual number of
days in the preceding month. Interest shall be due and payable no
later than the first day of each month.
2.5 Availability Fee. The Borrower agrees to pay to the Bank
an Availability Fee at a rate equal to three-eighths of one
percent (3/8%) per annum on the average daily unused portion of
the Working Capital Revolving Credit for the period from the date
of this Agreement to and including November 30, 1995, and
7
<PAGE> 106
thereafter until full payment of the Eleventh Amended and Restated
Working Capital Revolving Credit Note. Accrued availability
fees shall be payable quarterly in arrears on the first day of
each January, April, July and October commencing on the first such
day after the date of this Agreement.
2.6 Facility Fee. The Borrower agrees to pay to the Bank a
facility fee at a rate equal to one-eighth of one percent (1/8%)
per annum on the Working Capital Revolving Credit, whether used or
unused, for the period from the date of this Agreement to and
including November 30, 1995, and thereafter until payment of the
Twelfth Amended and Restated Working Capital Revolving Credit
Note. The facility fee shall be payable quarterly in arrears on
the first day of each January, April, July and October commencing
on the first such day after the date of this Agreement.
(b) AMENDMENT TO TERM LOAN.
(i) Section 3.3 of the Credit Agreement is hereby amended
in its entirety to read as follows:
"3.3 Payment of Term Note; Prepayment. Except as payment of
part or all of the Term Note is sooner required under Section 3.1
or Article VIII, the principal of the Term Note shall be paid in
monthly installments of $40,000 each on the first day of each
month commencing December 1, 1994, and continuing thereafter up to
and including November 1, 1995 and a final payment on November 30,
1995 consisting of the entire remaining outstanding principal
balance of, all accrued interest on, and all other sums due under
the Term Note. The Borrower may prepay at any time all or any
portion of the Term Note without premium or penalty provided that
any prepayments shall be applied to principal last maturing."
7. NEGATIVE COVENANTS. During the Forbearance Period, without the
prior written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or
allow to exist any new, additional or expanded lien upon any property or assets
now owned or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer
to exist, have outstanding or in any manner become liable in respect of any
indebtedness for money other than
8
<PAGE> 107
the Obligations or indebtedness incurred in the ordinary course of the business
of the Borrower for necessary materials and services.
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition
of capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing
for the leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or
suffer to exist, any transaction or arrangement with any Affiliate, except on
terms which are no less favorable to the Borrower than could be obtained from
persons who are not Affiliates in arm's length transactions.
8. FURTHER IN-PUT.
(a) Borrower shall continue to use its best efforts to arrange
a meeting between representatives of NBD, representatives of Borrower and
appropriate decision-making representatives of Motor Wheel to meet and discuss
the future direction and plans of Borrower prior to the expiration of the
Forbearance Period;
(b) Borrower shall use its best efforts to obtain a written
agreement by Comerica Bank to subordinate any debt and security interest it may
have with Borrower and/or Riviera, in form and substance acceptable to NBD.
(c) Borrower agrees that it will immediately engage a crisis
management consultant for advisory consulting purposes, which consultant must
be acceptable to NBD if NBD, in its sole discretion, requests Borrower retain
such consultant. Borrower agrees that it will, upon such request by NBD, seek
and recommend the immediate approval and engagement of, a crisis management
consultant with management authority, upon board approval and authorization
(which consultant must be acceptable to NBD) and retain such a consultant.
9. NO OVERDRAFTS. Borrower and Riviera agree that they will not
create any overdrafts in any accounts at NBD. Furthermore, Borrower and
Riviera acknowledge and agree that NBD shall not, under any circumstances, be
required to honor any checks or other items presented to NBD for payment for
which there are insufficient available funds in Borrower's account at NBD for
payment and NBD may return any such items so presented. In the event that such
items are not returned, this shall not create any right or expectation that
such overdrafts will be tolerated or permitted in the future.
10. TAXES. Borrower and Riviera represent that they are paying all
taxes on a timely basis except as set forth on Exhibit 2 attached hereto.
9
<PAGE> 108
11. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in, any of the Loan Documents (including
a worsening of any of the Existing Defaults for any reason other than the
impact of the restructuring transaction between the Borrower and Heller
Financial Leasing, Inc. and Banc One Leasing Corporation entered into in April
of 1994);
(b) if any representation or warranty made by Borrower or
Riviera in this Agreement or in connection with the negotiation hereof is
untrue as of the date made or hereafter becomes untrue;
(c) the Borrower and/or Riviera shall at any time fail to
observe, perform or comply with any Dominion of Funds Agreement with NBD;
(d) there shall exist at any time a Borrowing Base Deficiency;
(e) Any lender, supplier, creditor or lessor shall (i)
accelerate any obligations of the Borrower or Riviera, due to a default by
Borrower or Riviera under any agreement with any creditor in excess of $25,000
to such creditor or shall otherwise take any action of any kind or nature to
enforce or begin enforcement of its rights or remedies against Borrower or
Riviera by reason of such default, or (ii) receive from Borrower or Riviera any
prepayments of obligations, any extraordinary payments of outstanding
indebtedness or fees, or fees or interest above the level paid to such creditor
by Borrower or Riviera as of January 1, 1994;
(f) Any creditor, including, but not limited to, any
governmental taxing authority, shall cause a lien to be filed on any of the
Collateral (other than a lien for taxes not yet due and payable); and
(g) the Borrower has not received and delivered to NBD by
November 15, 1995 an executed Purchase Agreement for the sale of substantially
all of the assets of the Borrower or other written commitment for a business
transaction sufficient to satisfy the Obligations in full by November 30, 1995.
12. RELEASE. As of the date hereof, the Borrower and Riviera
represent and warrant that they are aware of, and possess, no claims or
causes of action against the Bank. Notwithstanding this representation and as
further consideration for the agreements and understandings herein, the
Borrower and Riviera, individually, jointly and severally, and on behalf of
each of their respective officers, directors, employees, agents, executors,
successors and assigns, hereby release NBD, its officers, directors, employees,
agents, attorneys, affiliates, subsidiaries, successors and assigns from any
liability, claim, right or cause of action which now exists or hereafter
arises, whether known or unknown, arising from events occurring prior to and
10
<PAGE> 109
in any way related to facts in existence as of the date hereof. By way of
example and not limitation, the foregoing includes any claims in any way
related to actions taken or omitted to be taken by NBD under the Loan
Documents, or this Agreement and the business relationship with NBD.
13. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment
called for by the Loan Documents, this Agreement (or any agreement referred to
or incorporated herein) or any other present or future agreements between NBD
and the Borrower and/or Riviera are not paid when and as called for under the
terms of such agreement, then NBD may debit any of such accounts of the
Borrower and/or Riviera at NBD for such amount. In the event of such a debit,
NBD will use its best efforts to notify the Borrower and/or Riviera of such
debit within two (2) business days. The fact that NBD had debited any of the
accounts of the Borrower and/or Riviera at NBD shall in no way whatsoever waive
or diminish any default for failure to make such payments when and as due.
14. SETOFF. Upon the occurrence of a default, NBD is hereby authorized
at any time and from time to time, without notice to the Borrower or Riviera
(any such notice being expressly waived), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by NBD to or for the credit or
the account of the Borrower and/or Riviera against any and all of the
Obligations, now or hereafter existing, including those under this Agreement or
the Loan Documents or any of the Notes or any other agreement or instrument,
irrespective of whether or not NBD shall have made any demand under this
Agreement or any Note or otherwise. The Bank agrees to promptly notify the
Borrower and/or Riviera after any such setoff and application provided that the
failure to give such notice shall not affect the validity of such setoff and
application and shall not create any claims or liabilities against NBD. The
rights of NBD under this section shall not require maturity of any indebtedness
and are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which NBD may have.
15. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree
that NBD, through its employees or authorized agents, shall be permitted to
send a letter to and otherwise contact each of its respective account debtors
to verify account receivable balances. In addition, NBD, an accountant or
accounting firm retained by NBD and other advisors, representatives or agents
of NBD shall be permitted full and complete access to the Borrower's and
Riviera's facilities and books and records to conduct audits as often as NBD
reasonably desires. The reasonable cost of such audits ("Audit Fees"), whether
conducted by NBD (in which case NBD shall be entitled to make a reasonable
charge, plus out-of-pocket costs and expenses), an accountant or accounting
firm retained by NBD or other advisors, representatives or agents of NBD
(including, but not limited to, Curtis Enterprises Inc.) shall be part of the
Obligations and shall be secured by all of the Collateral.
16. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and
Riviera, jointly and severally, shall be responsible for the payment of all
fees and out-of-pocket disbursements incurred by NBD, including fees of counsel
and court costs, in any way arising from or in
11
<PAGE> 110
connection with this Agreement, any of the Collateral, any of the Loan
Documents, any of the Obligations or the business relationship between NBD,
on the one hand, and any one or more of the Borrower, Riviera, Holding or
Rieth, on the other hand, including, without limitation, (a) Audit Fees; (b)
all fees and expenses (including recording fees and insurance policy fees) of
NBD and counsel for NBD for the preparation, examination, approval,
negotiation, execution and delivery of, or the closing of any of the
transactions contemplated by, this Agreement or any of the Loan Documents; (c)
all fees and out-of-pocket disbursements incurred by NBD, including attorneys'
fees and accountants' fees, in any way arising from or in connection with any
action taken by NBD to monitor, advise, administer, enforce or collect any of
the Obligations (including under this Agreement and the Loan Documents) or any
other obligations of the Borrower or Riviera, whether joint, joint and several,
or several, under this Agreement, any of the Loan Documents or any other
existing or future document or agreement, or arising from or relating to the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including any actions
to lift the automatic stay or to otherwise in any way monitor or participate in
any bankruptcy, reorganization or insolvency proceeding of the Borrower or
Riviera; (d) all expenses and fees (including attorneys' fees) incurred in
relation to, in connection with, in defense of and/or in prosecution of any
litigation instituted by any one or more of the Borrower, Riviera, Holding,
Rieth, NBD or any third party against or involving NBD arising from, relating
to, or in connection with any of the Obligations or any Guarantor's
obligations, this Agreement, any of the Collateral, any of the Loan Documents
or the business relationship between NBD, on the one hand, and any one or more
of the Borrower, Riviera, Holding or Rieth, on the other hand, including any
so-called "lender liability" action, any claim and delivery or other action for
possession of, or foreclosure on, any of the Collateral, post-judgment
enforcement of any rights or remedies including enforcement of any judgments,
and prosecution of any appeals (whether discretionary or as of right and
whether in connection with pre-judgment or post-judgment matters); (e) all
costs, expenses and fees incurred by NBD or its agents in connection with
appraisals and reappraisals of all or any of the Collateral (and the Borrower
and Riviera shall fully cooperate with such appraisers and make their property
available for appraisal in connection with as many appraisals as NBD may
request); (f) all costs, expenses and fees incurred by NBD and/or its counsel in
connection with consultants, expert witnesses or other professionals retained
by NBD and/or its counsel in order to assist, advise and/or give testimony with
respect to any matter relating to the Collateral, the Loan Documents, or the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand (and the Borrower and
Riviera shall fully cooperate with such consultant, expert witness or other
professional and shall make their premises, books and records, accounting
systems, computer systems and other media for the recordation of information
available to such persons); and (g) all costs, expenses and fees incurred by
NBD in connection with any environmental investigations including but not
limited to Phase I, Phase II and Phase III environmental audits (and the
Borrower and Riviera agree that NBD and/or its agents may enter on their
premises at any time to conduct such environmental investigations). Nothing
contained in this paragraph shall, or is intended to, expand the liability of
Rieth and Holding beyond that contained in the Limited Guaranty Documents.
12
<PAGE> 111
All of the foregoing costs, expenses and reimbursement
obligations, set forth in this section (the "Costs") shall be part of the
Obligations, and shall be secured by all of the Collateral. The costs shall be
paid within 10 days of written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim,
action or cause of action, damage, liability, loss, cost, debt, expense,
obligation, tax, assessment, charge, lawsuit, contract, agreement,
undertaking or deficiency, of any kind or nature, whether known or unknown,
fixed, actual, accrued or contingent, liquidated or unliquidated (including
interest, penalties, attorneys' fees and other costs and expenses incident to
proceedings or investigations relating to any of the foregoing or the defense
of any of the foregoing), whether or not litigation has commenced.
17. OTHER DOCUMENTS. The Borrower, Riviera, Rieth and Holding agree to
execute and deliver any and all documents reasonably deemed necessary or
appropriate by NBD or counsel to NBD to carry out the intent of and/or to
implement the Loan Documents or this Agreement, including, but not limited to,
such documentation necessary to grant NBD a lien, mortgage and/or security
interest in any assets of the Borrower and Riviera presently not subject to a
lien, mortgage or encumbrance in favor of NBD to secure the Obligations.
18. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of
this Agreement shall be considered an event of default, an event of
acceleration and a default under each document and agreement comprising the
Loan Documents and an event of default, an event of acceleration or a default
under any document or agreement comprising the Loan Documents, (other than the
Existing Defaults), shall be considered an Event of Default under the terms of
this Agreement, and all of the other Loan Documents. Upon the occurrence of an
Event of Default under this Agreement or any event of default, event of
acceleration or default under any document or agreement comprising the Loan
Documents, or any document executed in connection herewith, or referenced
herein, and without prior notice of or an opportunity to cure such event of
default, event of acceleration or default, except as otherwise provided herein,
(a) NBD shall have the right to exercise any rights or remedies provided in
this Agreement, the Loan Documents, or applicable law, (including, without
limitation, the right to offset any accounts of the Borrower or Riviera with
NBD), (b) NBD may deem the Forbearance Period to be expired, and (c) upon NBD's
election, but without further notice, all of the Obligations shall be
immediately due and payable. IN ANY EVENT, FROM AND AFTER THE CLOSE OF
BUSINESS ON November 30, 1995, NBD MAY IMMEDIATELY TAKE ACTION TO ENFORCE ALL
OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS, THIS AGREEMENT OR
APPLICABLE LAW, INCLUDING, BUT NOT LIMITED TO, COLLECTION OF THE BORROWER'S
OBLIGATIONS.
19. DOCUMENTS CONTINUE. Except as expressly modified and amended by the
terms of this Agreement, all of the terms and conditions of the Loan Documents
remain in full force and effect and are hereby ratified, confirmed and
approved. If there is an express conflict between the terms of this Agreement
and the terms of the Loan Documents, the terms of this Agreement shall govern
and control.
13
<PAGE> 112
20. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a
conditional and limited forbearance until November 30, 1995, only, upon the
terms and conditions set forth in this Agreement. Notwithstanding anything to
the contrary in this Agreement, all of NBD's rights and remedies against the
Borrower, Riviera, third parties, and/or the Collateral and/or any rights of
NBD under the Limited Guaranty Documents are expressly reserved, including,
without limitation, all rights and remedies resulting from, or arising in
connection with, the Existing Defaults. Likewise, nothing herein shall be
deemed to constitute a waiver of any defaults existing as of the date hereof, a
further worsening of the Existing Defaults or new events of default, events of
acceleration or defaults or shall in any way prejudice the rights or remedies
of NBD under the Loan Documents or applicable law. Further, NBD shall have the
right to waive any conditions set forth in this Agreement and/or the Loan
Documents, in its sole and unfettered discretion. And any such waiver shall
not prejudice, waive or reduce any other right or remedy which NBD may have
against the Borrower or Riviera, or any rights of NBD under the Limited
Guaranty Documents. However, the other parties to this Agreement and the Loan
Documents, understand that no waiver by NBD of the rights or any condition of
this Agreement and/or the Loan Documents shall be effective unless the same
shall be contained in writing signed by an authorized agent of NBD.
21. CREDIT INQUIRIES. In the event customers, buyers, potential
financing sources or other parties make inquiry of NBD as to the current
lending relationship between NBD, on the one hand, and the Borrower or Riviera,
on the other hand, the parties agree that NBD may refer such inquiries to the
Borrower or Riviera.
22. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
23. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and may be modified or
amended only by a writing signed by the party to be charged.
(b) This Agreement is governed by the internal laws of the
State of Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but together they shall constitute one and
the same instrument, and facsimile copies of signatures shall be treated as
original signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and
Riviera and their respective successors and assigns and shall inure to the
benefit of NBD and its successors and assigns.
14
<PAGE> 113
(e) If any provision of this Agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such offending
provision shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate
any other provision of this Agreement.
(f) Defined terms used in this Agreement without definition shall have
the meanings given to them under the Credit Agreement.
24. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or
inducements which have been made to any signatory hereto to cause such
signatory to enter into this Agreement other than those which are set forth in
this Agreement.
25. WAIVER OF JURY TRIAL AND ACKNOWLEDGEMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
EACH OF THE BORROWER AND RIVIERA ACKNOWLEDGES THAT (1) IT HAS BEEN
GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE
AND, AFTER CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY
AND WITHOUT DURESS, COERCION, 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, (3) IT HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS
AND PROVISIONS OF THIS AGREEMENT AND IS NOT RELYING ON THE OPINIONS OR ADVICE
OF NBD OR ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS AGREEMENT.
15
<PAGE> 114
26. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
NBD BANK
By: Timothy G. Skillman
---------------------------------
Its: First Vice President
-----------------------------
RIVIERA DIE & TOOL, INC.
By: Peter C. Canepa
-----------------------------------
Its: CFO
--------------------------------
Subscribed and sworn to before me this day of September, 1995.
- -----------------------------------
Notary Public, County,
------- --
My Commission expires:
---------
RIVIERA TOOL COMPANY
By: Peter C. Canepa
---------------------------------
Its: CFO
------------------------------
Subscribed and sworn to before me this day of September, 1995.
----
- -----------------------------------
Notary Public, County,
------- --
My Commission expires:
--------
16
<PAGE> 115
[RIVIERA PRODUCTION TOOLING GROUP LOGO]
June 29, 1995
Mr. George S. Hofmeister
Chairman and CEO
EWI, Inc.
100 South Broadway Avenue
Salem, Ohio 44460
RE: Exclusive Letter of Intent to Purchase Assets and Assume Specified
Liabilities of Riviera Production Tooling Group
Dear George:
Enclosed is you June 22, 1995 Exclusive Letter of Intent to Purchase
Assets and Assume Specified Liabilities of Riviera Production Tooling Group.
It has been executed by us conditioned upon this Letter of Addendum being
executed by you and returned by July, 10, 1995. The Letter of Intent is agreed
to and amended as follows:
1. Paragraph 1 has added "and certain other assets which will be
specifically identified in a definitive agreement."
2. Paragraph 2 will read in its entirety, to-wit:
LIABILITIES ASSUMED. Buyer shall assume all liabilities as identified,
including accounts payable, obligations for borrowed money and accrued
liabilities, product and warranty liabilities and purchase orders
accepted in the ordinary course of business including those only
partially reflected in work-in-process on the date of closing.
3. Paragraph 10 has added "notwithstanding the foregoing, the
parties acknowledge that Seller has begun a private placement
financing effort that will not result in any new owners of Seller.
In the event that such financing is successful prior to execution of
the definitive agreement contemplated hereby, Seller may choose to
terminate this letter of intent without any obligation or liability to
Buyer."
Very truly yours,
Kenneth K. Rieth
Kenneth K. Rieth
President & CEO
AGREED AND ACCEPTED ON
BEHALF OF BUYER:
By: George S. Hofmeister Dated:
--------------------- ------------
George S. Hofmeister
Chairman and CEO
<PAGE> 116
[EWI INCORPORATED LETTERHEAD]
June 22, 1995
Mr. Kenneth K. Rieth
President and CEO
Riviera Production Tooling Group
5460 Executive Parkway, SE
Grand Rapids, MI 49512
Re: Exclusive letter of Intent to Purchase Assets and Assume Specified
Liabilities of Riviera Production Tooling Group.
Dear Ken:
I am pleased to present this exclusive Letter of Intent on behalf of EWI, Inc.
or its designee ("Buyer"), for the purchase by Buyer of all of the assets, and
the assumption by Buyer of specified liabilities, of the Riviera Production
Tooling Group (the "Seller").
1. ASSETS TO BE ACQUIRED. All assets of the Seller as a going concern of
every nature, kind and description, tangible and intangible, whether or not
carried at value on the books of the Seller, including accounts receivable,
inventory, and fixed assets (the "Assets"), but excluding cash.
2. LIABILITIES ASSUMED. Buyer shall assume all liabilities as identified
including accounts payable and accrued liabilities and such other liabilities
as are disclosed to and specifically assumed by Buyer in writing related to the
Sellers' operations.
3. PURCHASE PRICE.
(a) The purchase price for the Assets shall be $6 million plus the
assumption of the specified liabilities. The purchase price shall be paid
in cash plus the assumption of the above specified liabilities.
(b) Buyer will assume the real estate lease on the property and the
personal property leases of Seller.
<PAGE> 117
[EWI INCORPORATED LETTERHEAD]
Riviera Tool and Die
Page 2
4. EMPLOYEES OF SELLER.
(a) Buyer and Kenneth K. Rieth shall execute an employment agreement
including performance incentives commencing at the closing in form mutually
acceptable.
(b) All other employees shall be hired by Purchaser and retained for a period
of ninety days after the date of closing.
(c) Buyer acknowledges that one of the shareholders f Seller, Motor Wheel
Corporation, an Ohio corporation. designs and builds or has built for its
use or resale to its customers in the ordinary course of its buinsess, tools
and dies of the type produced by the Seller. Since it has been the practice
of this shareholder to acquire such tooling though ourside contractors and
to protect its source therefor with an equity investment, a general covenant
not to compete will not be possible and any restrictions to be placved on
their activity in this field will need to be very carefully negotiated and
delineated.
5. NONCOMPETITION AGREEMENT. At closing the Seller and shareholders of Seller
shall execute a mutually acceptable noncompetition agreement providing that
the Seller shall refrain from competing in any manner with the businesses being
acquired by Buyer.
6. CONDITIONS TO CLOSING. The Buyer's obligation to consummate the acquisition
of the Seller is conditioned upon the following:
(a) Satisfactory results of customary due diligence review.
(b) Satisfactory results of an environmental audit, the cost of which shall
be borne by Buyer.
(c) Continued operations of the Seller in the ordinary course of business
until closing including specifically:
(i) No capital expenditure in excess of $100,000 without prior
consultation with Buyer.
(ii) No material adverse change in the financial condition, property,
business or prospects of the Seller.
(iii) No increase in wages, salaries or benefits except for regularly
scheduled increases about which the Buyer has received prior
notice.
(d) Formal approval of the acquisition transaction by the Buyer's and
Seller's Boards of Directors.
<PAGE> 118
[EWI INCORPORATED LETTERHEAD]
Riviera Tool and Die
Page 3
7. DUE DILIGENCE; SCHEDULE OF CLOSING. For a period until September 30, 1995
from and after the date of execution hereof by Seller, Buyer's representatives
shall have unrestricted access during normal business hours and upon reasonable
notice to the premises, personnel, books and records of the Seller for purposes
of conducting our due diligence. Buyer and Seller shall hereafter conduct
negotiations in good faith with a view to consummating the proposed purchase
and sale of the Seller consistent with the terms described herein on or before
September 30, 1995 In furtherance thereof, for a period equivalent to the due
diligence period described above, neither you nor your affiliates or agents
shall conduct negotiations for the sale of the Seller with any other
prospective purchaser thereof unless negotiations between us have terminated.
8. CONFIDENTIALITY. The Buyer and its representatives shall hold in confidence
any and all proprietary, confidential, trade secret and any other nonpublic
information and data relating to the business and affairs of the Seller
heretofore or hereafter furnished or disclosed to any of them in connection
herewith, and neither the Buyer nor its representatives shall disclose any of
the same or use the same for their own purposes without Sellers' prior written
consent or until the same shall have otherwise become general public knowledge,
provided that the Buyer shall have the right to disclose information as
necessary in connection with obtaining financing for the acquisition of the
Seller. In the event that discussions between the Buyer and Seller terminate,
the Buyer and its representatives shall promptly return to Seller any and all
copies of any and all such proprietary, confidential, trade secret and other
nonpublic information in their possession.
9. PUBLIC STATEMENTS. While these matters are progressing and until the Closing
Date, the timing, and to the extent reasonably practicable, the content of all
announcements regarding any aspects of the proposed acquisition of the Seller
shall be mutually agreed upon in advance.
10. EXPENSES. Except as set forth in Paragraph 6 hereof, each party shall bear
and be solely responsible for its own costs and expenses incurred by it in
connection with the transactions described herein.
11. NONBINDING AGREEMENT. Except as provided in paragraphs 7, 8, 9 and 10
hereof, this letter is not intended to constitute a binding agreement between
the Buyer and Seller with respect to the proposed transaction, but rather
tangible indication of each of the parties' desire to proceed towards such
transaction consistent with the terms described herein. It is understood and
agreed that neither party shall have any obligation to the other prior to
execution and delivery of a definitive agreement containing customary
representations, warranties and covenants, except for the obligations
established in paragraphs 7, 8, 9 and 10.
<PAGE> 119
[EWI INCORPORATED LETTERHEAD]
Riviera Tool and Die
Page 4
This letter of intent will terminate on June 30, 1995 if not agreed to and
accepted by the Sellers.
If the foregoing is acceptable to you, please indicate the same by executing
and returning the enclosed counterpart of this letter.
Agreed and accepted on behalf of the Seller:
as amended by conditional letter of acceptance of June 29, 1995:
By: Kenneth K. Rieth
--------------------
Kenneth K. Rieth
President and CEO
Date: June 29, 1995
------------------
EWI, INC.
By: George S. Hofmeister
--------------------
George S. Hofmeister
Chairman & CEO
Date: 6/23/95
-------------------
<PAGE> 120
FOURTEENTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, formerly known as NBD Bank, N.A., successor by merger to the
interests of NBD Grand Rapids, N.A. ("NBD" or the "Bank"), Riviera Die & Tool,
Inc. (formerly known as R.D.T., Inc.), a Michigan Corporation (the "Borrower"),
and Riviera Tool Company, a Michigan Corporation ("Riviera") enter into this
Fourteenth Amendment to Credit Agreement and Restated Forbearance Agreement
(the "Agreement") effective as of the 1st day of January, 1996.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated
April 20, 1988, as amended by a First Amendment to Credit Agreement dated
August 31, 1988, a Second Amendment to Credit Agreement dated January 30, 1989,
a Third Amendment to Credit Agreement dated January 30, 1990, a Fourth
Amendment to Credit Agreement dated May 16, 1991, a Fifth Amendment to
Credit Agreement dated July 31, 1992, a Sixth Amendment to Credit Agreement
dated January 31, 1993, a Seventh Amendment to Credit Agreement dated March 31,
1993, an Eighth Amendment to Credit Agreement dated July 26, 1993, a Ninth
Amendment to Credit Agreement dated March 4, 1994, a Forbearance Agreement
dated April 14, 1994 (the "Original Forbearance Agreement"), a Tenth Amendment
to Credit Agreement and Restated Forbearance Agreement dated May 5, 1994, an
Eleventh Amendment to Credit Agreement and Restated Forbearance Agreement dated
as of December 1, 1994, and a Twelfth Amendment to Credit Agreement and
Restated Forbearance Agreement dated as of May 1, 1995 and a Thirteenth
Amendment to Credit Agreement and Restated Forbearance Agreement dated as of
September 1, 1995 (collectively, the "Credit Agreement") by which the Bank has
made certain credit facilities available to the Borrower upon the terms and
subject to the conditions set forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed two (2)
promissory notes: (i) the Thirteenth Amended and Restated Working Capital
Revolving Credit Note in the original principal amount of $9,000,000.00
dated as of September 1, 1995 (the "Working Capital Revolving Credit Note");
and (ii) a Fourth Amended and Restated Term Note in the original principal
amount of $816,962.00 dated as of September 1, 1995 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and
delivered to the Bank a Guaranty dated April 20, 1988, pursuant to which, among
other things, Riviera guarantied all of the Borrower's obligations (including
the Obligations as defined below) to the Bank, whether then existing or
thereafter arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth ("Rieth") and Riviera Holding Company
("Holding") (collectively, Rieth and Holding may be hereinafter referred to as
the "Limited Guarantors") each executed and delivered Guaranties and Continuing
Pledge Agreements (the "Limited Guaranty Documents") dated August 4, 1992 and
July 26, 1993.
<PAGE> 121
E. As of January 24, 1996, there was (i) $8,556,624.26 in principal
indebtedness owing by the Borrower under the Working Capital Revolving
Credit Note and (ii) $696,962.00 in principal indebtedness owing by the
Borrower pursuant to the Term Note. These sums, together with accrued but
unpaid interest, costs and expenses (including attorneys' fees), as well as all
other present and future obligations of the Borrower to the Bank, including,
but not limited to, obligations arising under or in connection with the Loan
Documents (as defined below) or any other document executed in connection
therewith or subsequent thereto by the Borrower in favor of the Bank are
hereinafter referred to as the "Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment), as amended
by a First Amendment to each of the above-described Security Agreements dated
January 30, 1989 (the "Borrower Security Agreements") wherein Borrower granted
to NBD a valid, perfected, indefeasible and enforceable first priority lien and
security interest in favor of the Bank in all of the Borrower's present and
future personal property, including, but not limited to, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof with the exception of certain property described
in Section 5.8 of the Credit Agreement. For convenience, all of the collateral
referred to in the Borrower Security Agreements, together with all other
collateral described in and/or granted in connection with any of the Loan
Documents (as hereinafter defined), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other parties' present or future
obligations to the Bank, is collectively referred to as the "Borrower
Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a Security
Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment) (the "Riviera
Security Agreements") wherein Riviera granted to NBD a valid, perfected,
indefeasible and enforceable first priority lien and security interest in favor
of the Bank in all of Riviera's present and future personal property,
including, but not limited to, accounts, chattel paper, general intangibles,
documents, instruments, inventory, equipment, fixtures and all other tangible
and intangible personal property and all proceeds and products thereof. For
convenience, all of the collateral referred to in the Riviera Security
Agreements, together with all other collateral described in and/or granted in
connection with any of the Loan Documents (as hereinafter defined), together
with all collateral heretofore, simultaneously herewith or hereafter granted to
the Bank by Riviera to secure any of Riviera's or any other parties' present or
future obligations to the Bank, is collectively referred to as the "Riviera
Collateral".
H. The Borrower and Riviera acknowledge and agree that (i) the
Obligations are due the Bank without setoff, recoupment, defense or
counterclaim, in law or equity, of any nature or kind; (ii) the Obligations are
secured by valid, perfected, indefeasible, enforceable first priority
2
<PAGE> 122
liens and security interests (except as permitted by Section 5.8 of the Credit
Agreement) in favor of the Bank in, among other things, (a) all of the
Borrower's present and future personal property, including, without limitation,
accounts, chattel paper, general intangibles, documents, instruments,
inventory, equipment, fixtures and all other tangible and intangible personal
property and all proceeds and products thereof, and (b) all of Riviera's
present and future personal property, including, without limitation, accounts,
chattel paper, general intangibles, documents, instruments, inventory,
equipment, fixtures and all other tangible and intangible personal property and
all proceeds and products thereof, and (c) the collateral described in the
Limited Guaranty Documents. For convenience, the Credit Agreement, the Working
Capital Revolving Credit Note, the Term Note (collectively, the "Notes"), the
Borrower Security Agreements, the Riviera Guaranty, the Riviera Security
Agreements, the Limited Guaranty Documents, the Original Forbearance Agreement,
this Agreement and any other document executed therewith or subsequent thereto
by the Borrower in favor of the Bank are hereinafter referred to as the "Loan
Documents". For convenience, all of the Borrower Collateral, the Riviera
Collateral and the collateral referenced in the Limited Guaranty Documents
shall hereinafter be referred to as the "Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this
Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations)
owed to NBD, including, but not limited to the Collateral, shall constitute and
serve as collateral for any and all of the obligations and duties of the
Borrower and Riviera to NBD (including the Obligations), whether now existing
or hereafter arising.
K. Borrower and Riviera each acknowledge that prior to November 1, 1995,
there were defaults under the Loan Documents as follows (collectively, the
"Existing Defaults"):
(1) The Working Capital of Riviera and the Borrower, determined on
a consolidated basis, is less than $200,000 (minus $3,083,000 as
of October 31, 1995.
(2) As of December 28, 1995, the aggregate principal amount
outstanding under the Working Capital Revolving Credit, exceeded
the Borrowing Base by ($222,000) (the "Borrowing Base
Deficiency").
Borrower and Riviera represent and warrant that, to the best of their
knowledge, after due inquiry and investigation, they are unaware of any other
Events of Default (as defined in the Credit
3
<PAGE> 123
Agreement) or defaults under any of the Loan Documents or this Agreement or of
any event that, with the passage of time, notice, or both, would become an
Event of Default or a default under the Loan Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the Loan
Documents and applicable law.
M. Borrower and Riviera further acknowledge and agree that the actions
taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. Borrower and Riviera have requested that NBD continue to forbear from
enforcing its rights and remedies under the Loan Documents and applicable
law for an additional period through June 30, 1996, to afford such parties an
opportunity to consummate a sale of Borrower or its assets or refinancing from
one or more third parties which will result in payment of the Obligations in
full. Borrower has represented to NBD that it has entered into a Letter of
Intent with EWI, Inc. dated June 22, 1995 (which continues in full force and
effect as of the date hereof) to sell substantially all of the assets of
Borrower and is continuing negotiations for the sale of Borrower. Borrower has
further represented that it believes these efforts will result in payment in
full of the Obligations as well as the obligations of New Leap Corporation,
Leap Technologies, Inc. and Riviera Plastic Products Company to NBD.
0. Borrower and Riviera have additionally requested that the Bank extend
the November 30, 1995 maturity date on the Working Capital Revolving Credit
Note and the Term Note until June 30, 1996.
P. The Borrower and Riviera acknowledge and agree that (i) NBD has fully
performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond June 30,1996. NBD HAS INFORMED BORROWER AND RIVIERA THAT IT DOES NOT
INTEND TO EXTEND THE FORBEARANCE PERIOD BEYOND JUNE 30, 1996, AND THAT THEY
SHOULD PAY NBD IN FULL ON OR BEFORE THAT DATE. NBD HAS ADVISED THE PARTIES
THAT FROM AND AFTER JUNE 30,1996, NBD MAY TAKE ANY AND ALL STEPS TO SATISFY THE
OBLIGATIONS INCLUDING, BUT NOT LIMITED TO, ENFORCEMENT PROCEEDINGS, CESSATION
OF ADVANCES OR REDUCTION OF ADVANCE RATES UNDER THE BORROWING BASE, REDUCTION
IN THE CAP ON THE WORKING CAPITAL REVOLVING
4
<PAGE> 124
CREDIT, INCREASED INTEREST RATES AND FEES OR SUCH OTHER ACTIONS AS
NBD MAY, IN ITS SOLE DISCRETION, DEEM APPROPRIATE.
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated
in this Agreement as and shall constitute representations, warranties and
covenants of the respective parties to this Agreement, as the case may be), and
for other good and valuable consideration, the parties hereto agree as follows:
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
through the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) June 30, 1996 (the
"Forbearance Period"):
(a) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Fourteenth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Fifth Amended and Restated Term Note in substantially the
form attached hereto as Exhibit 1(b);
(c) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed copy of the Reaffirmation and Release Agreement in
substantially the form attached hereto as Exhibit 1(c);
(d) Simultaneously with the execution of this Agreement, receipt by
NBD of a fully-executed copy of this Agreement acknowledged by counsel to the
Borrower and Riviera;
(e) Simultaneously with the execution of this Agreement,
Borrower shall make all payments currently due under the Loan Documents.
(f) NBD receives such other additional documentation necessary to
carry out the intent and purposes of this Agreement.
2. ALL OBLIGATIONS DUE. ALL OF THE OBLIGATIONS INCLUDING, WITHOUT
LIMITATION, OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE WORKING CAPITAL
REVOLVING CREDIT NOTE, THE TERM NOTE AND THIS AGREEMENT SHALL BE DUE AND
PAYABLE ON THE EARLIER OF (i) A DEFAULT, AN EVENT OF DEFAULT OR BREACH OF THE
TERMS AND CONDITIONS OF THIS AGREEMENT, OR (ii) JUNE 30, 1996.
5
<PAGE> 125
3. NO FURTHER FORBEARANCE IMPLIED. THE BORROWER AND RIVIERA ACKNOWLEDGE
THAT (a) NBD DOES NOT INTEND, NOR DOES NBD HAVE ANY OBLIGATION, TO EXTEND
LOANS, ADVANCES OR OTHER FINANCIAL ACCOMMODATIONS TO THE PARTIES HERETO BEYOND
JUNE 30, 1996, (b) NBD DOES NOT INTEND TO FORBEAR FROM ENFORCING ITS RIGHTS AND
REMEDIES AFTER JUNE 30, 1996, AND NOTHING CONTAINED HEREIN OR OTHERWISE IS
INTENDED TO BE A PROMISE OR AGREEMENT TO MAKE ADVANCES UNDER THE WORKING
CAPITAL REVOLVING CREDIT NOTE AFTER JUNE 30, 1996 OR TO EXTEND THE TERMS OF
THIS AGREEMENT BEYOND JUNE 30, 1996, (c) ALL OF THE OBLIGATIONS ARE DUE, ABSENT
AN EARLIER DEFAULT UNDER THE LOAN DOCUMENTS, ON OR BEFORE JUNE 30, 1996, AND (d)
NBD INTENDS TO TAKE ANY STEPS NECESSARY TO ASSURE SATISFACTION OF THE
OBLIGATIONS IN FULL BY JUNE 30, 1995 OR AS SOON THEREAFTER AS POSSIBLE. THE
BORROWER, RIVIERA, RIETH AND HOLDING HAVE BEEN ADVISED THAT THEY SHOULD PURSUE
ALTERNATIVE FINANCING SOURCES.
4. BORROWING BASE DEFICIENCY. From the date of this Agreement through
February 15, 1996, Borrower shall not permit or cause the Borrowing Base
Deficiency to increase. Anything to the contrary herein, notwithstanding, by
February 15, 1996, the Borrowing Base deficiency shall be reduced to $0 and
shall remain at $0 for all times thereafter.
5. CONTROLLED DISBURSEMENT. Borrower's controlled disbursement account at
NBD shall be closed immediately.
6. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority
lien and security interest in and to all of their respective personal property
(except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its
personal property, including such equipment referenced in the UCC-3 partial
releases.
7. AMENDMENTS TO CREDIT AGREEMENT.
(a) AMENDMENT TO REVOLVING CREDIT FACILITY.
6
<PAGE> 126
(i) The definition "Acceptable Accounts Receivable" in
Article 1 of the Credit Agreement is hereby amended in its entirety to
read as follows:
"'Acceptable Accounts Receivable' shall mean those trade accounts
receivable of the Borrower, valued at the face amount thereof, other
than those accounts receivable that are (a) more than 120 days past
due; (b) due from any Affiliate of the Borrower, except that for
periods of during which an agreement pursuant to Section 7.1 (j) hereof
is in effect, accounts receivable from Motor Wheel Corporation shall
not be excluded by reason of this subsection (b), (c) subject to any
known offset, (d) related to goods or services sold which have been
rejected or with respect to which the amount is in dispute, (e)
payable by any person located outside the United States or Canada, or
(f) reasonably deemed by the Bank to be otherwise unacceptable.
Notwithstanding the foregoing, the Bank may, upon request by the
Borrower and at the Bank's sole discretion, allow inclusion of
accounts receivable that are more than 120 days past due as Acceptable
Accounts Receivable (the "Extended Accounts"). In no event shall
borrowing availability based on the Extended Accounts include accounts
receivable over 180 days past due, or exceed the aggregate amount of
Four Hundred Thousand Dollars ($400,000) from the date hereof through
April 30, 1996, provided that such $400,000 cap show shall be reduced
by $25,000 each month beginning May 1, 1996 and on the first day of
each month thereafter.
(ii) Article II of the Credit Agreement is hereby amended in its
entirety to read as follows:
"ARTICLE II
Working Capital Revolving Credit Facility
2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank may, in its sole and unfettered discretion, lend to the
Borrower from time to time through June 30, 1996, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may
7
<PAGE> 127
be requested from time to time by the Borrower in a manner specified
by the Bank, provided that the aggregate principal amount outstanding
at any time pursuant to the provisions of this Section 2.1 shall not
exceed the lesser of Nine Million Five Hundred Thousand Dollars
($9,500,000.00) (the "Working Capital Revolving Credit") or the
Borrowing Base. In the event the principal amount outstanding at any
time shall exceed said amounts, the Borrower shall forthwith pay to
the Bank an amount sufficient to eliminate such excess. Subject to
the terms and conditions of this Agreement, the Borrower may borrow,
prepay pursuant to Section 2.3, and reborrow under this Section 2.1.
Upon the execution of this Agreement, the Borrower shall execute and
deliver to the Bank a revolving credit demand note in the form of
Exhibit 1(a) attached hereto (the "Fourteenth Amended and Restated
Working Capital Revolving Credit Note"), the terms of which are
incorporated herein by reference. All commitments by the Bank on
behalf of the Borrower by way of instrument certification, letter of
credit or similar device shall be considered loans pursuant to this
Section 2.1.
2.2 Use of Proceeds. The proceeds of the loans pursuant to
this Article II shall be used to refinance existing revolving credit
debt and to assist with the working capital needs of the Borrower.
2.3 Payment of Working Capital Revolving Credit Note;
Prepayment. Except as payment of part or all of the principal amount
of the loans outstanding pursuant to this Article II is sooner
required to be made under Section 2.1 or Article VIII hereof, the full
principal amount of the loans outstanding under this Article II and
all accrued interest thereon shall be paid by Borrower on or before
June 30, 1996. The Borrower may prepay all or any part of the
indebtedness under Section 2.1 at any time without penalty provided
any prepayment shall be in a multiple of One Thousand Dollars
($1,000.00).
2.4 Interest. Except as provided in Article VIII hereof, the
Working Capital Revolving Credit Note shall bear interest at the
annual rate of four percent (4%) over the Prime Rate from and after
January 1, 1996. Interest shall be computed daily on the basis of a
Three Hundred Sixty (360) day year and shall be billed to the Borrower
monthly based upon the principal balance outstanding and
8
<PAGE> 128
the actual number of days in the preceding month. Interest shall be
due and payable no later than the first day of each month.
2.5 Availability Fee. The Borrower agrees to pay to the
Bank an Availability Fee at a rate equal to three-eighths of one
percent (3/8%) per annum on the average daily unused portion of
the Working Capital Revolving Credit for the period from the date of
this Agreement to and including June 30, 1996, and thereafter until
full payment of the Eleventh Amended and Restated Working Capital
Revolving Credit Note. Accrued availability fees shall be payable
quarterly in arrears on the first day of each January, April, July and
October commencing on the first such day after the date of this
Agreement.
2.6 Facility Fee. The Borrower agrees to pay to the Bank a
facility fee at a rate equal to one-eighth of one percent (1/8%) per
annum on the Working Capital Revolving Credit, whether used or
unused, for the period from the date of this Agreement to and
including June 30, 1996, and thereafter until payment of the
Fourteenth Amended and Restated Working Capital Revolving Credit Note.
The facility fee shall be payable quarterly in arrears on the first
day of each January, April, July and October commencing on the first
such day after the date of this Agreement.
(b) AMENDMENTS TO TERM LOAN.
(iii) Section 3.3 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"3.3 Payment of Term Note; Prepayment. Except as payment of part
or all of the Term Note is sooner required under Section 3.1 or
Article VIII, the principal of the Term Note shall be paid in monthly
installments of $40,000 each on the first day of each month commencing
February 1, 1996, and continuing thereafter up to and including
June 1, 1996 and a final payment on June 30, 1996 consisting of the
entire remaining outstanding principal balance of, all accrued
interest on, and all other sums due under the Term Note. The Borrower
may prepay at any time all or any portion of the Term Note without
premium or penalty provided that any prepayments shall be applied to
principal last maturing."
9
<PAGE> 129
(iv) Section 3.4 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"3.4. Interest. Except as provided in Article 8 hereof, the
Term Note shall bear interest at the annual rate of the prime rate
plus 4% from and after January 1, 1996. Interest shall be computed
daily on the basis of a three hundred sixty (360) day year and shall
be billed to the Borrower monthly based upon the principal balance
outstanding in the actual number of days elapsed. Interest shall be
billed to the Borrower monthly beginning February 1, 1996 and shall be
due and payable as indicated by such billing. Billings may estimate
a rate and balance for periods between the billing date and the end of
the period which is covered by such billing and if actual rates and
balances vary from the estimate, actual charges shall be adjusted and
reflected in subsequent billings.
8. NEGATIVE COVENANTS. During the Forbearance Period, without the prior
written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or allow to
exist any new, additional or expanded lien upon any property or assets now
owned or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer to
exist, have outstanding or in any manner become liable in respect of any
indebtedness for money other than the Obligations or indebtedness incurred in
the ordinary course of the business of the Borrower for necessary materials and
services.
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition of
capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing for
the leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or suffer to
exist, any transaction or arrangement with any Affiliate, except on terms which
are no less favorable to the Borrower than could be obtained from persons who
are not Affiliates in arm's length transactions.
9. NO OVERDRAFTS. Borrower and Riviera agree that they will not create
any overdrafts in any accounts at NBD. Furthermore, Borrower and Riviera
acknowledge and agree
10
<PAGE> 130
that NBD shall not, under any circumstances, be required to honor any checks or
other items presented to NBD for payment for which there are insufficient
available funds in Borrower's account at NBD for payment and NBD may return any
such items so presented. In the event that such items are not returned, this
shall not create any right or expectation that such overdrafts will be
tolerated or permitted in the future.
10. TAXES. Borrower and Riviera represent that they are paying all taxes
on a timely basis except as set forth on Exhibit 11 attached hereto.
11. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in any of the Loan Documents (including a
worsening of any of the Existing Defaults for any reason other than the impact
of the restructuring transaction between the Borrower and Heller Financial
Leasing, Inc. and Banc One Leasing Corporation entered into in April of 1994);
(b) if any representation or warranty made by Borrower or Riviera in
this Agreement or in connection with the negotiation hereof is untrue as of the
date made or hereafter becomes untrue;
(c) the Borrower and/or Riviera shall at any time fail to observe,
perform or comply with any Dominion of Funds Agreement with NBD;
(d) the Borrowing Base Deficiency increases prior to February 15,
1996, or after February 15, 1996, there shall exist at any time a Borrowing Base
Deficiency;
(e) Any lender, supplier, creditor or lessor shall (i) accelerate any
obligations of the Borrower or Riviera, due to a default by Borrower or Riviera
under any agreement with any creditor in excess of $25,000 to such creditor or
shall otherwise take any action of any kind or nature to enforce or begin
enforcement of its rights or remedies against Borrower or Riviera by reason of
such default, or (ii) receive from Borrower or Riviera any prepayments of
obligations, any extraordinary payments of outstanding indebtedness or fees, or
fees or interest above the level paid to such creditor by Borrower or Riviera as
of January 1, 1994;
(f) Any creditor, including, but not limited to, any governmental
taxing authority, shall cause a lien to be filed on any of the Collateral (other
than a lien for taxes not yet due and payable); and
11
<PAGE> 131
12. RELEASE. As of the date hereof, the Borrower and Riviera represent and
warrant that they are aware of, and possess, no claims or causes of action
against the Bank. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Borrower and
Riviera, individually, jointly and severally, and on behalf of each of their
respective officers, directors, employees, agents, executors, successors and
assigns, hereby release NBD, its officers, directors, employees, agents,
attorneys, affiliates, subsidiaries, successors and assigns from any liability,
claim, right or cause of action which now exists or hereafter arises, whether
known or unknown, arising from events occurring prior to and in any way related
to facts in existence as of the date hereof. By way of example and not
limitation, the foregoing includes any claims in any way related to actions
taken or omitted to be taken by NBD under the Loan Documents, or this Agreement
and the business relationship with NBD.
13. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment called
for by the Loan Documents, this Agreement (or any agreement referred to or
incorporated herein) or any other present or future agreements between NBD or
any of its affiliates and the Borrower and/or Riviera are not paid when and as
called for under the terms of such agreement, then NBD may debit any of such
accounts of the Borrower and/or Riviera at NBD or any of its affiliates for such
amount. In the event of such a debit, NBD or any of its affiliates will use its
best efforts to notify the Borrower and/or Riviera of such debit within two (2)
business days. The fact that NBD or any of its affiliates had debited any of
the accounts of the Borrower and/or Riviera at NBD or any of its affiliates
shall in no way whatsoever waive or diminish any default for failure to make
such payments when and as due.
14. SETOFF. Upon the occurrence of a default, NBD is hereby authorized at
any time and from time to time, without notice to the Borrower or Riviera (any
such notice being expressly waived), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NBD to or for the credit or the account
of the Borrower and/or Riviera against any and all of the Obligations, now or
hereafter existing, including those under this Agreement or the Loan Documents
or any of the Notes or any other agreement or instrument, irrespective of
whether or not NBD shall have made any demand under this Agreement or any Note
or otherwise. The Bank agrees to promptly notify the Borrower and/or Riviera
after any such setoff and application provided that the failure to give such
notice shall not affect the validity of such setoff and application and shall
not create any claims or liabilities against NBD. The rights of NBD under this
section shall not require maturity of any indebtedness and are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which NBD may have.
15. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree that
NBD, through its employees or authorized agents, shall be permitted to send a
letter to and otherwise contact each of its respective account debtors to verify
account receivable balances. In addition, NBD, an accountant or accounting firm
retained by NBD and other advisors, representatives or
12
<PAGE> 132
agents of NBD shall be permitted full and complete access to the Borrower's and
Riviera's facilities and books and records to conduct audits as often as NBD
reasonably desires. The reasonable cost of such audits ("Audit Fees"), whether
conducted by NBD (in which case NBD shall be entitled to make a reasonable
charge, plus out-of-pocket costs and expenses), an accountant or accounting firm
retained by NBD or other advisors, representatives or agents of NBD (including,
but not limited to, Curtis Enterprises Inc.) shall be part of the Obligations
and shall be secured by all of the Collateral.
16. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and Riviera,
jointly and severally, shall be responsible for the payment of all fees and
out-of-pocket disbursements incurred by NBD, including fees of counsel and court
costs, in any way arising from or in connection with this Agreement, any of the
Collateral, any of the Loan Documents, any of the Obligations or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including, without limitation, (a)
Audit Fees; (b) all fees and expenses (including recording fees and insurance
policy fees) of NBD and counsel for NBD for the preparation, examination,
approval, negotiation, execution and delivery of, or the closing of any of the
transactions contemplated by, this Agreement or any of the Loan Documents; (c)
all fees and out-of-pocket disbursements incurred by NBD, including attorneys'
fees and accountants' fees, in any way arising from or in connection with any
action taken by NBD to monitor, advise, administer, enforce or collect any of
the Obligations (including under this Agreement and the Loan Documents) or any
other obligations of the Borrower or Riviera, whether joint, joint and several,
or several, under this Agreement, any of the Loan Documents or any other
existing or future document or agreement, or arising from or relating to the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including any actions to
lift the automatic stay or to otherwise in any way monitor or participate in any
bankruptcy, reorganization or insolvency proceeding of the Borrower or Riviera;
(d) all expenses and fees (including attorneys' fees) incurred in relation to,
in connection with, in defense of and/or in prosecution of any litigation
instituted by any one or more of the Borrower, Riviera, Holding, Rieth, NBD or
any third party against or involving NBD arising from, relating to, or in
connection with any of the Obligations or any Guarantor's obligations, this
Agreement, any of the Collateral, any of the Loan Documents or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including any so-called "lender
liability" action, any claim and delivery or other action for possession of, or
foreclosure on, any of the Collateral, post-judgment enforcement of any rights
or remedies including enforcement of any judgments, and prosecution of any
appeals (whether discretionary or as of right and whether in connection with
pre-judgment or post-judgment matters); (e) all costs, expenses and fees
incurred by NBD or its agents in connection with appraisals and reappraisals of
all or any of the Collateral (and the Borrower and Riviera shall fully cooperate
with such appraisers and make their property available for appraisal in
connection with as many appraisals as NBD may request); (f) all costs, expenses
and fees incurred by NBD and/or its counsel in connection with consultants,
expert witnesses or other professionals retained by NBD and/or its counsel in
order to assist, advise
13
<PAGE> 133
and/or give testimony with respect to any matter relating to the Collateral, the
Loan Documents, or the business relationship between NBD, on the one hand, and
any one or more of the Borrower, Riviera, Holding or Rieth, on the other hand
(and the Borrower and Riviera shall fully cooperate with such consultant, expert
witness or other professional and shall make their premises, books and records,
accounting systems, computer systems and other media for the recordation of
information available to such persons); and (g) all costs, expenses and fees
incurred by NBD in connection with any environmental investigations including
but not limited to Phase I, Phase II and Phase III environmental audits (and the
Borrower and Riviera agree that NBD and/or its agents may enter on their
premises at any time to conduct such environmental investigations). Nothing
contained in this paragraph shall, or is intended to, expand the liability of
Rieth and Holding beyond that contained in the Limited Guaranty Documents.
All of the foregoing costs, expenses and reimbursement obligations,
set forth in this section (the "Costs") shall be part of the Obligations, and
shall be secured by all of the Collateral. The costs shall be paid within 10
days of written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim, action or
cause of action, damage, liability, loss, cost, debt, expense, obligation, tax,
assessment, charge, lawsuit, contract, agreement, undertaking or deficiency, of
any kind or nature, whether known or unknown, fixed, actual, accrued or
contingent, liquidated or unliquidated (including interest, penalties,
attorneys' fees and other costs and expenses incident to proceedings or
investigations relating to any of the foregoing or the defense of any of the
foregoing), whether or not litigation has commenced.
17. OTHER DOCUMENTS. The Borrower and Riviera agree to execute and deliver
any and all documents reasonably deemed necessary or appropriate by NBD or
counsel to NBD to carry out the intent of and/or to implement the Loan Documents
or this Agreement, including, but not limited to, such documentation necessary
to grant NBD a lien, mortgage and/or security interest in any assets of the
Borrower and Riviera presently not subject to a lien, mortgage or encumbrance in
favor of NBD to secure the Obligations.
18. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of this
Agreement shall be considered an event of default, an event of acceleration and
a default under each document and agreement comprising the Loan Documents and an
event of default, an event of acceleration or a default under any document or
agreement comprising the Loan Documents, (other than the Existing Defaults),
shall be considered an Event of Default under the terms of this Agreement, and
all of the other Loan Documents. Upon the occurrence of an Event of Default
under this Agreement or any event of default, event of acceleration or default
under any document or agreement comprising the Loan Documents, or any document
executed in connection herewith, or referenced herein, and without prior notice
of or an opportunity to cure such event of default, event of acceleration or
default, except as otherwise provided herein, (a) NBD shall have the right to
exercise any rights or remedies provided in this Agreement, the Loan
14
<PAGE> 134
Documents, or applicable law, (including, without limitation, the right to
offset any accounts of the Borrower or Riviera with NBD), (b) NBD may deem the
Forbearance Period to be expired, and (c) upon NBD's election, but without
further notice, all of the Obligations shall be immediately due and payable. IN
ANY EVENT, FROM AND AFTER THE CLOSE OF BUSINESS ON JUNE 30, 1996, NBD MAY
IMMEDIATELY TAKE ACTION TO ENFORCE ALL OF ITS RIGHTS AND REMEDIES UNDER THE LOAN
DOCUMENTS, THIS AGREEMENT OR APPLICABLE LAW, INCLUDING, BUT NOT LIMITED TO,
COLLECTION OF THE BORROWER'S OBLIGATIONS.
19. DOCUMENTS CONTINUE. Except as expressly modified and amended by the
terms of this Agreement, all of the terms and conditions of the Loan Documents
remain in full force and effect and are hereby ratified, confirmed and
approved. If there is an express conflict between the terms of this Agreement
and the terms of the Loan Documents, the terms of this Agreement shall govern
and control.
20. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a conditional
and limited forbearance until June 30, 1996, only, upon the terms and conditions
set forth in this Agreement. Notwithstanding anything to the contrary in this
Agreement, all of NBD's rights and remedies against the Borrower, Riviera, third
parties, and/or the Collateral and/or any rights of NBD under the Limited
Guaranty Documents are expressly reserved, including, without limitation, all
rights and remedies resulting from, or arising in connection with, the Existing
Defaults. Likewise, nothing herein shall be deemed to constitute a waiver of
any defaults existing as of the date hereof, a further worsening of the Existing
Defaults or new events of default, events of acceleration or defaults or shall
in any way prejudice the rights or remedies of NBD under the Loan Documents or
applicable law. Further, NBD shall have the right to waive any conditions set
forth in this Agreement and/or the Loan Documents, in its sole and unfettered
discretion. And any such waiver shall not prejudice, waive or reduce any other
right or remedy which NBD may have against the Borrower or Riviera, or any
rights of NBD under the Limited Guaranty Documents. However, the other parties
to this Agreement and the Loan Documents, understand that no waiver by NBD of
the rights or any condition of this Agreement and/or the Loan Documents shall be
effective unless the same shall be contained in writing signed by an authorized
agent of NBD.
21. CREDIT INQUIRIES. In the event customers, buyers, potential financing
sources or other parties make inquiry of NBD as to the current lending
relationship between NBD, on the one hand, and the Borrower or Riviera, on the
other hand, the parties agree that NBD may refer such inquiries to the Borrower
or Riviera.
22. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
15
<PAGE> 135
23. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and may be modified or amended only by
a writing signed by the party to be charged.
(b) This Agreement is governed by the internal laws of the State of
Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but together they shall constitute one and the same
instrument, and facsimile copies of signatures shall be treated as original
signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and Riviera and
their respective successors and assigns and shall inure to the benefit of NBD
and its successors and assigns.
(e) If any provision of this Agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such offending
provision shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate any
other provision of this Agreement.
(f) Defined terms used in this Agreement without definition shall have
the meanings given to them under the Credit Agreement.
24. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or inducements
which have been made to any signatory hereto to cause such signatory to enter
into this Agreement other than those which are set forth in this Agreement.
25. WAIVER OF JURY TRIAL AND ACKNOWLEDGEMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
16
<PAGE> 136
EACH OF THE BORROWER AND RIVIERA ACKNOWLEDGES THAT (1) IT HAS BEEN
GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE
AND, AFTER CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY AND
WITHOUT DURESS, COERCION, 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, (3) IT HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT AND IS NOT RELYING ON THE OPINIONS OR ADVICE OF NBD
OR ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS AGREEMENT.
26. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
NBD BANK
By: Timothy G. Skillman
---------------------------
Its: Vice President
-----------------------
[Signatures continue on following pages]
17
<PAGE> 137
[Signatures continued from previous page]
RIVIERA DIE & TOOL, INC.
By: Peter C. Canepa
------------------------------
Its: C.F.O.
----------------------------
Subscribed and sworn to before me this ____ day of February, 1996.
Carol S. Simonson
- ---------------------------
Notary Public, Kent County, Michigan
My Commission Expires Oct. 5, 2000
RIVIERA TOOL COMPANY
By: Peter C. Canepa
------------------------------
Its: C.F.O.
----------------------------
Subscribed and sworn to before me this 9th day of February, 1996.
Carol S. Simonson
- ---------------------------
Notary Public, Kent County, Michigan
My Commission Expires Oct. 5, 2000
18
<PAGE> 138
FIFTEENTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, formerly known as NBD Bank, N.A., successor by merger to the
interests of NBD Grand Rapids, N.A. ("NBD" or the "Bank"), Riviera Die & Tool,
Inc. (formerly known as R.D.T., Inc.), a Michigan Corporation (the "Borrower"),
and Riviera Tool Company, a Michigan Corporation ("Riviera") enter into this
Fourteenth Amendment to Credit Agreement and Restated Forbearance Agreement (the
"Agreement") effective as of the 1st day of April, 1996.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated April
20, 1988, as amended by a First Amendment to Credit Agreement dated August 31,
1988, a Second Amendment to Credit Agreement dated January 30, 1989, a Third
Amendment to Credit Agreement dated January 30, 1990, a Fourth Amendment to
Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement dated
July 31, 1992, a Sixth Amendment to Credit Agreement dated January 31, 1993, a
Seventh Amendment to Credit Agreement dated March 31, 1993, an Eighth Amendment
to Credit Agreement dated July 26, 1993, a Ninth Amendment to Credit Agreement
dated March 4, 1994, a Forbearance Agreement dated April 14, 1994 (the "Original
Forbearance Agreement"), a Tenth Amendment to Credit Agreement and Restated
Forbearance Agreement dated May 5, 1994, an Eleventh Amendment to Credit
Agreement and Restated Forbearance Agreement dated as of December 1, 1994, and a
Twelfth Amendment to Credit Agreement and Restated Forbearance Agreement dated
as of May 1, 1995, a Thirteenth Amendment to Credit Agreement and Restated
Forbearance Agreement dated as of September 1, 1995, and a Fourteenth Amendment
to Credit Agreement and Restated Forbearance Agreement effective as of January
1, 1996 (collectively, the "Credit Agreement") by which the Bank has made
certain credit facilities available to the Borrower upon the terms and subject
to the conditions set forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed two (2)
promissory notes: (i) the Fourteenth Amended and Restated Working Capital
Revolving Credit Note in the original principal amount of $9,000,000.00 dated as
of January 1, 1996 (the "Working Capital Revolving Credit Note"); and (ii) a
Fifth Amended and Restated Term Note in the original principal amount of
$816,962.00 dated as of January 1, 1996 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and
delivered to the Bank a Guaranty dated April 20, 1988, pursuant to which, among
other things, Riviera guarantied all of the Borrower's obligations (including
the Obligations as defined below) to the Bank, whether then existing or
thereafter arising or created (the "Riviera Guaranty").
D. In addition, Kenneth Rieth ("Rieth") and Riviera Holding Company
("Holding") (collectively, Rieth and Holding may be hereinafter referred to as
the "Limited Guarantors") each
<PAGE> 139
executed and delivered Guaranties and Continuing Pledge Agreements (the "Limited
Guaranty Documents") dated August 4, 1992 and July 26, 1993.
E. As of March 25, 1996, there was (i) $9,688,762.66 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note and (ii) $576,962.00 in principal indebtedness owing by the Borrower
pursuant to the Term Note. These sums, together with accrued but unpaid
interest, costs and expenses (including attorneys' fees), as well as all other
present and future obligations of the Borrower to the Bank, including, but not
limited to, obligations arising under or in connection with the Loan Documents
(as defined below) or any other document executed in connection therewith or
subsequent thereto by the Borrower in favor of the Bank are hereinafter referred
to as the "Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a
Security Agreement (Inventory) and a Security Agreement (Equipment), as amended
by a First Amendment to each of the above-described Security Agreements dated
January 30, 1989 (the "Borrower Security Agreements") wherein Borrower granted
to NBD a valid, perfected, indefeasible and enforceable first priority lien and
security interest in favor of the Bank in all of the Borrower's present and
future personal property, including, but not limited to, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof with the exception of certain property described
in Section 5.8 of the Credit Agreement. For convenience, all of the collateral
referred to in the Borrower Security Agreements, together with all other
collateral described in and/or granted in connection with any of the Loan
Documents (as hereinafter defined), together with all collateral heretofore,
simultaneously herewith or hereafter granted to the Bank by the Borrower to
secure any of the Borrower's or any other parties' present or future
obligations to the Bank, is collectively referred to as the "Borrower
Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a Security
Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment) (the "Riviera
Security Agreements") wherein Riviera granted to NBD a valid, perfected,
indefeasible and enforceable first priority lien and security interest in favor
of the Bank in all of Riviera's present and future personal property, including,
but not limited to, accounts, chattel paper, general intangibles, documents,
instruments, inventory, equipment, fixtures and all other tangible and
intangible personal property and all proceeds and products thereof. For
convenience, all of the collateral referred to in the Riviera Security
Agreements, together with all other collateral described in and/or granted in
connection with any of the Loan Documents (as hereinafter defined), together
with all collateral heretofore, simultaneously herewith or hereafter granted to
the Bank by Riviera to secure any of Riviera's or any other parties' present or
future obligations to the Bank, is collectively referred to as the "Riviera
Collateral".
2
<PAGE> 140
H. The Borrower and Riviera acknowledge and agree that (i) the
Obligations are due the Bank without setoff, recoupment, defense or
counterclaim, in law or equity, of any nature or kind; (ii) the Obligations are
secured by valid, perfected, indefeasible, enforceable first priority liens and
security interests (except as permitted by Section 5.8 of the Credit Agreement)
in favor of the Bank in, among other things, (a) all of the Borrower's present
and future personal property, including, without limitation, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof, and (b) all of Riviera's present and future
personal property, including, without limitation, accounts, chattel paper,
general intangibles, documents, instruments, inventory, equipment, fixtures and
all other tangible and intangible personal property and all proceeds and
products thereof, and (c) the collateral described in the Limited Guaranty
Documents. For convenience, the Credit Agreement, the Working Capital Revolving
Credit Note, the Term Note (collectively, the "Notes"), the Borrower Security
Agreements, the Riviera Guaranty, the Riviera Security Agreements, the Limited
Guaranty Documents, the Original Forbearance Agreement, this Agreement and any
other document executed therewith or subsequent thereto by the Borrower in favor
of the Bank are hereinafter referred to as the "Loan Documents". For
convenience, all of the Borrower Collateral, the Riviera Collateral and the
collateral referenced in the Limited Guaranty Documents shall hereinafter be
referred to as the "Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations) owed
to NBD, including, but not limited to the Collateral, shall constitute and serve
as collateral for any and all of the obligations and duties of the Borrower and
Riviera to NBD (including the Obligations), whether now existing or hereafter
arising.
K. Borrower and Riviera each acknowledge that prior to November 1,
1995, there were defaults under the Loan Documents as follows (collectively, the
"Existing Defaults"):
(1) The Working Capital of Riviera and the Borrower,
determined on a consolidated basis, is less than $200,000 (minus
$3,083,000 as of October 31, 1995.
(2) As of December 28, 1995, the aggregate principal amount
outstanding under the Working Capital Revolving Credit,
exceeded the Borrowing Base by ($222,000) (the "Borrowing Base
Deficiency").
3
<PAGE> 141
Borrower and Riviera represent and warrant that, to the best of their knowledge,
after due inquiry and investigation, they are unaware of any other Events of
Default (as defined in the Credit Agreement) or defaults under any of the Loan
Documents or this Agreement or of any event that, with the passage of time,
notice, or both, would become an Event of Default or a default under the Loan
Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the Loan
Documents and applicable law.
M. Borrower and Riviera further acknowledge and agree that the actions
taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. Borrower and Riviera have requested that NBD continue to forbear from
enforcing its rights and remedies under the Loan Documents and applicable law
for an additional period through June 30, 1996, to afford such parties an
opportunity to consummate a sale of Borrower or its assets or refinancing from
one or more third parties which will result in payment of the Obligations in
full. Borrower has represented to NBD that it has entered into a Letter of
Intent with EWI, Inc. dated June 22, 1995 (which continues in full force and
effect as of the date hereof) to sell substantially all of the assets of
Borrower and is continuing negotiations for the sale of Borrower. Borrower has
further represented that it believes these efforts will result in payment in
full of the Obligations as well as the obligations of New Leap Corporation, Leap
Technologies, Inc. and Riviera Plastic Products Company to NBD.
O. Borrower and Riviera have additionally requested that the Bank extend
the November 30, 1995 maturity date on the Working Capital Revolving Credit Note
and the Term Note until June 30, 1996.
P. The Borrower and Riviera acknowledge and agree that (i) NBD has fully
performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond June 30, 1996. NBD HAS INFORMED BORROWER AND RIVIERA THAT IT DOES NOT
INTEND TO EXTEND THE FORBEARANCE PERIOD BEYOND JUNE 30, 1996, AND THAT THEY
SHOULD PAY NBD IN FULL ON OR BEFORE THAT DATE. NBD HAS ADVISED THE PARTIES THAT
FROM AND AFTER JUNE 30, 1996, NBD MAY TAKE ANY AND ALL STEPS TO SATISFY THE
OBLIGATIONS INCLUDING, BUT NOT LIMITED TO, ENFORCEMENT PROCEEDINGS, CESSATION OF
ADVANCES OR REDUCTION OF ADVANCE RATES UNDER THE BORROWING
4
<PAGE> 142
BASE, REDUCTION IN THE CAP ON THE WORKING CAPITAL REVOLVING CREDIT, INCREASED
INTEREST RATES AND FEES OR SUCH OTHER ACTIONS AS NBD MAY, IN ITS SOLE
DISCRETION, DEEM APPROPRIATE,
NOW, THEREFORE, based on the foregoing Recitals (which are incorporated in
this Agreement as and shall constitute representations, warranties and covenants
of the respective parties to this Agreement, as the case may be), and for other
good and valuable consideration, the parties hereto agree as follows:
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
through the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) June 30, 1996 (the
"Forbearance Period"):
(a) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Fifteenth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed copy of the Reaffirmation and Release Agreement in
substantially the form attached hereto as Exhibit 1(c);
(c) Simultaneously with the execution of this Agreement, receipt by
NBD of a fully-executed copy of this Agreement acknowledged by counsel to the
Borrower and Riviera;
(d) Simultaneously with the execution of this Agreement, Borrower
shall make all payments currently due under the Loan Documents.
(e) NBD receives such other additional documentation necessary to
carry out the intent and purposes of this Agreement.
2. ALL OBLIGATIONS DUE. ALL OF THE OBLIGATIONS INCLUDING, WITHOUT
LIMITATION, OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE WORKING CAPITAL
REVOLVING CREDIT NOTE, THE TERM NOTE AND THIS AGREEMENT SHALL BE DUE AND PAYABLE
ON THE EARLIER OF (i) A DEFAULT, AN EVENT OF DEFAULT OR BREACH OF THE TERMS AND
CONDITIONS OF THIS AGREEMENT, OR (ii) JUNE 30, 1996.
3. NO FURTHER FORBEARANCE IMPLIED. THE BORROWER AND RIVIERA ACKNOWLEDGE
THAT (a) NBD DOES NOT INTEND, NOR DOES NBD HAVE ANY
5
<PAGE> 143
OBLIGATION, TO EXTEND LOANS, ADVANCES OR OTHER FINANCIAL ACCOMMODATIONS TO THE
PARTIES HERETO BEYOND JUNE 30, 1996, (b) NBD DOES NOT INTEND TO FORBEAR FROM
ENFORCING ITS RIGHTS AND REMEDIES AFTER JUNE 30, 1996, AND NOTHING CONTAINED
HEREIN OR OTHERWISE IS INTENDED TO BE A PROMISE OR AGREEMENT TO MAKE ADVANCES
UNDER THE WORKING CAPITAL REVOLVING CREDIT NOTE AFTER JUNE 30, 1996 OR TO EXTEND
THE TERMS OF THIS AGREEMENT BEYOND JUNE 30, 1996, (c) ALL OF THE OBLIGATIONS ARE
DUE, ABSENT AN EARLIER DEFAULT UNDER THE LOAN DOCUMENTS, ON OR BEFORE JUNE 30,
1996, AND (d) NBD INTENDS TO TAKE ANY STEPS NECESSARY TO ASSURE SATISFACTION OF
THE OBLIGATIONS IN FULL BY JUNE 30, 1995 OR AS SOON THEREAFTER AS POSSIBLE. THE
BORROWER, RIVIERA, RIETH AND HOLDING HAVE BEEN ADVISED THAT THEY SHOULD PURSUE
ALTERNATIVE FINANCING SOURCES.
4. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority lien
and security interest in and to all of their respective personal property
(except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its personal
property, including such equipment referenced in the UCC-3 partial releases.
5. AMENDMENTS TO CREDIT AGREEMENT.
(i) Section 2.1 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank may, in its sole and unfettered discretion, lend to the
Borrower from time to time through June 30, 1996, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified by
the Bank, provided that the aggregate principal amount outstanding at
any time pursuant to the provisions of this Section 2.1 shall not
exceed the lesser of (a) through and including May 31, 1996, Ten
Million Five Hundred Thousand Dollars ($10,500,000.00) and (b)
commencing June 1, 1996 and continuing thereafter, Nine Million
Dollars ($9,000,000.00) (the "Working Capital Revolving Credit") or
the Borrowing Base. In the event the principal amount outstanding at
any time shall exceed said amounts, the Borrower shall forthwith pay
to the Bank an amount
6
<PAGE> 144
sufficient to eliminate such excess. Subject to the terms and
conditions of this Agreement, the Borrower may borrow, prepay
pursuant to Section 2.3, and reborrow under this Section 2.1. Upon the
execution of this Agreement, the Borrower shall execute and deliver to
the Bank a revolving credit demand note in the form of Exhibit 1(a)
attached hereto (the "Fifteenth Amended and Restated Working Capital
Revolving Credit Note"), the terms of which are incorporated herein by
reference. All commitments by the Bank on behalf of the Borrower by
way of instrument certification, letter of credit or similar device
shall be considered loans pursuant to this Section 2.1."
6. NEGATIVE COVENANTS. During the Forbearance Period, without the prior
written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or allow to
exist any new, additional or expanded lien upon any property or assets now owned
or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer to
exist, have outstanding or in any manner become liable in respect of any
indebtedness for money other than the Obligations or indebtedness incurred in
the ordinary course of the business of the Borrower for necessary materials and
services.
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition of
capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing for
the leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or suffer to
exist, any transaction or arrangement with any Affiliate, except on terms which
are no less favorable to the Borrower than could be obtained from persons who
are not Affiliates in arm's length transactions.
7. NO OVERDRAFTS. Borrower and Riviera agree that they will not create
any overdrafts in any accounts at NBD. Furthermore, Borrower and Riviera
acknowledge and agree that NBD shall not, under any circumstances, be required
to honor any checks or other items presented to NBD for payment for which there
are insufficient available funds in Borrower's account at NBD for payment and
NBD may return any such items so presented. In the event that
7
<PAGE> 145
such items are not returned, this shall not create any right or expectation
that such overdrafts will be tolerated or permitted in the future.
8. TAXES. Borrower and Riviera represent that they are paying all
taxes on a timely basis except as set forth on Exhibit 9 attached hereto.
9. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in any of the Loan Documents (including a
worsening of any of the Existing Defaults for any reason other than the impact
of the restructuring transaction between the Borrower and Heller Financial
Leasing, Inc. and Banc One Leasing Corporation entered into in April of 1994);
(b) if any representation or warranty made by Borrower or Riviera
in this Agreement or in connection with the negotiation hereof is untrue as of
the date made or hereafter becomes untrue;
(c) the Borrower and/or Riviera shall at any time fail to observe,
perform or comply with any Dominion of Funds Agreement with NBD;
(d) there shall exist at any time a Borrowing Base Deficiency;
(e) any lender, supplier, creditor or lessor shall (i) accelerate any
obligations of the Borrower or Riviera, due to a default by Borrower or Riviera
under any agreement with any creditor in excess of $25,000 to such creditor or
shall otherwise take any action of any kind or nature to enforce or begin
enforcement of its rights or remedies against Borrower or Riviera by reason of
such default, or (ii) receive from Borrower or Riviera any prepayments of
obligations, any extraordinary payments of outstanding indebtedness or fees, or
fees or interest above the level paid to such creditor by Borrower or Riviera
as of January 1, 1994;
(f) any creditor, including, but not limited to, any governmental
taxing authority, shall cause a lien to be filed on any of the Collateral
(other than a lien for taxes not yet due and payable); and
10. RELEASE. As of the date hereof, the Borrower and Riviera represent
and warrant that they are aware of, and possess, no claims or causes of action
against the Bank. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Borrower and
Riviera, individually, jointly and severally, and on behalf of each of their
respective officers, directors, employees, agents, executors, successors and
8
<PAGE> 146
assigns, hereby release NBD, its officers, directors, employees, agents,
attorneys, affiliates, subsidiaries, successors and assigns from any liability,
claim, right or cause of action which now exists or hereafter arises, whether
known or unknown, arising from events occurring prior to and in any way related
to facts in existence as of the date hereof. By way of example and not
limitation, the foregoing includes any claims in any way related to actions
taken or omitted to be taken by NBD under the Loan Documents, or this Agreement
and the business relationship with NBD.
11. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment
called for by the Loan Documents, this Agreement (or any agreement referred to
or incorporated herein) or any other present or future agreements between NBD
or any of its affiliates and the Borrower and/or Riviera are not paid when and
as called for under the terms of such agreement, then NBD may debit any of
such accounts of the Borrower and/or Riviera at NBD or any of its affiliates
for such amount. In the event of such a debit, NBD or any of its affiliates
will use its best efforts to notify the Borrower and/or Riviera of such debit
within two (2) business days. The fact that NBD or any of its affiliates had
debited any of the accounts of the Borrower and/or Riviera at NBD or any of
its affiliates shall in no way whatsoever waive or diminish any default for
failure to make such payments when and as due.
12. SETOFF. Upon the occurrence of a default, NBD is hereby authorized at
any time and from time to time, without notice to the Borrower or Riviera (any
such notice being expressly waived), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NBD to or for the credit or the account
of the Borrower and/or Riviera against any and all of the Obligations, now or
hereafter existing, including those under this Agreement or the Loan Documents
or any of the Notes or any other agreement or instrument, irrespective of
whether or not NBD shall have made any demand under this Agreement or any Note
or otherwise. The Bank agrees to promptly notify the Borrower and/or Riviera
after any such setoff and application provided that the failure to give such
notice shall not affect the validity of such setoff and application and shall
not create any claims or liabilities against NBD. The rights of NBD under this
section shall not require maturity of any indebtedness and are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which NBD may have.
13. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree
that NBD, through its employees or authorized agents, shall be permitted to
send a letter to and otherwise contact each of its respective account debtors
to verify account receivable balances. In addition, NBD, an accountant or
accounting firm retained by NBD and other advisors, representatives or agents
of NBD shall be permitted full and complete access to the Borrower's and
Riviera's facilities and books and records to conduct audits as often as NBD
reasonably desires. The reasonable cost of such audits ("Audit Fees"), whether
conducted by NBD (in which case NBD shall be entitled to make a reasonable
charge, plus out-of-pocket costs and expenses), an accountant or accounting
firm retained by NBD or other advisors, representatives or agents of
9
<PAGE> 147
NBD (including, but not limited to, Curtis Enterprises Inc.) shall be part of
the Obligations and shall be secured by all of the Collateral.
14. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and Riviera,
jointly and severally, shall be responsible for the payment of all fees and
out-of-pocket disbursements incurred by NBD, including fees of counsel and
court costs, in any way arising from or in connection with this Agreement, any
of the Collateral, any of the Loan Documents, any of the Obligations or the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including, without
limitation, (a) Audit Fees; (b) all fees and expenses (including recording fees
and insurance policy fees) of NBD and counsel for NBD for the preparation,
examination, approval, negotiation, execution and delivery of, or the closing
of any of the transactions contemplated by, this Agreement or any of the Loan
Documents; (c) all fees and out-of-pocket disbursements incurred by NBD,
including attorneys' fees and accountants' fees, in any way arising from or in
connection with any action taken by NBD to monitor, advise, administer, enforce
or collect any of the Obligations (including under this Agreement and the Loan
Documents) or any other obligations of the Borrower or Riviera, whether joint,
joint and several, or several, under this Agreement, any of the Loan Documents
or any other existing or future document or agreement, or arising from or
relating to the business relationship between NBD, on the one hand, and any one
or more of the Borrower, Riviera, Holding or Rieth, on the other hand,
including any actions to lift the automatic stay or to otherwise in any way
monitor or participate in any bankruptcy, reorganization or insolvency
proceeding of the Borrower or Riviera; (d) all expenses and fees (including
attorneys' fees) incurred in relation to, in connection with, in defense of
and/or in prosecution of any litigation instituted by any one or more of the
Borrower, Riviera, Holding, Rieth, NBD or any third party against or involving
NBD arising from, relating to, or in connection with any of the Obligations or
any Guarantor's obligations, this Agreement, any of the Collateral, any of the
Loan Documents or the business relationship between NBD, on the one hand, and
any one or more of the Borrower, Riviera, Holding or Rieth, on the other hand,
including any so-called "lender liability" action, any claim and delivery or
other action for possession of, or foreclosure on, any of the Collateral,
post-judgment enforcement of any rights or remedies including enforcement of
any judgments, and prosecution of any appeals (whether discretionary or as of
right and whether in connection with pre-judgment or post-judgment matters);
(e) all costs, expenses and fees incurred by NBD or its agents in connection
with appraisals and reappraisals of all or any of the Collateral (and the
Borrower and Riviera shall fully cooperate with such appraisers and make their
property available for appraisal in connection with as many appraisals as NBD
may request); (f) all costs, expenses and fees incurred by NBD and/or its
counsel in connection with consultants, expert witnesses or other professionals
retained by NBD and/or its counsel in order to assist, advise and/or give
testimony with respect to any matter relating to the Collateral, the Loan
Documents, or the business relationship between NBD, on the one hand, and any
one or more of the Borrower, Riviera, Holding or Rieth, on the other hand (and
the Borrower and Riviera shall fully cooperate with such consultant, expert
witness or other professional and shall make their premises, books and records,
accounting systems, computer systems and other media for the
10
<PAGE> 148
recordation of information available to such persons); and (g) all costs,
expenses and fees incurred by NBD in connection with any environmental
investigations including but not limited to Phase I, Phase II and Phase III
environmental audits (and the Borrower and Riviera agree that NBD and/or its
agents may enter on their premises at any time to conduct such environmental
investigations). Nothing contained in this paragraph shall, or is intended to,
expand the liability of Rieth and Holding beyond that contained in the Limited
Guaranty Documents.
All of the foregoing costs, expenses and reimbursement
obligations, set forth in this section (the "Costs") shall be part of the
Obligations, and shall be secured by all of the Collateral. The costs shall be
paid within 10 days of written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim, action or
cause of action, damage, liability, loss, cost, debt, expense, obligation,
tax, assessment, charge, lawsuit, contract, agreement, undertaking or
deficiency, of any kind or nature, whether known or unknown, fixed, actual,
accrued or contingent, liquidated or unliquidated (including interest,
penalties, attorneys' fees and other costs and expenses incident to proceedings
or investigations relating to any of the foregoing or the defense of any of the
foregoing), whether or not litigation has commenced.
15. OTHER DOCUMENTS. The Borrower and Riviera agree to execute and
deliver any and all documents reasonably deemed necessary or appropriate by NBD
or counsel to NBD to carry out the intent of and/or to implement the Loan
Documents or this Agreement, including, but not limited to, such documentation
necessary to grant NBD a lien, mortgage and/or security interest in any assets
of the Borrower and Riviera presently not subject to a lien, mortgage or
encumbrance in favor of NBD to secure the Obligations.
16. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of this
Agreement shall be considered an event of default, an event of acceleration and
a default under each document and agreement comprising the Loan Documents and an
event of default, an event of acceleration or a default under any document or
agreement comprising the Loan Documents, (other than the Existing Defaults),
shall be considered an Event of Default under the terms of this Agreement, and
all of the other Loan Documents. Upon the occurrence of an Event of Default
under this Agreement or any event of default, event of acceleration or default
under any document or agreement comprising the Loan Documents, or any document
executed in connection herewith, or referenced herein, and without prior notice
of or an opportunity to cure such event of default, event of acceleration or
default, except as otherwise provided herein, (a) NBD shall have the right to
exercise any rights or remedies provided in this Agreement, the Loan Documents,
or applicable law, (including, without limitation, the right to offset any
accounts of the Borrower or Riviera with NBD), (b) NBD may deem the Forbearance
Period to be expired, and (c) upon NBD's election, but without further notice,
all of the Obligations shall be immediately due and payable. IN ANY EVENT, FROM
AND AFTER THE CLOSE OF BUSINESS ON JUNE 30, 1996, NBD MAY IMMEDIATELY TAKE
ACTION TO ENFORCE
11
<PAGE> 149
ALL OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS, THIS AGREEMENT OR
APPLICABLE LAW, INCLUDING, BUT NOT LIMITED TO, COLLECTION OF THE BORROWER'S
OBLIGATIONS.
17. DOCUMENTS CONTINUE. Except as expressly modified and amended by
the terms of this Agreement, all of the terms and conditions of the Loan
Documents remain in full force and effect and are hereby ratified, confirmed
and approved. If there is an express conflict between the terms of this
Agreement and the terms of the Loan Documents, the terms of this Agreement
shall govern and control.
18. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a conditional
and limited forbearance until June 30, 1996, only, upon the terms and
conditions set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, all of NBD's rights and remedies against the
Borrower, Riviera, third parties, and/or the Collateral and/or any rights of
NBD under the Limited Guaranty Documents are expressly reserved, including,
without limitation, all rights and remedies resulting from, or arising in
connection with, the Existing Defaults. Likewise, nothing herein shall be
deemed to constitute a waiver of any defaults existing as of the date hereof, a
further worsening of the Existing Defaults or new events of default, events of
acceleration or defaults or shall in any way prejudice the rights or remedies
of NBD under the Loan Documents or applicable law. Further, NBD shall have the
right to waive any conditions set forth in this Agreement and/or the Loan
Documents, in its sole and unfettered discretion. And any such waiver shall
not prejudice, waive or reduce any other right or remedy which NBD may have
against the Borrower or Riviera, or any rights of NBD under the Limited
Guaranty Documents. However, the other parties to this Agreement and the Loan
Documents, understand that no waiver by NBD of the rights or any condition of
this Agreement and/or the Loan Documents shall be effective unless the same
shall be contained in writing signed by an authorized agent of NBD.
19. CREDIT INQUIRIES. In the event customers, buyers, potential financing
sources or other parties make inquiry of NBD as to the current lending
relationship between NBD, on the one hand, and the Borrower or Riviera, on the
other hand, the parties agree that NBD may refer such inquiries to the Borrower
or Riviera.
20. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
21. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of
the parties with respect to the subject matter hereof and may be modified or
amended only by a writing signed by the party to be charged.
12
<PAGE> 150
(b) This Agreement is governed by the internal laws of the
State of Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of
which shall be deemed an original, but together they shall constitute one and
the same instrument, and facsimile copies of signatures shall be treated as
original signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and
Riviera and their respective successors and assigns and shall inure to the
benefit of NBD and its successors and assigns.
(e) If any provision of this Agreement is in conflict with
any applicable statute or rule of law or otherwise unenforceable, such
offending provision shall be null and void only to the extent of such conflict
or unenforceability, but shall be deemed separate from and shall not invalidate
any other provision of this Agreement.
(f) Defined terms used in this Agreement without definition shall
have the meanings given to them under the Credit Agreement.
22. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or
inducements which have been made to any signatory hereto to cause such
signatory to enter into this Agreement other than those which are set forth in
this Agreement.
23. WAIVER OF JURY TRIAL AND ACKNOWLEDGEMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
EACH OF THE BORROWER AND RIVIERA ACKNOWLEDGES THAT (1) IT HAS BEEN
GIVEN THE OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE
AND, AFTER CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY
AND WITHOUT DURESS, COERCION, 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
13
<PAGE> 151
ENTERED INTO IN EXCHANGE FOR GOOD AND VALUABLE CONSIDERATION, RECEIPT OF WHICH
THE PARTIES HERETO ACKNOWLEDGE, (3) IT HAS CAREFULLY AND COMPLETELY READ ALL OF
THE TERMS AND PROVISIONS OF THIS AGREEMENT AND IS NOT RELYING ON THE OPINIONS
OR ADVICE OF NBD OR ITS AGENTS OR REPRESENTATIVES IN ENTERING INTO THIS
AGREEMENT.
24. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
NBD BANK
By: [SIG]
------------------------
Its: Vice President
--------------------
RIVIERA DIE & TOOL, INC.
By: [SIG]
------------------------
Its: C.F.O.
--------------------
Subscribed and sworn to before me this 27th day of March, 1996.
Carol S. Simonson
- --------------------
Notary Public, Kent County,
------ ----
My Commission expires:
----------
[Signatures continue on following pages]
14
<PAGE> 152
[Signatures continued from prior page]
RIVIERA TOOL COMPANY
By: [SIG]
------------------------
Its: C.F.O.
--------------------
Subscribed and sworn to before me this 27th day of March, 1996.
Carol S. Simonson
- --------------------
Notary Public, Kent County,
----- ----
My Commission expires:
----------
15
<PAGE> 153
SIXTEENTH AMENDMENT TO CREDIT AGREEMENT
AND RESTATED FORBEARANCE AGREEMENT
NBD Bank, formerly known as NBD Bank, N.A., successor by merger to the
interests of NBD Grand Rapids, N.A. ("NBD" or the "Bank"), Riviera Die & Tool,
Inc. (formerly known as R.D.T., Inc.), a Michigan Corporation (the "Borrower")
and Riviera Tool Company, a Michigan Corporation ("Riviera") enter into this
Sixteenth Amendment to Credit Agreement and Restated Forbearance Agreement (the
"Agreement") dated as of the 4th day of October, 1996.
RECITALS
A. The Borrower and the Bank entered into a Credit Agreement dated April
20, 1988, as amended by a First Amendment to Credit Agreement dated August 31,
1988, a Second Amendment to Credit Agreement dated January 30, 1989, a Third
Amendment to Credit Agreement dated January 30, 1990, a Fourth Amendment to
Credit Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement
dated July 31, 1992, a Sixth Amendment to Credit Agreement dated January 31,
1993, a Seventh Amendment to Credit Agreement dated March 31, 1993, an Eighth
Amendment to Credit Agreement dated July 26, 1993, a Ninth Amendment to Credit
Agreement dated March 4, 1994, a Forbearance Agreement dated April 14, 1994 (the
"Original Forbearance Agreement"), a Tenth Amendment to Credit Agreement and
Restated Forbearance Agreement dated May 5, 1994, an Eleventh Amendment to
Credit Agreement and Restated Forbearance Agreement dated as of December 1,
1994, and a Twelfth Amendment to Credit Agreement and Restated Forbearance
Agreement dated as of May 1, 1995, a Thirteenth Amendment to Credit Agreement
and Restated Forbearance Agreement dated as of September 1, 1995, a Fourteenth
Amendment to Credit Agreement and Restated Forbearance Agreement effective as of
January 1, 1996, and a Fifteenth Amendment to Credit Agreement and Restated
Forbearance Agreement dated effective as of April 1, 1996, as amended by a
letter agreement dated September 24, 1996 (collectively, the "Credit Agreement")
by which the Bank has made certain credit facilities available to the Borrower
upon the terms and subject to the conditions set forth in the Credit Agreement.
B. Pursuant to the Credit Agreement, the Borrower has executed two (2)
promissory notes: (i) the Fifteenth Amended and Restated Working Capital
Revolving Credit Note in the original principal amount of $10,500,000.00 dated
as of April 1, 1996 (the "Working Capital Revolving Credit Note"); and (ii) a
Fifth Amended and Restated Term Note in the original principal amount of
$696,962.00 dated as of January 1, 1996 (the "Term Note").
C. In connection with the Credit Agreement, Riviera executed and
delivered to the Bank a Guaranty dated April 20, 1988, pursuant to which, among
other things, Riviera guarantied all of the Borrower's obligations (including
the Obligations as defined below) to the Bank, whether then existing or
thereafter arising or created (the "Riviera Guaranty").
<PAGE> 154
D. In addition, Rieth and Holding (collectively, Rieth and Holding may be
hereinafter referred to as the "Limited Guarantors") each executed and delivered
Guaranties and Continuing Pledge Agreements dated August 4, 1992 and July 26,
1993 (the "Limited Guaranty Documents").
E. As of October 7, 1996, there was (i) $10,045,885.36 in principal
indebtedness owing by the Borrower under the Working Capital Revolving Credit
Note and (ii) $296,962.00 in principal indebtedness owing by the Borrower
pursuant to the Term Note. These sums, together with accrued but unpaid
interest, costs and expenses (including attorneys' fees), as well as all other
present and future obligations of the Borrower to the Bank, including, but not
limited to, obligations arising under or in connection with the Loan Documents
(as defined below) or any other document executed in connection therewith or
subsequent thereto by the Borrower in favor of the Bank are hereinafter referred
to as the "Obligations".
F. On April 20, 1988, the Borrower executed and delivered to NBD a
Security Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment), as amended by a
First Amendment to each of the above-described Security Agreements dated January
30, 1989 (the "Borrower Security Agreements") wherein Borrower granted to NBD a
valid, perfected, indefeasible and enforceable first-priority lien and security
interest in favor of the Bank in all of the Borrower's present and future
personal property, including, but not limited to, accounts, chattel paper,
general intangibles, documents, instruments, inventory, equipment, fixtures and
all other tangible and intangible personal property and all proceeds and
products thereof with the exception of certain property described in Section 5.8
of the Credit Agreement. For convenience, all of the collateral referred to in
the Borrower Security Agreements, together with all other collateral described
in and/or granted in connection with any of the Loan Documents (as hereinafter
defined), together with all collateral heretofore, simultaneously herewith or
hereafter granted to the Bank by the Borrower to secure any of the Borrower's or
any other parties' present or future obligations to the Bank, is collectively
referred to as the "Borrower Collateral".
G. On April 20, 1988, Riviera executed and delivered to NBD a Security
Agreement (Accounts, General Intangibles and Chattel Paper), a Security
Agreement (Inventory) and a Security Agreement (Equipment) (the "Riviera
Security Agreements") wherein Riviera granted to NBD a valid, perfected,
indefeasible and enforceable first priority lien and security interest in favor
of the Bank in all of Riviera's present and future personal property, including,
but not limited to, accounts, chattel paper, general intangibles, documents,
instruments, inventory, equipment, fixtures and all other tangible and
intangible personal property and all proceeds and products thereof. For
convenience, all of the collateral referred to in the Riviera Security
Agreements, together with all other collateral described in and/or granted in
connection with any of the Loan Documents (as hereinafter defined), together
with all collateral heretofore, simultaneously herewith or hereafter granted to
the Bank by Riviera to secure any of Riviera's
2
<PAGE> 155
or any other parties' present or future obligations to the Bank, is collectively
referred to as the "Riviera Collateral".
H. The Borrower and Riviera acknowledge and agree that (i) the
Obligations are due the Bank without setoff, recoupment, defense or
counterclaim, in law or equity, of any nature or kind; (ii) the Obligations are
secured by valid, perfected, indefeasible, enforceable first priority liens and
security interests (except as permitted by Section 5.8 of the Credit Agreement)
in favor of the Bank in, among other things, (a) all of the Borrower's present
and future personal property, including, without limitation, accounts, chattel
paper, general intangibles, documents, instruments, inventory, equipment,
fixtures and all other tangible and intangible personal property and all
proceeds and products thereof, and (b) all of Riviera's present and future
personal property, including, without limitation, accounts, chattel paper,
general intangibles, documents, instruments, inventory, equipment, fixtures and
all other tangible and intangible personal property and all proceeds and
products thereof, and (c) the collateral described in the Limited Guaranty
Documents. For convenience, the Credit Agreement, the Working Capital Revolving
Credit Note, the Term Note (collectively, the "Notes"), the Borrower Security
Agreements, the Riviera Guaranty, the Riviera Security Agreements, the Limited
Guaranty Documents, the Original Forbearance Agreement, this Agreement and any
other document executed therewith or subsequent thereto by the Borrower in favor
of the Bank are hereinafter referred to as the "Loan Documents". For
convenience, all of the Borrower Collateral, the Riviera Collateral and the
collateral referenced in the Limited Guaranty Documents shall hereinafter be
referred to as the "Collateral".
I. The Borrower and Riviera reaffirm, ratify, confirm and approve their
obligations and duties under the Loan Documents as modified by this Agreement.
J. Borrower and Riviera, jointly, jointly and severally and severally,
reaffirm, ratify and confirm the liens, assignments and security interests
granted to NBD under the Loan Documents and confirm that any and all collateral
granted to NBD by any party for the purpose of securing repayment of all or any
part of the Borrower's or Riviera's obligations (including the Obligations) owed
to NBD, including, but not limited to the Collateral, shall constitute and serve
as collateral for any and all of the obligations and duties of the Borrower and
Riviera to NBD (including the Obligations), whether now existing or hereafter
arising.
K. Borrower and Riviera each acknowledge that currently there are
defaults under the Loan Documents as follows (collectively, the "Existing
Defaults"):
1. Consolidated working capital was ($2,335,297.00) as of July 31,
1996 instead of not less than $1,000,000.00 as required by the Loan Documents.
2. Tangible Net Worth was $5,662,833.00 as of July 31, 1996 instead
of not less than $6,000,000.00.
3
<PAGE> 156
3. Leverage Ratio was 3.06:1 as of July 31, 1996 instead of not
greater than 2.25:1.
4. The amount outstanding under the Working Capital Revolving Credit
Note did not permanently reduce to $9,000,000.00 or below by May 31, 1996.
5. The Obligations were not satisfied in full by June 30, 1996.
Borrower and Riviera represent and warrant that, to the best of their knowledge,
after due inquiry and investigation, they are unaware of any other Events of
Default (as defined in the Credit Agreement) or defaults under any of the Loan
Documents or this Agreement or of any event that, with the passage of time,
notice, or both, would become an Event of Default or a default under the Loan
Documents or this Agreement.
L. Borrower and Riviera also acknowledge that based on the Existing
Defaults, NBD has the right, without further notice, to accelerate all of the
Obligations, demand payment in full and enforce its rights under the
Loan Documents and applicable law.
M. Borrower and Riviera further acknowledge and agree that the actions
taken by the Bank to date are reasonable and appropriate under the
circumstances, are within NBD's rights under the Loan Documents and applicable
law and do not constitute interference with or control over the business
operations of any of the parties hereto.
N. Around June 1996, Borrower and Riviera contacted NBD to discuss their
desire to merge Borrower into Riviera, with Riviera to be the surviving entity,
in accordance with the Agreement of Merger attached as Exhibit N hereto (the
"Merger"). Borrower and Riviera have since confirmed to NBD their desire to
complete the Merger. As part of this Merger, Holding will be issued a
certificate representing 730,000 shares of common stock in the post-merger
Riviera, representing 50% of all issued common stock immediately after the
Merger, in exchange for its current 50% ownership of Riviera. This new stock in
Riviera shall be subject to the Continuing Pledge Agreement given by Holding in
favor of NBD dated May 5, 1994, as well as all covenants regarding stock issued
or held by Borrower, Riviera or Holding under the Loan Documents. Borrower and
Riviera have additionally informed NBD that, subject to NBD's consent, they hope
ultimately to issue and sell publicly new stock in Riviera, and apply the
proceeds of such sale, together with the proceeds of the refinancing of the
Obligations with a new lender, to satisfy the Borrower's Obligations in full.
O. Borrower and Riviera acknowledge that, under the terms of the Loan
Documents, the Merger will constitute a default absent NBD's consent. Borrower
and Riviera acknowledge that currently NBD has agreed to consent only to the
Merger, and has not consented to the issuance or public sale of new stock of
Riviera, as survivor of the Merger.
4
<PAGE> 157
P. Borrower and Riviera have requested that NBD continue to forbear from
enforcing its rights and remedies under the Loan Documents and applicable law
for an additional period through November 30, 1996, to afford such parties an
opportunity to complete the contemplated Merger. Borrower has further
represented that it believes these efforts will ultimately result in payment in
full of the Obligations.
Q. Borrower and Riviera have additionally requested that the Bank extend
the October 4, 1996 maturity date on the Working Capital Revolving Credit Note
and the Term Note until November 30, 1996.
R. The Borrower and Riviera acknowledge and agree that (i) NBD has fully
performed all of its obligations under the Loan Documents and all other
agreements between NBD and such parties; (ii) any future loans will be made at
NBD's sole and unfettered discretion; and (iii) NBD has not made any
representations of any kind or nature that funding in any amount will continue
or that the Forbearance Period (as defined in Section 1 below) will be extended
beyond November 30, 1996. NBD HAS INFORMED BORROWER AND RIVIERA THAT IT DOES
NOT INTEND TO EXTEND THE FORBEARANCE PERIOD BEYOND NOVEMBER 30, 1996, AND THAT
THEY SHOULD PAY NBD IN FULL ON OR BEFORE THAT DATE. NBD HAS ADVISED THE PARTIES
THAT FROM AND AFTER NOVEMBER 30,1996, NBD MAY TAKE ANY AND ALL STEPS TO SATISFY
THE OBLIGATIONS INCLUDING, BUT NOT LIMITED TO, ENFORCEMENT PROCEEDINGS,
CESSATION OF ADVANCES OR REDUCTION OF ADVANCE RATES UNDER THE BORROWING BASE,
REDUCTION IN THE CAP ON THE WORKING CAPITAL REVOLVING CREDIT, INCREASED INTEREST
RATES AND FEES OR SUCH OTHER ACTIONS AS NBD MAY, IN ITS SOLE DISCRETION, DEEM
APPROPRIATE.
Based on the foregoing Recitals (which are incorporated in this Agreement
as and shall constitute representations, warranties and covenants of the
respective parties to this Agreement, as the case may be), and for other good
and valuable consideration, the parties hereto agree as follows:
AGREEMENT
1. FORBEARANCE. Subject to the following conditions precedent in this
Section 1 and subject to the other terms of this Agreement, NBD agrees to
forbear from enforcing its rights and remedies based on the Existing Defaults,
until the earlier of (i) a further or additional default or Event of Default
under the Loan Documents (including a worsening of the Existing Defaults); (ii)
a default or Event of Default under this Agreement; or (iii) November 30, 1996
(the "Forbearance Period"):
5
<PAGE> 158
(a) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Sixteenth Amended and Restated Working Capital Revolving
Credit Note in substantially the form attached hereto as Exhibit 1(a);
(b) Simultaneously with the execution of this Agreement, receipt by
NBD of an executed Sixth Amended and Restated Term Note in substantially the
form attached hereto as Exhibit 1(b);
(c) Simultaneously with the execution of this Agreement, receipt
by NBD of each additional document listed on the Preliminary Closing List
attached as Exhibit 1(c) hereto, in form and substance satisfactory to NBD and
fully executed as appropriate;
(d) Simultaneously with the execution of this Agreement, receipt by
NBD of a fully-executed copy of this Agreement acknowledged by counsel to the
Borrower and Riviera;
(e) Simultaneously with the execution of this Agreement, receipt by
NBD of UCC-3 terminations for all UCC financing statements filed by Comerica
Bank against Borrower or Riviera.
(f) Simultaneously with the execution of this Agreement, Borrower
shall make all payments currently due under the Loan Documents, and shall
additionally pay to NBD the $50,000.00 forbearance fee and the $25,000,00 fee
for non-reduction of working capital borrowings, both as discussed more fully in
Paragraph 11 below.
(g) Simultaneously with the execution of this Agreement, receipt by
NBD of insurance policies on the life of Rieth assigned to NBD aggregating
$2,500,000.00.
(h) Simultaneously with the execution of this Agreement, receipt by
NBD of evidence of updated insurance covering the assets of Borrower naming NBD
as lender loss payee.
(i) NBD receives such other additional documentation necessary to
carry out the intent and purposes of this Agreement.
2. ASSUMPTION OF OBLIGATIONS.
(a). By signing below Riviera acknowledges and assumes all of the
Obligations of Borrower under the Loan Documents. Riviera acknowledges that it
shall be solely liable for such obligations as if it had been the original
signatory to the Loan Documents. Notwithstanding this assignment and
assumption, Riviera Die & Tool, Inc. shall remain liable for any and all of the
Obligations to the extent they are determined not to be the responsibility of
Riviera.
6
<PAGE> 159
(b). All references to "Borrower" in the Loan Documents (including
this Sixteenth Amendment) shall be deemed to be references to Borrower and
Riviera, as successor by merger to Borrower.
(c). Subject to the terms and effectiveness of this Sixteenth
Amendment, Lender consents to the Merger of Riviera as contemplated by the
Agreement of Merger attached as Exhibit 2(c) hereto insofar as required by the
Loan Documents.
3. ALL OBLIGATIONS DUE. ALL OF THE OBLIGATIONS INCLUDING, WITHOUT
LIMITATION, OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE WORKING CAPITAL
REVOLVING CREDIT NOTE, THE TERM NOTE AND THIS AGREEMENT SHALL BE DUE AND PAYABLE
ON THE EARLIER OF (i) A DEFAULT, AN EVENT OF DEFAULT OR BREACH OF THE TERMS AND
CONDITIONS OF THIS AGREEMENT, OR (ii) NOVEMBER 30, 1996.
4. NO FURTHER FORBEARANCE IMPLIED. THE BORROWER AND RIVIERA ACKNOWLEDGE
THAT (a) NBD DOES NOT INTEND, NOR DOES NBD HAVE ANY OBLIGATION, TO EXTEND LOANS,
ADVANCES OR OTHER FINANCIAL ACCOMMODATIONS TO THE PARTIES HERETO BEYOND NOVEMBER
30, 1996, (b) NBD DOES NOT INTEND TO FORBEAR FROM ENFORCING ITS RIGHTS AND
REMEDIES AFTER NOVEMBER 30, 1996, AND NOTHING CONTAINED HEREIN OR OTHERWISE IS
INTENDED TO BE A PROMISE OR AGREEMENT TO MAKE ADVANCES UNDER THE WORKING CAPITAL
REVOLVING CREDIT NOTE AFTER NOVEMBER 30, 1996 OR TO EXTEND THE TERMS OF THIS
AGREEMENT BEYOND NOVEMBER 30, 1996, (c) ALL OF THE OBLIGATIONS ARE DUE, ABSENT
AN EARLIER DEFAULT UNDER THE LOAN DOCUMENTS, ON OR BEFORE NOVEMBER 30, 1996, AND
(d) NBD INTENDS TO TAKE ANY STEPS NECESSARY TO ASSURE SATISFACTION OF THE
OBLIGATIONS IN FULL BY NOVEMBER 30, 1996 OR AS SOON THEREAFTER AS POSSIBLE. THE
BORROWER, RIVIERA, RIETH AND HOLDING HAVE BEEN ADVISED THAT THEY SHOULD PURSUE
ALTERNATIVE FINANCING SOURCES.
5. COLLATERAL. As noted in the Recitals, Borrower and Riviera have
granted to NBD a valid, perfected, indefeasible, enforceable first priority lien
and security interest in and to all of their respective personal property
(except as permitted by Section 5.8 of the Credit Agreement). As an
accommodation to the Borrower, NBD, from time to time, has executed and filed
UCC-3 partial releases with respect to certain specific equipment.
Notwithstanding the filing of these partial releases, the Borrower hereby
ratifies and grants to NBD a continuing security interest in all of its personal
property, including such equipment referenced in the UCC-3 partial releases.
7
<PAGE> 160
6. AMENDMENTS TO CREDIT AGREEMENT.
(i) Section 2.1 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"2.1 Loan. Subject to all of the terms and conditions hereof,
the Bank may, in its sole and unfettered discretion, lend to the
Borrower from time to time through November 30, 1996, such sums in
multiples of Twenty-Five Thousand Dollars ($25,000.00) as may be
requested from time to time by the Borrower in a manner specified by
the Bank, provided that the aggregate principal amount outstanding at
any time pursuant to the provisions of this Section 2.1 shall not
exceed the lesser of (1)(a) through and including October 31, 1996,
Ten Million Five Hundred Thousand Dollars ($10,500,000.00) and (b)
commencing November 1, 1996 and continuing thereafter, Nine Million
Dollars ($9,000,000.00) (the "Working Capital Revolving Credit") and
(2) the Borrowing Base. If the principal amount outstanding at any
time exceeds said amounts, the Borrower shall forthwith pay to
the Bank an amount sufficient to eliminate such excess. Subject to
the terms and conditions of this Agreement, the Borrower may borrow,
prepay pursuant to Section 2.3, and reborrow under this Section 2.1.
Upon the execution of the Sixteenth Amendment to Credit Agreement and
Restated Forbearance Agreement, the Borrower shall execute and
deliver to the Bank a revolving credit demand note in the form of
Exhibit l(a) attached hereto (the "Sixteenth Amended and Restated
Working Capital Revolving Credit Note"), the terms of which are
incorporated herein by reference. All commitments by the Bank on
behalf of the Borrower by way of instrument certification, letter of
credit or similar device shall be considered loans pursuant to this
Section 2.1."
7. NEGATIVE COVENANTS. During the Forbearance Period, without the prior
written consent of the Bank, the Borrower and Riviera shall not:
(a) RESTRICTION ON LIENS. Create or permit to be created or allow
to exist any new, additional or expanded lien upon any property or assets now
owned or acquired in the future by the Borrower and Riviera.
(b) RESTRICTION ON INDEBTEDNESS. Create, incur, assume, suffer to
exist, have outstanding or in any manner become liable in respect of any
indebtedness for money other than
8
<PAGE> 161
the Obligations or indebtedness incurred in the ordinary course of the business
of the Borrower for necessary materials and services.
(c) CAPITAL ASSET EXPENDITURE. Expend sums for the acquisition of
capital assets, including payments under any new lease of real or personal
property.
(d) SALE AND LEASEBACK. Enter into any new agreement providing for
the leasing by the Borrower of property which has been or is to be sold or
transferred by the Borrower or lessor of the property.
(e) TRANSACTIONS WITH AFFILIATES. Enter into, or permit or suffer
to exist, any transaction or arrangement with any Affiliate, except on terms
which are no less favorable to the Borrower than could be obtained from persons
who are not Affiliates in arm's length transactions.
(f) STOCK. Issue any new stock of any class in Borrower, or offer
any stock of Borrower for sale publicly.
8. NO OVERDRAFTS. Borrower and Riviera agree that they will not create
any overdrafts in any accounts at NBD. Furthermore, Borrower and Riviera
acknowledge and agree that NBD shall not, under any circumstances, be required
to honor any checks or other items presented to NBD for payment for which there
are insufficient available funds in Borrower's account at NBD for payment and
NBD may return any such items so presented. In the event that such items are
not returned, this shall not create any right or expectation that such
overdrafts will be tolerated or permitted in the future.
9. TAXES. Borrower and Riviera represent that they are paying all
taxes on a timely basis except as set forth on Exhibit 9 attached hereto.
10. EVENTS OF DEFAULT. In addition to any other defaults or Events of
Default contained in any of the Loan Documents, the following shall constitute
an Event of Default under this Agreement and each of the Loan Documents:
(a) any further or additional Events of Default, events of
acceleration or defaults provided for in any. of the Loan Documents (including a
worsening of any of the Existing Defaults for any reason other than the impact
of the restructuring transaction between the Borrower and Heller Financial
Leasing, Inc. and Banc One Leasing Corporation entered into in April of 1994);
(b) if any representation or warranty made by Borrower or Riviera
in this Agreement or in connection with the negotiation hereof is untrue as of
the date made or hereafter becomes untrue;
9
<PAGE> 162
(c) the Borrower and/or Riviera shall at any time fail to observe,
perform or comply with any Dominion of Funds Agreement with NBD;
(d) there shall exist at any time a Borrowing Base Deficiency;
(e) any lender, supplier, creditor or lessor shall (i) accelerate
any obligations of the Borrower or Riviera, due to a default by Borrower or
Riviera under any agreement with any creditor in excess of $25,000 to such
creditor or shall otherwise take any action of any kind or nature to enforce or
begin enforcement of its rights or remedies against Borrower or Riviera by
reason of such default, or (ii) receive from Borrower or Riviera any prepayments
of obligations, any extraordinary payments of outstanding indebtedness or fees,
or fees or interest above the level paid to such creditor by Borrower or Riviera
as of January 1, 1994;
(f) any creditor, including, but not limited to, any governmental
taxing authority, shall cause a lien to be filed on any of the Collateral (other
than a lien for taxes not yet due and payable); and
11. CREDIT FEES. As partial consideration for NBD's agreement to extend
the Forbearance Period as provided hereunder, Borrower and Riviera shall pay to
NBD a $50,000.00 forbearance fee simultaneously with execution of this
Agreement, and shall pay an additional $50,000.00 forbearance fee on or before
October 31, 1996; provided, however that the $50,000.00 fee due and payable on
October 31, 1996 shall be deferred to November 30, 1996 if on or prior to
October 31, 1996 Borrower has presented to NBD a commitment letter satisfactory
to NBD at its discretion providing new financing in an amount sufficient to
satisfy all of the Obligations in full on or before November 30, 1996; provided
further that if the Obligations are satisfied in full on or before November 30,
1996, the $50,000.00 fee otherwise owing on that date shall then be waived.
Borrower and Riviera must additionally pay to NBD an additional $25,000.00 fee
simultaneous with execution of this Agreement since borrowings under the Working
Capital Revolving Credit did not permanently reduce to $9,000,000.00 or below on
or before September 30, 1996 as previously agreed by Borrower.
12. RELEASE. AS OF THE DATE HEREOF, THE BORROWER AND RIVIERA REPRESENT AND
WARRANT THAT THEY ARE AWARE OF, AND POSSESS, NO CLAIMS OR CAUSES OF ACTION
AGAINST THE BANK. NOTWITHSTANDING THIS REPRESENTATION AND AS FURTHER
CONSIDERATION FOR THE AGREEMENTS AND UNDERSTANDINGS HEREIN, THE BORROWER AND
RIVIERA, INDIVIDUALLY, JOINTLY AND SEVERALLY, AND ON BEHALF OF EACH OF THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, EXECUTORS, SUCCESSORS AND
ASSIGNS, HEREBY RELEASE NBD, ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS, AFFILIATES, SUBSIDIARIES, SUCCESSORS AND ASSIGNS FROM ANY LIABILITY,
CLAIM,
10
<PAGE> 163
RIGHT OR CAUSE OF ACTION WHICH NOW EXISTS OR HEREAFTER ARISES, WHETHER KNOWN OR
UNKNOWN, ARISING FROM EVENTS OCCURRING PRIOR TO AND IN ANY WAY RELATED TO FACTS
IN EXISTENCE AS OF THE DATE HEREOF. BY WAY OF EXAMPLE AND NOT LIMITATION, THE
FOREGOING INCLUDES ANY CLAIMS IN ANY WAY RELATED TO ACTIONS TAKEN OR OMITTED TO
BE TAKEN BY NBD UNDER THE LOAN DOCUMENTS, OR THIS AGREEMENT AND THE BUSINESS
RELATIONSHIP WITH NBD.
13. AUTHORIZATION TO DEBIT ACCOUNT. In the event that any payment called
for by the Loan Documents, this Agreement (or any agreement referred to or
incorporated herein) or any other present or future agreements between NBD or
any of its affiliates and the Borrower and/or Riviera are not paid when and as
called for under the terms of such agreement, then NBD may debit any of such
accounts of the Borrower and/or Riviera at NBD or any of its affiliates for such
amount. In the event of such a debit, NBD or any of its affiliates will use its
best efforts to notify the Borrower and/or Riviera of such debit within two (2)
business days. The fact that NBD or any of its affiliates had debited any of
the accounts of the Borrower and/or Riviera at NBD or any of its affiliates
shall in no way whatsoever waive or diminish any default for failure to make
such payments when and as due.
14. SETOFF. Upon the occurrence of a default, NBD is hereby authorized at
any time and from time to time, without notice to the Borrower or Riviera (any
such notice being expressly waived), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by NBD to or for the credit or the account
of the Borrower and/or Riviera against any and all of the Obligations, now or
hereafter existing, including those under this Agreement or the Loan Documents
or any of the Notes or any other agreement or instrument, irrespective of
whether or not NBD shall have made any demand under this Agreement or any Note
or otherwise. The Bank agrees to promptly notify the Borrower and/or Riviera
after any such setoff and application provided that the failure to give such
notice shall not affect the validity of such setoff and application and shall
not create any claims or liabilities against NBD. The rights of NBD under this
section shall not require maturity of any indebtedness and are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which NBD may have.
15. VERIFICATION OF ACCOUNTS/AUDITS. The Borrower and Riviera agree that
NBD, through its employees or authorized agents, shall be permitted to send a
letter to and otherwise contact each of its respective account debtors to verify
account receivable balances. In addition, NBD, an accountant or accounting firm
retained by NBD and other advisors, representatives or agents of NBD shall be
permitted full and complete access to the Borrower's and Riviera's facilities
and books and records to conduct audits as often as NBD reasonably desires. The
reasonable cost of such audits ("Audit Fees"), whether conducted by NBD (in
which case NBD shall be entitled to make a reasonable charge, plus out-of-pocket
costs and expenses), an accountant or accounting firm retained by NBD or other
advisors, representatives or agents of
11
<PAGE> 164
NBD (including, but not limited to, Curtis Enterprises Inc.) shall be part of
the Obligations and shall be secured by all of the Collateral.
16. EXPENSES, FEES AND COSTS; INDEMNIFICATION. The Borrower and Riviera,
jointly and severally, shall be responsible for the payment of all fees and
out-of-pocket disbursements incurred by NBD, including fees of counsel and court
costs, in any way arising from or in connection with this Agreement, any of the
Collateral, any of the Loan Documents, any of the Obligations or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including, without limitation, (a)
Audit Fees; (b) all fees and expenses (including recording fees and insurance
policy fees) of NBD and counsel for NBD for the preparation, examination,
approval, negotiation, execution and delivery of, or the closing of any of the
transactions contemplated by, this Agreement or any of the Loan Documents; (c)
all fees and out-of-pocket disbursements incurred by NBD, including attorneys'
fees and accountants' fees, in any way arising from or in connection with any
action taken by NBD to monitor, advise, administer, enforce or collect any of
the Obligations (including under this Agreement and the Loan Documents) or any
other obligations of the Borrower or Riviera, whether joint, joint and several,
or several, under this Agreement, any of the Loan Documents or any other
existing or future document or agreement, or arising from or relating to the
business relationship between NBD, on the one hand, and any one or more of the
Borrower, Riviera, Holding or Rieth, on the other hand, including any actions to
lift the automatic stay or to otherwise in any way monitor or participate in any
bankruptcy, reorganization or insolvency proceeding of the Borrower or Riviera;
(d) all expenses and fees (including attorneys' fees) incurred in relation to,
in connection with, in defense of and/or in prosecution of any litigation
instituted by any one or more of the Borrower, Riviera, Holding, Rieth, NBD or
any third party against or involving NBD arising from, relating to, or in
connection with any of the Obligations or any Guarantor's obligations, this
Agreement, any of the Collateral, any of the Loan Documents or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand, including any so-called "lender
liability" action, any claim and delivery or other action for possession of, or
foreclosure on, any of the Collateral, post-judgment enforcement of any rights
or remedies including enforcement of any judgments, and prosecution of any
appeals (whether discretionary or as of right and whether in connection with
pre-judgment or post-judgment matters); (e) all costs, expenses and fees
incurred by NBD or its agents in connection with appraisals and reappraisals of
all or any of the Collateral (and the Borrower and Riviera shall fully
cooperate with such appraisers and make their property available for appraisal
in connection with as many appraisals as NBD may request); (f) all costs,
expenses and fees incurred by NBD and/or its counsel in connection with
consultants, expert witnesses or other professionals retained by NBD and/or its
counsel in order to assist, advise and/or give testimony with respect to any
matter relating to the Collateral, the Loan Documents, or the business
relationship between NBD, on the one hand, and any one or more of the Borrower,
Riviera, Holding or Rieth, on the other hand (and the Borrower and Riviera
shall fully cooperate with such consultant, expert witness or other
professional and shall make their premises, books and records, accounting
systems, computer systems and other media for the
12
<PAGE> 165
recordation of information available to such persons); and (g) all costs,
expenses and fees incurred by NBD in connection with any environmental
investigations including but not limited to Phase I, Phase II and Phase III
environmental audits (and the Borrower and Riviera agree that NBD and/or its
agents may enter on their premises at any time to conduct such environmental
investigations). Nothing contained in this paragraph shall, or is intended to,
expand the liability of Rieth or Holding beyond that contained in the Limited
Guaranty Documents.
All of the foregoing costs, expenses and reimbursement obligations,
set forth in this section (the "Costs") shall be part of the Obligations, and
shall be secured by all of the Collateral. The costs shall be paid within 10
days of written request from NBD.
For purposes hereof "Claims" shall mean any demand, claim, action or
cause of action, damage, liability, loss, cost, debt, expense, obligation, tax,
assessment, charge, lawsuit, contract, agreement, undertaking or deficiency, of
any kind or nature, whether known or unknown, fixed, actual, accrued or
contingent, liquidated or unliquidated (including interest, penalties,
attorneys' fees and other costs and expenses incident to proceedings or
investigations relating to any of the foregoing or the defense of any of the
foregoing), whether or not litigation has commenced.
17. OTHER DOCUMENTS. The Borrower and Riviera agree to execute and deliver
any and all documents reasonably deemed necessary or appropriate by NBD or
counsel to NBD to carry out the intent of and/or to implement the Loan Documents
or this Agreement, including, but not limited to, such documentation necessary
to grant NBD a lien, mortgage and/or security interest in any assets of the
Borrower and Riviera presently not subject to a lien, mortgage or encumbrance in
favor of NBD to secure the Obligations.
18. CROSS DEFAULT/REMEDIES. An Event of Default under the terms of this
Agreement shall be considered an event of default, an event of acceleration and
a default under each document and agreement comprising the Loan Documents and an
event of default, an event of acceleration or a default under any document or
agreement comprising the Loan Documents, (other than the Existing Defaults),
shall be considered an Event of Default under the terms of this Agreement, and
all of the other Loan Documents. Upon the occurrence of an Event of Default
under this Agreement or any event of default, event of acceleration or default
under any document or agreement comprising the Loan Documents, or any document
executed in connection herewith, or referenced herein, and without prior notice
of or an opportunity to cure such event of default, event of acceleration or
default, except as otherwise provided herein, (a) NBD shall have the right to
exercise any rights or remedies provided in this Agreement, the Loan Documents,
or applicable law, (including, without limitation, the right to offset any
accounts of the Borrower or Riviera with NBD), (b) NBD may deem the Forbearance
Period to be expired, and (c) upon NBD's election, but without further notice,
all of the Obligations shall be immediately due and payable. IN ANY EVENT, FROM
AND AFTER THE CLOSE OF BUSINESS ON NOVEMBER 30, 1996, NBD MAY IMMEDIATELY TAKE
ACTION TO
13
<PAGE> 166
ENFORCE ALL OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS, THIS AGREEMENT
OR APPLICABLE LAW, INCLUDING, BUT NOT LIMITED TO, COLLECTION OF THE BORROWER'S
OBLIGATIONS.
19. DOCUMENTS CONTINUE. Except as expressly modified and amended by the
terms of this Agreement, all of the terms and conditions of the Loan Documents
remain in full force and effect and are hereby ratified, confirmed and approved.
If there is an express conflict between the terms of this Agreement and the
terms of the Loan Documents, the terms of this Agreement shall govern and
control.
20. RESERVATION OF RIGHTS/NO WAIVERS. This Agreement grants a conditional
and limited forbearance until November 30, 1996, only, upon the terms and
conditions set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, all of NBD's rights and remedies against the
Borrower, Riviera, third parties, and/or the Collateral and/or any rights of NBD
under the Limited Guaranty Documents are expressly reserved, including, without
limitation, all rights and remedies resulting from, or arising in connection
with, the Existing Defaults. Likewise, nothing herein shall be deemed to
constitute a waiver of any defaults existing as of the date hereof, a further
worsening of the Existing Defaults or new events of default, events of
acceleration or defaults or shall in any way prejudice the rights or remedies of
NBD under the Loan Documents or applicable law. Further, NBD shall have the
right to waive any conditions set forth in this Agreement and/or the Loan
Documents, in its sole and unfettered discretion. And any such waiver shall not
prejudice, waive or reduce any other right or remedy which NBD may have against
the Borrower or Riviera, or any rights of NBD under the Limited Guaranty
Documents. However, the other parties to this Agreement and the Loan Documents,
understand that no waiver by NBD of the rights or any condition of this
Agreement and/or the Loan Documents shall be effective unless the same shall be
contained in writing signed by an authorized agent of NBD.
21. CREDIT INQUIRIES. In the event customers, buyers, potential financing
sources or other parties make inquiry of NBD as to the current lending
relationship between NBD, on the one hand, and the Borrower or Riviera, on the
other hand, the parties agree that NBD may refer such inquiries to the Borrower
or Riviera.
22. AUTHORITY. Each party executing this Agreement in a representative
capacity represents and warrants that he or she has authority to execute this
Agreement and legally bind the entity he or she represents.
23. MISCELLANEOUS.
(a) This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and may be modified or amended
only by a writing signed by the party to be charged.
14
<PAGE> 167
(b) This Agreement is governed by the internal laws of the State
of Michigan (without regard to conflicts of law principles).
(c) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but together they shall constitute one and the same
instrument, and facsimile copies of signatures shall be treated as original
signatures for all purposes.
(d) This Agreement is binding on each of the Borrower and Riviera
and their respective successors and assigns and shall inure to the benefit of
NBD and its successors and assigns.
(e) If any provision of this Agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such offending
provision shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate any
other provision of this Agreement.
(f) Defined terms used in this Agreement without definition shall
have the meanings given to them under the Credit Agreement.
24. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or inducements
which have been made to any signatory hereto to cause such signatory to enter
into this Agreement other than those which are set forth in this Agreement.
25. REAFFIRMATION OF GUARANTY. Riviera hereby reaffirms each and every
term of its Guaranty (as more fully described herein) as it relates to the
payment and performance of the Obligations of Borrower owing to NBD, and further
affirms that the terms of its Guaranty extend to payment and performance of any
Obligations of Borrower that may remain after its merger with and into Riviera.
26. WAIVER OF JURY TRIAL AND ACKNOWLEDGEMENT. THE PARTIES HERETO
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT
THIS RIGHT MAY BE WAIVED. NBD, THE BORROWER AND RIVIERA EACH HEREBY KNOWINGLY,
VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL
DISPUTES BETWEEN NBD AND ANY OTHER PARTY HERETO ARISING OUT OF OR IN ANY
RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS OR RELATIONSHIPS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
15
<PAGE> 168
EACH OF THE PARTIES ACKNOWLEDGE THAT (1) IT HAS BEEN GIVEN THE
OPPORTUNITY TO CONSULT WITH COUNSEL AND OTHER ADVISORS OF ITS CHOICE AND, AFTER
CONSULTING WITH SUCH COUNSEL AND ADVISORS, KNOWINGLY, VOLUNTARILY AND WITHOUT
DURESS, COERCION, 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, (3)
IT HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT AND IS NOT RELYING ON THE OPINIONS OR ADVICE OF NBD OR ITS AGENTS OR
REPRESENTATIVES IN ENTERING INTO THIS AGREEMENT.
27. STATUTE OF FRAUDS. THIS WRITTEN FORBEARANCE AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
28. CONDITIONS PRECEDENT. The following sections of this Agreement and
additional documents executed in connection herewith shall be effective only
following effectuation of the Merger: Section 2, Amendment to Stock Pledge
Agreement of Kenneth Rieth, Amendment to Stock Pledge Agreement of Riviera
Holding Company, and Amended and Restated Security Agreement. Additionally, the
Borrower shall notify NBD (and counsel to the Borrower shall notify counsel to
NBD) immediately following effectuation of the Merger, and shall sign
replacement notes in the name of the post-Merger entity immediately upon receipt
of same from NBD.
NBD BANK
By:
--------------------------
Its:
---------------------
[Signatures continued on next page]
16
<PAGE> 169
[Signatures continued from previous page]
RIVIERA DIE & TOOL, INC.
By: Peter C. Canepa
------------------------------
Its: C.F.O.
-----------------------------
Subscribed and sworn to before me this 31st day of October, 1996.
Carol S. Simonson
- ----------------------------------
Notary Public, County,
--------- ---
My Commission expires:
CAROL S. SIMONSON
Notary Public, Kent County, Michigan
My Commission Expires Oct 5, 2000
RIVIERA TOOL COMPANY
By: Peter C. Canepa
------------------------------
Its: C.F.O.
-----------------------------
Subscribed and sworn to before me this 31st day of October, 1996.
Carol S. Simonson
- ----------------------------------
Notary Public, County,
--------- ---
My Commission expires:
CAROL S. SIMONSON
Notary Public, Kent County, Michigan
My Commission Expires Oct 5, 2000
17
<PAGE> 170
SIXTEENTH AMENDED AND RESTATED
WORKING CAPITAL REVOLVING CREDIT NOTE
$10,500,000.00 Grand Rapids, Michigan
Maturity Date: November 30, 1996 As of June 30, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of NBD
BANK, formerly known as NBD BANK, N.A., a national banking association (the
"Bank"), at 200 Ottawa Avenue, N.W., Grand Rapids, Michigan 49503, or at such
other place as the holder hereof may from time to time designate in writing,
the principal sum of Ten Million Five Hundred Thousand Dollars
($10,500,000.00), or so much of such sum as has been advanced and is
outstanding, plus accrued but unpaid interest thereon as specified below, on
September 30, 1996. The indebtedness outstanding hereunder from time to time
prior to maturity (whether by acceleration or otherwise) or the occurrence of
an Event of Default under the Loan Agreements (as hereinafter defined) shall
bear interest in lawful money of the United States, on the basis of a year of
360 days for the actual number of days elapsed in a month, at the rate
of 4 percentage points in excess of the Prime Rate; and after maturity or the
occurrence of an Event of Default under the Loan Agreements, at the rate of 7
percentage points in excess of the Prime Rate, until paid; however, in no event
shall the rate of interest be in excess of the highest rate permitted by law.
For purposes hereof, the "Prime Rate" is that rate of interest which the Bank
shall from time to time announce to be the Bank's Prime Rate. The Prime Rate
is set by the Bank based upon various factors, including its costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may make loans at, above or
below the Prime Rate. Any change in the Prime Rate shall immediately effect a
change in the rate of interest payable hereunder.
The undersigned shall pay all accrued interest monthly, commencing on July
1, 1996 and continuing on the first day of each month thereafter until and
including September 30, 1996, when the entire outstanding principal balance
plus all accrued but unpaid interest shall be due and payable in full.
Principal of and interest on this Sixteenth Amended and Restated Working
Capital Revolving Credit Note (this "Note") shall be payable in lawful money
of the United States of America. The undersigned agrees to pay all costs of
collection and enforcement of this Note, including reasonable attorneys' fees
and court costs.
This Note is given pursuant to, and is subject to the terms and conditions
of, a Credit Agreement dated April 20, 1988, as amended by a First Amendment to
Credit Agreement dated August 31, 1988, a Second Amendment to Credit Agreement
dated January 30, 1989, a Third Amendment to Credit Agreement dated January 30,
1990, a Fourth Amendment to Credit Agreement dated May 16, 1991, a Fifth
Amendment to Credit Agreement dated July 31, 1992, a Sixth Amendment to Credit
Agreement dated January 31, 1993, a Seventh Amendment to Credit Agreement dated
March 31, 1993, an Eighth Amendment to Credit Agreement dated July 26, 1993, a
Ninth Amendment to Credit Agreement dated March 4, 1994, Forbearance Agreement
dated April 14, 1994, a Tenth Amendment to Credit Agreement and Restated
<PAGE> 171
Forbearance Agreement dated May 5, 1994, an Eleventh Amendment to Credit
Agreement and Restated Forbearance Agreement dated as of December 1, 1994, a
Twelfth Amendment to Credit Agreement and Restated Forbearance Agreement dated
as of May 1, 1995, a Thirteenth Amendment to Credit Agreement and Restated
Forbearance Agreement dated as of September 1, 1995, a Fourteenth Amendment to
Credit Agreement and Forbearance Agreement dated as of January 1, 1996, a
Fifteenth Amendment to Credit Agreement and Restated Forbearance Agreement
dated effective as of January 1, 1996 and a Sixteenth Amendment to Credit
Agreement and Restated Forbearance Agreement dated as of June 30, 1996
(collectively, as they may be further modified, amended, and restated from time
to time, referred to as the "Loan Agreements"). Capitalized terms used but not
defined in this Note shall have the same meanings as in the Loan Agreements.
This Note is secured by, among other collateral, the collateral granted to the
Bank under the terms of the Loan Agreements (and all agreements referred to or
incorporated therein). The failure to make any payment when due under this
Note or the occurrence of any default under the Loan Agreements (or any other
agreements referred to or incorporated therein) shall be deemed a default
hereunder, and in any such events, the holder of this Note shall be entitled to
accelerate the maturity of the debt evidenced hereby and have all rights and
remedies afforded by law or available under the Loan Agreements (and all other
agreements referred to or incorporated therein).
This Note is in substitution and exchange for the Fifteenth Amended and
Restated Working Capital Revolving Credit Note dated as of April 1,
1996, in the original principal amount of $10,500,000.00 (the "Old Note") and
shall not in any circumstances be deemed a novation or to have paid,
terminated, extinguished or discharged the undersigned's indebtedness evidenced
by the Loan Agreements, all of which indebtedness shall continue under and be
evidenced and governed by this Note. The Old Note is consolidated, amended and
restated in this Note. Any reference in any other document or instrument
including but not limited to the Loan Agreements (and any agreement referred to
or incorporated therein) to the Old Note shall constitute a reference to this
Note.
The undersigned, and all endorsers and guarantors, hereby severally waive
valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or said endorsers or guarantors.
2
<PAGE> 172
This Note, made in the State of Michigan, shall be governed and construed
according to the internal laws of Michigan.
RIVIERA TOOL COMPANY,
successor by merger to Riviera Die & Tool, Inc. f/k/a
R.D.T., Inc., a Michigan corporation
By: Peter C. Canepa
---------------------------------
Name: Peter C. Canepa
--------------------------
Title: CFO
-------------------------
5460 Executive Parkway S.E.
Grand Rapids, Michigan 49512
3
<PAGE> 173
SIXTH AMENDED AND RESTATE TERM NOTE
$296,962.00 Grand Rapids, Michigan
Maturity Date: November 30, 1996 As of June 30, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of NBD
BANK, formerly known as NBD BANK, N.A., a national banking association (the
"Bank"), at 200 Ottawa Avenue, N.W., Grand Rapids, Michigan 49503, or at such
other place as the holder hereof may from time to time designate in writing,
the principal sum of Two Hundred Ninety-Six Thousand Nine Hundred Sixty-Two and
00/100 ($296,962.00), plus interest as specified below, payable in equal
consecutive monthly installments of principal of $40,000 each, commencing on
July 1, 1996, plus all accrued and unpaid interest thereon, and continuing on
the first day of each month thereafter through and including September 1, 1996,
with a final installment equal to the then outstanding principal balance plus
all accrued and unpaid interest, on September 30, 1996, the Maturity Date.
The indebtedness outstanding hereunder from time to time prior to maturity
(whether by acceleration or otherwise) or the occurrence of a default under
the Loan Agreements (as hereinafter defined) shall bear interest in lawful
money of the United States, on the basis of a year of 360 days for the actual
number of days elapsed in a month, at the per annum rate of 4 percentage points
in excess of the Prime Rate, and after maturity or the occurrence of a default
under the Loan Agreements, at the per annum rate of 7 percentage points in
excess of the Prime Rate, until paid. However, in no event shall the rate of
interest be in excess of the highest rate permitted by law. For purposes
hereof, the "Prime Rate" is that rate of interest which the Bank shall from
time to time announce to be the Bank's Prime Rate. The Prime Rate is set by
the Bank based upon various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans. The Bank may make loans at, above or below the Prime
Rate. Any change in the Prime Rate shall immediately effect a change in the
rate of interest payable hereunder.
Principal of and interest on this Sixth Amended and Restated Term Note
(this "Note") shall be payable in lawful money of the United States of
America. The undersigned agrees to pay all costs of collection and enforcement
of this Note including reasonable attorneys' fees and court costs.
At maturity of this Note, a balloon payment will be due. The Bank has
made no representations or promises to the undersigned, expressed or implied,
that the Bank will extend or postpone the due date of this Note or provide the
undersigned with any other loan or alternative financing with respect to the
balloon payment due at the maturity of this Note.
This Note is given pursuant to, and is subject to the terms and conditions
of, a Credit Agreement dated April 20, 1988, as amended by a First Amendment
to Credit Agreement dated August 31, 1988, a Second Amendment to Credit
Agreement dated January 30, 1989, a Third Amendment to Credit Agreement dated
January 30, 1990, a Fourth Amendment to Credit
<PAGE> 174
Agreement dated May 16, 1991, a Fifth Amendment to Credit Agreement dated
July 31, 1992, a Sixth Amendment to Credit Agreement dated January 31, 1993, a
Seventh Amendment to Credit Agreement dated March 31, 1993, an Eighth Amendment
to Credit Agreement dated July 26, 1993, a Ninth Amendment to Credit Agreement
dated March 4, 1994, Forbearance Agreement dated April 14, 1994, a Tenth
Amendment to Credit Agreement and Restated Forbearance Agreement dated May 5,
1994, an Eleventh Amendment to Credit Agreement and Restated Forbearance
Agreement dated as of December 1, 1994, a Twelfth Amendment to Credit Agreement
and Restated Forbearance Agreement dated as of May 1, 1995, a Thirteenth
Amendment to Credit Agreement and Restated Forbearance Agreement dated as of
September 1, 1995, a Fourteenth Amendment to Credit Agreement and Forbearance
Agreement dated as of January 1, 1996, a Fifteenth Amendment to Credit
Agreement dated effective as of April 1, 1996 and a Sixteenth Amendment to
Credit Agreement and Restated Forbearance Agreement dated as of June 30, 1996
(collectively, as they may be further modified, amended and restated from time
to time, referred to as the "Loan Agreements"). Capitalized terms used but not
defined in this Note shall have the same meanings as in the Loan Agreements.
This Note is secured by, among other collateral, the collateral granted to the
Bank under the terms of the Loan Agreements (and all agreements referred to or
incorporated therein). The failure to make any payment when due under this
Note or the occurrence of any default under the Loan Agreements (or any
other agreements referred to or incorporated therein) shall be deemed a default
hereunder, and in any such events, the holder of this Note shall be entitled to
accelerate the maturity of the debt evidenced hereby and have all rights and
remedies afforded by law or available under the Loan Agreements (and all other
agreements referred to or incorporated therein).
This Note is in substitution and exchange for a Fifth Amended and Restated
Term Note dated as of January 1, 1996, in the original principal amount
of $696,962.00 (the "Old Note"), and shall not be deemed a novation or to have
paid, terminated, extinguished or discharged the undersigned's indebtedness
evidenced by the Old Note, all of which indebtedness shall continue under and
be evidenced and governed by this Note. The Old Note is amended and restated
in its entirety by this Note. Any reference in any other document or
instrument (including but not limited to the Loan Agreements) to the Old Note
shall constitute a reference to this Note.
This Note may be prepaid in whole or in part at any time. All partial
prepayments shall be applied to the scheduled installments of principal
in inverse order of maturity.
The undersigned, and all endorsers and guarantors, hereby severally waive
valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or said endorsers or guarantors.
2
<PAGE> 175
This Note, made in the State of Michigan, shall be governed and construed
according to the internal laws of Michigan.
RIVIERA TOOL COMPANY,
successor by merger to Riviera Die & Tool, Inc. f/k/a
R.D.T., Inc., a Michigan corporation
By: /s/ PETER C. CANEPA
------------------------------------
Name: Peter C. Canepa
--------------------------
Title: CFO
-----------------
5460 Executive Parkway S.E.
Grand Rapids, Michigan 49512
3
<PAGE> 176
AMENDED AND RESTATED
GENERAL SECURITY AGREEMENT
(All Business Collateral)
RECITALS
A. On or about April 20, 1988, Riviera Die & Tool, Inc., formerly
known as R.D.T., Inc. ("Die"), and Riviera Tool Company, formerly known
as Riviera Die & Tool, Inc. ("Riviera") each separately executed each of the
following documents in favor of NBD Bank, formerly know as NBD Bank, N.A.
("NBD"), granting a first priority, properly perfected security interest in
substantially all of their respective personal property:
1. Security Agreement (Accounts, General Intangibles and Chattel
Paper);
2. Security Agreement (Inventory); and
3. Security Agreement (Equipment).
The foregoing are collectively referred to as the "Original Security
Documents".
B. In or about June 1996, Die and Riviera, Die's parent corporation
and guarantor of Die's obligations to NBD, contacted NBD to request that
NBD consent to a merger of Die and Riviera, with Riviera to be the surviving
corporation. NBD consented to this merger pursuant to the terms of a Sixteenth
Amendment to Credit Agreement and Restated Forbearance Agreement (the
"Sixteenth Amendment") of even date herewith.
C. As a condition of the Sixteenth Amendment, NBD, Die and Riviera
desire to enter into this Amended and Restated General Security
Agreement (All Business Collateral) in the name of both Die and Riviera to
continue the grant of security under the Original Security Documents and
to clarify that NBD continues to hold a security interest in and against any
and all personal property that Die may continue to own individually after its
merger into Riviera, and any and all personal property that Riviera may
continue to own individually after the merger.
WHEREFORE, based on the foregoing land other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Die and Riviera hereby agree as follows:
1. GRANT OF SECURITY INTEREST
The undersigned, Riviera Tool Company, a Michigan corporation, as
successor by merger to Riviera Die & Tool, Inc., f/k/a R.D.T., Inc., with
offices at 5460 Executive Parkway S.E., Grand Rapids, Michigan, 48512
(hereinafter collectively referred to as "Debtor"), grants to NBD Bank, a
Michigan banking corporation, with offices at 611 Woodward Avenue, Detroit,
Michigan
<PAGE> 177
48226 (hereinafter referred to as "NBD"), a first lien and security interest in
all of Debtor's now owned and hereafter acquired or arising: goods, equipment,
vehicles, fixtures, inventory, documents, general intangibles (including all
federal and state tax refunds, royalty payments such as under patent, trade
mark or other licensing arrangements, patents, trademarks and copyrights
[including but not limited to the patents, trademarks and copyrights listed on
Exhibit A attached to and made a part of this Agreement], proceeds of
condemnation, awards, proceeds of judgments and proceeds of fire and other
property insurance, such as business interruption insurance, all causes of
action (including, without limitation, causes of action and recoveries under 11
U.S.C. Sections 542 - 550 and 553), and all earned and unearned insurance
premium refunds) accounts, accounts receivable, contract rights, chattel paper,
choses in action and instruments, and all additions and accessions to, all
spare and repair parts, special tools, equipment and replacements for, all
returned or repossessed goods, the sale of which gave rise to, and all proceeds
and products of the foregoing wherever located ("Collateral") to secure all
Debtor's present and future debts, obligations and liabilities to NBD, its
parent corporation, its subsidiaries, and its affiliates (including NBD
Equipment Finance, Inc.) (each, an "NBD Affiliate" and collectively, the "NBD
Affiliates"), or any one or more of the foregoing, howsoever evidenced,
including, without limitation (1) all of Debtor's obligations to NBD under a
Credit Agreement, executed by Die, dated April 20, 1988, a Sixteenth Amendment
to Credit Agreement and Restated Forbearance Agreement, executed by Debtor,
dated June 30, 1996 (as may be amended or restated from time to time, and along
with all prior amendments and/or restatements, the "Loan Agreement") and under
all documents executed in connection therewith or referred to or incorporated
therein or other agreements between Debtor and NBD (and/or NBD Affiliates) of
even date or given hereafter; (2) all obligations now or hereafter guaranteed
or endorsed by Debtor; and (3) all costs of enforcement of the rights granted
to NBD under this General Security Agreement (this "Agreement"), such as
reasonable attorneys' fees and court costs (all of Debtor's obligations to NBD
and NBD Affiliates described in this paragraph are referred to
collectively as the "Obligations").
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) OWNERSHIP. Debtor is the owner of the Collateral free of all
encumbrances and security interests (except NBD's security interest and
Permitted Liens as defined in the Loan Agreement), and chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement (other than NBD's or Permitted Liens) is on file covering
the Collateral or any of it. If inventory is represented or covered by
documents of title, Debtor is the owner of the documents, free of all
encumbrances and security interests other than NBD's security interest and
warehouseman's charges, if any, not delinquent.
2
<PAGE> 178
(b) SALE OF GOODS OR SERVICES RENDERED. Each account and chattel paper
constituting Collateral arose from the performance of services by Debtor or
from a bona fide sale or lease of goods, which have been delivered or shipped
to the account debtor and for which Debtor has genuine invoices, shipping
documents or receipts.
(c) ENFORCEABILITY. Each account, contract right and chattel paper
constituting Collateral is genuine and enforceable against the account
debtor according to its terms. It and the transaction out of which it arose
comply with all applicable laws and regulations. The amount represented by
Debtor to NBD as owing by each account debtor is the amount actually owing, and
is not subject to setoff, credit, allowance or adjustment, except discount for
prompt payment, nor has any account debtor returned the goods or disputed
liability.
(d) DUE DATE. No payment on any account or chattel paper constituting
Collateral is more than 60 days overdue, there has been no default
according to the terms of any such Collateral and no step has been taken to
foreclose the security interest it evidences or otherwise enforce its payment.
(e) FINANCIAL CONDITION OF ACCOUNT DEBTOR. Debtor has no notice or
knowledge of anything which might impair the credit standing of any account
debtor.
(f) CONDITION. The inventory constituting Collateral is in good
condition and, in the case of goods held for sale (other than trade-ins
or repossessed goods), is new and unused except as NBD may otherwise consent in
writing.
(g) OTHER AGREEMENTS. Debtor is not in default under any agreement for
the payment of money.
(h) AUTHORITY TO CONTRACT. The execution and delivery of this
Agreement and any instruments evidencing Obligations will not violate or
constitute a breach of Debtor's Articles of Incorporation, Bylaws or any
agreement or restriction to which Debtor is a party or is subject.
(i) ACCURACY OF INFORMATION. All information, certificates or
statements given to NBD pursuant to this Agreement shall be true and
complete in all material respects, when given.
(j) ADDRESSES. The address of Debtor's chief executive office,
is as set forth above. The other address(es) of Debtor's
businesses, if any are ______________________________________. Such locations
shall not be changed without prior written consent of NBD, but the
Collateral, wherever located, is covered by this Agreement.
(k) CHANGE OF NAME OR ADDRESS. Debtor shall provide NBD 30 days prior
written notice of any change in its name or address.
3
<PAGE> 179
(l) FIXTURES. All fixtures, if any, will be affixed to real
estate, the legal description of which is contained on Exhibit B attached
hereto and made a part hereof, and the name of the record owner thereof, if not
Debtor, is specified on Exhibit B.
3. SALE AND COLLECTIONS
(a) SALE OF INVENTORY. So long as no event of default exists as to any
of the Obligations or under this Agreement, Debtor may: (i) sell inventory in
the ordinary course of Debtor's business; or (ii) with the prior written
consent of NBD, lease inventory on terms approved by NBD.
(b) VERIFICATION AND NOTIFICATION. NBD may verify Collateral in any
manner, at any time, and from time to time, and Debtor shall assist NBD in
so doing. Anything contained herein to the contrary notwithstanding, NBD may
at any time, and Debtor shall, thereafter, upon request of NBD, notify the
account debtors to make payment directly to NBD, and NBD may enforce collection
of, settle, compromise, extend or renew the indebtedness of such account
debtors. Until account debtors are otherwise notified, Debtor, as agent
for NBD, shall make collections on the Collateral. NBD may also, at any time,
notwithstanding any other provision of this Agreement, notify the bailee of any
Inventory of its security interest therein.
(c) DEPOSIT WITH NBD. If an Event of Default has occurred and notice of
such Event of Default has been given in writing to Debtor, then all proceeds of
Collateral received by Debtor shall be held by Debtor upon an express trust for
NBD, shall not be commingled with any other funds or property of Debtor, and
shall be turned over to NBD in precisely the form received (but endorsed by
Debtor if necessary for collection) not later than the business day following
the day of their receipt. If Debtor fails to endorse any item NBD, as Debtor's
attorney in fact, may endorse all such items. All proceeds of Collateral
received by NBD directly or from Debtor shall be applied against the
Obligations in such order and at such times as NBD shall determine.
(d) CLEARANCE OF CHECKS. All checks and other items shall be credited
to Debtor's account after allowing two (2) business days for clearance
thereof.
4. DEBTOR'S COVENANTS
Debtor agrees:
(a) MAINTENANCE OF COLLATERAL. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired; keep it free
from all liens, encumbrances and security interests (other than NBD's security
interest and Permitted Liens);
4
<PAGE> 180
defend it against all claims and legal proceedings by persons other than NBD;
pay and discharge when due all taxes, license fees, levies and other
charges upon it; not sell, lease or otherwise dispose of it or permit it to
become a fixture or an accession to other goods, except for sales or leases of
inventory as provided in this Agreement; not permit it to be used in violation
of any applicable law, regulation or policy of insurance; and, as to Collateral
consisting of instruments and chattel paper, preserve rights in it against
prior parties. Loss of or damage to the Collateral shall not release Debtor
from any of the Obligations.
(b) INSURANCE. Debtor shall keep the Collateral and NBD's interest in
it insured under policies with such provisions, for such amounts and by
such insurers as shall be satisfactory to NBD from time to time, and shall
furnish duplicate originals of all such policies of insurance to NBD, with
lender's loss payable or standard mortgagee endorsements showing NBD's interest
in such form as NBD shall approve. If an insured casualty has occurred then
(i) Debtor assigns (and directs any insurer to pay) to NBD the proceeds of all
such insurance and any premium refund, (ii) authorizes NBD to endorse in the
name of Debtor any instrument for such proceeds or refunds and, at the option
of NBD, to apply such proceeds and refunds to any unpaid balance of the
Obligations, whether or not due, and/or to restoration of the Collateral,
returning any excess to Debtor, and (iii) authorizes NBD, in the name of Debtor
or otherwise, to make, adjust and/or settle claims under any credit insurance
financed by NBD or any insurance on the Collateral, or cancel the same. All
such insurance policies shall contain a provision that no cancellation or
material alteration therein may be effected without giving NBD 30 days prior
written notice thereof.
(c) MAINTENANCE OF SECURITY INTEREST. Debtor shall pay all expenses,
and, upon request, take any action reasonably deemed advisable by NBD to
preserve the Collateral or to establish, determine priority of, perfect,
continue perfected, terminate and/or enforce NBD's interest in it or rights
under this Agreement.
(d) COLLATERAL RECORDS AND STATEMENTS. Debtor shall keep accurate
and complete records respecting the Collateral. At such times as NBD may
require, Debtor shall furnish to NBD a statement certified by the chief
financial officer of Debtor, and in such form and containing such information
as may be prescribed by NBD, showing the current status and value of the
Collateral.
(e) INSPECTION OF COLLATERAL. At reasonable times, during business
hours, NBD may examine the Collateral and Debtor's records pertaining to it,
wherever located, and make copies of records. Debtor shall assist NBD in so
doing.
(f) UNITED STATES CONTRACTS. If any accounts or contract rights
constituting Collateral arose out of contracts with the United States or any of
its departments, agencies or instrumentalities, Debtor will notify NBD and
execute writings required by NBD in order that all money due or to become due
under such contracts shall be assigned to NBD and proper notice of the
assignment given under the Federal Assignment of Claims Act, as amended, or
similar law now or hereafter in force.
5
<PAGE> 181
(g) MODIFICATIONS. Without the prior written consent of NBD, Debtor
shall not alter, modify, extend, renew or cancel any Collateral.
(h) RETURNS AND REPOSSESSIONS. Debtor shall promptly notify NBD of the
return to or repossession by Debtor of goods underlying any Collateral and if
requested by NBD, Debtor shall hold and dispose of them only as NBD directs.
5. RIGHTS OF NBD
(a) AUTHORITY TO PERFORM FOR DEBTOR. Upon the occurrence of an Event
of Default or if Debtor fails to perform any of Debtor's duties set forth in
this Agreement or in any evidence of or document or agreement relating to the
Obligations, NBD is authorized, in Debtor's name or otherwise, to take any such
action including, without limitation, signing Debtor's name or paying any
amount so required, and the cost shall be one of the Obligations secured by
this Agreement and shall be payable by Debtor upon demand, with interest at the
default rate specified in the Loan Agreement .
(b) POWERS OF ATTORNEY. Debtor irrevocably appoints any officer of NBD
as Debtor's attorney, with power to receive, open and dispose of all mail
addressed to Debtor; to notify the Post Office authorities to change the
address for delivery of all mail addressed to Debtor to such address as NBD may
designate; and to endorse the name of Debtor upon any instruments which may
come into NBD's possession. Debtor agrees that Obligations may be created by
drafts drawn on NBD by shippers of inventory to Debtor. Debtor authorizes NBD
to honor any such draft when accompanied by invoices aggregating the amount of
the draft and describing inventory to be shipped to Debtor. Debtor irrevocably
appoints any employee of NBD as Debtor's attorney, with full power to sign
Debtor's name on any instrument evidencing an Obligation, or any renewals or
extensions, for the amount of such drafts honored by NBD. Such instruments may
be payable at fixed times or on demand, and shall bear interest at the rate
from time to time fixed by NBD. Debtor agrees, upon request of NBD, to execute
any such instruments. All such powers of attorney being coupled with an
interest shall be irrevocable so long as any Obligation remains outstanding
to NBD. All acts of any such attorney are ratified and approved, and he or she
will not be liable for any act or omission or for any error of judgment or
mistake of fact or law.
(c) LEASE OF LEDGERS. In addition to NBD's other Collateral, Debtor
hereby grants NBD a lease and first security interest in all of Debtor's books
of accounts, ledgers, computer software, computer printouts and other
computerized records and cabinets in which there are reflected or maintained
the Collateral in which NBD has a security interest, or which relate to any
other Collateral NBD may hold from Debtor and all supporting evidence and
documents relating to such security in the form of written applications, credit
information, account cards, payment records, correspondence, delivery and
installation certificates, invoice copies, delivery receipts, notes and other
evidences of indebtedness, insurance certificates and the
6
<PAGE> 182
like. For convenience, these documents are called "Business Records".
The Business Records, presently included in this Agreement, are described as
follows:
accounts receivable subsidiary ledger including unpaid invoice file,
cash receipts journal, cash disbursements journal and filing cabinets
containing : customer orders, correspondence, paid invoice file and
any other books and records, filing cabinets, or places of storage of
data and information, including all computer storage facilities,
records and software usually located at 5460 Executive Parkway
S.E., Grand Rapids, Michigan 49512 or elsewhere.
(d) NON-LIABILITY OF NBD. NBD has no duty to determine the validity of
any invoice, the authority of any shipper to ship goods to Debtor or compliance
with any order of Debtor. NBD has no duty to protect, insure, collect or
realize upon the Collateral or preserve rights in it against prior parties.
Debtor releases NBD from any liability for any act or omission relating to the
Obligations, the Collateral or this Agreement, except NBD's willful misconduct.
6. EVENTS OF DEFAULT
The occurrence of an Event of Default or a default under (1) the Loan
Agreement or (2) under any other agreement between Debtor and NBD or Debtor and
any NBD Affiliate shall be deemed a default hereunder, as shall the
non-performance or inability to perform any of the covenants and agreements of
the Debtor in this Agreement. After the occurrence of default, all of the
Obligations due from the Debtor to NBD and each NBD Affiliate shall be
immediately due and payable at NBD's discretion.
7. REMEDIES
Upon the occurrence of an Event of Default, NBD shall have all rights and
remedies for default provided by the Uniform Commercial Code ("UCC") as well
as any other applicable law and any evidence of or document or agreement
relating to the Obligations. With respect to such rights and remedies:
(a) ASSEMBLING COLLATERAL. NBD may require Debtor to assemble
the Collateral and to make it available to NBD at any convenient place
designated by NBD.
(b) NOTICE OF DISPOSITION. Written notice, when required by law, sent
to any address of Debtor, shown as provided for in this Agreement, at least 15
calendar days (counting
7
<PAGE> 183
the day of sending) before the date of a proposed disposition of the
Collateral is reasonable notice.
(c) EXPENSES AND APPLICATION OF PROCEEDS. Debtor shall reimburse NBD
for any expense incurred by NBD in protecting or enforcing its rights under
this Agreement, including, without limitation, reasonable attorneys' fees and
court costs, and all expenses of taking possession, holding, preparing for
disposition and disposing of the Collateral. After deduction of such expenses,
NBD may apply the proceeds of disposition to the Obligations in such order and
amounts as it elects.
(d) WAIVER. NBD may permit Debtor to remedy any default without waiving
the default so remedied, and NBD may waive any default without waiving any
other subsequent or prior default by Debtor.
8. PERSONS BOUND
This Agreement benefits NBD, its successors and assigns, and binds the
Debtor and its personal representatives, successors and assigns. Neuter terms
as used herein shall also refer, where applicable, to the feminine
gender and the masculine gender and the singular reference shall also include
the plural of any word if the context so requires.
9. INTERPRETATION
To the extent permissible under the UCC, the validity, construction and
enforcement of this Agreement shall be determined and governed by the internal
laws of Michigan. All terms not otherwise defined have the meanings
assigned to them by the Michigan Uniform Commercial Code. Invalidity of
any provision of this Agreement shall not affect the validity of any other
provision.
10. LOAN AGREEMENT CONTROLS
Anything contained in this Agreement to the contrary notwithstanding, in
the event of an express conflict between the terms hereof and the terms of the
Loan Agreement, the terms and provisions of the Loan Agreement shall govern and
control. Terms defined in the Loan Agreement shall have the same meaning in
this Agreement.
Signed and delivered this ___ day of__________, 1996.
8
<PAGE> 184
RIVIERA DIE & TOOL, INC. RIVIERA TOOL COMPANY, successor by
merger to Riviera Die & Tool, Inc., f/k/a
R.D.T., Inc.
By: Peter C. Canepa By: Peter C. Canepa
------------------------ ---------------------------------
Name: Peter C. Canepa Name: Peter C. Canepa
----------------- --------------------------
Title: CFO Title: CFO
---------------- -------------------------
ACCEPTED AT DETROIT, MICHIGAN
ON THE DATE WRITTEN ABOVE:
NBD BANK
a Michigan bank corporation
By:
----------------------------
Name:
---------------------
Title:
-------------------
Exhibit A - List of Patents, Trademarks, and Copyrights
Exhibit B - Legal Description and Name of Record Owner
9
<PAGE> 1
EXHIBIT 10(h)
ASSIGNMENT OF STOCK OPTION
KNOW ALL MEN BY THESE PRESENTS, that Riviera Holding Company, a
Michigan corporation ("Riviera Holding") for and in consideration of Ten
Dollars ($10.00) and other good and valuable consideration, and in connection
with the issuance and public offering of 1,100,000 shares of the common stock
of Riviera Tool Company, a Michigan corporation ("Riviera"), pursuant to a
Registration Statement and Prospectus, Registration No. 333-14187 filed with
the Securities and Exchange Commission (altogether the "Offering"), does grant
and assign unto Riviera, its successors and assigns, its rights pursuant to a
Stock Option Agreement dated October 31, 1996 (the "Agreement") to purchase all
shares of the capital stock of Riviera held by Motor Wheel Corporation ("Motor
Wheel") upon or after the effective date of the Offering, subject to the
following conditions:
(1) Riviera Holding shall have and retain the right to exercise its
option pursuant to the Agreement and this Assignment shall be null and of no
further force and effect in the event that (i) within ten (10) days of written
notice to Riviera by Riviera Holding of its intent to exercise the option (the
"Option Period") Riviera does not exercise its option pursuant to this
Assignment by delivery of notice of exercise to both Motor Wheel and Riviera
Holding, and (ii) Riviera Holding actually exercises its option with ten (10)
days after the expiration of the Option Period.
(2) This assignment is expressly conditioned upon and may only be
exercised after the effective date of the Offering as set forth by the
Securities Exchange Commission.
If further contracts, agreements, documents or consents to assignment
are or shall be necessary or helpful to transfer to Riviera, or to allow
Riviera to fully own, use or exercise the rights hereby assigned, Riviera
Holding agrees to execute all such agreements, documents or consents in a
timely manner.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 24th day
of February, 1997.
RIVIERA HOLDING COMPANY
By: /s/ Kenneth K. Rieth
--------------------------------
Kenneth K. Rieth, President
RIVIERA TOOL COMPANY
By: /s/ Kenneth K. Rieth
--------------------------------
Kenneth K. Rieth, President
