AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
NOVEMBER 4, 1996
REGISTRATION NO. 333
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL BEARING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 3562 13-2796245
--------- -------- ------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation or Classification Code Number)
organization) Number)
44 High Street
West Nyack, New York 10994
(914) 358-6000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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DAVID L. GUSSACK
President
General Bearing Corporation
44 High Street
West Nyack, New York 10994
(914) 358-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Please address a copy of all communications to:
STEVEN L. WASSERMAN, JAMES M. JENKINS, ESQ.
ESQ. Harter, Secrest & Emery
Reid & Priest LLP 700 Midtown Tower
40 West 57th Street Rochester, New York
New York, New York 14604
10019 (716) 232-6500
(212) 603-2000
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Approximate date of commencement of proposed sale to the public: as
soon as practicable after this 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.
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM
OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
Common Stock, par 1,150,000 $10.00 $11,500,000 $3,485
value $.01 per share
(1) Includes 150,000 shares of Common Stock which the Underwriters have
the option to purchase to cover over-allotments, if any. See
"Underwriting."
(2) Estimated pursuant to Rule 457(a) solely for the purpose of
calculating the registration fee.
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, as amended, or until this
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
===========================================================================
<PAGE>
PROSPECTUS Subject to Completion
Preliminary Prospectus dated November , 1996
1,000,000 Shares
GENERAL BEARING CORPORATION
COMMON STOCK
All of the shares of Common Stock, par value $.01 per share, offered
hereby are being sold by General Bearing Corporation, a Delaware
corporation (the "Company"). Prior to this offering (the "Offering"),
there has been no public market for the Common Stock of the Company, and
there can be no assurance that an active market will develop. It is
currently estimated that the initial public offering price will be between
$8.00 and $10.00 per share of Common Stock. The offering price of the
Common Stock will be determined by negotiation between the Company and H.J.
Meyers & Co., Inc., the representative ("Representative") of the several
underwriters ("Underwriters"), and is not necessarily related to the
Company's asset value or any other established criterion of value. For the
method of determining the initial public offering price of the Common
Stock, see "Risk Factors" and "Underwriting." The Company has applied for
listing of the Common Stock on the NASDAQ SmallCap Market and The Pacific
Stock Exchange under the symbol "GENB."
---------------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
--------------------------------
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.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
Per Share . . . . . . $ $ $
Total(3) . . . . . . $ $ $
(1) Does not include additional compensation to be received by the
Representative in the form of (i) a non-accountable expense allowance
of $ (or $ if the Underwriters' over-allotment option
described in footnote (3) is exercised in full); and (ii) warrants to
purchase up to 100,000 shares of Common Stock at $ per share (that
being 120% of the initial public offering price), exercisable over a
period of four years, commencing one year from the date of this
Prospectus (the "Representative's Warrants"). In addition, the
Company has agreed to indemnify the Underwriters against certain civil
liabilities under the Securities Act of 1933, as amended (the "Act").
See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company,
estimated at $ , including the Representative's non-accountable
expense allowance.
(3) The Company has granted the Underwriters an option, exercisable within
45 business days of the date of this Prospectus, to purchase up to
150,000 additional shares of Common Stock on the same terms and
conditions as set forth above to cover over-allotments, if any. If
all such additional shares of Common Stock are purchased, the total
price to public, underwriting discounts and commissions and proceeds
to Company will be increased to $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock are offered on a "firm commitment" basis by
the Underwriters when, as and if delivered to and accepted by the
Underwriters, and subject to prior sale, withdrawal or cancellation of the
offer without notice. It is expected that delivery of the certificates
representing the shares of Common Stock will be made at the offices of H.J.
Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620 on or
about , 1996.
------------------------
H.J. MEYERS & CO., INC.
The date of this Prospectus is November __, 1996
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
The General is a trademark of, and Hyatt is a trademark licensed to, the
Company. This Prospectus also includes names, tradenames and trademarks of
other companies.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and must be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
Investors should consider carefully the information set forth under "Risk
Factors." Unless otherwise indicated, (i) the information set forth in
this Prospectus assumes no exercise of the Underwriters' over-allotment
option and (ii) all share and per share data gives effect to a 3,000-for-
one stock split effective as of October 10, 1996. Certain of the
information contained in this Prospectus Summary and elsewhere in this
Prospectus, including information with regard to the Company's strategy for
expanding operations and market share and related financing requirements,
are forward looking statements. For a discussion of important factors that
could affect such matters, see "Risk Factors." All references to the
Company's operations for a particular fiscal year refer to the 52-53 week
period ending on the last Saturday in December of such year. The 26 week
periods ending June 30, 1995 and June 29, 1996 are referred to herein as
the "1995 Interim Period" and the "1996 Interim Period," respectively.
THE COMPANY
General Bearing Corporation (the "Company") manufactures, sources,
assembles and distributes a variety of bearing components and bearing
products, including ball bearings, tapered roller bearings, spherical
roller bearings and cylindrical roller bearings under the Hyatt and The
General trademarks. The Company supplies original equipment manufacturers
("OEMs") and the industrial aftermarket principally in the United States
("U.S.") and Canada. The Company's products are used in a broad range of
applications, including automobiles, railroad cars, locomotives, trucks,
office equipment, machinery and appliances.
The Company operates in two divisions: the OEM Division, which
supplies OEMs, and the Distribution Division, which serves distributors
that supply the repair and maintenance aftermarket and small OEMs. Current
OEM Division customers include automotive and locomotive divisions of
General Motors Corporation ("GM"), Gunite Corporation, Strick Corporation,
Trinity Industries, Burlington Northern and Xerox Corporation. The
Distribution Division has customers ranging in size from Motion Industries
and Bearings, Inc., each of which has more than 400 outlets, to independent
single outlet operations. The Distribution Division's individual shipments
are typically smaller in volume but have higher gross margins.
Through flexibility in manufacturing and sourcing, as well as
attentive customer service, the Company strives to be a reliable,
innovative and cost effective provider of bearing components and products
to the approximately $5 billion per year U.S. bearing market. The
Company's strategy to accomplish this objective includes the following:
* PROVIDE HIGH QUALITY PRODUCTS AND SUPERIOR CUSTOMER SERVICE. The
Company maintains a detailed and extensive Quality Assurance Program
and has been certified to the M 1003 standard by the Association of
American Railroads ("AAR") and the MIL-I-45208 standard by General
Dynamics, a military contractor. The Company currently is taking
steps to obtain ISO 9001 and QS 9000 registrations from the
International Standards Organization ("ISO"). The Company also
requires that both its affiliated and unaffiliated suppliers conform
to Company and customer quality and engineering standards. Certain of
the Company's products also have been specifically certified by the
AAR for use in locomotives and railroad cars. In addition, leading
automobile and truck trailer manufacturers and national distributors
of bearings have qualified the Company as an authorized supplier.
These certifications and qualifications, which often take significant
time to obtain because of testing and other requirements, enable the
Company to supply large markets currently served by a limited number
of competitors and to which the Company's access had been limited
previously.
* PRESENCE IN CHINA. In 1987, the Company formed a joint venture,
Shanghai General Bearing Co. Ltd. ("SGBC"), in the People's Republic
of China ("PRC") to establish a low cost, quality controlled source
for bearings and bearing components. The Company has formed other
joint ventures in the PRC, and it continues to investigate joint
venture opportunities. The Company believes that potential customers
in the U.S. intending to establish or expand manufacturing and other
facilities in the PRC have, and will continue to have, an incentive to
purchase bearings from the Company in order to satisfy Chinese
counterpurchasing and local content requirements. In addition, the
U.S. Department of Commerce ("Commerce") has granted a preliminary
order with respect to SGBC revoking the applicability to it of an
antidumping order covering tapered roller bearings ("TRBs") issued in
1987. A final determination revoking the antidumping order as it
applies to SGBC would result in a direct benefit to the Company and
SGBC by eliminating costs associated with antidumping duties, yearly
antidumping investigations and other compliance requirements. The
Company knows of no such revocations pending for other companies and
believes its own revocation, if granted, will provide it with a
competitive advantage.
* MANUFACTURING AND SOURCING FLEXIBILITY. The Company operates on the
principle that a flexible method of combining product and component
purchasing with its own manufacturing and assembly capabilities can
provide customers with high quality products and cost advantages. The
Company uses its manufacturing, engineering and purchasing expertise
to determine the highest quality and most cost effective methods of
production. The Company currently sources bearing components and
products from approximately 24 factories outside the U.S. In order to
maintain the Company's flexibility to change within the marketplace,
the Company typically limits the term of its supply contracts to not
more than one year.
* NICHE MARKET PRODUCTS. Since 1992, the Company increasingly has
emphasized the sale of special and niche market bearings. Special
bearings are manufactured according to the design specifications of a
particular customer, often in cooperation with the Company's
engineering staff. Niche market bearings are used in specific
industries served by a limited number of manufacturers and are often
sold at higher profit margins than standard bearings. Sales of
special and niche market bearings by the Company have increased by
approximately 40% from fiscal 1993 to fiscal 1995.
* IMPROVED FINANCIAL POSITION AND CUSTOMER CONFIDENCE. In September
1991, the Company filed for bankruptcy protection as a result of its
inability to meet its obligations under a loan it incurred to acquire
the assets of Hyatt Clark Industries ("Hyatt"), formerly a division of
GM. In connection with the Company's reorganization, the Company took
significant steps to improve its operations and financial position and
reestablish the well-known Hyatt brand. As a result of these
efforts, the Company increased its sales from approximately $27.3
million in fiscal 1993, the last year in which the Company operated in
bankruptcy, to approximately $42.1 million in fiscal 1995, and
reported operating income of $354,000 for fiscal 1995 despite an
approximately $2.2 million charge due to customer damage claims,
compared to an operating loss of $387,000 for fiscal 1993. During the
1996 Interim Period, the Company recorded operating income of
approximately $1.5 million. During the bankruptcy, the Company lost
its status as an approved vendor to certain distributors of bearings
and bearing products. The Company believes that as a result of the
Offering it may be redesignated as an approved vendor by certain of
such distributors, enabling the Company to increase its distribution
sales. The Company also believes that the Offering will enhance
customer confidence in the Company's ability to undertake projects
requiring greater capital commitments by the Company.
As a result of the Company's improved financial condition,
certifications and qualifications, a favorable operating environment for
its Chinese joint ventures, its manufacturing and sourcing expertise and
focus on niche markets, the Company believes it is well positioned to
increase sales and profitability.
The Company was incorporated in 1958 by Seymour I. Gussack, its
current Chairman of the Board of Directors. The Company's principal
executive offices are located at 44 High Street, West Nyack, New York
10994, and its telephone number is (914) 358-6000.
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per share and share data)
52-53 Week Period Ended 26 Week Period Ended
December December December June June
25, 31, 30, 30, 29,
1993 1994 1995 1995 1996
-------- ------- -------
------- --------
STATEMENT OF
OPERATIONS DATA:
Sales. . . . . . $27,254 $37,032 $42,070 $22,853 $21,007
Gross profit . . 6,529 8,548 10,001 5,540 5,261
Provision for
customer damage
claims . . . . . -- -- 2,152(2) 2,152(2) --
Operating income
(loss) . . . (387) 874 354 (444) 1,509
Income (loss)
before
extraordinary
income . . . . . (365) 255 (1,729) (2,265) 517
Extraordinary
item . . . . . . 15,836(1) 108 - - -
Net income
(loss). . . . . . 15,471 363 (1,729) (2,265) 517
Net income (loss)
per share . . . . .67 .12 (.58) (.76) .17
Shares used in
calculating net
income (loss)
per share(3). . .
23,125,000 3,000,0003,000,000 3,000,000 3,000,000
JUNE 29, 1996
-----------------------------------
-
BALANCE SHEET DATA: ACTUAL AS ADJUSTED(4)
-----------------------------------
-
Working capital . . . . . . . . . . . . . . . . . . $03,359 $
Total assets . . . . . . . . . . . . . . . . . . . . 24,401
Current liabilities . . . . . . . . . . . . . . . . . 17,226
Long-term debt (less current maturities) . . . . . . 4,717
Stockholders' equity . . . . . . . . . . . . . . . . 2,458
(1) In December 1993, the Company emerged from a bankruptcy reorganization
which commenced in September 1991. In connection with its Plan of
Reorganization, the Company issued to World Machinery Company
("World"), which prior to the Offering owned all of the Company's
Common Stock, (i) a 6% Secured Promissory Note due 1998 in the
original principal amount of $2.5 million (the "Secured Note"), (ii) a
non-interest bearing, Unsecured Promissory Note in the principal
amount of $750,142 payable in annual installments of $125,000
commencing December 1993 (the "Installment Note") and (iii) 1,000
shares of Common Stock, in exchange for a note in the original
principal amount of $12.0 million, together with accrued interest
thereon in the amount of $2,701,416 (the "Discharged Obligation").
World acquired the Discharged Obligation from Wells Fargo Bank
N.A.("Wells Fargo"), which provided financing for the Company's
purchase of Hyatt in March 1987 and for working capital. The
difference between the amount of the Discharged Obligation and the
principal amounts of the notes and the value attributed to the Common
Stock issued to World in exchange for the Discharged Obligation,
$11,451,174, has been recorded as "Extraordinary Income settlement
of debts at a discount." In addition, unsecured creditors of the
Company were offered a cash settlement equal to 5% of their
outstanding pre-petition claims or, in the alternative, 10% of such
claims, payable 2% per year for five years, which resulted in an
additional reduction in obligations of $3,974,480. See "Risk Factors
Bankruptcy Reorganization," "Company History," "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" and Notes to Consolidated Financial Statements.
(2) In April 1995, three railroads reported to the AAR problems with a
total of eight bearings which had overheated due to friction that was
attributed to misplaced seals on the Company's tapered journal
bearings. The Company agreed with the AAR to recall and replace all
Company tapered journal bearings that had been shipped. In
anticipation of the expenses related to the reimbursement, recall and
rework, the Company accrued a one-time charge of approximately $2.2
million in fiscal 1995. See "Risk Factors Product Recall."
(3) For an explanation of the number of shares used to calculate net
income (loss) per share, see "Consolidated Financial Statements
Summary of significant accounting policies."
(4) Adjusted to reflect the application of the estimated net proceeds of
this Offering, after deducting underwriting discounts and commissions
and estimated Offering expenses. See "Use of Proceeds" and
"Capitalization."
<PAGE>
THE OFFERING
Common Stock Offered by
the Company . . . . . . . . . . . . . 1,000,000 shares
Common Stock to be Outstanding
after the Offering(1) . . . . . . . . 4,000,000 shares
Expansion of manufacturing capacity,
working capital and general corporate
Use of Proceeds . . . . . . . . . . . purposes
Proposed NASDAQ SmallCap and
Pacific Stock Exchange Symbol . . . . "GENB"
----------------------------------
(1) Excludes (i) 500,000 shares reserved for issuance pursuant to the
Company's 1996 Stock Option and Performance Award Plan ("1996 Option
Plan"), of which options to purchase 257,500 shares of Common Stock at
the price offered to the public in the Offering have been granted
subject to certain vesting periods, and (ii) 100,000 shares of Common
Stock issuable upon exercise of the Representative's Warrants.
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high
degree of risk and should not be made by persons who cannot afford the
loss of their entire investment. Prospective investors, prior to
making an investment decision, should consider carefully, in addition
to the other information contained in this Prospectus (including the
financial statements and notes thereto), the following factors. This
Prospectus contains, in addition to historical information, forward-
looking statements that involve risks and uncertainties. The
Company's actual results could differ materially. Factors that could
cause or contribute to such differences include, but are not limited
to, those discussed below, as well as those discussed elsewhere in
this Prospectus.
BANKRUPTCY REORGANIZATION
In 1987, the Company purchased the assets of Hyatt, a
manufacturer of TRBs for automotive OEM and railway markets and
cylindrical roller bearings for locomotive applications. In order to
finance the purchase and related working capital requirements, the
Company borrowed $12.0 million from Wells Fargo. As a result of a
number of factors, including litigation between local residents and
the Town of Orangetown, New York challenging the establishment of a
Company production facility, the Company was delayed in reestablishing
the production of Hyatt products. During the litigation, the Company
continued to maintain the Hyatt assets and related executive,
maintenance and production staff at the facility in New Jersey at
which they had been located. However, the Company could not operate
the facilities without potentially incurring liability as an operator
under applicable environmental laws. The expenses incurred to
maintain the assets and staff before production commenced materially
and adversely affected the Company's financial position. In addition,
the delays adversely affected the Company's efforts to regain Hyatt's
market share for journal boxes (locomotive axle bearings), traction
motor bearings (part of the drive motor of a locomotive) and TRBs
(automobiles). Sales of journal boxes and traction motor bearings by
the Company were limited to $776,000 in 1987 and approximately $2.0
million in 1988, compared to sales by Hyatt of approximately $11.0
million in 1986. In addition, Hyatt sales of TRBs aggregated
approximately $70.3 million in 1985 and the Company did not have any
sales of such Hyatt products for 1987 or 1988. As a result of a lack
of sales, the Company became unable to meet its obligations under its
loan agreement with Wells Fargo, and filed for protection under
Chapter 11 of the U.S. Bankruptcy Code in September 1991. In
connection with its reorganization in bankruptcy, the Company took
significant steps to improve its operations and financial position,
leading to profitability in 1994. The Company's long-term viability,
however, will depend upon its ability to sustain profitable results of
operations. There can be no assurance that such results can or will
be sustained. See "Company History."
PRODUCT RECALL
In January 1995, the Company initiated shipments of Hyatt tapered
journal bearings (a type of TRB), which are used in the manufacture
and maintenance of railroad freight cars. Through April 1995, the
Company shipped approximately 10,000 tapered journal bearings to five
railroad car manufacturing customers: Trinity Industries, Inc.
("Trinity"), National Steel Car Company, Thrall Car Manufacturing, TTX
Company and American Allied Railway Equipment Company. During
April 1995, three railroads, CSX, Burlington Northern and Southern
Pacific, reported to the AAR problems with a total of eight bearings,
which had overheated due to friction that was attributed to misplaced
seals. The AAR and the Company investigated the reports and the AAR
issued a warning notice to all railroads. The Company agreed with the
AAR to recall and replace all Company bearings which had been shipped.
Claims were submitted to the Company by railroad car manufacturers and
railroads for replacement bearings and damages, including incidental
damages, related to the recall. In anticipation of the expenses
related to the reimbursement, recall and rework, the Company accrued a
one-time charge of approximately $2.2 million in fiscal 1995, which
resulted in the Company incurring a net loss of approximately $1.8
million for fiscal 1995. As of June 29, 1996, the Company had
replaced all recalled tapered journal bearings and had paid more than
90% of the claims. The Company satisfied approximately 83% of the
claims by shipping new tapered journal bearings. The Company's
liability insurance carrier agreed to reimburse the Company
approximately $440,000 for certain claims attributable to incidental
damages, of which approximately $395,000 has been received by the
Company through September 1996. After completing its investigation,
in September 1995, the AAR approved the Company's tapered journal
bearings for use in railroad freight cars, conditioned upon the
Company providing information to the AAR about the number of bearings
returned from service, submitting a written proposal for further
handling of roller bearing components that were returned and making
arrangements for an AAR representative to witness the teardown of a
sample of the recalled roller bearings. The Company satisfied these
conditions and, in addition to shipping bearings to replace those
removed from railroad freight cars, has received orders for new
tapered journal bearings from various customers. The Company believes
that its Quality Assurance Program (as described herein) has reduced
the possibility of future recalls. However, any additional recalls
could have a material adverse effect on the Company's reputation,
business, results of operations and financial condition. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Business."
LOSS OF CERTIFICATIONS AND QUALIFICATIONS
In order to supply certain OEMs, particularly automotive
manufacturers and manufacturers of railroad freight cars and
locomotives, the Company is required to qualify with such customers
and may have to obtain certifications and registrations from the ISO,
as well as other certifying organizations. There can be no assurance
that the Company will be successful in maintaining its certifications
or qualifications in the future. From time to time, the Company also
may be subject to requirements by customers to obtain certifications
and qualifications which it does not currently possess. GM has
requested that the Company meet by December 1997 the QS 9000 standard,
a standard jointly developed by GM, Ford Motor Company and Chrysler
Corporation that has all the basic systems of ISO 9000 with additional
requirements specific to the automotive industry. The Company is
unable to anticipate or predict changes in the requirements to
maintain existing certifications or qualifications, or to obtain
additional ones. A failure to meet existing or additional
certifications or qualifications requirements may have a material
adverse effect on the business and results of operations of the
Company. See "Business Quality and Customer Service Programs."
OPERATING RESULTS
The Company's industry is characterized by relatively narrow
profit margins and the Company's earnings depend significantly on its
ability to manufacture and distribute products efficiently and to
source products and components on favorable terms. Operating results
between 1987 and 1991 were adversely affected by the Company's
inability to service debt incurred in connection with its acquisition
of Hyatt, resulting in the Company's filing in 1991 for protection
under the federal bankruptcy laws. However, the Company's performance
has been, and future performance will, be subject to a number of
factors, including those beyond its control. Such factors include,
but are not limited to, economic downturns, increased competition and
price increases of components, raw materials and finished products
that the Company distributes. During periods of economic expansion,
when industrial production is increasing, the demand for bearings
normally increases. Likewise, during recessionary times, the bearing
industry is affected adversely by declines in demand and possible
increases in delinquent accounts receivable. In addition, operating
results may be adversely affected by losses incurred at Company joint
ventures, for which the Company accounts using the equity method. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Consolidated financial statements Summary of
significant accounting policies."
RELIANCE ON BORROWINGS UNDER REVOLVING CREDIT FACILITY; SUBSTANTIAL
INDEBTEDNESS
The Company has incurred substantial indebtedness to finance its
needs for working capital in the form of a $15.0 million revolving
credit facility ("the Revolving Credit Facility") from the Bank of New
York Commercial Corporation ("BNYCC"). At September 11, 1996, the
Company had indebtedness under the Revolving Credit Facility of
approximately $10,751,000, representing approximately 437% of
stockholders' equity as of June 29, 1996. Borrowings under the
Revolving Credit Facility are secured by the Company's accounts
receivable, inventory and various other assets, based on certain
acceptable coverage ratios. The Revolving Credit Facility contains
covenants which, among other things, limit the Company's ability to
incur additional indebtedness and require the Company to maintain
certain levels of working capital and satisfy other financial tests.
The Company has obtained several amendments to the Revolving Credit
Facility to increase the maximum amount permitted to be borrowed and
to increase the percentage of receivables or inventory used to
determine the amount available to be borrowed at any time. Since the
beginning of fiscal 1994, BNYCC has agreed on two occasions to
increase the amount available to be borrowed from the amount otherwise
permitted by the applicable percentages of receivables and inventory
(the "Overadvances"). In each case, the increase in availability was
based, in part, upon the agreement of David L. Gussack, the Company's
President, to personally guarantee payment of the Overadvances. In
addition, BNYCC may require the establishment of such reserves as it
may reasonably deem proper and necessary from time to time, thus
reducing the amounts that may otherwise be borrowed under the
Revolving Credit Facility. There can be no assurances that BNYCC will
agree to any future Overadvances, that David L. Gussack will provide,
if needed, additional personal guarantees or that BNYCC not require
additional reserves. As a result of the effects of the recall of
tapered journal bearings, as of December 31, 1995, the Company was not
in compliance with covenants requiring the maintenance of minimum
tangible net worth and of fixed charge coverage rates. BNYCC agreed
to waive such noncompliance and amended such covenants. There can be
no assurances, however, that BNYCC will grant any such waivers or
amendments in the future. As of June 29, 1996, the Company was in
compliance with all covenants under the Revolving Credit Facility and
all Overadvances due had been repaid. The Revolving Credit Facility
expires in June 1998. Based upon the Company's performance and 20
year relationship with BNYCC, the Company intends to request and
believes it may be able to obtain more favorable terms on the
Revolving Credit Facility upon the completion of the Offering,
although there can be no assurances it will be able to do so. The
Company's high level of indebtedness has the following important
consequences: (i) significant interest expense resulting in
substantial annual fixed charges; (ii) significant limitations on the
Company's ability to obtain financing, fund working capital
requirements, make capital expenditures and acquisitions and take
advantage of other significant business opportunities that may arise;
and (iii) increased vulnerability to adverse general economic and
industry conditions. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
COMPETITION
The ball and roller bearing industry is highly competitive. The
Company believes that competition in the industry is based principally
on engineering, experience, quality, price and the ability to meet
customer delivery requirements. Price competition in the industry
affects the Company's ability to increase prices on certain products
and, in some cases, subjects the Company to pressure from its
customers to reduce prices. While efforts to improve its
manufacturing and assembly processes have permitted the Company to
reduce costs through operating efficiencies, thereby improving
profitability, there can be no assurance that continued pricing
pressure will not have a material adverse effect on the Company's
operations. Additionally, many of the Company's competitors have
greater financial resources than the Company and there can be no
assurance that the Company will continue to be able to compete
efficiently with these larger manufacturers. The Company's ability to
compete with foreign based competitors also may be adversely affected
by an increase in the value of the U.S. dollar relative to foreign
currencies. See "Business Competition."
RELIANCE ON UNAFFILIATED MANUFACTURERS
The Company produces approximately 37% of the bearings that it
sells and obtains another 24% of components and finished products from
joint ventures in which it participates. The Company currently relies
on approximately 82 unaffiliated manufacturers to produce the
remaining 39% of the bearings that it distributes. The Company
maintains long term relationships with its unaffiliated manufacturing
sources, but does not have long term supply contracts with any of
them. In the event any of the Company's key unaffiliated
manufacturers become unable or unwilling to continue to manufacture
the Company's products, the Company would have to rely on other
current manufacturing sources or identify and qualify new unaffiliated
manufacturers. In such event, there can be no assurance that the
Company would be able to qualify such manufacturers for existing or
new products in a timely manner or that such manufacturers would
allocate sufficient capacity to the Company in order to meet the
Company's requirements. Any significant delay in the Company's
ability to obtain adequate supplies of its products from its current
or alternative sources could materially and adversely affect the
Company's business and results of operations. Additionally, although
the Company believes that it has good relationships with its
unaffiliated manufacturers and maintains good control with respect to
product specifications and quality, there can be no assurance that
these manufacturers will continue to produce products that are
consistent with the Company's quality and performance standards. In
this regard, the Company has occasionally received, and may in the
future continue to receive, shipments of product from unaffiliated
manufacturers that fail to conform to the Company's quality control
standards. In such event, unless the Company is able to obtain
replacement products in a timely manner, the Company risks the loss of
revenue resulting from the sale of such products. The failure of any
key unaffiliated manufacturer to supply products that conform to the
Company's standards could materially and adversely affect the
Company's results of operations and its reputation in the marketplace.
Furthermore, if the Company experiences significant increased demand,
which cannot be assured, or if an existing unaffiliated manufacturer
needs to be replaced, the Company may need to significantly expand its
manufacturing capacity, both from current and new manufacturing
sources. There can be no assurance that such additional manufacturing
capacity will be available when required on terms that are acceptable
to the Company. See "Business Sourcing and Manufacturing."
INTERNATIONAL OPERATIONS
The Company imports over half of its raw materials, components
and finished products from manufacturers, including joint ventures in
which the Company participates, located outside of the U.S., primarily
in the PRC. As a result, the Company's business is subject to the
risks generally associated with doing business abroad, such as foreign
governmental regulations, political unrest, disruptions or delays in
shipments and changes in economic conditions in countries in which the
Company's manufacturing sources, including both joint ventures and
unaffiliated manufacturers are located. These factors, among others,
could influence the Company's ability to manufacture its products or
procure certain materials. If any such factors were to render the
conduct of business in a particular country, including through joint
ventures in which the Company participates, undesirable or
impractical, there could be a material adverse effect on the Company's
results of operations and financial condition. The Company's
inventory purchases from manufacturers in the PRC, including both
joint venture partners and unaffiliated manufacturers, generally are
denominated in U.S. dollars. Unanticipated changes in the value of
the U.S. dollar relative to the value of certain foreign currencies
could have a material adverse effect on the Company's results of
operations and financial condition. Additionally, the Company's
business is subject to the risks associated with the imposition of
additional U.S. legislation and regulations relating to the
manufacture and importation of foreign manufactured products,
including duties, tariffs, taxes and other charges or restrictions.
The Company cannot predict whether additional U.S. duties, tariffs,
taxes or other charges or restrictions will be imposed upon the
importation of its products in the future, or what effect any such
actions would have on its business, financial condition and results of
operations. A significant portion of the Company's products is
produced in the PRC. From time to time, the U.S. government has
considered imposing punitive tariffs on certain exports from the PRC.
Such sanctions, if implemented, could have a material adverse effect
on the Company's results of operations and financial condition. In
addition, the Company obtains approximately 24% of the bearings that
it sells from joint ventures in which it participates. Although the
Company believes that its participation in joint ventures improves its
ability to monitor and control production and quality, the Company
does not exercise complete control over any such joint venture and may
be limited from exercising such control by local law. Moreover,
changes in foreign government regulations, political unrest or other
disruptions could threaten or result in the forfeiture of the
Company's investments in joint ventures or further limit the Company's
involvement in their governance or access to their products. See
"Management's Discussion and Analysis of Results of Operation and
Financial Condition" and "Business Sourcing and Manufacturing."
EFFECT OF ANTIDUMPING CLAIMS
In May 1987, Commerce found that TRBs from certain countries,
including the PRC, were being sold in the U.S. at less than fair
value. Commerce subsequently issued antidumping orders imposing
duties on the unfairly traded TRBs equal to the percentage difference
between the selling prices in the U.S. and the foreign market value of
the imported TRBs during specified review periods. The order applied
to the Company's joint venture, SGBC, as a result of its exports to
the Company from the PRC, although SGBC has never itself been found to
have dumped any bearings or had imposed upon it any antidumping margin
in any final determination by Commerce. In June 1995, SGBC requested
a revocation of the order imposing antidumping duties with respect to
its products. Commerce issued a preliminary order granting such
revocation based upon, among other factors, SGBC not having sold TRBs
at less than foreign market value for three consecutive years. A
final determination revoking the antidumping order as it applies to
SGBC would result in a direct benefit to the Company and SGBC by
eliminating costs associated with antidumping duties, yearly
antidumping investigations and other compliance requirements.
However, there can be no assurance that there will be a final
determination revoking the antidumping order as it applies to SGBC or
that the Company or any of its sources and affiliated manufacturers
will not be subject to future antidumping claims. See "Business
Manufacturing and Sourcing."
PENDING LEGAL PROCEEDINGS
4 In February 1995, the Company and its indirect 50% subsidiary,
WMW Machinery, Inc. ("WMW"), commenced an action in the U.S. District
Court for the Southern District of New York against
Werkzeugmaschinenhandel GmbH im Aufbau ("WEMEX"), Werner P. Muender,
Treuhandanstalt and Bundesanstalt fur Vereinigungsbedingte
Sonderaufgaben (collectively, the "Defendants") alleging, among other
things, that: (i) WEMEX, the successor in liquidation to a former
East German export agency, breached a joint venture agreement with the
Company and a commercial sales agency agreement with WMW and violated
its duties to the Company and WMW arising under such agreements; (ii)
the Company relied to its detriment upon promises made by WEMEX to
support WMW's marketing efforts; and (iii) Werner P. Muender, the
liquidator of WEMEX, wrongfully converted property of WMW to his
benefit. WMW also is seeking a declaratory judgment that any
indebtedness it may owe to WEMEX be extinguished or diminished to the
extent of existing value of machine tools purchased by WMW from or
through WEMEX. Defendants answered the complaint, denying the
allegations therein, and WEMEX asserted counterclaims against: (i) WMW
for goods sold and delivered in the amount of $9,507,337; (ii) Seymour
I. Gussack and WMW Machinery Company, Inc. ("WMW Machinery Co.") in
the amount of $9,507,337, alleging that Seymour I. Gussack improperly
caused the sale of WMW's assets to WMW Machinery Co.; and (iii) the
Company in the amount of $9,507,337, alleging that the Company
breached its fiduciary duty to WEMEX by failing to provide the working
capital requirements of WMW. WMW, the Company, WMW Machinery Co. and
Seymour I. Gussack have denied any liability to WEMEX and believe its
counterclaims to be without merit. However, there can be no assurance
the case will be resolved in a timely manner or settled to the
satisfaction of the Company. Furthermore, the enforcement of an award
favorable to the Company may be subject to further review by German
courts. Defendants have also moved to dismiss the action based on
various grounds including, among others, the Foreign Sovereign
Immunities Act of 1976, the Act of State Doctrine, forum non
conveniens, legal insufficiency of certain claims and improper venue.
WMW, the Company, WMW Machinery Co. and Seymour I. Gussack have
opposed Defendants' motion for dismissal, arguing that, if the Court
dismisses the Company's claims, it should also dismiss the Defendants'
counterclaims. There can be no assurance, however, that if the court
dismisses the action in its entirety, the Defendants will not
institute an action in Germany, which may be a less favorable forum
for the Company. In addition, if the Defendants prevail in their
counterclaim against the Company for the amount claimed and the
Company is unsuccessful in its claims against the Defendants, there
would be a material adverse effect on the Company's financial
condition. See "Business Legal Proceedings."
ENVIRONMENTAL COMPLIANCE
The Company's operations involve the handling and use of
substances, such as various cleaning fluids used to remove grease from
metal, that are subject to federal, state and local environmental laws
and regulations that impose limitations on the discharge of pollutants
into the soil, air and water and establish standards for their storage
and disposal. Based on information compiled to date, management
believes that the Company's current operations are in material
compliance with applicable environmental laws and regulations, the
violation of which would have a material adverse effect on the
Company. There can be no assurance, however, that currently unknown
matters, new laws and regulations, or stricter interpretations of
existing laws and regulations will not materially affect the Company's
business or operations in the future. See "Business Environmental
Compliance."
DEPENDENCE ON EXISTING MANAGEMENT AND KEY PERSONNEL
Seymour I. Gussack, Chairman of the Board of Directors of the
Company, has been instrumental in the development and implementation
of the Company's business strategy since the Company's inception in
1958. David L. Gussack, the Company's President, has been responsible
for the daily operations of the Company since 1991 and has
participated in the development of the Company's business strategy
since 1987. Seymour I. Gussack currently devotes his time and
attention primarily to matters of business strategy rather than to the
daily operations of the Company. The loss or interruption of the
continued services of either Seymour I. Gussack or David L. Gussack
could have a material adverse effect on the Company. The Company does
not have employment agreements with, or key man life insurance on, any
of its directors, officers or employees, including Seymour I. Gussack
and David L. Gussack. See "Management."
BROAD DISCRETION IN USE OF PROCEEDS
Approximately $5.5 million ( %) of the estimated $ million of
net proceeds from this Offering (along with any net proceeds derived
from the exercise of the Underwriters' over-allotment option) will be
used by the Company for working capital and applied to general
corporate purposes. Accordingly, the Company's management will have
broad discretion as to the application of such proceeds. See "Use of
Proceeds."
TAX LOSS CARRYFORWARD
At December 30, 1995, the Company had net operating loss carry
forwards ("NOLs") aggregating approximately $13.2 million, which
expire in various years through 2010. Under Section 382 of the
Internal Revenue Code of 1986, as amended, (the "Code"), the amount of
NOLs that can be used in any year is subject to restriction if an
ownership change occurs. Under Section 382 of the Code, an "ownership
change" occurs if the percentage of stock of the corporation owned
actually or constructively by one or more "5-percent Shareholders"
increases by more than 50 percentage points relative to the lowest
percentage of stock of the corporation owned by such 5-percent
Shareholders at any time during the statutory "testing period"
(generally, the past three years). An ownership change will not occur
as a result of this Offering. A "5-percent Shareholder" is a person
who, at any time during the testing period, owns at least five percent
of the stock of the corporation (not including certain nonvoting,
nonparticipating preferred stock), and all stock owned by shareholders
who are not 5-percent Shareholders is generally treated as being owned
by one 5-percent Shareholder. Accordingly, future equity offerings by
the Company or sales by its principal stockholder could limit the use
of NOLs. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of the Offering, World will hold approximately
75% of the Common Stock of the Company. World's two directors are
Seymour I. Gussack and David L. Gussack, who own 19.6% and 17.6%,
respectively, of the Common Stock of World. In addition, two other
directors of the Company are stockholders of World. As a result,
World will be in a position to control the management and policies of
the Company, including, but not limited to, electing or removing the
Company's Board of Directors, changing the core business of the
Company, causing or restricting the sale of the Company, causing the
Company to engage in transactions with affiliated companies and
controlling the Company's dividend policy. See "Principal
Stockholder."
EFFECT OF CERTAIN ANTITAKEOVER PROVISIONS
It is possible that the ability of the Company to issue Preferred
Stock and certain provisions of the General Corporation Law of the
State of Delaware may discourage other persons from making a tender
offer for or acquiring substantial amounts of the Company's Common
Stock. This could have the incidental effect of inhibiting changes in
management and also may prevent temporary fluctuations in the market
price for the Common Stock which can result from actual or rumored
takeover attempts. In addition, the limited liability and
indemnification provisions of the Company's Certificate of
Incorporation and By-laws may discourage stockholders from bringing a
lawsuit against directors for breaches of fiduciary duty and may also
have the effect of reducing the likelihood of derivative litigation
against directors and officers even though such action, if successful,
might otherwise have benefitted the Company and its stockholders.
Furthermore, a stockholder's investment in the Company may be
adversely affected to the extent that costs of settlement and damage
awards against the Company's directors and officers are paid by the
Company pursuant to the indemnification provisions of its Certificate
of Incorporation or the indemnity provisions described above. See
"Description of Capital Stock."
EFFECT OF BLANK CHECK PREFERRED STOCK
The authorized capital stock of the Company includes 1,000,000
shares of preferred stock, par value $.01 per share (the "Preferred
Stock"). The Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions of any series of Preferred
Stock, including the dividend rights, original issue price, conversion
rights, voting rights, terms of redemption, liquidation preferences
and sinking fund terms thereof, and the number of shares constituting
any such series and the designation thereof and to increase or
decrease the number of shares of such series subsequent to the
issuance of shares of such series (but not below the number of shares
of such series then outstanding). Because the terms of the Preferred
Stock can be fixed by the Board of Directors without stockholder
action, the Preferred Stock could be issued quickly with terms
calculated to defeat a proposed takeover of the Company or to make the
removal of management more difficult. The Board of Directors, without
stockholder approval, could issue Preferred Stock with dividend,
voting and conversion rights which could adversely affect the rights
of the holders of Common Stock. See "Description of Securities."
DILUTION
This Offering involves immediate and substantial dilution between
the net tangible book value per share of Common Stock after the
Offering and the per share public offering price. See "Dilution."
DIVIDEND POLICY
The Company's management expects that all of the Company's future
earnings, if any, will be retained for expansion or development of the
Company's business and that no dividends will be declared or paid for
the foreseeable future. See "Dividend Policy."
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE
Prior to the Offering, there was no public market for the Common
Stock. The Company has applied for inclusion of the Common Stock in
the Nasdaq SmallCap Market and on the Pacific Stock Exchange. There
can be no assurance, however, that an active trading market will
develop in the Common Stock or that purchasers of the shares of Common
Stock will be able to resell their shares at prices equal to or
greater than the initial public offering price. The market for the
Common Stock will depend upon, among other things, the number of
holders thereof, the interest of securities dealers in maintaining a
market for the Common Stock and other factors beyond the control of
the Company. The initial public offering price will be determined by
negotiation between the Company and the Representative and may not
reflect the market price of the Common Stock after the Offering. See
"Underwriting" for factors considered in determining the initial
public offering price. The trading price of the Common Stock could be
subject to significant fluctuations in response to variations in
quarterly operating results, general trends in the Company's industry
and other factors.
SHARES ELIGIBLE FOR FUTURE SALE
The Company is unable to predict the effect that sales made
under Rule 144 under the Act (as defined below) or otherwise may have
on the market price of the Common Stock, but such sales could have a
depressive effect in the public market price of the Common Stock
offered hereby and may impair the Company's ability to raise
additional capital by the sale of its equity securities. See "Shares
of Common Stock Eligible for Future Sale."
EXERCISE OF REPRESENTATIVE'S WARRANTS
The Company has sold warrants for the purchase of Common Stock to
the Representative for nominal consideration as compensation for its
services in this Offering. The Representative's Warrants are
exercisable only upon the one-year anniversary of the closing of this
Offering and will continue to be exercisable until the five-year
anniversary of the closing of this offering, at a purchase price equal
to 120% of the initial public offering price of the Common Stock. The
Representative's Warrants may have certain dilutive effects because
the holders thereof will be given the opportunity to profit from a
rise in the market price of the underlying shares of Common Stock with
a resulting dilution in the interest of the Company's other
stockholders. The terms on which the Company could obtain additional
capital during the life of the Representative's Warrants may be
adversely affected because the holders of the Representative's
Warrants may exercise them at a time when the Company would otherwise
be able to obtain comparable additional capital in a new offering of
securities at a price per share greater than the exercise price of the
Representative's Warrants.
The Company has agreed that, at the request of the holders of the
Representative's Warrants under certain circumstances, it will
register under federal and state securities laws the Representative's
Warrants and the shares of Common Stock issuable thereunder. Exercise
of these registration rights could involve substantial expense to the
Company at a time when the Company may not be able to afford such
expenditures and may adversely affect both the terms upon which the
Company may obtain additional funding and the market price of the
Common Stock. In addition, no prediction can be made as to the
effect, if any, that sales of shares of Common Stock or the
availability of such shares of Common Stock for sale will have on the
market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of Common Stock may be sold in
the public market upon the exercise of the Representative's Warrants
may adversely affect prevailing market prices for the Common Stock and
could impair the Company's ability to raise capital through the sale
of its equity securities. See "Underwriting."
COMPANY HISTORY
The Company was founded in 1958 by Seymour I. Gussack, currently
the Chairman of the Board of Directors, as an engineering-oriented
supplier which designed bearings for a variety of special industrial
applications. In 1965, using its established sales force, the Company
began marketing standard precision bearings to OEMs. Product was
manufactured by the Company and also sourced from a network of
overseas producers. In 1975, the Company formed its Distribution
Division, which sold the Company's full line of products, both
manufactured and imported, to industrial distributors throughout the
U.S. In 1969, the Company built a manufacturing facility in North
Carolina and moved its domestic manufacturing operations there.
Bearings and bearing components produced at this facility were sold
primarily to the automotive industry. Sales of such products exceeded
$18.0 million per year by 1985, when the Company sold the facility and
executed a non-competition agreement that expired in December 1991.
In 1992, the Company initiated a marketing campaign to the automotive
industry, which yielded orders from GM beginning in 1995.
In October 1987, the Company purchased the assets of Hyatt, which
was then in bankruptcy proceedings. Hyatt was primarily a
manufacturer of TRBs for the automotive and railroad industries. The
Company borrowed $12.0 million from Wells Fargo to finance the
transaction and to provide the Company with working capital. The
transaction presented to the Company the opportunity to: (i) acquire
a large amount of equipment to establish new domestic manufacturing
capabilities and to form a manufacturing joint venture in the PRC;
(ii) utilize the well-recognized Hyatt trademark and other
intellectual property; (iii) gain entry into the TRB market; and (iv)
have access to the railroad market for locomotive bearings. In 1985,
Hyatt's last full year of production prior to filing for bankruptcy
protection, its sales were approximately $70.3 million, of which
approximately $11.0 million represented railroad product sales. In
1987, portions of the assets acquired from Hyatt were used to
establish a new TRB manufacturing facility in Union, New Jersey.
In 1987, the Company also established a joint venture, SGBC, in
Shanghai, PRC. The joint venture agreement provided for SGBC to
manufacture bearing and bearing components. The Company's initial
contribution to the joint venture was the TRB production equipment
acquired from Hyatt in 1986, including hot and cold forming equipment,
heat treating, machining, grinding and roller manufacturing equipment
to be used in a 100,000 square foot manufacturing facility in
Shanghai, PRC. Until 1994, the facility operated as a captive supply
source to the Company, exporting its production solely to the Company
for sales in the U.S. to Company customers. In 1994, SGBC was
certified as a supplier of bearings to Shanghai Volkswagen.
Nonetheless, for the term of the joint venture SGBC still may only
sell in the U.S. to the Company. See "Business."
As a result of a number factors, including litigation that
precluded the Company from establishing a production facility in New
York adjacent to a Company distribution facility, the Company was
delayed in starting production of the Hyatt product lines, which,
combined with the requirements of establishing SGBC, adversely
affected the Company's liquidity. In September 1991, as a result of
its continuing inability to meet interest payments and related
obligations under its loan agreements, principally its loan agreement
with Wells Fargo, the Company filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. In connection with its reorganization in
bankruptcy, the Company took significant steps to improve its
operations and financial position. These steps included consolidating
operations and facilities, reducing general, administrative and
production costs, improving inventory management and refocusing the
Company on certain core businesses, including the sale of higher
margin TRBs. Partially as a result of these efforts, the Company
increased sales from approximately $27.3 million for fiscal 1993, the
last year in which the Company operated in bankruptcy, to
approximately $37.0 million and $42.1 million for fiscal 1994 and
fiscal 1995, respectively, and had operating income of $874,000 for
fiscal 1994 and of $354,000 for fiscal 1995, despite an approximately
$2.2 million charge in fiscal 1995 due to customer damage claims,
compared to an operating loss of $387,000 for fiscal 1993. During the
1996 Interim Period, The Company recorded operating income of
approximately $1.5 million. In connection with the bankruptcy
reorganization, the Company also used proceeds from the liquidation of
excess inventory to substantially reduce its obligations under its
Revolving Credit Facility. In December 1992, World, a corporation
controlled by Seymour I. Gussack and members of his family, including
David L. Gussack, currently the Company's President and Chief
Executive Officer, purchased the Discharged Obligation from Wells
Fargo. The Company's Plan of Reorganization was confirmed by the U.S.
Bankruptcy Court for the Southern District of New York in November
1993. In connection with the Plan of Reorganization, the Company
issued to World, in exchange for the Discharged Obligation, the
Secured Note, the Installment Note and 1,000 shares of Common Stock,
representing all of the Company's issued and outstanding shares of
capital stock. See "Certain Relationships and Related Transactions."
DILUTION
At June 29, 1996, the net tangible book value of the Company was
approximately $2.5 million, or $0.82 per share. Net tangible book
value per share represents the Company's total tangible assets less
total liabilities divided by the total number of shares of Common
Stock outstanding. Net tangible book value dilution per share
represents the difference between the amount per share paid by the
purchasers of Common Stock in the Offering and the pro forma net
tangible book value per share of Common Stock immediately after
completion of the Offering. After giving effect to the sale by the
Company of the 1,000,000 shares of Common Stock offered hereby, at an
assumed initial public offering price of $9.00 per share, and receipt
by the Company of the estimated net proceeds therefrom, the pro forma
net tangible book value of the Company at June 29, 1996, would have
been approximately $10.1 million, or $2.53 per share. This represents
an immediate increase in net tangible book value of $1.71 per share to
existing holders of Common Stock and an immediate dilution of $6.47
per share to purchasers of shares of Common Stock in the Offering, as
illustrated by the following:
Assumed initial public offering price
per share (1) . . . . . . . . . . . . . . . $9.00
Net tangible book value per share
at June 29, 1996 . . . . . . . . . . $0.82
Increase per share attributable to $1.71
the Offering . . . . . . . . . . . . . -----
Pro forma net tangible book value per $2.53
share after the Offering . . . . . . . . . ------
$6.47
Dilution per share to new investors(2) . . . =====
_________
(1) Before deducting the estimated underwriting discounts,
commissions and expenses of this Offering.
(2) Excludes (i) 500,000 shares reserved for issuance under the 1996
Option Plan, of which options to purchase 257,500 shares of
Common Stock at the price to the public in this Offering have
been granted subject to certain vesting periods, and (ii) 100,000
shares of Common Stock issuable upon exercise of the
Representative's Warrants. See Management 1996 Stock Option
and Performance Award Plan.
The following table summarizes, on a pro forma basis as of June
29, 1996, the difference between the number of shares of Common Stock
purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders and by new
public investors purchasing shares in this Offering (at an assumed
initial public offering price of $9.00 per share and before deduction
of estimated underwriting discounts and commissions and offering
expenses payable by the Company):
Average
SHARES PURCHASED TOTAL CONSIDERATION
Price
----------------- --------------
Per
Number Percent Amount Percent Share
------- ------ -------- ------ --------
Existing - -
stockholders . 3,000,000 75.0% $1 (1)
New public
investors . . . 1,000,000 25.0% $9,000,000 100.0% $9.00
--------- ------ ----------- -------
Total . . . . 4,000,000 100.0% $9,000,001 100.0%
========= ====== =========== =======
_________
(1) In December 1993, the Company emerged from a bankruptcy
reorganization which commenced in September 1991. In connection
with its Plan of Reorganization, the Company issued to World,
which prior to the Offering owned all of the Company's Common
Stock, (i) the Secured Note in the original principal amount of
$2.5 million, (ii) the Installment Note in the principal amount
of $750,142 and (iii) 1,000 shares of Common Stock, in exchange
for a note in the original principal amount of $12.0 million,
together with accrued interest thereon in the amount of
$2,701,416. World acquired the Discharged Obligation from Wells
Fargo, which provided financing for the Company's purchase of
Hyatt in March 1987 and for working capital.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000
shares of Common Stock being offered by the Company hereby, at an
assumed initial public offering price of $9.00 per share, after
deducting estimated underwriting discounts and commissions and
expenses of the Offering payable by the Company, are estimated to be
approximately $_______ ($_____ if the Underwriter's over-allotment
option is exercised in full). The Company anticipates using
approximately $2.0 million to expand its manufacturing capacity,
particularly for the production of tapered roller bearings and ball
bearings supplied to the automotive industry, including possible
investments in joint ventures abroad or by providing equipment to
vendors for use at their facilities under the guidelines of certain
supply agreements. As of the date hereof, the Company has not
committed to enter into any joint venture or other arrangement with
vendors that would be funded with the proceeds of the Offering. Of
the remaining net proceeds, the Company anticipates using
approximately $1.0 million for expanded marketing and research and
development and approximately $5.5 million for working capital,
general corporate purposes and possibly the acquisition of the
business or assets of other bearings manufacturers. However, the
Company at the present time has not identified any acquisition
candidates. Pending the application of the net proceeds for such
purposes, the Company intends to use such proceeds to repay
outstanding borrowings under the Revolving Credit Facility. As of
September 11, 1996, the Company had outstanding borrowings under the
Revolving Credit Facility of $10,751,000. The Revolving Credit
Facility currently terminates in June 1998 and will remain available
through that date, with or without payment of outstanding borrowings
with the proceeds of the Offering. The Revolving Credit Facility
allows for borrowings, from time to time, not to exceed the lesser of
$15.0 million or an amount equal to the sum of (i) 85% of eligible
receivables, as defined, (ii) 50% of eligible inventory, as defined,
consisting of raw materials, (iii) 50% of eligible inventory, as
defined, consisting of finished goods, and (iv) 50% of eligible
inventory, as defined, in transit under letters of credit less the sum
of (i) the aggregate amount of outstanding letters of credit and (ii)
such reserves as the lender may reasonably deem proper and necessary
from time to time. Based upon such formula, as of Sept. 11, 1996, the
maximum amount the Company could borrow under the Revolving Credit
Facility was $11.4 million. Amounts outstanding under the Revolving
Credit Facility bear interest at the bank's base rate (8.25% per annum
at August 15, 1996) plus 2.0%. Based upon the Company's performance
and 20 year relationship with BNYCC, the Company intends to seek and
believes it may be able to obtain more favorable terms on the
Revolving Credit Facility upon the completion of the Offering,
although there can be no assurance it will be able to do so. See
"Management's Discussion and Analysis of Results of Operations and
Financial Condition." The foregoing represents the Company's best
estimate of the allocation of the net proceeds of the Offering based
upon current economic and industry conditions and the current state of
its business operations and plans. The application of proceeds for
any particular purpose will depend on a number of factors, including
the timing of expenditures, other business and acquisition
opportunities, the availability of funds from operations or other
sources. As a result, the Company may find it desirable, and reserves
the right, to change the allocation of funds.
DIVIDEND POLICY
The Company currently expects that it will retain all future
earnings for use in the operation and expansion of its business and
does not anticipate paying any cash dividends in the foreseeable
future. In addition, the Company is subject to restrictions against
the payment of dividends under the terms of the Revolving Credit
Facility. See "Risk Factors Reliance on Borrowings under Revolving
Credit Facility, Substantial Indebtedness."
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company
at June 29, 1996 and as adjusted to give effect to (i) the sale by the
Company of 1,000,000 shares of Common Stock at the assumed public
offering price of $9.00 per share, less estimated underwriting
discounts and commissions and expenses of the Offering payable by the
Company, and (ii) the application of the estimated net proceeds of
this Offering. See "Use of Proceeds."
Actual As Adjusted
------- -----------
Note payable bank and current maturities
of long-term debt . . . . . . . . . . . . $10,595,148 $
=========== ===========
Long-term debt (less current maturities) $4,717,374 $
---------- ----------
Stockholders' equity:
Preferred Stock, par value $.01 per
share, 1,000,000 shares authorized;
none issued
Common Stock, par value $.01 per
share, 19,000,000 shares
authorized; 3,000,000 shares issued
and outstanding; 30,000 40,000
4,000,000 shares issued and
outstanding, as adjusted (1) . . . .
Additional paid-in capital . . . . . 12,203,250
Accumulated deficit . . . . . . . . (9,775,705) ________
-----------
Total stockholders' equity . . . . . 2,457,545
----------- --------
Total capitalization . . . . . $7,397,759 $
========== ==========
_____________
(1) Excludes (i) 500,000 shares of Common Stock reserved for issuance
under the 1996 Option Plan, of which options to purchase 257,500
shares of Common Stock at the price offered to the public in the
Offering have been granted subject to certain vesting periods,
and (ii) 100,000 shares of Common Stock issuable upon exercise of
the Representative's Warrants.
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the financial statements and
notes thereto that appear elsewhere herein. The statement of
operations balance sheet data for the 1991, 1992, 1993, 1994 and 1995
fiscal years have been derived from the financial statements of the
Company, which financial statements have been compiled with respect to
the 1991 and 1992 fiscal years, and audited with respect to the 1993
and 1994 fiscal years by Ferro, Berdon & Company, L.L.P. independent
public accountants, as indicated in their report included elsewhere
herein. The financial statements as of and for the 1995 fiscal year
have been audited by BDO Seidman, LLP, independent public accountants,
as indicated in their report included elsewhere herein. The selected
financial data as of and for the 1995 and 1996 Interim Periods have
been derived without audit from the Company's interim financial
statements. In the opinion of Management, the unaudited financial
statements include all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of the
results of operations for the periods. The results for the 1996
Interim Period are not necessarily indicative of the results that may
be expected for 1996 fiscal year or in any other future period.
52-53 WEEK PERIOD ENDED
IN THOUSANDS EXCEPT
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31,
FOR SHARE AND 1991 1992 1993 1994
PER SHARE DATA ------ ------ ------ -----
Statement of
Operations Data:
Sales $32,146 $27,155 $27,254 $37,032
24,289 20,738 20,724 28,484
Cost of sales ------- ------- ------- -------
7,859 6,417 6,529 8,548
Gross profit ------- ------- ------- -------
Selling, general and
administrative
expenses 8,806 6,762 6,916 7,674
Provision for
Customer Damage -
Claims ----- ----- ----- -----
Operating income (949) (345) (387) 874
(loss) ------ ------ ------- -----
Interest expense (2,517) (671) (513) (990)
Equity in income
(loss) of affiliate (390) (662) (183) 403
Other (expense) 12 (350) 717 (32)
income ------- ------- ------ ------
Income (loss) before
reduction of
carrying value of
assets, income tax
(benefit) and (3,844) (2,028) (365) 255
extraordinary item ------- -------- -------- ------
Reduction of
carrying value
of assets (1,451) (7,441)
--
Income tax (benefit) ------- ------- -------- -------
Income (loss)
before
extraordinary
item (5,295) (9,469)(1) (365) 255
Extraordinary - - 15,836(2) 108
item --------- --------- ---------- ---------
$ (5,295) $(9,469) $15,471 $363
Net income (Loss) ======== ========= ========= ========
Net income (Loss) $(.22) $(.39) $.67 $.12
per share ======== ========= ========= =======
Shares used in
calculating net 24,000,000 24,000,000 23,125,000 3,000,000
income per share ======== ========= ========= ========
DECEMBER 30, JUNE 30, JUNE 29,
OR SHARE AND 1995 1995 1996
PER SHARE DATA ----- ----- -----
Statement of
Operations Data:
Sales $42,070 $22,853 $21,007
32,069 17,314 15,746
Cost of sales -------- ------- -------
10,001 5,540 5,261
Gross profit -------- ------- -------
Selling, general and
administrative expenses 7,495 3,831 3,751
Provision for Customer 2,152(3) 2,152(3)
Damage Claims --------- -------- -------
354 (444) 1,509
Operating income (loss) ------- -------- -------
Interest expense (1,428) (696) (675)
Equity in income (loss) of
affiliate 78 (7)
(1,233) (1,118)
Other (expense) income -------- --------- -------
Income (loss) before
reduction of carrying
value of assets,
income tax (benefit) (2,229) (2,265) 835
and extraordinary item -------- -------- -------
Reduction of
carrying value
of assets
(500) 318
Income tax (benefit) -------- ------- --------
Income (loss) before
extraordinary item (1,729) (2,265) 517
-
Extraordinary item ---------- ---------- ---------
$(1,729) $(2,265) $517
Net income (Loss) ======== ======= =======
Net income (Loss) $(.58) $(.76) $.17
per share ====== ======= =======
3,000,000
Shares used in calculating 3,000,000 3,000,000 =======
net income per share ======== =========
52-53 WEEK PERIOD ENDED
DECEMBER 28, DECEMBER 26, DECEMBER 25,
IN THOUSANDS EXCEPT 1991 1992 1993
FOR PER SHARE DATA ---- ----- -----
BALANCE SHEET DATA:
Working capital $3,353 $3,091 $3,842
Total assets 28,319 15,913 17,618
Long-term debt
(excluding current
portion) 14,850 14,920 4,512
Stockholders' equity (5,969) (15,265) 3,306
26 WEEK PERIOD
52-53 WEEK PERIOD ENDED ENDED
DECEMBER 31, DECEMBER 30, JUNE 29,
IN THOUSANDS EXCEPT 1994 1995 1996
FOR PER SHARE DATA -------- ----- -----
BALANCE SHEET DATA:
Working capital $4,686 $2,793 $3,359
Total assets 24,143 27,086 24,401
Long-term debt
(excluding current
portion) 5,218 4,817 4,717
Stockholders' equity 3,670 1,941 2,458
(1) On September 16, 1991, the Company filed for bankruptcy protection
under Chapter 11 of the U.S. Bankruptcy Code. As part of its
bankruptcy reorganization, the Company incurred losses on: (a) the
liquidation of inventory of approximately $4.9 million; (b) the write-
down of plant and equipment of approximately $3.0 million; and (c) the
write down of intangible assets of $1.0 million in fiscal 1991 and
1992. Additionally, the Company incurred approximately $360,000 of
bankruptcy related costs in 1991 and 1992 which are reflected in other
income (expense).
(2) In December 1993, the Company emerged from a bankruptcy reorganization
which commenced in September 1991. In connection with the Plan of
Reorganization, the Company issued to World, which prior to the
Offering owned all of the Company's Common Stock, the Secured Note,
the Installment Note and 1,000 shares of Common Stock in exchange for
the Discharged Obligation. World acquired the Discharged Obligation
from Wells Fargo, which provided financing for the Company's purchase
of Hyatt in March 1987 and for working capital. The difference
between the amount of the Discharged Obligation and the principal
amounts of the notes and the value attributed to the Common Stock
issued to World in exchange for the Discharged Obligation,
$11,451,174, has been recorded as "Extraordinary Income settlement
of debts at a discount." In addition, unsecured creditors were
offered a cash settlement equal to 5% of their outstanding pre-
petition claims or, in the alternative, 10% of such claims, payable 2%
per year for five years resulting in a reduction in obligations of
$3,974,480. See "Risk Factors Bankruptcy Reorganization," "Company
History," "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and Note 14 of Notes to
Consolidated Financial Statements.
(3) In April 1995, three railroads reported to the AAR problems with a
total of eight bearing assemblies which had overheated due to friction
that was attributed to misplaced seals on the Company's tapered
journal bearings. The Company agreed with AAR to recall and replace
all Company tapered journal bearings that had been shipped. In
anticipation of the expenses related to the reimbursement, recall and
rework, the Company accrued a one-time charge of approximately $2.2
million in fiscal 1995. See "Risk Factors Product Recall."
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with, and
is qualified in its entirety by, the Financial Statements and the Notes
thereto and Selected Financial Data included elsewhere in this Prospectus.
Historical operating results and percentage relationships among any amounts
included in the Financial Statements are not necessarily indicative of
trends in operating results.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the
percentage of the Company's sales represented by each income statement line
item presented.
As a Percentage of Sales
--------------------------
Six Months Years Ended
Ended ------------
-------------
---
June June Dec. Dec. Dec.
30, 29, 25, 31, 30,
1995 1996 1993 1994 1995
------ ------ ------- ------ -------
-- - -
Net sales . . . . . . . . .
100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold . . . 75.8 75.0 76.0 76.9 76.2
Gross profit . . . . . 24.2 25.0 24.0 23.1 23.8
Selling, general and
administrative expenses . . 16.8 17.9 25.4 20.7 17.8
Operating income (loss) . . (1.9) 7.2 (1.4) 2.4 0.8
Other (income) expense . . 8.0 3.2 (0.1) 1.7 6.1
Income (loss) before
extraordinary income . . . (9.9) 2.5 (1.3) 0.7 (4.1)
(9.9) 2.5 56.8 1.0 (4.1)
Net income (loss) . . . . .
===== ===== ===== ===== ======
1996 INTERIM PERIOD COMPARED TO 1995 INTERIM PERIOD (UNAUDITED)
Sales.
-------
The Company's sales decreased 8% from approximately $22.9 million for
the 1995 Interim Period to approximately $21.0 million for the 1996 Interim
Period. Sales of the OEM Division and the Distribution Division
represented 65% and 35% of total sales for 1996 Interim Period,
respectively, as compared to 67% and 33% of total sales for the 1995
Interim Period. The decrease in sales between the two periods reflected a
28% to 30% decline in the production of truck trailers, which resulted in a
reduction of truck trailer bearing sales of approximately $2.5 million,
despite an increase in the Company's market share for such bearings. The
Company expects that sales of bearings for truck trailers will remain
stable or increase gradually for the remainder of fiscal 1996. However,
there can be no assurance in this regard. In addition, a $300,000
reduction in sales of OEM ball bearings for various commodity applications
was attributable to the Company's strategy to de-emphasize sales of low
margin commodity bearings. These decreases in sales were partially offset
by an increase of approximately $1.1 million in sales of tapered journal
bearings used in railroad freight cars.
Cost of Sales.
---------------
The Company's cost of sales as a percentage of sales decreased from
75.8% for the 1995 Interim Period to 75% for the 1996 Interim Period. The
decrease was partially the result of the commencement of a program to
increase efficiency in plant operations. This program entails the
consolidation of operations between the Company's Union, New Jersey and
West Nyack, New York facilities, which will simplify tooling, personnel and
quality control functions. The decrease of cost of sales as a percentage
of sales also reflects the Company's strategy to de-emphasize sales of low
margin commodity bearings.
Selling, General and Administrative Expenses.
---------------------------------------------
Selling, general and administrative expenses remained constant at
approximately $3.8 million for each of the 1995 and 1996 Interim Periods,
although, as a percentage of sales, such expenses increased from 16.8% to
17.9%, respectively, due to a decrease in sales.
Provision for Customer Damage Claims.
--------------------------------------
In April 1995, three railroads reported to the AAR problems with eight of
the Company's bearings that were attributed to misplaced seals. The
Company agreed to recall approximately 10,000 tapered journal bearings. As
a result, the Company recorded a special provision of approximately $2.2
million during the 1995 Interim Period representing estimated liability for
rework costs and customer damage claims. See "Risk Factors Product
Recall."
Operating Income.
-------------------
Operating income increased to approximately $1.5 million for the 1996
Interim Period from an operating loss on $444,000 for the 1995 Interim
Period, which was the result of a customer damage claim of approximately
$2.2 million recorded in fiscal 1995.
Other Income (Expense).
-----------------------
Other expenses decreased by 63% from approximately $1.8 million for
the 1995 Interim Period to $675,000 for the 1996 Interim Period, primarily
as a result of the resolution of certain goodwill and certain equity
investments treatment.
Net Income (Loss).
-------------------
As a result of the factors discussed above, net income increased to
$517,000 for the 1996 Interim Period from a net loss of approximately $2.3
million for the 1995 Interim Period.
FISCAL 1995 COMPARED TO FISCAL 1994
Sales.
-------
The Company's sales increased 13.6% to approximately $42.1 million in
fiscal 1995 from approximately $37.0 million in fiscal 1994. This increase
in sales was attributable to increased penetration into the truck trailer
bearing market, as well as the market for special bearings, locomotive
journal boxes and ball bearings. Sales of the OEM Division increased 16.5%
from approximately $23.8 million in fiscal 1994 to approximately $27.7
million in fiscal 1995 and represented 66% of total sales in fiscal 1995 as
compared to 64% of total sales in fiscal 1994. Sales of the Distribution
Division increased 8.5% to approximately $14.4 million in fiscal 1995 from
approximately $13.3 million in fiscal 1994 and represented 34% of sales in
fiscal 1995 as compared to 36% of sales in fiscal 1994.
Cost of Sales.
--------------
Cost of sales increased by 12.6% to approximately $32.1 million in fiscal
1995 from approximately $28.5 million in fiscal 1994, reflecting increased
sales. However, cost of sales as a percentage of net sales declined from
76.9% in fiscal 1994 to 76.2% in fiscal 1995.
Selling, General and Administrative Expenses.
---------------------------------------------
Selling, general and administrative expenses remained stable at
approximately $7.5 million in fiscal 1995 compared to approximately $7.7
million in fiscal 1994. However, such expenses decreased as a percentage
of sales to 17.8% in fiscal 1995 from 20.7% in fiscal 1994, reflecting the
increase in sales and measures to control selling, general and
administrative expenses.
Provision for Customer Damage Claims.
--------------------------------------
In April 1995, three railroads reported to the AAR problems with eight of
the Company's bearings that were attributed to misplaced seals. The
Company agreed to recall approximately 10,000 tapered journal bearings. As
a result, the Company recorded a special provision of approximately $2.2
million in fiscal 1995 representing estimated liability for rework costs
and customer damage claims. See "Risk Factors Product Recall."
Operating Income.
-----------------
As a result of the factors described above, operating income decreased
59.5% to approximately $354,000 in fiscal 1995 from approximately $874,000
in fiscal 1994.
Other Income (Expense).
-----------------------
Other expenses increased 317% to approximately $2.6 million in fiscal
1995 from approximately $0.6 million in fiscal 1994. This increase
reflected a 44.2% increase in interest expense to $1.4 million in fiscal
1995 from $1.0 million in fiscal 1994, primarily as a result of an increase
in average borrowings under the Company's credit facility to fund working
capital requirements related to the increase in sales. Interest expense
during fiscal 1995 also included $180,000 of interest accrued with respect
to the Secured Note and 6% loans due December 1995 in the aggregate
principal amount of $1,000,000 owed to World. In fiscal 1995, the Company
had equity in income of an affiliate of approximately $79,000 compared to
equity in the income of affiliates of approximately $403,000 during fiscal
1994. During fiscal 1995 the Company had other expenses of approximately
$1.2 million compared to other expenses of approximately $32,000 in fiscal
1994 due to the write down of an investment in its Alurop subsidiary.
Net Income (Loss).
------------------
Due to the provision for customer damage claims and the write down of an
investment in a subsidiary, the Company had a net loss in fiscal 1995 of
approximately $1.7 million. For fiscal 1994, the Company had net income of
$363,237. For fiscal 1995, the Company did not need to apply a tax loss
carryforward because the Company had a net loss.
FISCAL 1994 COMPARED TO FISCAL 1993
Sales.
------
The Company's sales increased by 35.9% to approximately $37.0 million for
fiscal 1994 from approximately $27.3 million for fiscal 1993. The increase
was attributable to overall increases in orders from existing customers,
particularly sales in the Truck Trailer market, following the Company's
emergence from bankruptcy proceedings. Sales of the OEM Division increased
59.7% to approximately $23.8 million in fiscal 1994 from approximately
$14.9 million in fiscal 1993 and represented 64% of total sales in fiscal
1994 compared to 55% of total sales in fiscal 1993. This increase included
increased ball bearings sales of approximately $2.3 million, increased
tapered roller bearings sales of approximately $4.9 million, and increased
bearing component sales of approximately $1.4 million. Sales of the
Distribution Division increased 6.7% to approximately $13.3 million in
fiscal 1994 from approximately $12.4 million in fiscal 1993 and represented
36% of total sales in fiscal 1994 compared to 45% of total sales in fiscal
1993.
Cost of Sales.
--------------
Cost of sales increased by 37.4% to approximately $28.5 million for
fiscal 1994 from approximately $20.7 million for fiscal 1993. Cost of
sales as a percentage of sales increased to 76.9% in fiscal 1994 from 76.0%
in fiscal 1993 due to cost increases from certain component and raw
material vendors, which the Company could not completely pass through to
customers.
Selling, General and Administrative Expenses.
--------------------------------------------
Selling, general and administrative expenses increased by 11% to
approximately $7.7 million from approximately $6.9 million in fiscal 1993.
However, such expenses decreased as a percentage of sales to 20.7% in
fiscal 1994 from 25.4% in fiscal 1993 due to increasing sales while
controlling costs.
Operating Income.
-----------------
As a result of the factors discussed above, operating income was
approximately $874,000 for fiscal 1994, compared to an operating loss of
approximately $387,000 for fiscal 1993.
Other income (expense).
----------------------
Other expense increased to approximately $619,000 for fiscal 1994
compared to other income of approximately $22,000 for fiscal 1993. The
increase reflected a 93.0% increase in interest expense to approximately
$1.0 million, for fiscal 1994 from approximately $513,000 primarily as a
result of increased borrowings required to finance increases in sales,
offset in part by decreased average interest rates during fiscal 1994.
Interest expense during fiscal 1994 also included $210,000 accrued with
respect to the Secured Note and 6% loans due December 1995 in the aggregate
principal amount of $1.0 million owed to World. In fiscal 1994, the
Company also recognized equity in the income of an affiliate of
approximately $403,000 compared to equity in the loss of an affiliate and
other unconsolidated subsidiaries of approximately $183,000 during fiscal
1993. During fiscal 1994, the Company also had other expense of
approximately $32,000 as described above, compared to other income of
$717,355 during fiscal 1993 due, in part, to a recovery of legal fees from
a settled lawsuit, management fees and the refund of a cash deposit and
interest thereon from the U.S. Customs Service.
Net income.
------------
The Company had net income of approximately $363,000 for fiscal 1994,
reflecting increased sales and operating income, partially offset by
increased interest expense. For fiscal 1993, the Company had net income of
approximately $15.5 million as a result of extraordinary income of $15.8
resulting from the settlement of debts at a discount in the Company's
bankruptcy reorganization. Before giving effect to extraordinary income
and minority interest, the Company had a loss for fiscal 1993 of
approximately $365,000.
LIQUIDITY AND CAPITAL RESOURCES
During the three years ended December 31, 1995, the Company's primary
sources of capital have been net cash provided by operating activities,
bank borrowings and financing from affiliates. Working capital
requirements also have been financed through revolving credit borrowings.
The primary demands on the Company's capital resources have been the need
to fund inventory and receivables growth created in normal business
expansion. In 1996 there was an additional requirement for capital to fund
expenses associated with the tapered journal bearing recall. These demands
have been met through cash from operations and revolving debt.
The Company's arrangements with its North American customers typically
provide that payments are due within 30 days following the date of the
Company's shipment of goods, while arrangements with foreign customers are
generally on a letter of credit basis. Due to the continuing expansion of
the Company's sales, management believes that the Company's working capital
requirements will increase. The Company expects to fulfill this need with
a portion of the proceeds of the Offering.
At December 31, 1994, December 30, 1995, and June 29, 1996, the
Company had working capital of approximately $4.7 million, $2.8 million and
$3.4 million, respectively. Cash flow from operations for 1995 was
$194,000 as compared to cash outflow of ($4.7 million) during 1994. The
improvement in the Company's cash flow from operations primarily reflects
an increase in results of operations in 1995, offset by the tapered journal
bearing recall.
Historically, the Company has used cash provided by operations to fund
a portion of its operating requirements and capital expenditures. The
Company also has relied on borrowings under its $15.0 million Revolving
Credit Facility to fund operations. As of September 11, 1996, $10,751,000
was outstanding under the Revolving Credit Facility, which sums are secured
by the Company's accounts receivable, inventory and various other assets.
The Revolving Credit Facility currently terminates in June 1998 and will
remain available through that date, with or without payment of outstanding
borrowings with the proceeds of the Offering. The Revolving Credit
Facility allows for borrowings, from time to time, not to exceed the lesser
of $15.0 million or an amount equal to the sum of (i) 85% of eligible
receivables, as defined, (ii) 50% of eligible inventory, as defined,
consisting of raw materials, (iii) 50% of eligible inventory, as defined,
consisting of finished goods, and (iv) 50% of eligible inventory, as
defined, in transit under letters of credit less the sum of the (i) the
aggregate amount of outstanding letters of credit and (ii) such reserves as
the lender may reasonably deem proper and necessary from time to time.
Amounts outstanding under the Revolving Credit Facility bear interest at
the bank's base rate from time to time (8.25% per annum at August 15,
1996), plus 2.0%. Based upon the Company's performance and 20 year
relationship with BNYCC, The Company intends to request and believes it may
be able to obtain more favorable terms on the Revolving Credit Facility
upon completion of the Offering, although there can be no assurances it
will be able to do so. The Revolving Credit Facility contains covenants
that, among other things, limit the Company's ability to incur additional
indebtedness and requires the Company to maintain certain levels of working
capital and satisfy other financial tests. As of June 29, 1996, the
Company was in compliance with all covenants under the Revolving Credit
Facility.
The Company anticipates that capital expenditures for the current
fiscal year and the foreseeable future will be approximately $750,000 to
$1.0 million per year. However, the Company, from time to time, may
consider the implementation of programs to expand its operations, which
could increase capital expenditures above such level.
In June 1995, the Company obtained $1.56 million in term financing
from BNYCC, bearing interest at the bank's base rate from time to time
(8.25% at August 15, 1996) plus 2.0%. The term loan provides for 35
consecutive monthly payments of principal of $18,570, with the final
payment due on July 1, 1998. Proceeds of the term loan were primarily used
to reduce debt owed to World.
In connection with the Company's bankruptcy reorganization, the
Company issued the Secured Note and the Installment Note to World. The
Installment Note does not bear interest. Interest on the Secured Note
accrues annually on the initial principal amount but only is payable to the
extent of net income in excess of $400,000. The Company has accrued
$375,000 in unpaid interest under the Secured Note as of June 29, 1996.
The Secured Note is subordinated in right of payment to all other creditors
of the Company but is secured by a second lien on certain machines and
equipment of the Company with an aggregate value of approximately $1.4
million. See "Certain Relationships and Related Transactions."
The Company believes that funds generated from continuing operations,
the net proceeds of this Offering and borrowings under the Revolving Credit
Facility will be sufficient to finance the Company's anticipated working
capital needs and capital expenditure requirements for the next 24 months.
INFLATION
The effect of inflation on the Company has not been significant during
the last two fiscal years.
<PAGE>
BUSINESS
The Company manufactures, sources, assembles and distributes a variety
of bearing components and bearing products, including ball bearings,
tapered roller bearings, spherical roller bearings and cylindrical roller
bearings under the Hyatt and The General trademarks. The Company
supplies OEMs and the industrial aftermarket principally in the U.S. and
Canada. The Company's products are used in a broad range of applications,
including automobiles, railroad cars, locomotives, trucks, machinery and
appliances.
The Company operates in two divisions: the OEM Division, which
supplies OEMs, and the Distribution Division, which serves distributors
that supply the repair and maintenance aftermarket and small OEMs. Current
OEM Division customers include automotive and locomotive divisions of GM,
Gunite Corporation, Strick Corporation, Trinity Industries, Burlington
Northern and Xerox Corporation. The Distribution Division has customers
ranging in size from Motion Industries and Bearings, Inc., each of which
has over 400 outlets, to independent single outlet operations. The
Distribution Division's individual shipments are typically smaller in
volume but have higher gross margins.
Through flexibility in manufacturing and sourcing, as well as
attentive customer service, the Company strives to be a reliable,
innovative and cost effective provider of bearing component products to the
approximately $5 billion per year U.S. bearing market. The Company's
strategy to accomplish this objective includes the following:
* PROVIDE HIGH QUALITY PRODUCTS AND SUPERIOR CUSTOMER SERVICE. The
Company maintains a detailed and extensive Quality Assurance Program
and has been certified to the M 1003 standard by the AAR and the MIL-
I-45208 standard by General Dynamics, a military contractor. The
Company currently is taking steps to obtain IS0 9001 and QS 9000
registrations from the ISO. The Company also requires that both its
affiliated and unaffiliated suppliers conform to Company and customer
quality and engineering standards. Certain of the Company's products
also have been specifically certified by the AAR for use in
locomotives and railroad cars. In addition, leading automobile and
truck trailer manufacturers and national distributors of bearings also
have qualified the Company as an authorized supplier. These
certifications and qualifications, which take significant time to
obtain because of testing and other requirements, enable the Company
to supply large markets currently served by a limited number of
competitors and to which the Company's access had been limited
previously.
* PRESENCE IN CHINA. In 1987, the Company formed a joint venture,
SGBC, in the PRC to establish a low cost, quality controlled source
for bearings and bearing components. The Company has formed other
joint ventures in the PRC, and it continues to investigate joint
venture opportunities. The Company believes that potential customers
in the U.S. intending to establish or expand manufacturing and other
facilities in the PRC have, and will continue to have, an incentive to
purchase bearings from the Company in order to satisfy Chinese
counterpurchasing and local content requirements. In addition,
Commerce has granted a preliminary order with respect to SGBC revoking
the applicability to it of an antidumping order covering TRBs issued
in 1987. A final determination revoking the antidumping order as it
applies to SGBC would result in a direct benefit to the Company and
SGBC by eliminating costs associated with antidumping duties, yearly
antidumping investigations and other compliance requirements. The
Company knows of no such revocations pending for other companies and
believes its own revocation, if granted, will provide it with a
competitive advantage.
* MANUFACTURING AND SOURCING FLEXIBILITY. The Company operates on the
principle that a flexible method of combining product and component
purchasing with its own manufacturing and assembly capabilities can
provide customers with high quality products and cost advantages. The
Company uses its manufacturing, engineering and purchasing expertise
to determine the highest quality and most cost effective methods of
production. The Company currently sources bearing components and
products from approximately 24 factories outside the U.S. In order to
maintain the Company's flexibility to change with the marketplace, the
Company typically limits the term of its supply contracts to not more
than one year.
* NICHE MARKET PRODUCTS. Since 1992, the Company increasingly has
emphasized the sale of special and niche market bearings. Special
bearings are manufactured according to the design specifications of a
particular customer, often in cooperation with the Company's
engineering staff. Niche market bearings are used in specific
industries, served by a limited number of manufacturers and are often
sold at higher profit margins than standard bearings. Sales of
special and niche market bearings by the Company have increased by
approximately 40% from fiscal 1993 to fiscal 1995.
* IMPROVED FINANCIAL POSITION AND CUSTOMER CONFIDENCE. In September
1991, the Company filed for bankruptcy protection as a result of its
inability to meet its obligations under a loan it incurred to acquire
the assets of Hyatt, formerly a division of GM. In connection with
the Company's reorganization, the Company took significant steps to
improve its operations and financial position and reestablish the
well-known Hyatt brand. As a result of these efforts, the Company
increased its sales from approximately $27.3 million in fiscal 1993,
the last year in which the Company operated in bankruptcy, to
approximately $42.1 million in fiscal 1995, and reported operating
income of $354,000 for fiscal 1995 despite an approximately $2.2
million charge due to customer damage claims, compared to an operating
loss of $387,000 for fiscal 1993. During the 1996 Interim Period, the
Company recorded operating income of approximately $1.5 million.
During the bankruptcy, the Company lost its status as an approved
vendor to certain distributors of bearings and bearing products. The
Company believes that as a result of the Offering it may be
redesignated as an approved vendor by certain of such distributors,
enabling the Company to increase its distribution sales. The Company
also believes that the Offering will enhance customer confidence in
the Company's ability to undertake projects requiring greater capital
commitments by the Company.
As a result of the Company's improved financial condition,
certifications and qualifications, a favorable operating environment for
its Chinese joint ventures, its manufacturing and sourcing expertise and
focus on niche markets, the Company believes it is well positioned to
increase sales and profitability.
INDUSTRY OVERVIEW
Based upon statistics published by Commerce, shipments of antifriction
bearings and components in the U.S. exceeded $5.2 billion for 1995, an
increase of 11% over 1994. There has been an approximately 5% annual rate
of growth for antifriction bearings and components in the U.S. for the past
10 years. The industry's 1995 shipments included approximately
$1.9 billion of ball bearings, $1.3 billion of TRBs, $900 million of other
types of roller bearings, $450 million of mounted units and $589 million of
bearing components. Timken dominates the TRB market with estimated sales
in excess of $1 billion. The Company competes in segments of each of these
bearing classifications. The antifriction bearings industry historically
has been cyclical in nature, however long-term growth prospects are
expected to continue as the demand for application products requiring
antifriction bearings increases. Antifriction bearings are used in
practically every industrial and consumer product requiring reliable,
continuous circular motion.
PRODUCTS
The Company and its joint ventures manufacture and market high
quality, precision ball and roller bearings used in a broad range of
applications including automotive and trucking (e.g., steering columns,
drive trains and transmissions), railcar and locomotive (e.g., wheel and
axle assemblies), appliances (e.g., washing machines, fans and vacuum
cleaners), lawn and garden implements (e.g., lawn mowers), office equipment
(e.g., copiers), consumer products (e.g., bicycles), medical equipment
(e.g., wheelchairs), material handling (e.g., conveyor assemblies and hand
trucks), power tools (e.g., drills and lathes), chemical processing and the
oil industry (e.g., drilling rigs).
The Company sells approximately 2,000 products. The Company's product
line includes standard and metric precision ball bearings, double row ball
bearings, unground bearings, and special ball bearings. The Company offers
its products in standard, modified, and custom designs where appropriate.
The Company produces both special and niche market bearings. Special
bearings are specifically manufactured to the requirements of a customer,
as determined in cooperation with the Company's engineering staff.
Examples of these products include bearings for copier machines, automotive
steering columns, postal equipment and wheelchairs. Niche bearings are
bearings used in specific industries, and are produced by a limited number
of manufacturers. The Company produces, under the Hyatt brand, selected
TRBs, spherical roller bearings and cylindrical roller bearings which are
used in railroad, truck trailer, automotive and other industrial
applications.
MANUFACTURING AND SOURCING
The Company primarily manufactures and assembles bearings at its
facilities in New York and New Jersey, and, since 1987, at the Company's
joint venture facility, SGBC, in Shanghai, PRC. The Company believes that
it was among the first U.S. suppliers of ball and roller bearings to source
from and/or joint venture with suppliers from the PRC, Russia, Poland, the
former Yugoslavia and Japan. Although certain imports from various
locations have been subject to antidumping duties since 1987, requiring
importing companies to post cash deposits, SGBC, the Company's Chinese
joint venture and principal source of imported product, has not been
required to pay cash deposits for antidumping duties on TRBs imported from
the PRC since 1991, based upon Commerce's final determination as to the
fairness of SGBC's pricing that year. Based on such determination and
preliminary determinations for subsequent years, SGBC recently requested a
revocation of the applicability of the antidumping order to it. The
Company believes that of the approximately 400 bearing factories in the
PRC, SGBC is the only factory that Commerce has found to have had at least
three consecutive years of sales at not less than foreign market value.
Additionally, as of October 1996, the Company believes SGBC is the only TRB
producer in the PRC to have received a preliminary revocation of an
antidumping duty order.
The Company produces approximately 37% of the bearings that it sells
and obtains an additional 24% from joint ventures in which it participates.
The Company currently relies on approximately 82 unaffiliated manufacturers
to produce the remaining 39% of the bearings and components that it
distributes. The Company has no long-term contracts with its unaffiliated
manufacturing sources. The Company attempts to maintain sourcing
flexibility by not engaging in any purchasing contracts that exceed a one
year time period.
CHINESE JOINT VENTURES
The Company has entered into joint ventures with factories in the PRC
to enable it to secure a reliable source of high quality low cost bearings
and bearing components. By entering into joint ventures, rather than long
term manufacturing contracts, the Company is better able to monitor and
control production and quality assurance by having access to the factories
at both management and production levels. Furthermore, by sourcing from
joint ventures, the Company is not required to incur inventory carrying
costs, since the joint ventures typically hold all inventory until needed
by the Company. The joint ventures also provide a far less capital
intensive alternative to building a Company-owned facility.
SGBC was established by the Company and SRBF in June 1987 as a joint
venture limited liability company in accordance with PRC law for an initial
term of ten years, which was recently extended to June 2008. SGBC produces
tapered roller and ball bearings, which the Company imports into the U.S.
for further assembly, inspection, testing and distribution. The Company
contributed 25% of the initial capital of SGBC in the form of capital
equipment valued by the parties at $750,000 and the Company's joint venture
partner, SRBF, contributed 75% of the initial capital of SGBC in the form
of facilities and equipment, valued by the parties at $1,500,000 and
$750,000, respectively. Subsequently, SBGC's capital was increased by
$2,500,000, with the Company contributing 25% of such amount in the form of
capital equipment and SRBF contributing 75% of such amount in the form of
additional facilities, equipment and cash. The Company is not required,
however, to contribute additional capital.
The Company has the exclusive right to sell the products of SGBC in
the U.S. In 1994 and 1995, the Company imported $4,900,000 and $5,500,000,
respectively, in bearings from SGBC. Purchases are made upon terms and
conditions established periodically by negotiation between the Company and
SGBC and are subject to adjustment based upon certain events, including
increases in the prices of raw materials. The Company is responsible for
selecting and purchasing equipment and materials outside of the PRC.
Governance, operations, distributions and the dissolution of SGBC are
governed by PRC law and by SGBC's joint venture contract and articles of
association. SGBC's eight-member Board of Directors, which consists of
five directors chosen by SRBF and three directors chosen by the Company,
exercises authority over the joint venture by majority vote. Certain
decisions involving annual strategy, budgeting and production plans require
the vote of at least one Director chosen by the Company. Unanimous consent
of the Board of Directors is required for all fundamental corporate
changes.
Subject to PRC law and regulations providing for the payment of taxes,
allocations to cover losses of prior years, and contributions to special
funds for enterprise expansion, employee welfare and bonuses and general
reserves, the profits of SGBC may be distributed, at the discretion of its
Board of Directors, to the Company and SRBF in proportion to their
registered capital contributions. A distribution of 450,000 Renminbi (the
legal currency of the PRC) ("RMB") (approximately $51,981 at then current
exchange rates) from 1993 operating profits was made by SGBC to the Company
in February 1995. A distribution of another 740,000 RMB (approximately
$89,156 at then current exchange rates) from 1994 operating profits, was
declared in December 1995. The Company has agreed that this distribution
be invested in the Kong Qiao General Bearing Company ("KQGBC"), a new joint
venture between the Company and Shanghai Xinhua Industrial Corp. A
distribution of 650,000 RMB ($78,313 at current exchange rates) from 1995
operating profits has been proposed by SGBC management for approval by the
Board of Directors of SGBC.
The joint venture contract and articles of association of SGBC provide
that after the Company receives $1,375,000 in profits, its right to receive
any additional dividends will terminate and all profits after that time
will be distributed exclusively to SRBF. Furthermore, after termination of
the joint venture, all equipment and machinery contributed by the Company
will be turned over to SRBF without compensation to the Company.
Wafangdian-Hyatt Bearing Manufacturing Co. Ltd. and Hyatt-ZWZ Bearing
Corporation
("Wafangdian-Hyatt" and "Hyatt-ZWZ," respectively) were established
pursuant to a Joint Venture Contract dated as of October 9, 1990, by and
between the Company and Wafangdian Bearing Factory ("WBF"), a corporation
organized under the laws of the PRC.
Wafangdian-Hyatt is a joint venture limited liability company formed
in accordance with PRC law by the Company and WBF for an initial term of
ten years. Wafangdian-Hyatt is situated in Wafangdian, PRC and it
manufacturers journal boxes, traction motor bearings and components for
exclusive shipment to Hyatt-ZWZ, which prepares them for distribution by
the Company. The Company contributed 25% of the initial registered capital
of Wafangdian-Hyatt in the form of capital equipment valued by the parties
at $250,000 and WBF contributed 75% of the initial registered capital of
Wafangdian-Hyatt in the form of facilities and capital equipment valued by
the parties at $750,000. Provisions with respect to pricing, governance,
administration and distributions are substantially similar in all material
aspects to those of SGBC.
Wafangdian-Hyatt will be terminated by the end of 1996 and all of its
operations will be assumed by Wafangdian General Bearing Co., Ltd.
("WGBC"), a new joint venture between World and Wafangdian Bearing Company.
In its initial stage, WGBC will produce rear wheel automotive bearings in
the PRC with machinery purchased from GM's Delphi plant in Bristol,
Connecticut. The Company will sell the WGBC bearings in the U.S. In its
second stage, WGBC will produce railroad bearings for sale in U.S. by the
Company.
Hyatt-ZWZ is a New York corporation whose share capital is owned 65%
by the Company and 35% by WBF. The Company initially contributed $130,000
in capital equipment and cash to Hyatt-ZWZ. Hyatt-ZWZ purchases (from
Wafangdian-Hyatt and others) and manufactures components for railroad
bearing products exclusively for worldwide distribution by the Company. In
1994 and 1995, the Company purchased $1,263,012 and $965,159 of bearings,
respectively, from Hyatt-ZWZ.
Governance, operations, distributions and dissolution of Hyatt-ZWZ are
governed by New York law and by the terms of the joint venture contract.
Hyatt-ZWZ's seven-member Board of Directors, which consists of three
directors (including its Chairman) chosen by WBF and four directors
(including its Vice-Chairman) chosen by the Company, must unanimously
approve all significant corporate actions.
QUALITY AND CUSTOMER SERVICE PROGRAMS
In order to meet the need for quality products, the Company has
focused on the development and implementation of appropriate systems and
controls to ensure that proper levels of quality are established and
consistently maintained. These systems are documented in the Company's
Quality Assurance Manual, which is also used as part of the operating
standard of the Company's joint ventures and certain other suppliers. The
systems were designed with special requirements to meet customers'
specifications. Over the years, the Quality Assurance Manual has been
revised to keep abreast with new and revised customer and industry
requirements. The systems control not only the activities of the Quality
Assurance Department, but also receiving inspection, in-process inspection,
final audit procedures, and certain activities of other departments of the
Company. These include procedures for design engineering, procurement,
manufacturing, assembly and distribution. The system has been audited by
certain of the Company's customers and the Company has been certified to
the M1003 standard by the AAR and the MIL-I-45208-A standard by General
Dynamics, a military contractor.
The Company is seeking to obtain ISO 9001 and QS 9000 certifications
by December 1997. Both of these are comprehensive industry-wide quality
control systems. ISO 9001 is similar to ISO 9002, a quality standard
applicable to manufacturing companies promulgated by the ISO, but contains
specifications regarding engineering and design as well as manufacturing.
QS 9000, a standard jointly developed by GM, Ford Motor Company and
Chrysler Corporation, has all the basic systems of ISO 9000 with certain
additional requirements specific to the automotive industry. GM has
requested that the Company meet the QS 9000 certification by December 1997.
In order to obtain ISO 9001 and QS 9000 registration, a Quality
Assurance Coordinator has been designated. Requirements for such
certifications include benchmarking the Company's current quality assurance
system against the standards specified by ISO 9001 and QS9000, rewriting
the Quality Assurance Manual, selecting a registration body, implementing
the new system, collecting documentation, revising problem areas,
conducting a pre-registration audit and conducting the registration audit
itself.
SALES, MARKETING AND CUSTOMERS
The Company markets its products in the U.S. and abroad through nine
salaried sales employees as well as 33 commissioned independent sales
representative organizations, aggregating 92 sales persons. In addition,
the Company has seven customer service representatives responsible for
handling orders and providing sales support. Products sold through the OEM
Division bear The General label for ball bearings and the Hyatt brand for
all types of roller bearings.
The Company participates in trade shows sponsored by the Truck
Maintenance Council, Society of Automotive Engineers and the Railway Supply
Association. The Company's advertising budget for fiscal 1996 is $50,000
and it anticipates that its advertising budget for fiscal 1997 will be
between $100,000 and $150,000.
Current OEM customers include automotive and locomotive divisions of
GM, Gunite Corporation (manufacturer of wheels and hubs for trucks and
trailers), Strick Corporation (truck trailer manufacturer), Trinity
Industries (freight car manufacturer), Burlington Northern (railroad) and
Xerox Corporation (office equipment manufacturer). The OEM Division has
over 150 customers. The Distribution Division markets the same broad line
of bearing products as the OEM division. The Distribution Division has
over 1,200 customers, ranging in size from Motion Industries and Bearings,
Inc., each of which has approximately 400 stores in the U.S., to
independent single outlet operations. Since 1992, the Company increasingly
has emphasized the sale of special and niche market bearings including
certain TRBs. The OEM Division focuses on the transportation industry,
specialty truck trailer manufacturers (to which the Company was the leading
supplier in 1995), railroad locomotive and freight car manufacturers and
automotive manufacturers. No customer accounted for more than 10% of the
Company's consolidated revenues for fiscal 1995.
The Distribution Division generally ships product within 24 hours of
the time an order is placed. The OEM Division ships products within one to
365 days from the date an order is placed. Actual shipments are dependent
upon production schedules of the Company's customers. The Company's
arrangements with its North American customers typically provide that
payments are due within 30 days following the date of shipment of goods.
Foreign customers are generally required to pay by letter of credit. At
June 30, 1996, in excess of 90% of accounts receivable were current or less
than 30 days past due. Approximately 3.7% of accounts receivable were over
90 days old as of June 30, 1996.
EMPLOYEES
As of August 31, 1996, the Company had 172 full-time employees, of
whom 122 were engaged in production, shipping and receiving and
maintenance, and 16 of whom were engaged in sales and marketing. 110 of
the Company's employees engaged in production, shipping and receiving, and
maintenance, are subject to collective bargaining and are represented by
the United Brotherhood of Carpenters and Joiners of America, AFL-CIO, Local
3127 (the "Union"). The current collective bargaining agreement with the
Union expires on April 30, 1997. The Company believes that relations with
its employees, including those subject to collective bargaining, are good.
The Company has a 20 year relationship with the Union and has never
experienced a Union work stoppage.
COMPETITION
The ball and roller bearing industry is highly competitive. The
Company believes that competition within the precision ball and roller
bearing market is based principally on quality, price and the ability to
meet customer delivery requirements. The Company's primary domestic and
foreign competitors are Timken, SKF USA Inc., NSK Corporation, NTN Bearing
Corporation of America, The Torrington Company and FAG Holding Corporation.
Many of the Company's competitors have substantially greater financial
resources than the Company. Management believes that the Company's
manufacturing and sourcing capabilities and its reputation for consistent
quality and reliability have positioned the Company for continued growth in
both market share and sales.
PATENTS, TRADEMARKS AND LICENSES
Except for The General trademark and the license from GM with respect
to the Hyatt trademark, (the "Hyatt License") the Company does not own any
U.S. or foreign patents, trademarks or licenses that are material to its
business. The Company does rely on certain data, including costing and
customer lists, and the success of its business depends, to some extent, on
such information remaining confidential. Each employee who may have access
to confidential information is subject to a confidentiality agreement.
Under the Hyatt License, the Company has exclusive use of the terms
"Hyatt," "Hyatt Railway," "Hyatt Railway Products," "Hyatt Manufacturing,"
"Hyatt General" and most derivatives of "Hyatt" in connection with
locomotive journal boxes, traction motor bearings and component parts
thereof, and non-exclusive rights to such trademarks with respect to other
products. The term of the Hyatt License extends until January 1, 2000, and
may be renewed at the option of the Company for an additional ten year
term. The Company paid an initial fee of $30,000 upon execution of the
Hyatt License and has paid or will pay an annual licensing fee to GM in an
amount increasing from $20,000 in 1990 to $35,000 in 1999. The fee payable
by the Company upon the exercise of its option to renew the Hyatt License
is based upon a benchmark of $27,500 indexed for inflation as of 1999.
PROPERTIES
The Company leases facilities located in Union, New Jersey and West
Nyack, New York, which have approximately 72,000 and 190,000 square feet of
space, respectively. Management believes that the plants are adequate for
the Company's present needs and anticipated expansion. The West Nyack
facility, which is used principally for administrative, assembly, and
distribution purposes, is owned by Gussack Realty Company ("Realty") and
from January 1 to November 1, 1996 the Company held a month-to-month
tenancy for the premises at a monthly rent of $76,070. Effective November
1, 1996, the Company and Realty entered into a lease for the West Nyack
facility (the "Lease"), which provides for an initial term expiring on
October 31, 2003 and is renewable at the option of the Company for an
additional six year period. The Company pays rent of $4.81 per square foot
(or $912,840) annually, payable in monthly rent payments of $76,070. The
Lease provides for an increase in the rent every other year, commencing in
1998, to the greater of (i) 106% of the next preceding year's rent or (ii)
the preceding years rent multiplied by a fraction the numerator of which is
the Consumer Price Index for the area including Rockland County or, if no
such index is published, for Northern Jersey (the "CPI") in effect 90 days
prior to November 1 of the new rent year and the denominator of which is
the CPI in effect 90 days prior to November 1 of the preceding year.
Approximately 31,000 and 5,500 square feet of the West Nyack facility are
sublet by the Company to WMW Machinery Co. and World, respectively. See
"Certain Relationships and Related Transactions." The lease for the Union
facility, which is used principally for assembly, manufacturing and
distribution purposes, expires on April 1, 1998, renewable at the option of
the Company for an additional five year term. Rent expense for the Union
location was approximately $238,000, $204,000 and $204,000 in 1993, 1994
and 1995, respectively. Rent expense for each of the 1995 and 1996 Interim
Periods was $102,000.
ENVIRONMENTAL COMPLIANCE
The Company's operations and products are subject to extensive
federal, state and local regulatory requirements relating to pollution
control and protection of the environment. Based on information compiled
to date, management believes that the Company's current operations are in
material compliance with applicable environmental laws and regulations, the
violation of which would have a material adverse effect on the Company.
There can be no assurance, however, that currently unknown matters, new
laws and regulations, or stricter interpretations of existing laws and
regulations will not materially affect the Company's business or operations
in the future.
LEGAL PROCEEDINGS
On August 25, 1986, Timken, a U.S. producer of TRBs, filed a petition
on behalf of the U.S. TRB industry with both the ITC and Commerce seeking
the imposition of antidumping duties on imports of TRBs from Japan, Italy,
the former Yugoslavia, Romania, Hungary and the PRC. In May 1987, Commerce
found that TRBs from each of the aforementioned countries were being sold
in the U.S. at less than fair value, as determined by Commerce based upon
an estimate of the foreign market value of TRBs (i.e. the price at which
the same or similar merchandise is sold or offered for sale in the
principal markets of the home market country). Commerce subsequently
issued an antidumping order imposing duties on the unfairly traded TRBs
equal to the percentage difference between the selling prices in the U.S.
and the foreign market value of the imported TRBs during specified review
periods. Among others, the order named SGBC, the Company's joint venture
in the PRC. Importers subject to the antidumping order are required to
post a cash deposit with the U.S. Customs Service equal to the antidumping
margin percentage multiplied by the export price of any imported product
covered by the dumping petition. The Company, as an importer of TRBs from
SGBC, has not been required to post cash deposits since 1991, when Commerce
allotted a 0% dumping margin to SGBC. In June 1995, SGBC requested a
revocation of the order imposing antidumping duties on it with respect to
its products. Commerce issued a preliminary order granting such revocation
based upon, among other factors, the fact that SGBC not selling TRBs at
less than foreign market value for three consecutive years.
In February 1995, the Company and its indirect 50% subsidiary, WMW,
commenced an action in the U.S. District Court for the Southern District of
New York against WEMEX, Werner P. Muender, Treuhandanstalt and
Bundesanstalt fur Vereinigungsbedingte Sonderaufgaben (collectively, the
"Defendants") alleging, among other things, that: (i) WEMEX, the successor
in liquidation to a former East German export agency, breached a joint
venture agreement with the Company and a commercial sales agency agreement
with WMW and violated its duties to the Company and WMW arising under such
agreements; (ii) the Company relied to its detriment upon promises made by
WEMEX to support WMW's marketing efforts; and (iii) Werner P. Muender, the
liquidator of WEMEX, wrongfully converted property of WMW to his benefit.
WMW also is seeking a declaratory judgment that any indebtedness it may owe
to WEMEX be extinguished or diminished to the extent of existing value of
machine tools purchased by WMW from or through WEMEX. Defendants answered
the complaint, denying the allegations therein, and WEMEX asserted
counterclaims against (i) WMW for goods sold and delivered in the amount of
$9,507,337; (ii) Seymour I. Gussack and WMW Machinery Co. in the amount of
$9,507,337, alleging that Seymour I. Gussack improperly caused the sale of
WMW's assets to WMW Machinery Co.; and (iii) the Company in the amount of
$9,507,337, alleging that the Company breached its fiduciary duty to WEMEX
by failing to provide the working capital requirements of WMW. WMW, the
Company, WMW Machinery Co. and Seymour I. Gussack have denied any liability
to WEMEX and believe its counterclaims to be without merit. However, there
can be no assurance the case will be resolved in a timely manner or settled
to the satisfaction of the Company. Furthermore, enforcement of an award
favorable to the Company may be subject to further review by German courts.
Defendants also have moved to dismiss the action based on various grounds
including, among others, the Foreign Sovereign Immunities Act of 1976, the
Act of State Doctrine, forum non conveniens, legal insufficiency of certain
claims and improper venue. WMW, the Company, WMW Machinery Co. and Seymour
I. Gussack have opposed Defendants' motion for dismissal, and have argued
that, if the Court dismisses the Company's claims, it should also dismiss
the Defendants' counterclaims. There can be no assurances, however, that
if the court dismisses the action in its entirety, the Defendants will not
institute an action in Germany, which may be a less favorable forum for the
Company. In addition, if the Defendants prevail in their counterclaim
against the Company for the amount claimed, and the Company is unsuccessful
in its claims against the Defendants, there would be a material adverse
effect on the Company's financial condition.
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
------- ----
Seymour I. Gussack 72 Chairman of the Board of
Directors
David L. Gussack 39 President and Director
Harold S. Geneen 86 Director Designee
Jerome Johnson 84 Director
Lester M. White 37 Vice President
MIS/Administration
Eugene Passariello 64 Vice President
Manufacturing
William F. Kurtz 38 Vice President Technical
Services
Christopher Moore 39 Vice President Finance,
Secretary and Treasurer
Joseph J. Hoo 61 Vice President Advanced
Technology and
China Affairs
============================================================
Set forth below is certain additional information with respect to the
directors, executive officers and director designees of the Company.
Harold S. Geneen will be appointed as a Director upon completion of the
Offering.
Seymour I. Gussack founded the Company in 1958 and has served as
Chairman of the Board and a director of the Company since its formation.
Seymour I. Gussack is also the Chairman of the Board and a director of
World and a partner of Realty. See "Certain Relationships and Related
Transactions" and "Principal Stockholder." Seymour I. Gussack's son is
David L. Gussack, President of the Company and a director.
David L. Gussack became President of the Company in 1993 and has been
a Director of the Company since 1987. David L. Gussack has held various
positions with the Company since 1983, including Executive Vice President
from 1991 to 1992, General Manager of the OEM Division from 1988 to 1990,
Supervisor and Coordinator, Hyatt Absorption Project from 1987 to 1988,
Plant Manager from 1986 to 1987, Office Facilities Manager from 1985 to
1986, and Manager of Special Projects from 1983 to 1985. David L. Gussack
is a Secretary and a Director of SGBC and Hyatt-ZWZ, respectively. He also
is a partner of Realty. See "Certain Relationships and Related
Transactions." David L. Gussack is a graduate of the University of
Pennsylvania. David L. Gussack's father is Seymour I. Gussack, Chairman of
the Board of Directors of the Company.
Harold S. Geneen has agreed to serve as a Director of the Company upon
the closing of this Offering. Mr. Geneen served as Chief Executive Officer
of ITT Corporation ("ITT") from 1959 until 1977, and as Chairman of the
Board of Directors of ITT from 1965 until 1979. He has been Chairman
Emeritus of ITT since 1983. Mr. Geneen is also Chairman and a director of
First Rock Financial Corporation, an equipment leasing company, and of
Insurakco Holdings Inc.. In addition, Mr. Geneen is a director of
Investors Management Corporation, an owner of restaurants, IVAX
Corporation, a pharmaceutical company, and Gunther International, Ltd., a
document assembly company.
Lester M. White has served as Vice President Administration/Management
Information Systems of the Company since 1989. Mr. White is a graduate of
University of Massachusetts, Boston (B.S. Management and Economics).
Eugene Passariello has served as Vice President Manufacturing of the
Company since 1989. Mr. Passariello was a Plant Manager of the Company
from 1991 to 1991. He is a graduate of Fairleigh Dickenson University
(B.S. in Industrial Engineering), Brooklyn Technical College (M.S. in
Metallurgy), and Rockland College (M.A. in Business Administration).
William F. Kurtz has served as Vice President Technical Services of
the Company since 1993. Mr. Kurtz was also a Chief Engineer of the Company
from 1989 to 1993 and Senior Project Engineer of the Company from 1988-89.
He is a graduate of Manhattan College (M.E. and B.E. in Mechanical
Engineering).
Christopher Moore has served as Vice President Finance of the Company
since 1995 and as Secretary and Treasurer since 1993. Prior to that time,
Mr. Moore held various positions in the Company, including Controller from
1986 to 1995 and Assistant Controller from 1984 to 1986. Mr. Moore is a
graduate of Seton Hall University (B.S. in Accounting) and has been a
certified public accountant since 1981.
Joseph I. Hoo has served as Vice President Advanced Technology & China
Affairs at the Company since August 1995. Prior to such time, Mr. Hoo
served as General Manager, Industrial Products Division from 1991 to 1995
and Chief Metallurgist from 1987 to 1991. Mr. Hoo is a graduate of the
National University of Japan (B.S. in Engineering) and University of
Michigan (M.S.E. in Metallurgy and Engineering).
Jerome Johnson has been a director of the Company since September
1987. Mr. Johnson has been an attorney in private practice for more than
50 years. He also serves on the Board of Directors of Presidential Life
Insurance Company. Mr. Johnson is a graduate of DePaul University (L.L.B
and J.D.) and is a member of the Illinois and New York bars.
Seymour I. Gussack, David L. Gussack and Eugene Passariello were each
officers of the Company at the time the Company filed for protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code in 1991. See
"Company History."
Directors hold office until the next annual meeting of stockholders
following their election, or until their successors are elected and
qualified. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board of Directors.
The standing committees of the Board of Directors are the Audit
Committee and the Compensation/Stock Option Committee.
The Audit Committee of the Board of Directors consists of three
directors, David L. Gussack, __________ and Jerome Johnson. The Audit
Committee's function is to review and report to the Board of Directors with
respect to the selection and the terms of engagement of the Company's
independent public accountants, and to maintain communications among the
Board of Directors, such independent public accountants, and the Company's
internal accounting staff with respect to accounting and audit procedures,
the implementation of recommendations by such independent public
accountants, the adequacy of the Company's internal controls and related
matters. The Audit Committee also reviews certain related party
transactions and any potential conflict of interest situations involving
officers, directors or stockholders beneficially owning more than 10% of an
equity security of the Company.
The Compensation/Stock Option Committee will consist of Messrs. Harold
S. Geneen and _____________, each of whom is an independent Director. The
Compensation/Stock Option Committee's function is to review and approve
annual salaries and bonuses for all employees with salaries in excess of
$100,000 and review, approve and recommend to the Board of Directors the
terms and conditions of all employee benefit plans or changes thereto,
including the granting of stock options pursuant to the Company's 1996
Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid for
services rendered in all capacities to the Company's executive officer who
received compensation of $100,000 or more during the fiscal year ended
December 30, 1995:
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
(1) -------------
----------------------
ALL OTHER
NAME AND RESTRICTE STOCK COMPENSATIO
PRINCIPAL FISCAL D STOCK OPTIONS N
POSITION YEAR SALARY BONUS AWARDS # -----------
-------------- ------ ------ ------ --------- ------- -
David L. 1995 $155,232 $5,000 0 0 $28,000 (2)
Gussack,
President
------------------------------------
(1) Perquisites and other personal benefits are not included because
they do not exceed the lesser
of $50,000 or 10% of the total base salary and annual bonus for
each of the named executive officers.
(2) Represents deferred compensation.
1996 STOCK OPTION AND PERFORMANCE AWARD PLAN
In September 1996, the Company adopted the 1996 Option Plan, which
authorizes the grant to directors, officers and key employees of the
Company and any parent or subsidiary of the Company, of incentive or non-
qualified stock options, performance shares, restricted shares and
performance units. The 1996 Option Plan covers up to 500,000 shares of the
Company's Common Stock. Options to purchase 257,500 shares at the Offering
price per share were granted certain officers, directors and other key
employees, subject to the closing of the Offering.
The 1996 Option Plan is administered by a committee (the "Stock Option
Committee") consisting of Messrs. Harold S. Geneen and ___________. The
Stock Option Committee determines the prices and terms at which options may
be granted. Options may be exercisable in installments over the option
period, but no options may be exercised after ten years from the date of
grant.
The exercise of any incentive stock option granted to an eligible
employee may not be less than 100% of the fair market value of the shares
underlying such option on the date of grant, unless such employee owns more
than 10% of the outstanding Common Stock or stock of any subsidiary or
parent of the Company, in which case the exercise price of any incentive
stock option may not be less than 110% of such fair market value. No
option may be exercisable more than ten years after the date of grant and,
in the case of an incentive stock option granted to an eligible employee
owning more than 10% of the Common Stock or stock of any subsidiary or
parent of the Company, no more than five years from its date of grant.
Options are not transferable, except upon the death of the optionee. In
general, upon termination of employment of an optionee, all options granted
to such person which are not exercisable on the date of such termination
immediately expire, and any options that are exercisable expire three
months following termination of employment, if such termination is not the
result of death or retirement, two years following such termination, if
such termination was because of death, and one year following such
termination if such termination was because of disability or retirement
under the provisions of any retirement plan that may be established by the
Company, or with the consent of the Company.
At the time each grant of shares is made, the Stock Option Committee
will determine the duration of the performance or restriction period, if
any, the performance targets, if any, and the times at which restrictions
placed on restricted shares shall lapse.
DIRECTOR COMPENSATION
The members of the Company's Board of Directors are not compensated
for their service on the Board, but are reimbursed for out-of-pocket and
travel expenses incurred in attending Board meetings. Directors will
participate in the 1996 Option Plan.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
BANKRUPTCY AND RESULTING OBLIGATIONS TO WORLD
In connection with the Plan of Reorganization, the Company issued to
World, which prior to this Offering owned all of the Company's Common
Stock, the Secured Note, the Installment Note, and 1,000 shares of Common
Stock in exchange for the Discharged Obligation. World acquired the
Discharged Obligation from Wells Fargo, which provided financing for the
purchase by the Company in March 1987 of Hyatt and for working capital.
The Secured Note is secured by a subordinated lien in certain machinery and
equipment having a net book value of approximately $1.4 million at December
30, 1995. Interest on the Secured Note accrues annually but is only
payable with respect to any fiscal year to the extent the Company's net
income exceeds $400,000. The Company has never made any payments of
principal or interest with respect to the Secured Note, and it has accrued
$375,000 in interest thereon. World agreed to defer the payment under the
Installment Note for fiscal 1993 and fiscal 1994, and received principal
payments of $375,000 during fiscal 1995, which included the two
installments previously deferred. The Installment Note does not bear
interest. During 1994, World lent $1,000,000 to the Company, with interest
payable quarterly at the rate of 6% per annum. The loan was repaid in full
in December 1995, and interest payments for fiscal 1994 and fiscal 1995
were made in the amount of $45,000 each year.
LEASES WITH REALTY
From January 1 to November 1, 1996, the Company held a month-to-month
tenancy for the premises located at West Nyack, New York comprising 189,833
square feet owned by Realty, whose partners include Seymour I. Gussack,
David L. Gussack and Nina M. Gussack, each a member of the Board of
Directors of the Company. The Company and Realty entered into the Lease
effective as of November 1, 1996, which provides for an initial term
expiring on October 31, 2003 and may be renewed at the option of the
Company for an additional six year period. The Company pays rent of $4.81
per square foot (or $912,840) annually, payable in monthly rent payments of
$76,070. The Lease provides for an increase every other year, commencing
in 1998, to the greater of (i) 106% of the next preceding year's rent or
(i) the preceding year's rent multiplied by a fraction the numerator of
which is the Consumer Price Index for the area including Rockland County or
if no such index is published, for Northern New Jersey (the "CPI") in
effect 90 days prior to November 1 of the new rent year and the denominator
of which is the CPI in effect 90 days prior to November 1 of the preceding
year.
During 1993, 1994 and 1995, the Company leased facilities from Realty
in Blauvelt, New York at which the Company located its headquarters and
operations. The Company is the guarantor with respect to a mortgage loan
currently in the principal amount of $679,586 from the Job Development
Authority of Rockland County and a mortgage loan currently in the principal
amount of $543,750 from the Industrial Development Authority of Rockland
County on the property in Blauvelt, New York. The Company incurred rent
and real estate taxes with respect to the facilities leased from Realty in
Blauvelt, New York for 1993, 1994 and 1995 of approximately $786,000,
$923,000 and $861,000, respectively.
SUBLEASES TO WMW MACHINERY CO. AND WORLD
The Company currently subleases 30,949 square feet and 5,500 square
feet at the West Nyack facility to WMW Machinery Co., a subsidiary of
World, and World, respectively, pursuant to subleases in each case
effective November 1, 1996. The subleases are coterminous with the Lease.
The sublease with WMW Machinery Co. provides for rent of $5.50 square feet
or $170,220 per year until November 1998, payable to the Company in equal
monthly installments. The sublease with World provides for rent of $33,000
per year until November 1998, payable to the Company in equal monthly
installments. Each sublease provides for an increase in rent every other
year, commencing in 1998, to the greater of (i) 106% of the next preceding
year's rent or (ii) the preceding year's rent multiplied by a fraction the
numerator of which is the CPI in effect 90 days prior to November 1 of the
next rent year and the denominator of which is the CPI in effect 90 days
prior to November 1 of the preceding year.
OTHER TRANSACTIONS WITH WORLD AND WORLD AFFILIATES
The Company made payments for and advances to World, World
subsidiaries and joint ventures and certain affiliates for payroll,
benefits and other expenses. Such payments aggregated approximately
$84,000, $1,708,000, $1,742,000 and $970,000 and $776,000 for 1993, 1994,
1995 and the 1995 and 1996 Interim Periods, respectively. The advances did
not bear interest through the end of the 1996 Interim Period. In certain
cases, the obligation to repay advances made by the Company were satisfied
by offsetting the price of bearings or bearing products purchased from
joint ventures obligated to the Company. The Company has purchased
bearings from four joint ventures and machinery from another joint venture
in which World has interests. Such purchases aggregated $0, $600,000,
$2,650,000 and $1,550,000 and $350,000 for 1993, 1994, 1995 and the 1995
and 1996 Interim Periods, respectively. Following the completion of this
Offering, the Company anticipates that it will continue to make payments
for and advances to joint ventures in which World has interests and to
purchase bearings from such joint ventures.
FUTURE TRANSACTIONS
All future transactions between the Company and its officers,
directors, principal shareholders and affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent
and disinterested outside directors on the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
<PAGE>
PRINCIPAL STOCKHOLDER
The following table sets forth, as of the date of this Prospectus, and
as adjusted to reflect the sale of the 1,000,000 shares of Common Stock
offered hereby, certain information concerning the beneficial ownership of
Common Stock as to each director and current executive officer of the
Company, and each person who, to the Company's knowledge, beneficially owns
more than 5% of the outstanding Common Stock.
PERCENTAGE OF SHARES
BENEFICIALLY
OWNED(1)(2)
---------------------
---
AFTER
NAME AND ADDRESS OF NUMBER OF SHARES BEFORE OFFERING
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(1) OFFERING ---------
-------------------- ---------------------- -------- -
World Machinery Company 3,000,000 100% 75%
44 High Street
West Nyack, New York 10994
---------------------------
(1) Pursuant to Rule 13d-3 under the U.S. Securities Exchange Act of 1934,
as amended, beneficial ownership of a security consists of sole or
shared voting power (including the power to vote or direct the voting)
and/or sole or shared investment power (including the power to dispose
or direct the disposition) with respect to a security whether through
a contract, arrangement, understanding, relationship or otherwise.
(2) Assumes the Underwriters' over-allotment option is not exercised. If
such option is exercised, the percentage of the issued and outstanding
Common Stock owned by World will be reduced to 72.3%.
(3) Seymour I. Gussack, the Company's Chairman of the Board and David L.
Gussack, the Company's President own or control approximately 19.6%
and 17.6%, respectively of the stock of World. The remaining children
of Seymour I. Gussack and his spouse own or control an additional
approximately 42% of the stock of World. Harold S. Geneen, a Director
Designee of the Company, and Joseph J. Hoo, Vice President -Advanced
Technology and China Affairs of the Company, own approximately 19.6%
and 2% of the shares of World, respectively.
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 19,000,000 shares of Common Stock,
par value $.01 per share, and 1,000,000 shares of Preferred Stock, $.01 par
value per share, upon completion of the offering, there will be 4,000,000
shares of Common Stock and no shares of Preferred Stock issued and
outstanding.
The following summary is qualified in its entirety by reference to the
Company's Second Restated Certificate of Incorporation (the "Certificate of
Incorporation") and the Company's Amended and Restated By-Laws (the "By-
laws"), a copy of each of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Each holder of Common Stock is entitled to cast one vote, either in
person or by proxy, for each share of Common Stock owned of record on the
record date (as defined in the Company's By-laws) or all matters submitted
to a vote of stockholders, including the election of directors. Until the
date five years from the date of this Prospectus, the holders of Common
Stock, voting separately as a class, will be entitled to elect that number
of directors equal to one less than one half of the total number of
directors comprising the Board of Directors (subject to the rights, if any,
of holders of shares of Preferred Stock that the Company may issue, from
time to time, to elect separately a class of directors, which will reduce
the number of directors to be elected by holders of Common Stock). The
holders of Common Stock do not possess cumulative voting rights, which
means that the holders of more than 50% of the outstanding shares voting
for the election of the class of directors to be elected by the Common
Stock can elect all of such directors, and, in such event, the holders of
the remaining shares of Common Stock will be unable to elect any of the
Company's directors.
Holders of outstanding shares of Common Stock are entitled to share
ratably in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. Upon the liquidation, dissolution, or
winding up of the Company, each outstanding share of Common Stock will be
entitled to share equally in the assets of the Company legally available
for distribution to stockholders after the payment of all debts and other
liabilities, subject to any superior rights of the holders of any
outstanding shares of Preferred Stock.
Holders of the shares of Common Stock have no preemptive rights.
There are no conversion or subscription rights, and shares of Common Stock
are not subject to redemption. All of the outstanding shares of Common
Stock are, and the shares of Common Stock offered hereby will be, when
issued and paid for in accordance with the terms thereof, duly authorized
and issued, fully paid and nonassessable.
PREFERRED STOCK
The authorized capital stock of the Company includes 1,000,000 shares
of Preferred Stock. The Board of Directors is authorized to fix the rights,
preferences, privileges and restrictions of any series of Preferred Stock,
including the dividend rights, original issue price, conversion rights,
voting rights, terms of redemption, liquidation preferences and sinking
fund terms thereof, and the number of shares constituting any such series
and the designation thereof and to increase or decrease the number of
shares of such series subsequent to the issuance of shares of such series
(but not below the number of shares of such series then outstanding).
Because the terms of the Preferred Stock can be fixed by the Board of
Directors without stockholder action, the Preferred Stock could be issued
quickly with terms calculated to defeat a proposed takeover of the Company
or to make the removal of management more difficult. The Board of
Directors, without stockholder approval, could issue Preferred Stock with
dividend, voting and conversion rights which could adversely affect the
rights of the holders of Common Stock. At present, the Company has no plans
to issue any Preferred Stock.
CERTAIN DELAWARE LAW PROVISIONS
Section 203 of the Delaware Law prevents an "interested stockholder"
(defined in Section 203, generally, as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a publicly held Delaware
corporation for three years following the date such person became an
interested stockholder unless: (i) before such person became an interested
stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested
stockholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with
the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following
the date on which such person became an interested stockholder, the
business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder. Section 203 may have
a depressive effect on the market price of the Common Stock offered hereby.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION AND BY-LAWS
Certain provisions of the Certificate of Incorporation and By-laws of
the Company summarized in the following paragraphs will become operative
prior to consummation of this Offering and may be deemed to have an anti-
takeover effect and may delay or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest, including those
attempts that might result in a premium over the market price for the
shares of Common Stock held by such stockholders. These provisions also
may have a depressive effect on the market price of the Common Stock.
Special Meeting of Stockholders. The Certificate of Incorporation
provides that special meetings of stockholders of the Company may be called
only by the Board of Directors. This provision makes it more difficult for
stockholders to take action opposed by the Board of Directors. The
approval of the holders of two-thirds of the Company's outstanding Common
Stock is necessary to amend or repeal this provision of the Company's
Certificate of Incorporation.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The By-laws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual or special meeting of
stockholders, must provide timely notice thereof in writing. To be timely,
a stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company (i) in the case of an annual
meeting that is called for a date that is within 30 days before or after
anniversary date of the immediately preceding annual meeting of
stockholders, not fewer than 60 days nor more than 90 days prior to such
anniversary date and (ii) in the case of the annual meeting to be held
during the first complete fiscal year following the date of this Prospectus
and in the case of an annual meeting that is called for a date that is not
within 30 days before or after the anniversary date of the immediately
preceding annual meeting, or in the case of a special meeting of
stockholders called for the purpose of electing directors, no later than
the close of business on the tenth day following the day on which notice of
the date of the meeting was mailed or public disclosure of the date of the
meeting was made, whichever occurs first. The By-laws also specify certain
requirements for a stockholder's notice to be in proper written form.
These provisions may preclude some stockholders from bringing matters
before the stockholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting. As set forth
below, the By-laws may not be amended or repealed by the stockholders of
the Company, except with the approval of holders of two-thirds of the
Company's outstanding Common Stock.
Adjournment of Meetings of Stockholders. The By-laws provide that
when a meeting of stockholders of the Company is convened, the presiding
officer, if directed by the Board of Directors, may adjourn the meeting if
(i) no quorum is present for the transaction of business or if (ii) the
Board of Directors determines that adjournment is necessary or appropriate
to enable the stockholders to consider fully information the Board of
Directors determines has not been made sufficiently or timely available to
stockholders or to otherwise effectively exercise their voting rights.
This provision will, under certain circumstances, make more difficult or
delay actions by the stockholders opposed by the Board of Directors. The
effect of such provision could be to delay the timing of a stockholders'
meeting, including in cases where stockholders have brought proposals
before the stockholders that are in opposition to those brought by the
Board of Directors and therefore may provide the Board of Directors with
additional flexibility in responding to such stockholder proposals. As set
forth below, the By-laws may not be amended or repealed by the stockholders
of the Company, except with the approval of holders of two-thirds of the
Company's outstanding Common Stock.
Amendment of the By-laws. The Certificate provides that the By-laws
may be amended or repealed by the Board of Directors and may not be amended
or repealed by the stockholders of the Company, except with the consent of
holders of two-thirds of the Company's outstanding Common Stock. This
provision will make it more difficult for stockholders to make changes to
the By-laws that are opposed by the Board of Directors. This provision of
the Certificate of Incorporation may not be amended or repealed by the
stockholders of the Company, except with the approval of the holders of
two-thirds of the Company's outstanding Common Stock.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is American Stock
Transfer & Trust Co., 40 Wall Street, New York, New York 10005.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
The Company has 4,000,000 shares of Common Stock issued and
outstanding. Of these shares, 1,000,000 shares of Common Stock registered
in this Offering (1,150,000 if the over-allotment option is exercised) will
be freely tradeable without restriction or further registration under the
Act, except for shares purchased by affiliates of the Company, which will
be subject to certain resale limitations of Rule 144 under the Act. The
remaining 3,000,000 outstanding shares were initially issued and sold by
the Company in December 1993 as 1000 shares which were subject to a 3000-
for-one stock split effective as of October 10, 1996.
In general, under Rule 144, as currently in effect, subject to the
satisfaction of certain conditions, provides that a person, including an
affiliate of the Company, who has beneficially owned restricted shares of
Common Stock for at least two years is entitled to sell, within any three-
month period, a number of shares that does not exceed the greater of one
percent of the total number of outstanding shares of Common Stock or the
average weekly trading volume of shares of Common Stock during the four
calendar weeks preceding the sale. A person who has not been an affiliate
of the Company for at least the three month period immediately preceding
the sale and who has beneficially owned shares of Common Stock for at least
three years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.
<PAGE>
UNDERWRITING
The Underwriters named below have agreed, subject to the terms and
conditions of the Underwriting Agreement between the Company and H.J.
Meyers & Co., Inc., as Representative of the Underwriters, to purchase from
the Company the number of shares of Common Stock set forth opposite their
names. The 9% underwriting discount set forth on the cover page of this
Prospectus will be allowed to the Underwriters at the time of delivery to
the Underwriters of the shares of Common Stock so purchased.
NUMBER OF
NAME OF UNDERWRITER SHARES PURCHASED
-------------------- -----------------
H.J. Meyers & Co., Inc. . . .
---------
Total . . . 1,000,000 1,000,000
==========
The Underwriters have advised the Company that they propose to offer
the shares of Common Stock to the public at the initial public offering
price set forth on the front cover page of this Prospectus, and at such
price less a concession not in excess of $_______ per share of Common Stock
to certain dealers who are members of the National Association of
Securities Dealers, Inc., of which the Underwriters may allow and such
dealers may reallow concessions not in excess of $______ per share of
Common Stock to certain other dealers. The public offering price and
concession and discount may be changed by the Underwriters after the
initial public offering.
The Company has granted to the Underwriters an over-allotment option
expiring at the close of business on the 45th business day subsequent to
the date of this Prospectus, to purchase up to an additional 150,000 shares
of Common Stock at the public offering price, less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriters
may exercise such option only to satisfy over-allotments in the sale of the
shares of Common Stock.
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to 3% of the total proceeds of this Offering, or
$300,000 (and 3% of the total proceeds from the sale of any shares of
Common Stock pursuant to the exercise of the over-allotment option, or
$45,000 if the Underwriters exercise the over-allotment option in full).
In addition to the Underwriters' commissions and the Representative's
expense allowance, the Company is required to pay the costs of qualifying
the shares of Common Stock under Federal and state securities laws,
together with legal and accounting fees, printing and other costs in
connection with this Offering.
At the closing of this Offering, the Company will issue to the
Representative, for nominal consideration, the Representative's Warrants to
purchase up to 100,000 shares of Common Stock of the Company. The shares
of Common Stock subject to the Representative's Warrants are identical to
the shares of Common Stock sold to the public, except for the purchase
price and certain registration rights. The Representative's Warrants will
be exercisable for a four-year period commencing one year from the date of
this Prospectus, at an exercise price of $_________ per share of Common
Stock (that being 120% of the initial public offering price per share of
Common Stock). The Representative's Warrants will not be transferable
prior to their initial exercise date except to successors in interest to
the Representative, and directors and officers of the Representative.
The Representative's Warrants will contain anti-dilution provisions
providing for appropriate adjustment in the event of any recapitalization,
reclassification, stock dividend, stock split or similar transactions. The
Representative's Warrants do not entitle the Representative to any rights
as a stockholder of the Company until such warrants are executed and the
shares of Common Stock are purchased thereunder.
The Representative's Warrants and the shares of Common Stock issuable
thereunder may not be offered for sale to the public except in compliance
with the applicable provisions of the Act. The Company has agreed that if
it causes a post-effective amendment to the Registration Statement of which
this Prospectus is a part, or a new registration statement or offering
statement under Regulation A, to be filed with the Securities and Exchange
Commission (the "Commission"), the Representative shall have the right
during the life of the Representative's Warrants to include therein for
registration the Representative's Warrants and/or the shares of Common
Stock issuable upon their exercise at no expense to the Representative.
Additionally, the Company has agreed that, upon demand by the holder(s) of
at least 50% of the (i) total unexercised Representative's Warrants and
(ii) shares of Common Stock issued upon the exercise of the
Representative's Warrants, made on no more than two separate occasions
during the exercise period of the Representative's Warrants, the Company
shall use its best efforts to register the Representative's Warrants and/or
any of the shares of Common Stock issuable upon the exercise thereof,
provided that the Company has available current financial statements, the
initial such registration to be at the Company's expense and the second at
the expense of the holder(s).
For the period during which the Representative's Warrants are
exercisable, the holder(s) will have the opportunity to profit from a rise
in the market value of the Company's Common Stock, with a resulting
dilution in the interests of the other stockholders of the Company. The
holder(s) of the Representative's Warrants can be expected to exercise it
at a time when the Company would, in all likelihood, be able to obtain any
needed capital from an offering of its unissued Common Stock on terms more
favorable to the Company than those provided for in the Representative's
Warrants. Such facts may materially adversely affect the terms on which
the Company can obtain additional financing. To the extent that the
Representative realizes any gain from the resale of the Representative's
Warrants or the shares of Common Stock issuable thereunder, such gain may
be deemed additional underwriting compensation under the Act.
The Company has agreed to enter into a one year consulting agreement
with the Representative, pursuant to which the Representative will act as
financial consultant to the Company, commencing upon the closing date of
this Offering. Under the terms of this agreement, the Representative, to
the extent reasonably required in the conduct of the business of the
Company and at the prior written request of the President of the Company,
has agreed to evaluate the Company's managerial and financial requirements,
assist in the preparation of budgets and business plans, advise with regard
to sales planning and sales activities, and assist in financial
arrangements. The Representative will make available qualified personnel
for this purpose. The non-refundable consulting fee of $60,000 will be
payable, in full, on the closing date of this Offering.
The Company has agreed that it will engage a public relations firm
acceptable to the Representative and the Company. The Company also has
agreed to maintain a relationship with such public relations firm for
minimum period of two years and on such other terms as are acceptable to
the Representative.
The Company has also agreed that, for a period of two years from the
closing of this Offering, if it participates in any merger, consolidation
or other transaction which the Representative has brought to the Company
(including an acquisition of assets or stock for which it pays, in whole or
in part, with shares of the Company's Common Stock or other securities),
which transaction is consummated within three years of the closing of this
Offering, then it will pay for the Representative's services an amount
equal to 5% of the first $1.0 million of value paid or value received in
the transaction, 4% of any consideration above $1 million and less than
$2.0 million and 3% of any consideration in excess of $2.0 million and less
than $3.0 million, 2% of any consideration above $3.0 million and less than
4.0 million and 1% of any consideration exceeding $4.0 million. The
Company has also agreed that if, during this two-year period, someone other
than the Representative brings such a merger, consolidation or other
transaction to the Company, and if the Company in writing retains the
Representative for consultation or other services in connection therewith,
then upon consummation of the transaction the Company will pay to the
Representative as a fee the appropriate amount as set forth above or as
otherwise agreed to between the Company and the Representative.
The Company has agreed that for a period of one year from the date of
this Prospectus the Company will not sell or otherwise dispose of any
securities without the prior written consent of the Representative, which
consent shall not be unreasonably withheld, with the exception of shares of
Common Stock issued pursuant to the exercise of options, warrants or other
convertible securities outstanding prior to the date of this Prospectus and
described herein. The Company also has agreed that for a period of 18
months from the date of this Prospectus, the Company will not sell or issue
any securities pursuant to Regulation S under the Securities Act without
the Representative's prior written consent.
The holders of all of the shares of Common Stock outstanding
immediately prior to this Offering and the holders of all options and
warrants to purchase Common Stock outstanding on the date hereof have
agreed that for a period of 18 months from the date of this Prospectus they
will not offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock acquired prior to this Offering or purchasable under any
option, warrant or convertible debt owned by them prior to this Offering,
without the prior written consent of the Representative.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain liabilities in
connection with the Registration Statement, including liabilities under the
Act.
Prior to this Offering, there has been no public market for the Common
Stock. The offering price of the securities being offered hereby was
determined by negotiation between the Company and the Representative.
Factors considered in determining such price include the history of and the
prospects for the industry in which the Company competes, the past and
present operations of the Company, the future prospects of the Company, the
ability of the Company's management, the earnings, net worth and financial
condition of the Company, the general condition of the securities markets
at the time of this Offering, and the prices of similar securities of
comparable companies.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by Reid & Priest LLP, New York, New York. Certain legal
matters in connection with the Offering will be passed upon for the
Representative by Harter, Secrest & Emery, Rochester, New York.
EXPERTS
The financial statements of the Company included in this Prospectus
have been audited by BDO Seidman, LLP and Ferro, Berdon & Company, L.L.P.,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said
firms as experts in giving said reports.
CHANGE IN INDEPENDENT AUDITORS
In September 1996, the Company's Board of Directors retained BDO
Seidman, LLP as its independent public accountants. Prior to 1996, the
Company retained Ferro, Berdon & Company, L.L.P. as its independent public
accountants. During the period Ferro, Berdon & Company, L.L.P. was
retained, there were no disagreements with the former auditors on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure with respect to the Company's
financial statements for the fiscal years ended December 25, 1993 and
December 31, 1994 or up through the time of replacement which, if not
resolved to the former auditors' satisfaction, would have caused them to
make reference to the subject matter of the disagreement in connection with
their report. Prior to retaining BDO Seidman, LLP, the Company had not
consulted with BDO Seidman, LLP regarding accounting principles.
AVAILABLE INFORMATION
The Company has filed with the Commission, a Registration Statement on
Form S-1 (the "Registration Statement") under the Act, with respect to the
shares of Common Stock offered hereby. This Prospectus, filed as a part of
the Registration Statement, does not contain certain information set forth
in or annexed as exhibits and schedules to the Registration Statement. For
further information regarding the Company and the securities offered
hereby, reference is made to the Registration Statement and to the exhibits
and schedules filed as a part thereof, which may be inspected without
charge at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or copied upon request to the Public Reference
Section of the Commission and payment of the prescribed fee. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONTENTS
=================================================================
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2 - F-3
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets F-4
Statements of operations F-5
Statements of changes in stockholder's equity F-6
Statements of cash flows F-7
Summary of significant accounting policies F-8 - F-11
Notes to consolidated financial statements F-12 - F-28
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
General Bearing Corporation
West Nyack, New York
We have audited the accompanying consolidated balance sheet of General
Bearing Corporation and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations, changes in stockholder's
equity and cash flows for the years ended December 25, 1993 and
December 31, 1994. 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 audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Bearing Corporation and subsidiaries as of December 31, 1994, and the
results of their operations and their cash flows for the years ended
December 25, 1993 and December 31, 1994, in conformity with generally
accepted accounting principles.
Ferro, Berdon & Company, LLP
New York, New York
March 24, 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
General Bearing Corporation
West Nyack, New York
We have audited the accompanying consolidated balance sheet of General
Bearing Corporation and subsidiaries as of December 30, 1995, and the
related consolidated statements of operations, changes in stockholder's
equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Bearing Corporation and subsidiaries as of December 30, 1995, and the
results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
September 13, 1996, except for Note 15(a),
which is as of October 10, 1996
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 30, June 29,
1994 1995 1996
(Unaudited)
Assets
Current:
Cash $ 66,953 $ 50,735 $ 17,051
Accounts receivable -
trade, less allowance
for doubtful accounts
of $255,000, $255,000
and $294,000 5,586,661 6,044,042 5,271,821
Inventories 13,662,631 16,626,234 14,785,704
Prepaid expenses and other
current assets 210,141 184,139 107,817
Advances to parent and
affiliates 413,978 215,350 402,587
----------------------------------------
TOTAL
CURRENT ASSETS 19,940,364 23,120,500 20,584,980
-------------------------------------------------------------------------
FIXED ASSETS, NET 2,028,075 2,480,170 2,654,839
-------------------------------------------------------------------------
INVESTMENTS AND ADVANCES:
Investments in affiliates 1,568,867 687,454 687,454
Advances to affiliate 255,824 255,824 255,824
---------------------------------------
1,824,691 943,278 943,278
-------------------------------------------------------------------------
DEFERRED TAX ASSET - 500,000 182,000
-------------------------------------------------------------------------
OTHER ASSETS 349,436 42,460 36,097
-------------------------------------------------------------------------
$24,142,566 $27,086,408 $24,401,194
==========================================================================
LIABILITIES AND STOCKHOLDER'S
EQUITY
CURRENT:
Note payable - bank $ 9,970,109 $10,862,894 $10,372,308
Accounts payable:
Trade 2,615,446 4,811,677 2,503,025
Affiliates 724,859 1,398,525 1,985,968
Accrued expenses and other
current liabilities 1,944,074 1,467,563 1,441,213
Accrued customer damage
claims - 1,564,742 700,921
Current maturities of
long-term debt - 222,840 222,840
------------------------------------------
TOTAL CURRENT
LIABILITIES 15,254,488 20,328,241 17,226,275
-------------------------------------------
LONG-TERM DEBT, LESS CURRENT
MATURITIES:
Bank - 1,225,740 1,114,320
Parent 4,460,142 2,875,142 2,875,142
Affiliates 758,173 716,422 727,912
------------------------------------------
5,218,315 4,817,304 4,717,374
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Preferred Stock par value
$.01 per share -
shares authorized
1,000,000, none issued
and outstanding - - -
Common Stock par value
$.01 per share -
shares authorized
19,000,000, issued and
outstanding 3,000,000 30,000 30,000 30,000
Additional paid-in capital 12,203,250 12,203,250 12,203,250
Deficit (8,563,487) (10,292,387) (9,775,705)
----------------------------------------------------------------------
TOTAL STOCKHOLDER'S
EQUITY 3,669,763 1,940,863 2,457,545
---------------------------------------------------------------------
$24,142,566 $27,086,408 $24,401,194
=====================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended
December 25, December 31, December 30,
1993 1994 1995
-------------------------------------------------------------------------
SALES $27,253,855 $37,031,669 $42,070,000
COST OF SALES 20,724,474 28,483,348 32,068,789
-------------------------------------------------------------------------
GROSS PROFIT 6,529,381 8,548,321 10,001,211
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 6,916,056 7,674,250 7,495,208
PROVISION FOR CUSTOMER
DAMAGE CLAIMS - - 2,152,000
------------------------------------------------------------------------
OPERATING
INCOME (LOSS) (386,675) 874,071 354,003
------------------------------------------------------------------------
OTHER (INCOME)
EXPENSE:
Interest, including
$-0-, $210,000,
$180,000, $84,000
and $75,000 to
parent 512,965 989,912 1,428,451
Equity in (income)
loss of affiliate 182,802 (403,071) (78,587)
Other (717,355) 32,268 1,233,039
----------------------------------------------------------------------
(21,588) 619,109 2,582,903
----------------------------------------------------------------------
INCOME (LOSS)
BEFORE INCOME
TAX (BENEFIT)
AND
EXTRAORDINARY
INCOME (365,087) 254,962 (2,228,900)
INCOME TAX (BENEFIT) - - (500,000)
-------------------------------------------------------------------------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
INCOME (365,087) 254,962 (1,728,900)
EXTRAORDINARY INCOME -
SETTLEMENT OF DEBTS
AT A DISCOUNT 15,835,639 108,275 -
-------------------------------------------------------------------------
NET INCOME (LOSS) $15,470,552 $363,237 $(1,728,900)
=========================================================================
INCOME (LOSS) PER
COMMON SHARE:
Income (loss) before
extraordinary
income $(.01) $.08 $(.58)
Extraordinary income .68 .04 -
-----------------------------------------------------------------------
Net income (loss) $.67 $.12 $(.58)
=====================================================================
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES 23,125,000 3,000,000 3,000,000
=========================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(continued)
Six months ended
June 30, 1995 June 29, 1996
(Unaudited)
SALES $22,853,251 $21,006,585
COST OF SALES 17,313,746 15,745,699
-------------------------------------------------------------------------
GROSS PROFIT 5,539,505 5,260,886
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES 3,831,079 3,751,460
PROVISION FOR CUSTOMER
DAMAGE CLAIMS 2,152,000 -
--------------------------------------------------------------------------
OPERATING
INCOME (LOSS) (443,574) 1,509,426
-------------------------------------------------------------------------
OTHER (INCOME)
EXPENSE:
Interest, including
$-0-, $210,000,
$180,000, $84,000
and $75,000 to
parent 695,996 674,744
Equity in (income)
loss of affiliate 7,466 -
Other 1,118,261 -
-----------------------------------------------------------------------
1,821,723 674,744
----------------------------------------------------------------------
INCOME (LOSS)
BEFORE INCOME
TAX (BENEFIT)
AND
EXTRAORDINARY
INCOME (2,265,297) 834,682
INCOME TAX (BENEFIT) - 318,000
-------------------------------------------------------------------------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
INCOME (2,265,297) 516,682
EXTRAORDINARY INCOME -
SETTLEMENT OF DEBTS
AT A DISCOUNT - -
-----------------------------------------------------------------------
NET INCOME (LOSS) $(2,265,297) $516,682
=========================================================================
INCOME (LOSS) PER
COMMON SHARE:
Income (loss) before
extraordinary
income $(.76) $.17
Extraordinary income - -
-----------------------------------------------------------------------
Net income (loss) $(.76) $.17
========================================================================
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES 3,000,000 3,000,000
========================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes
in Stockholder's Equity
==========================================================================
10.5%
cumulative, 5% cumulative,
Series B Series A
preferred preferred
stock, par stock, par
value $.01 per value $894.50
share per share
Shares Amount Shares Amount
--------------------------------------------------------------------------
BALANCE, DECEMBER 26, 1992 1,000 $3,000,000 10,000 $8,945,000
Cancellation of outstanding
shares pursuant to
Chapter XI
reorganization (1,000) (3,000,000) (10,000) (8,945,000)
Shares issued to World Machinery
Company pursuant to Chapter XI
reorganization - - - -
Contributed capital - - - -
Net income - - - -
------------------------------------------------------------------------
BALANCE, DECEMBER 25, 1993 - - - -
Net income - - - -
------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 - - - -
Net loss - - - -
------------------------------------------------------------------------
BALANCE, DECEMBER 30, 1995 - - - -
Net income (unaudited) - - - -
------------------------------------------------------------------------
BALANCE, JUNE 29,
1996 (unaudited) - $ - - $ -
========================================================================
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes
in Stockholder's Equity
(continued)
=======================================================================
Preferred Common
stock stock
------------- -------------
Shares Amount Shares Amount
-------- -------- ------ -------
BALANCE, DECEMBER 26, 1992 - $ - 24,000,000 $0240,000
Cancellation of outstanding
shares pursuant to
Chapter XI
reorganization - - (24,000,000) (240,000)
Shares issued to World Machinery
Company pursuant to Chapter XI
reorganization - - 3,000,000 30,000
Contributed capital - - - -
Net income - - - -
----------------------------------------------------------------------
BALANCE, DECEMBER 25, 1993 - - 3,000,000 30,000
Net income - - - -
----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 - - 3,000,000 30,000
Net loss - - - -
----------------------------------------------------------------------
BALANCE, DECEMBER 30, 1995 - - 3,000,000 30,000
Net income (unaudited) - - - -
----------------------------------------------------------------------
BALANCE, JUNE 29, 1996
(unaudited) - $ - 3,000,000 $0030,000
=======================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes
in Stockholder's Equity
(continued)
========================================================================
Additional
paid-in
capital Deficit
-------------- ------------
BALANCE, DECEMBER 26, 1992 $000(44,650) $(24,397,276)
Cancellation of outstanding shares pursuant
to Chapter XI reorganization 12,177,800 -
Shares issued to World Machinery Company
pursuant to Chapter XI reorganization (29,900) -
Contributed capital 100,000 -
Net income - 15,470,552
-----------------------------------------------------------------------
BALANCE, DECEMBER 25, 1993 12,203,250 (8,926,724)
Net income - 363,237
----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 12,203,250 (8,563,487)
Net loss - (1,728,900)
-----------------------------------------------------------------------
BALANCE, DECEMBER 30, 1995 12,203,250 (10,292,387)
Net income (unaudited) - 516,682
---------------------------------------------------------------------
BALANCE, JUNE 29, 1996 (unaudited) $12,203,250 $0(9,775,705)
=====================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
<PAGE>
GENERAL BEARING CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year ended
------------------------------------
December December December
25, 31, 30,
1993 1994 1995
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $15,470,552 $363,237 $1,728,900)
Add (deduct) noncash items charged
(credited) to income:
Extraordinary income (15,835,639) (108,275) -
Deferred income taxes - - (500,000)
Depreciation and amortization 540,253 505,447 520,082
Equity in (income) loss of
affiliate 182,802 (403,071) (78,587)
Revaluation of equity investment - - 960,000
Revaluation of goodwill - - 93,333
(Gain) loss on disposal of
equipment and improvements - (24,073) 144,967
Other (38,172) (9,787) 64,928
Add (deduct) changes in operating
assets and liabilities:
Accounts receivable (517,949) (1,345,403) (457,381)
Inventories (523,371) (4,757,159)(2,963,603)
Prepaid expenses and other
assets 13,845 (183,484) 169,234
Due to (from) affiliates (17,693) (399,601) 617,296
Accounts payable and accrued
expenses 930,688 1,665,002 1,788,263
Accrued customer damage claims - - 1,564,742
----------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 205,316 (4,697,167) 194,374
---------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (156,412) (253,892) (1,111,653)
Sale of machinery - 86,000 -
Net cash from acquisition 291,846 - -
-------------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES 135,434 (167,892) (1,111,653)
-----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - - 1,560,000
Repayment of long-term debt (562,210) - (111,420)
Increase (decrease) in note payable -
bank - 4,158,002 892,785
Proceeds from long-term debt and
other balances - parent 500,000 500,000 -
Repayment of long-term debt and other
balances - parent - (50,918) (1,440,304)
---------------------------------------------------------------------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES (62,210) 4,607,084 901,061
-------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 278,540 (257,975) (16,218)
CASH, BEGINNING OF PERIOD 46,388 324,928 66,953
-------------------------------------------------------------------------
CASH, END OF PERIOD $324,928 $66,953 $50,735
=========================================================================
See accompanying summary of significant accounting policies
and notes to consolidated financial statements.
General Bearing Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
(continued)
Six months ended
------------------------------
June 30 June 29
1995 1996
------------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,265,297) $516,682
Add (deduct) noncash items charged
(credited) to income:
Extraordinary income - -
Deferred income taxes - 318,000
Depreciation and amortization 192,440 271,117
Equity in (income) loss of affiliate 7,466 -
Revaluation of equity investment 960,000 -
Revaluation of goodwill 93,333 -
(Gain) loss on disposal of equipment and
improvements - -
Other 64,928 -
Add (deduct) changes in operating
assets and liabilitie
Accounts receivable (487,079) 772,221
Inventories (730,826) 1,840,530
Prepaid expenses and other assets 310,284 80,971
Due to (from) affiliates 91,462 696,784
Accounts payable and accrued
expenses 2,029,312 (2,341,246)
Accrued customer damage claims 1,852,000 (863,821)
-------------------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES 2,118,023 1,291,238
--------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (957,111) (444,072)
Sale of machinery - -
Net cash from acquisition - -
-------------------------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES (957,111) (444,072)
-------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 1,560,000 -
Repayment of long-term debt - (111,420)
Increase (decrease) in note
payable - bank (1,616,603) (490,586)
Proceeds from long-term debt
and other balances - parent - -
Repayment of long-term debt
and other balances - parent (1,163,944) (278,844)
-----------------------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES (1,220,547) (880,850)
-------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (59,635) (33,684)
CASH, BEGINNING OF PERIOD 66,953 50,735
-------------------------------------------------------------------------
CASH, END OF PERIOD $7,318 $17,051
<PAGE>
General Bearing Corporation
and Subsidiaries
Summary of Significant Accounting Policies
(Information related to the six months ended June 30, 1995
and June 29, 1996 is unaudited)
THE COMPANY General Bearing Corporation ("General") and
subsidiaries (collectively, the "Company")
manufactures, sources, assembles and
distributes ball bearings, including standard
radial, electric motor quality, tapered
roller and traction motor ball bearings, used
in a broad range of industrial applications.
The Company supplies bearings to original
equipment manufacturers and to manufacturing
industries, railroad companies and the
industrial aftermarket primarily in the
United States and Canada. The Company also
markets bearings for freight cars and
locomotives worldwide. The Company is a
wholly-owned subsidiary of World Machinery
Company ("World" or "Parent").
PRINCIPLES OF The accompanying consolidated financial
CONSOLIDATION statements include the accounts of General
and its majority-owned subsidiaries.
Investments in 20%- to 50%-owned companies
are accounted for on the equity method.
All significant intercompany accounts and
transactions have been eliminated.
INVENTORIES Inventories are stated at the lower of cost
(first-in, first-out method) or market.
FIXED ASSETS The cost of depreciable plant and equipment
is depreciated for financial reporting
purposes over the estimated useful lives
using the straight-line or declining balance
methods. The estimated lives for each
property classification are as follows:
=================================================================
Machinery and equipment 3 to 10 years
Furniture and fixtures 10 years
Transportation equipment 3 to 5 years
Leasehold improvements Lesser of life of lease or useful life
=================================================================
Expenditures for maintenance, repairs and
minor renewals or betterments are charged
against income. Major renewals and
replacements are capitalized.
REVENUE The Company recognizes revenue when products
RECOGNITION are shipped.
REPORTING PERIOD The reporting period for the Company is a 52-
53 week period ending on the last Saturday in
December. There were 52 weeks in the period
ended December 25, 1993 and 1995 and 53 weeks
in the period ended December 31, 1994.
INCOME TAXES The Company files a consolidated Federal
income tax return with its Parent and
separate state and local tax returns. Federal
income taxes are calculated as if the Company
filed its tax return on a separate return
basis.
Deferred income taxes reflect the net tax
effect of temporary differences between the
carrying amounts of assets and liabilities
for financial reporting purposes and the
amounts used for income tax purposes.
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
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
ESTIMATED FAIR Statement of Financial Accounting Standards
VALUE OF FINANCIAL ("SFAS") No. 107, "Disclosure About Fair
INSTRUMENTS Value of Financial Instruments", requires
disclosures of fair value information about
financial instruments, for which it is
practicable to estimate the value, whether or
not recognized on the balance sheet.
The fair value of financial instruments,
including cash, accounts receivable and
accounts payable, approximate their carrying
value because of the current nature of these
instruments. The carrying amounts of the
Company's note payable - bank and long-term
debt - bank approximate fair value because
the interest rates on these instruments are
subject to changes with market interest
rates. It is not practical to determine the
fair value of receivables from, payables to
and long-term debt payable to the parent and
affiliates because of the nature of their
terms.
CONCENTRATIONS OF The Company extends credit based on an
CREDIT RISK evaluation of the customer's financial
condition, generally without requiring
collateral. Exposure to losses on receivables
is principally dependent on each customer's
financial condition. The Company monitors its
exposure for credit losses and maintains
allowances for anticipated losses.
LONG-LIVED ASSETS Long-lived assets, such as goodwill and
property and equipment, are evaluated for
impairment when events or changes in
circumstances indicate that the carrying
amount of the assets may not be recoverable
through the estimated undiscounted future
cash flows from the use of these assets. When
any such impairment exists, the related
assets will be written down to fair value.
This policy is in accordance with Statement
of Financial Accounting Standards No. 121
("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which
is effective for fiscal years beginning after
December 15, 1995. The Company elected early
adoption of this standard and has,
accordingly, written down its goodwill as of
December 30, 1995 (Note 10).
RECENT ACCOUNTING In October 1995, the Financial Accounting
STANDARDS Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 encourages entities to adopt the
fair value method in place of the provisions
of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"), for all
arrangements under which employees receive
shares of stock or other equity instruments
of the employer or the employer incurs
liabilities to employees in amounts based on
the price of its stock. The Company does not
anticipate adopting the fair value method
encouraged by SFAS No. 123 and will account
for such transactions in accordance with APB
No. 25.
EARNINGS PER Earnings per common share are computed on the
COMMON SHARE basis of the weighted average number of
common shares outstanding during the year.
INTERIM FINANCIAL The accompanying unaudited consolidated
INFORMATION interim financial statements have been
prepared in accordance with generally
accepted accounting principles for interim
financial information. In the opinion of
management, all adjustments (consisting of
only normal recurring accruals) considered
necessary for a fair presentation have been
included. Operating results for the six-month
period ended June 29, 1996 are not
necessarily indicative of the results that
may be expected for the year ending
December 27, 1996.
<PAGE>
1. INVENTORIES Inventories consist of the following:
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Finished goods $8,597,545 $11,134,414 $8,600,697
Raw materials,
purchased parts
and
work-in-process 5,065,086 5,491,820 6,185,007
-----------------------------------------------------------------
$13,662,631 $16,626,234 $14,785,704
=================================================================
2. FIXED ASSETS Fixed assets consist of the following:
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Machinery and
equipment $5,185,392 $6,071,074 $6,329,203
Furniture and fixtures 601,303 608,468 749,254
Leasehold improvements 821,318 389,729 415,987
Transportation
equipment 119,088 88,893 105,155
-----------------------------------------------------------------
6,727,101 7,158,164 7,599,599
Less: Accumulated
depreciation
and
amortization 4,699,026 4,677,994 4,944,760
-----------------------------------------------------------------
$2,028,075 $2,480,170 $2,654,839
=================================================================
Depreciation and amortization expense was
$540,253, $505,447 and $518,368 for the years
1993, 1994 and 1995, respectively.
Depreciation and amortization expense for the
six months ended 1995 and 1996 was $192,440
and $269,403, respectively.
The Company purchased, through an affiliate,
$750,000 of machinery and equipment in 1995
which has not been placed into service.
3. OTHER ASSETS Other assets consist of the following:
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Security deposits and
other $111,103 $20,174 $15,525
Deferred loan costs - 22,286 20,572
Miscellaneous
receivables 145,000 - -
Goodwill, net of
accumulated
amortization of
$6,667 (Note 10) 93,333 - -
-----------------------------------------------------------------
$349,436 $42,460 $36,097
=================================================================
4. INVESTMENTS
AND ADVANCES
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Investments in
affiliates:
50%-owned,
at equity -
Alurop Trading
Corp., a Panamanian
holding company
whose principal
asset is 100% of
the capital stock
of WMW Machinery
of New Jersey,
Inc.(a) (b) $977,479 $- $-
Less than
50%-owned - at
equity:
Shanghai General
Bearing Company
Ltd. (25%-owned)
and Wafangdian
Hyatt Bearing
Manufacturing Co.
Ltd. (25%-owned)
(c) 591,388 687,454 687,454
----------------------------------------------------------------
$1,568,867 $687,454 $687,454
================================================================
Advances to Parent and
affiliates:
=================================================================
Current:
Parent(d) $260,918 $116,222 $395,066
Shar
General Corp. 97,795 57,094 -
All others 55,265 42,034 7,521
-----------------------------------------------------------------
$413,978 $215,350 $402,587
=================================================================
Long-term:
General IKL
Corp. (see
Note 11(e)) $255,824 $255,824 $255,824
=================================================================
(a) Condensed financial data of WMW
Machinery of New Jersey, Inc. ("WMW") is
as follows:
BALANCE SHEET
December 31, 1994
-----------------------------------------------------------------
ASSETS
Current assets $121,000
Other assets 523,000
Investment in redeemable preferred
stock - affiliate 12,049,000
-----------------------------------------------------------------
$12,693,000
=================================================================
LIABILITIES
Accounts payable $9,121,000
Other current liabilities 845,000
Notes and other payables -
affiliates 772,000
-----------------------------------------------------------------
$10,738,000
=================================================================
STOCKHOLDERS' EQUITY $1,955,000
=================================================================
STATEMENT OF OPERATIONS
Year ended December 31, 1994
-----------------------------------------------------------------
Net sales $146,000
Operating loss (57,000)
Net income 578,000
=================================================================
(b) During 1995, the Company revalued its
equity investment in Alurop Trading
Corp. to properly reflect its share of
equity to be realized from the
investment. The Company determined that
due to WMW being Alurop's only asset,
the limited operations of WMW and the
uncertain value of WMW's investment in
preferred stock, the Company has written
off its investment (Note 10).
(c) Condensed financial data of Shanghai
General Bearing Company Ltd. are as
follows:
BALANCE SHEETS
December 31, December 30,
1994 1995
-----------------------------------------------------------------
Current assets $2,663,000 $2,585,000
Total assets 6,512,000 6,293,000
Current liabilities 3,318,000 3,319,000
Total liabilities 3,318,000 3,336,000
Stockholder's equity 3,194,000 2,957,000
=================================================================
STATEMENTS OF OPERATIONS
Year ended
--------------------------------
December 31, December 30,
1994 1995
-----------------------------------------------------------------
Net sales $5,875,000 $7,321,000
Gross profit 1,352,000 1,586,000
Operating income 521,000 438,000
Net income 456,000 384,000
=================================================================
(d) Includes accrued interest payable to the
parent of $150,000, $300,000 and
$375,000 as of December 31, 1994,
December 30, 1995 and June 29, 1996,
respectively, relating to the
subordinated note (Note 7).
5. NOTE PAYABLE The Company is obligated to a bank under a
- BANK revolving line of credit which expires on
July 1, 1998 and a term loan (see Note 7).
The loan and security agreement provides the
Company with a secured line of credit of up
to $15 million for working capital,
acceptances and letters of credit.
Borrowings under the credit line are based
upon percentage formulas relating to accounts
receivable and inventories. The maximum
amount available is reduced by the term loan
balance outstanding. Interest on the
outstanding obligation is payable at the
bank's prime rate plus 2%, 10.25% at June 29,
1996. The loan is secured by all of the
Company's inventories, accounts receivable,
general intangibles, and certain machinery
and equipment. The loan and security
agreement also contains certain restrictive
covenants which include, among others, the
maintenance of financial ratios relating to
working capital and net worth, limitations on
capital expenditures and payment of
dividends, and prepayment penalties. At
December 30, 1995, the Company was in
violation of certain loan covenants; however,
the bank agreed to waive those violations and
amended the covenants going forward.
Commitments under letters of credit amounted
to $398,736 at June 29, 1996.
6. TAXES ON Provisions for Federal, state and local
INCOME income taxes consist of the following:
Year ended Six months ended
---------------------------- -------------------
December December December June 30, June 29,
25, 1993 31, 1994 30, 1995 1995 1996
-----------------------------------------------------------------
Deferred
(benefit):
Federal $ - $ - $(473,000) $ - $302,000
State
and
local - - (27,000) - 16,000
-----------------------------------------------------------------
$ - $ - $(500,000) $ - $318,000
=================================================================
The major elements contributing to the
difference between the Federal statutory rate
and the Company's effective tax rate are as
follows:
Year ended Six months ended
---------------------------- ---------------------
December December December June 30, June 29,
25, 1993 31, 1994 30, 1995 1995 1996
-----------------------------------------------------------------
Statutory
rate 34.0% 34.0% 34.0% 34.0% 34.0%
(Increase)
decrease
in
valuation
allowance
(due primarily
to non-utiliza-
tion of net
operating
loss) (35.8) (41.8) (9.1) (33.0) -
Permanent
and
other
differences 1.8 7.8 1.0 (1.0) 4.0
-----------------------------------------------------------------
-% -% 25.9% -% 38.0%
=================================================================
Temporary differences which give rise to a
significant portion of deferred tax assets
and liabilities are as follows:
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Gross deferred tax
assets:
Accounts
receivable
allowances $90,000 $90,000 $104,000
Net operating
loss
carryforwards 4,230,000 4,693,000 4,516,000
Other 189,000 336,000 117,000
-----------------------------------------------------------------
4,509,000 5,119,000 4,737,000
Gross deferred tax
liabilities:
Plant and
equipment,
depreciation
differences (514,000) (351,000) (289,000)
-----------------------------------------------------------------
3,995,000 4,768,000 4,448,000
Valuation allowance (3,995,000) (4,268,000) (4,266,000)
-----------------------------------------------------------------
$- $500,000 $182,000
=================================================================
Management believes that the remaining
portion of the deferred tax asset will more
likely than not be fully realized based on
the Company's historical earnings and future
expectations of adjusted taxable income.
As of December 30, 1995, the Company has
Federal tax loss carryovers of approximately
$13.2 million expiring at various dates
through the year 2010.
7. LONG-TERM
DEBT
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Bank:
$1,560,000 three
year loan
from the
same bank
referred to
in Note 5.
Interest is
calculated
at the
bank's prime
rate plus
2%; 10.25%
at June 29,
1996;
principal of
$18,570 plus
interest is
payable
monthly,
through
June 1, 1998
with final
payment of
$910,050 due
July 1, 1998. $- $1,448,580 $1,337,160
Less: Current
maturities - 222,840 222,840
----------------------------------------------------------------
- 1,225,740 1,114,320
----------------------------------------------------------------
================================================================
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Parent:
6% subordinated
promissory
notes due
December
1998.
Interest is
accruable
but is to be
paid annually
only out of
net income
in excess of
$400,000.
The notes
are subordinated
to the rights
of all creditors
and are secured
by machinery
and equipment
having a net
book value
of approximately
$1,400,000 at
December 30,
1995 $2,500,000 $2,500,000 $2,500,000
Noninterest-bearing
promissory
note,
payable in
annual
installments
of $125,000
commencing
December
1993. The
1993 and 1994
installments
were deferred
until, and
paid in, 1995.
Repayment is
subject to
management
discretion. 750,142 375,142 375,142
6% loan payable
due December
1995, interest
payable
quarterly 1,000,000 - -
Accrued interest 210,000 - -
-----------------------------------------------------------------
4,460,142 2,875,142 2,875,142
-----------------------------------------------------------------
=================================================================
December 31, December 30, June 29,
1994 1995 1996
-----------------------------------------------------------------
Affiliates:
General-IKL Corp.
(see Note 11
(d)) $758,173 $716,422 $727,912
-----------------------------------------------------------------
$5,218,315 $4,817,304 $4,717,374
=================================================================
At December 30, 1995, aggregate principal
payments for the long-term bank debt
agreements are $222,840 in 1996, $222,840 in
1997 and $1,000,900 in 1998. The repayment
terms of the long-term debt - parent and
affiliates are stated above or are at the
discretion of management.
8. DISCRETIONARY The Company and certain of its affiliates
PROFIT maintain profit sharing plans covering
SHARING PLAN eligible salaried and nonunion employees.
Contributions are made to the plans at the
discretion of the management of the
companies. The Company made contributions of
$30,000 and $60,000 for 1993 and 1994. There
were no contributions recorded in 1995. For
the six months ended 1996, the Company
recorded accrued contributions of $15,000.
9. PROVISION FOR In 1995, the Company was notified that
CUSTOMER certain wheel bearings supplied to the
DAMAGE CLAIMS railroad industry did not meet
specifications. As a result, substantially
all these bearings previously sold, were
recalled to be reworked. In connection with
this recall, the Company made a special
provision against earnings of $2,152,000, in
the year ended December 30, 1995,
representing the estimated liability for
rework costs and customer damage claims.
10. OTHER Other (income) expense consists of:
(INCOME)
EXPENSE
December December December June 30, June 29,
25, 1993 31, 1994 30, 1995 1995 1996
-----------------------------------------------------------------
Revaluation of
equity in
vestment
(Note 4)
(b) $- $- $960,000 $960,000 $-
Revaluation of
goodwill
(Note 3) - - 93,333 93,333 -
Interest
income (436,244) - - - -
Litigation
settlement (235,013) - - - -
Other (7,926) (19,699) 179,706 64,928 -
-------------------------------------------------------------------
$(679,183) $(19,699) $1,233,039 $1,118,261 $-
===================================================================
11. TRANSACTIONS (a) The Company made purchases of
WITH approximately $5.3 million, $6.9 million
AFFILIATES and $9.1 million from affiliates in
1993, 1994 and 1995, respectively. For
the six months ended 1995 and 1996, the
Company made purchases of approximately
$4.9 million and $3.7 million,
respectively. Accounts payable -
affiliates relate primarily to these
purchases.
(b) General shares office facilities and
provides services for several
affiliates. General charged these
affiliates $108,000, $115,000 and
$120,000 in 1993, 1994 and 1995,
respectively. General charged these
affiliates $60,000 for each of the six
months ended 1995 and 1996.
(c) General leases property, including its
corporate headquarters, from Gussack
Realty Company ("Realty"), which is
owned by the shareholders of World. Rent
and real estate taxes paid to the
affiliate were approximately $786,000,
$923,000 and $861,000 in 1993, 1994 and
1995, respectively (see Note 12). For
the six months ended 1995 and 1996, the
Company paid rent and real estate taxes
of $505,710 and $500,010, respectively.
(d) The Company made payments for and
advances to World, World subsidiaries
and joint ventures and certain
affiliates for payroll, benefits, and
other expenses. Such payments aggregated
approximately $84,000, $1,708,000 and
$1,742,000 for the fiscal years ended
1993, 1994 and 1995, respectively. For
the six months ended 1995 and 1996, such
payments amounted to approximately
$970,000 and $776,000, respectively.
(e) The amounts receivable from and payable
to General-IKL Corp., a corporate joint
venture with a manufacturer located in
the former Republic of Yugoslavia, are
restricted due to the suspension of
economic activity with that country.
12. COMMITMENTS (a) Effective January 1996, the Company
AND completed a move to new facilities owned
CONTINGENCIES by Realty. Existing obligations under a
long-term lease for the previous
facilities, also owned by Realty, were
waived. The facilities are currently
leased on a month-to-month basis.
Rent expense consists of the following:
Year ended Six months ended
---------------------------- ----------------
December December December June 30, June 29,
25, 1993 31, 1994 30, 1995 1995 1996
-----------------------------------------------------------------
Gross rent paid
(excluding
taxes) $596,016 $756,555 $748,320 $377,010 $371,310
Less: Reimbursed
from
related
companies (108,000) (123,791) (224,820) (112,400) (15,600)
-----------------------------------------------------------------
$488,016 $632,764 $523,500 $264,610 $355,710
=================================================================
(b) The Company is obligated under an
operating lease for manufacturing
facilities in New Jersey through May
1999. The lease requires payment of real
estate taxes, insurance and maintenance.
Rent expense was $238,000, $204,000 and
$204,000 in 1993, 1994 and 1995,
respectively. Rent expense for each of
the six-month periods ended 1995 and
1996 was $102,000.
Minimum annual rentals as of
December 30, 1995, under this lease, are
as follows:
Year Amount
-----------------------------------------------------------------
1996 $216,000
1997 219,500
1998 239,500
1999 105,000
-----------------------------------------------------------------
$780,000
=================================================================
(c) The Company has a management consulting
and noncompetition agreement with a
former officer and stockholder. The
agreement, which commenced as of July 1,
1980, provides for quarterly payments
aggregating $35,000 per annum for twenty
years. As of December 30, 1995, future
payments required under the agreement
total $157,500.
(d) In 1995, General and WMW Machinery of
New Jersey, Inc. (formerly WMW
Machinery, Inc.) commenced an action for
damages in the United States District
Court for the Southern District of New
York against the successor to a former
East German Foreign Trade Organization
and certain other German parties.
The defendants filed an answer and
counterclaim which included a claim
against General and certain affiliates
in the amount of $9,507,337 for
allegedly failing to provide the working
capital requirements of WMW Machinery of
New Jersey, Inc.
Management believes the claim against
the Company to be entirely without merit
and anticipates that the claim will have
no material impact on the Company.
Additionally, US Customs has asserted a
claim against the Company, which the
Company believes to be without merit.
The Company denies any liability under
this claim and believes that the claim
will not have a material impact on the
Company.
(e) General is party to a trademark license
agreement which provides for increasing
annual fees of between $25,000 and
$35,000 through 1999, and $35,000 per
year plus an inflation factor thereafter
until 2009. The agreement contains an
acceleration clause which provides for
immediate payment of all remaining fees
in the event of breach of contract.
(f) The Company has guaranteed certain of
Realty's outstanding obligations of
approximately $1.2 million to a bank and
other parties.
13. SUPPLEMENTAL For the periods ended December 25, 1993,
CASH FLOW December 31, 1994 and December 30, 1995, the
INFORMATION Company paid interest of approximately
$518,000, $745,000, and $1,257,000,
respectively. For the six months ended 1995
and 1996, the Company paid interest of
approximately $602,000 and $605,000,
respectively.
14. DISCHARGE In December 1993, General successfully
FROM CHAPTER emerged from a Chapter XI bankruptcy
XI - PLAN OF proceeding which commenced in September 1991.
REORGANIZA- In connection with the plan of
TIO reorganization, the following significant
transactions occurred:
(a) 100% of the common stock of General was
acquired by World (see (b) below). (The
shareholders of World, while not
identical, were similar to the former
owners of General).
(b) General was obligated to World for
$14,701,416 (the "Obligation") resulting
from World's purchase of a General
obligation from the Wells Fargo Bank.
The Obligation was satisfied by the
issuance of a 6% secured promissory note
in the amount of $2,500,000, a $750,142
unsecured promissory note and the
issuance of 1,000 shares of $.10 par
value Class A common stock of General
valued at $100. The difference between
the face value of the Obligation and the
settled amounts ($11,451,174) has been
recorded in the accounts as
"Extraordinary income - settlement of
debts at a discount."
(c) To assist General with its plan of
reorganization, World agreed to make
advances of up to $1,200,000. $500,000
was advanced on December 25, 1993 (see
Note 7), and $500,000 was advanced in
January 1994.
(d) Unsecured creditors were offered a cash
settlement equal to 5% of their
outstanding pre-petition claims or in
the alternative, 10% of such claims
payable 2% per year for five years.
(e) The holders of the Company's redeemable
Series B preferred stock, its Series A
preferred stock and its common stock
received no consideration.
(f) The Company entered into a financing
agreement with the Bank of New York
("BNY") replacing its existing
arrangement with BNY.
In connection with the plan of
reorganization, the Company settled its pre-
petition obligations at a discount. A summary
of the income arising from this settlement
follows:
-----------------------------------------------------------------
Reduction in obligations owing to:
World $11,451,174
Unsecured creditors and reversals of
accruals 3,974,480
Affiliates and shareholders 409,985
-----------------------------------------------------------------
$15,835,639
=================================================================
15. SUBSEQUENT (a) In connection with a proposed initial
EVENTS public offering of its common stock, the
Company, on October 10, 1996, filed an
amendment to its Certificate of
Incorporation, increasing the authorized
common shares from 10,600 to 19,000,000
and changing its $.10 par value per
common share to $.01 par value, and
effecting a 3,000-for-one stock split.
Additionally, the amendment authorizes
1,000,000 shares of preferred stock $.01
par value per share. The Board of
Directors is authorized to fix the
rights, preferences, privileges and
restrictions of any series of preferred
stock, including the dividend rights,
original issue price, conversion rights,
voting rights, terms of redemption,
liquidation preferences and sinking fund
terms thereof, and the number of shares
constituting any such series and the
designation thereof and to increase or
decrease the number of shares of such
series subsequent to the issuance of
shares of such series (but not below the
number of shares of such series then
outstanding). All share and per share
data in the consolidated financial
statements have been adjusted to give
retroactive effect to the stock split.
(b) In September 1996, the Company adopted
the 1996 Stock Option and Performance
Award Plan ("1996 Plan"), which
authorizes the granting to directors,
officers and key employees of the
Company of incentive or nonqualified
stock options, performance shares,
restricted shares and performance units.
The 1996 Plan covers up to 500,000
shares of common stock. Subject to the
completion of the proposed offering,
257,500 options at the offering price
were granted.
The exercise of any incentive stock
option granted to an eligible employee
may not be less than 100% of the fair
market value of the shares underlying
such option on the date of grant, unless
such employee owns more than 10% of the
outstanding common stock or stock of any
subsidiary or parent of the Company, in
which case the exercise price of any
incentive stock option may not be less
than 110% of such fair market value. No
option may be exercisable more than ten
years after the date of grant and, in
the case of an incentive stock option
granted to an eligible employee owning
more than 10% of the common stock or
stock of any subsidiary or parent of the
Company, no more than five years from
its date of grant. Options are not
transferable, except upon the death of
the optionee. In general, upon
termination of employment of an
optionee, all options granted to such
person which are not exercisable on the
date of such termination immediately
expire, and any options that are
exercisable expire three months
following termination of employment, if
such termination is not the result of
death or retirement, two years following
such termination if such termination was
because of death and one year following
such termination if such termination was
because of disability or retirement
under the provisions of any retirement
plan that may be established by the
Company, or with the consent of the
Company.
<PAGE>
=====================================
No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus and, if
given or made, such information or
representations must not be relied
upon as having been authorized by the
Company or the Underwriters. This
Prospectus does not constitute an
offer to sell or the solicitation of
any offer to buy any security other
than the shares of Common Stock
offered by this Prospectus, nor does
it constitute an offer to sell or a
solicitation is not authorized, or in
which the person making such 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, under any circum-
stances, create any implication that
the information contained herein is
correct as of any time subsequent to
the date hereof.
----------------
TABLE OF CONTENTS
---------------
PAGE
----
PROSPECTUS SUMMARY . . . . . . . 3
RISK FACTORS . . . . . . . . . . 7
COMPANY HISTORY . . . . . . . . . 14
DILUTION . . . . . . . . . . . . 15
USE OF PROCEEDS . . . . . . . . . 16
DIVIDEND POLICY . . . . . . . . . 17
CAPITALIZATION . . . . . . . . . 18
SELECTED FINANCIAL DATA . . . . . 19
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
21
BUSINESS . . . . . . . . . . . . 26
MANAGEMENT . . . . . . . . . . . 35
PRINCIPAL STOCKHOLDER . . . . . . 41
DESCRIPTION OF SECURITIES . . . . 42
SHARES OF COMMON STOCK ELIGIBLE
FOR FUTURE SALE . . . . . . . . . 44
UNDERWRITING . . . . . . . . . . 46
LEGAL MATTERS . . . . . . . . . . 48
EXPERTS . . . . . . . . . . . . . 49
CHANGE IN INDEPENDENT AUDITORS . 49
AVAILABLE INFORMATION . . . . . . 49
INDEX TO FINANCIAL STATEMENTS . F-1
=====================================
=====================================
1,000,000 SHARES
GENERAL BEARING
CORPORATION
COMMON STOCK
--------------
PROSPECTUS
--------------
H.J. MEYERS & CO., INC.
NOVEMBER ___, 1996
===========================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses expected to be incurred in
connection with the Offering described in this Registration Statement. All
amounts are estimated except the Registration Fee.
Registration fee $ 3,485.00
NASD filing fee 1,650.00
NASD listing fee *
Underwriters' nonaccountable
expense allowance *
Accounting fees and expenses *
Legal fees and expenses *
Blue Sky fees and expenses *
Transfer agent fee *
Printing and engraving *
Miscellaneous *
------------------
Total $ *
-----------------
___________________________
* To be completed by amendment
All of the above expenses of this Offering will be paid by the
Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Company's Certificate of Incorporation provides that:
"The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
complete action, suit or proceeding, whether civil, criminal,
administrative or investigative, or by or in the right of the
corporation to procure judgment in its favor, by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, in accordance with and to
the full extent permitted by statute. Expenses incurred in defending
a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific
case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section. The indemnification
provided by this section shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under
this Certificate of Incorporation or any agreement or vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person."
Article X of the Company's Bylaws provides that:
"Any person made or threatened to be made a party to or involved
in any action, suit or proceeding, whether civil or criminal,
administrative or investigative (hereinafter, "proceeding") by reason
of the fact that he, his testator or intestate, is or was a director,
officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent
of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended (but
in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to
such amendment) against all expense, loss and liability (including,
without limitation, judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees), actually and
necessarily incurred or suffered by him in connection with the defense
of or as a result of such proceeding, or in connection with any appeal
therein. The Corporation shall have the power to purchase and
maintain insurance for the indemnification of such directors, officers
and employees to the full extent permitted under the laws of the State
of Delaware from time to time in effect. Such right of
indemnification shall not be deemed exclusive of any other rights of
indemnification to which such director, officer or employee may be
entitled.
The right to indemnification conferred in this By-Law shall be a
contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that if the
-------- --------
General Corporation Law of the State of Delaware requires, the payment
of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in
which services were or are rendered by such person while a director or
officer, including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking by or on
behalf of such director or officer, to repay all amounts so advanced
if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this By-Law or otherwise."
Statutory
Generally, Section 145 of the General Corporation Law of the
State of Delaware authorizes Delaware corporations, under certain
circumstances, to indemnify their officers and directors against all
expenses and liabilities (including attorneys' fees) incurred by them
as a result of any suit brought against them in their capacity as a
director or an officer, if they acted in good faith and in manner they
reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct
was unlawful. A director on officer may also be indemnified against
expenses incurred in connection with a suit by or in the right of the
corporation of such director or officer acted in good faith and in a
manner reasonably believe to be in or not opposed to the best
interests of the corporation, except that no indemnification may be
made without court approval if such person was adjudged liable to the
corporation.
The Underwriting Agreement provides that the Underwriters shall
indemnify each director of the Company, each officer of the Company
who signed this Registration Statement and each person who controls
the Company against certain liabilities, including certain liabilities
under the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In December 1993, the Company emerged from a bankruptcy
reorganization which commenced in September 1991. In connection with
its Plan of Reorganization, the Company issued to World (i) a 6%
Secured Promissory Note due 1998 in the original principal amount of
$2.5 million (the "Secured Note"), (ii) a non-interest bearing,
Unsecured Promissory Note in the principal amount of $750,142 payable
in annual installments of $125,000 commencing December 1993 (the
"Installment Note") and (iii) 1,000 shares of Common Stock. The
Secured Note, the Installment Note and the shares of Common Stock were
issued in exchange for a note in the original principal amount of
$12.0 million, together with accrued interest thereon in the amount of
$2,701,416 that World had acquired from Wells Fargo Bank, N.A., one of
the Company's lenders. The Secured Note, Installment Note and Common
Stock were issued in a transaction exempt from registration under the
Act pursuant to Section 1145 of Chapter 11 of the United States
Bankruptcy Code (11 U.S. Code Section 1145). In connection with the
issuance of such securities, no commissions or fees were paid.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit No. Description of Exhibit
------------ ----------------------
1.1 Underwriting Agreement+
3.1 Second Restated Certificate of Incorporation
3.2 By-Laws of the Company
4.1 Specimen Stock Certificate+
5 Opinion of Reid & Priest LLP+
10.1 Loan and Security Agreement dated December 20, 1993 by
and among the Bank of New York Commercial Corporation,
the Company and Hyatt Railway Products Corp., including
amendments 1 through 8 thereto.
10.2 Contract dated June 1988 by and between Shanghai
Rolling Bearing Factory and the Company, including
Agreement for the Revision and Amendment to the
Contract.
10.3 Lease Agreement dated November 1, 1996 by and between
Gussack Realty Company and the Company relating to West
Nyack, New York premises.
10.4 Lease dated March 15, 1988 by and between Lamington
Associates II and the Company relating to the Union,
New Jersey premises.+
10.5 Sublease Agreement dated November 1, 1996 between the
Company and World Machinery Company.
10.6 Sublease Agreement dated November 1, 1996 between the
Company and WMW Machinery Co.
10.9 1996 Stock Option and Performance Award Plan.+
21 List of Subsidiaries of the Company.
23.1 Consent of Ferro, Berdon & Company, L.L.P.
23.2 Consent of BDO Seidman, LLP
23.3 Consent of Reid & Priest LLP (contained in Exhibit 5
hereto).
24 Power of Attorney (included on page II-15).
99.1 Consent of Harold S. Geneen pursuant to Rule 438 of the
Act.
+ To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
Report of Independent Certified Public Accountants
Schedule II Valuations and Qualifying Accounts
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) 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 deliver to
each purchaser;
(b) Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "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 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.
(i) For 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 a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(ii) For the purpose 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.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S-1 and authorizes this
Registration Statement to be signed on its behalf by the undersigned, in
the Town of West Nyack, State of New York, on this 1st day of November
1996.
GENERAL BEARING CORPORATION
/s/ David L. Gussack
-----------------------------
David L. Gussack
President
(Principal Executive Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signatures" constitutes and appoints
Seymour I. Gussack, David L. Gussack and Christopher Moore, or either of
them his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any or all amendments (including post-
effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents, each acting alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection with the above premises, as fully for all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
Signatures Title Date
------------ ------ -----
/s/
Seymour I. Gussack
--------------------- Chairman of the Board November 1, 1996
Seymour I. Gussack of
Directors
/s/ David L. Gussack President and November 1, 1996
--------------------- Director
David L. Gussack (Principal Executive
Officer)
Vice President and November 1, 1996
/s/ Christopher Moore Treasurer
-------------------- (Principal Financial
Christopher Moore and Accounting
Officer)
/s/Jerome Johnson
--------------------- Director November 4, 1996
Jerome Johnson
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
General Bearing Corporation
West Nyack, New York
The audit referred to in our report dated March 24, 1995 relating to the
consolidated financial statements of General Bearing Corporation and
Subsidiaries, which is contained in the Prospectus, included the audit
of the financial statement schedule listed in the accompanying index for
the years ended December 25, 1993 and December 24, 1994. This financial
statement schedule is the responsibility of management. Our
responsibility is to express an opinion on this financial statement
schedule based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ FERRO, BERDON & COMPANY
---------------------------
FERRO, BERDON & COMPANY
New York, New York
November 4, 1996
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTATNS
General Bearing Corporation
West Nyack, New York
The audit referred to in our report dated September 13, 1996, except for Note
15(a) which is as of October 10, 1996 relating to the consolidated financial
statements of General Bearing Corporation and Subsidiaries, which is contained
in the Prospectus, included the audit of the financial statement schedule
listed in the accompanying index for the year ended December 30, 1995. This
financial statement schedule is the responsibility of management. Our
responsibility is to express an opinion on this financial schedule schedule
based upon our audit.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ BDO SEIDMAN, LLP
----------------------
BDO SEIDMAN, LLP
New York, New York
September 13, 1996
<PAGE>
(B) SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
-------- -------- -------- --------- --------
Add
-----
Balance at
beginning Charged to Balance at
of costs and Deductions end of
Description period expenses (1) period
------------ -------- ------- --------- ---------
Year ended December
25, 1993 Allowance
for doubtful $250,000 $5,119 $119 $255,000
accounts . . . .
----------- ---------- ----------- ------------
$250,000 $5,119 $119 $255,000
=========== ========== =========== ============
Year ended December
31, 1994
Allowance for
doubtful $255,000 - - $255,000
accounts . . . . ---------- --------- ----------------------
$255,000 - - $255,000
========== ========== ======================
Year ended December
30, 1995
Allowance for
doubtful $255,000 $17,050 $17,050 $255,000
accounts . . . . --------- ---------- ---------- ------------
$255,000 $17,050 $17,050 $255,000
========= ======== ========== ============
(1)Uncollectible accounts written
off net of recoveries
EXHIBIT 3.1
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
GENERAL BEARING CORPORATION
(Pursuant to Section 245 of the General
Corporation Law of the State of Delaware)
GENERAL BEARING CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on October
19, 1987.
2. A Restated Certificate of Incorporation of the Corporation
which amended and restated the original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on June 25,
1990.
3. This Second Restated Certificate of Incorporation restates
and integrates the provisions of the Restated Certificate of Incorporation
of the Corporation, and was duly adopted in accordance with the provisions
of Section 245 of the General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation is hereby
restated to read in its entirety as follows:
ARTICLE I
---------
The name of the Corporation is General Bearing Corporation
ARTICLE II
----------
The address of the registered office of the Corporation in the
State of Delaware is 32 Lookerman Square, Suite L-100, Kew County, Dover,
Delaware 19901. The name of its registered agent at such address is
Prentice Hall Corporation System, Inc.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
----------
Section 4.1. Authorized Capital. The total number of shares of
------------------
all classes of stock which the Corporation shall have authority to issue is
Twenty Million (20,000,000) shares, consisting of:
(a) One Million (1,000,000) shares of preferred stock, $.01
par value (the "Preferred Stock"), and
(b) Nineteen Million (19,000,000) shares of common stock,
$.01 par value ("Common Stock").
Section 4.2. Preferred Stock. Shares of the preferred stock of
---------------
the Corporation may be issued from time to time in one or more classes or
series, each of which class or series shall have such distinctive
designation or title as shall be fixed by the Board of Directors of the
Corporation prior to the issuance of any shares thereof. Each such class
or series of preferred stock shall have such voting powers, full or
limited, or no voting powers, and such other relative rights, powers and
preferences, including, without limitation, the dividend rate, conversion
rights, if any, redemption price and liquidation preference, and such
qualifications, limitations or restrictions thereof, as shall be stated in
such resolution or resolutions providing for the issuance of such class or
series of preferred stock as may be adopted from time to time by the Board
of Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the laws of
the State of Delaware.
Section 4.3. Common Stock. The powers, rights and other matters
------------
relating to the Common Stock are as follows:
(a) Dividends. Subject to the limitations set forth in
---------
this Article IV, dividends may be paid on Common Stock out of any funds
legally available for that purpose, when, as and if declared by the Board
of Directors. No dividend shall be paid on or declared and set apart for
any share of any class of the Corporation's Common Stock unless at the same
time a like proportionate dividend shall be paid on or declared and set
apart for each share of any other class of the Corporation's Common Stock.
(b) Liquidation Rights. In the event of any liquidation,
------------------
dissolution or winding up of the Corporation, after there shall have been
paid to or set aside for the holders of outstanding shares having superior
liquidation preferences to Common Stock the full preferential amounts to
which they are respectively entitled, the holders of outstanding shares of
all classes of Common Stock shall be entitled to receive pro rata,
according to the number of shares held by them, the remaining assets of the
Corporation legally available for distribution to the stockholders.
(c) Voting Rights. (1) Except as set forth in this
-------------
Article IV or as by statute or otherwise mandatorily provided, the holders
of the outstanding shares of Common Stock shall exclusively possess full
voting powers for the election of directors of the Corporation and for all
other corporate purposes.
(2) Any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote
of the stockholders at an annual or special meeting duly noticed and
called, as provided in the By-Laws of the Corporation, and may not be taken
by a written consent of the stockholders pursuant to the General
Corporation Law of the State of Delaware.
(3) Special meetings of the stockholders of the Corporation
for any purpose or purposes may be called at any time by the Board of
Directors or the Chairman of the Board of Directors. Special meetings of
the stockholders of the Corporation may not be called by any other Person
or Persons.
ARTICLE V
---------
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized
to adopt, alter or repeal its By-Laws. In addition, the By-Laws may be
made, altered, amended, changed or repealed by the stockholders of the
Corporation upon the affirmative vote of the holders of at least 66-2/3% of
the outstanding Common Stock entitled to vote thereon.
ARTICLE VI
----------
Election of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
ARTICLE VII
-----------
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of the Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
the Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under the provisions of
Section 279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
ARTICLE VIII
------------
A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for injury
resulting from a breach of his fiduciary duty as a director, except for
liability (i) for injury resulting from a breach of his duty of loyalty to
the Corporation and its stockholders, (ii) for injury resulting from acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv)
for injury resulting from any transaction from which the director derives
an improper personal benefit. If the Delaware General Corporation Law
hereafter is amended so as to authorize the further elimination or
limitation of the liability of directors to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, then the liability of a director of the Corporation for monetary
damages, in addition to the limitation on personal liability provided in
the preceding sentence, shall automatically, by virtue hereof and without
any further action on the part of the Corporation or its stockholders, be
further limited so as to be limited to the fullest extent permitted by the
Delaware General Corporation Law. Any repeal or modification of this
Section by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of
a director of the Corporation with regard to actions taken or omitted
before such repeal or modification.
ARTICLE IX
----------
The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or complete
action, suit or proceeding, whether civil, criminal, administrative or
investigative, or by or in the right of the Corporation to procure judgment
in its favor, by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, in accordance with and to the full extent permitted by
statute. Expenses incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this section. The
indemnification provided by this section shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled
under this Restated Certificate of Incorporation or any agreement or vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE X
---------
Notwithstanding anything contained in this Restated Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Common Stock shall be required
to amend, repeal, or adopt any provision inconsistent with, Sections
4.3(c)(2) or 4.3(c)(3) of Article IV, Article V or this Article X of this
Second Restated Certificate of Incorporation.
5. The Second Restated Certificate of Incorporation which further amends
the Certificate of Incorporation of the Corporation, was proposed by the
Board of Directors of the Company and was duly adopted by its stockholders
in the manner and by the vote prescribed by section 242 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has
been executed on behalf of the Corporation this 10th day of October, 1996.
GENERAL BEARING CORPORATION
By: /s/ David Gussack
-----------------------------------------
David Gussack, President
Attest:
/s/ Christopher Moore, Secretary
-----------------------------------
Christopher Moore, Secretary
STATE OF NEW YORK}
SS:
COUNTY OF ROCKLAND}
On this 10th day of October, 1996, before me personally came David Gussack,
President of General Bearing Corporation, the corporation described in and
which executed the foregoing instrument, and that he signed his name
thereto by authority of the Board of Directors of the said Corporation.
/s/ Paulina Snyder
------------------------------------
(Notary)
Paulina Snyder
Notary Public, State of New York
No. 4997154
Qualified in Rockland County
Commission Expire June 1, 1998
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS OF
GENERAL BEARING CORPORATION
(a Delaware corporation)
__________________________________________________
ARTICLE I
Meetings of Stockholders
________________________
SECTION 1. Annual Meeting. The annual meeting of the
______________
stockholders of General Bearing Corporation (hereinafter referred
to as the "Corporation") for the election of directors and for
the transaction of such other business as may properly come
before the meeting shall be held on such date and at such time as
may be fixed by the Board of Directors (hereinafter referred to
as the "Board") or if no date and time are so fixed, on the
second Wednesday, in February of each year, if not a legal
holiday, and if a holiday, then on the next succeeding day not a
legal holiday, at the office of the Corporation or at such other
place and at such hour as shall be designated by the Board, or,
if no such time be fixed, then at 10:00 o'clock in the forenoon.
SECTION 2. Special Meetings. Special meetings of the
________________
stockholders may be called at any time by the Board to be held at
such place within or without the State of Delaware, on such date
and at such hour as shall be designated in the notice or waiver
of notice thereof.
Only such business as is stated in the written notice
of a special meeting may be acted upon thereat.
SECTION 3. Notice of Meetings. Notice of the place,
__________________
date and hour of each annual and special meeting of the
stockholders and the purpose or purposes thereof shall be given
personally or by mail in a postage prepaid envelope, not less
than ten or more than sixty days before the date of such meeting,
to each stockholder entitled to vote at such meeting, and, if
mailed, it shall be directed to such stockholder at his address
as it appears on the record of stockholders, unless he shall have
filed with the Secretary of the Corporation a written request
that notices to him be mailed to some other address. Any such
notice for any meeting other than the annual meeting shall
indicate that it is being issued at the direction of the Board.
Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in person
or by proxy and shall not, prior to the conclusion of such
meeting, protest the lack of notice thereof, or who shall, either
before or after the meeting, submit a signed waiver of notice, in
person or by proxy. Unless the Board shall fix a new record date
for an adjourned meeting, notice of such adjourned meeting need
not be given if the time and place to which the meeting shall be
adjourned were announced at the meeting at which the adjournment
is taken.
SECTION 4. Quorum. At all meetings of the
______
stockholders the holders of the majority of the shares of Common
Stock of the Corporation, issued and outstanding and entitled to
vote, shall be present in person or by proxy to constitute a
quorum for the transaction of business. In the absence of a
quorum, the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote may adjourn
the meeting from time to time. At any such adjourned meeting at
which a quorum may be present any business may be transacted
which might have been transacted at the meeting as originally
called.
SECTION 5. Adjournments. When a meeting is adjourned
_____________
to another date, hour or place, notice need not be given of the
adjourned meeting if the date, hour and place thereof are
announced at the meeting at which the adjournment is taken. If
the adjournment is for more than 30 calendar days, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
At the adjourned meeting any business may be transacted which
might have been transacted at the original meeting.
When any meeting is convened the presiding officer, if
directed by the Board, may adjourn the meeting if (a) no quorum
is present for the transaction of business, or (b) the Board
determines that adjournment is necessary or appropriate to enable
the stockholders (i) to consider fully information which the
Board determines has not been made sufficiently or timely
available to stockholders or (ii) otherwise to exercise
effectively their voting rights.
SECTION 6. Organization. At each meeting of the
____________
stockholders, the Chairman of the Board or in his absence the
President or any Vice President of the Corporation, shall act as
chairman of the meeting or, if no one of the foregoing officers
is present, a chairman shall be chosen at the meeting by the
stockholders. The Secretary, or in his absence or inability to
act, the person whom the chairman of the meeting shall appoint
secretary of the meeting, shall act as secretary of the meeting
and keep the minutes thereof.
SECTION 7. Order of Business. The order of business
_________________
at all meetings of the stockholders shall be as determined by the
chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by
______
statute or the Second Restated Certificate of Incorporation,
each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing
in his name on the record of stockholders of the Corporation:
(a) on the date fixed pursuant to the provisions of
Section 5 of Article IV of these By-Laws as the record date
for the determination of the stockholders who shall be
entitled to notice of and to vote at such meeting; or
(b) if such record date shall not have been so fixed,
then at the close of business on the day next preceding the
day on which notice thereof shall be given.
Each stockholder entitled to vote at any meeting of stockholders
may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. Any such
proxy shall be delivered to the secretary of such meeting at or
prior to the time designated in the order of business for so
delivering such proxies. Except as otherwise required by statute
or by the Second Restated Certificate of Incorporation, any
corporate action to be taken by vote of the stockholders shall
require the vote of a majority of the votes cast at a meeting of
the holders of the Common Stock of the Corporation entitled to
vote thereon. Unless required by statute, or determined by the
chairman of the meeting to be advisable, the vote on any question
need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.
SECTION 9. List of Stockholders. A list of
____________________
stockholders as of the record date, certified by the Secretary of
the Corporation or by the transfer agent for the Corporation,
shall be produced at any meeting of the Stockholders upon the
request of any stockholder made at or prior to such meeting.
SECTION 10. Inspectors. The Board may, in advance of
__________
any meeting of stockholders, appoint one or more inspectors to
act at such meeting or any adjournment thereof. If the
inspectors shall not be so appointed or if any of them shall fail
to appear or act, the chairman of the meeting shall appoint
inspectors. Each inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality
and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder
entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an
inspector of an election of directors. Inspectors need not be
stockholders.
SECTION 11. Advance Notice of Business to be
________________________________
Transacted at Stockholder Meetings. No business may be
___________________________________
transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board (or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction
of the Board (or any duly authorized committee thereof) or (c)
otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this
Section 11 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who
complies with the notice procedures set forth in this Section 11.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
________
however, that (i) in the event that the annual meeting is called
_______
for a date that is not within 30 days before or after such
anniversary date, or (ii) in the case of the annual meeting of
stockholders held during the 1997 fiscal year of the Corporation,
notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth as to each matter such stockholder
proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (b) the name and record address of such
stockholder, (c) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or
of record by such stockholder, (d) a description of all
arrangements or understandings between such stockholder and any
other person or persons (including their names) in connection
with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (e) a
representation that such stockholder intends to appear in person
or by proxy at the annual meeting to bring such business before
the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 11,
provided, however, that, once business has been properly brought
________ _______
before the annual meeting in accordance with such procedures,
nothing in this Section 11 shall be deemed to preclude discussion
by any stockholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE II
Board of Directors
__________________
SECTION 1. General Powers. The business and affairs
______________
of the Corporation shall be managed under the direction of the
Board. The Board may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not
by statute or the Second Restated Certificate of Incorporation
directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Increase or Decrease Thereto and
________________________________________
Term of Office. The Board of Directors shall consist of six (6)
______________
directors. By vote of a majority of the entire Board, the number
of directors may be increased to not more than ten or reduced to
not less than three. Vacancies occurring by reason of any such
increase shall be filled in accordance with Section 13 of this
Article II. Any such reduction shall not affect the term of
office of any director. Each director shall hold office until
the annual meeting of stockholders of the Corporation next
succeeding his election or until his successor is duly elected
and qualified. Directors need not be stockholders.
SECTION 3. Nomination of Directors and Advance Notice
__________________________________________
Thereof. Only persons who are nominated in accordance with the
______
following procedures shall be eligible for election as directors
of the Corporation, except as may be otherwise provided in the
Second Restated Certificate of Incorporation with respect to the
right of holders of preferred stock of the Corporation to
nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders,
or at any special meeting of stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board
(or any duly authorized committee thereof) or (b) by any
stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this
Section 3 and on the record date for the determination of
stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 3.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must
have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the principal
executive offices of the Corporation (a) in the case of an annual
meeting, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that (i) in the event that the
________ _______
annual meeting is called for a date that is not within 30 days
before or after such anniversary date, or (ii) in the case of the
annual meeting of stockholders held during the 1997 fiscal year
of the Corporation, notice by the stockholder in order to be
timely must be so received not later than the close of business
on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure
of the date of the annual meeting was made, whichever first
occurs; and (b) in the case of a special meeting of stockholders
called for the purpose of electing directors, not later than the
close of business on the tenth day following the day on which
notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to
the Secretary must set forth (a) as to each person whom the
stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of
record by the person and (iv) any other information relating to
the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class
or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee
and any other person or persons (including their names) pursuant
to which the nomination(s) are to be made by such stockholder,
(iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named
in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated hereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the
procedures set forth in this Section 3. If the Chairman of the
meeting determines that a nomination was not made in accordance
with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective
nomination shall be disregarded.
SECTION 4. Place of Meeting. Meetings of the Board
________________
shall be held at the principal office of the Corporation in the
State of Delaware or at such other place, within or without such
state, as the Board may from time to time determine or as shall
be specified in the notice of any such meeting.
SECTION 5. Annual Meeting. The Board shall meet for
______________
the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each
annual meeting of the stockholders, on the same day and at the
same place where such annual meeting shall be held. Notice of
such meeting need not be given. Such meeting may be held at any
other time or place (within or without the State of Delaware)
which shall be specified in a notice thereof given as hereinafter
provided in Section 7 of this Article II.
SECTION 6. Regular Meeting. Regular meetings of the
_______________
Board shall be held at such time as the Board may fix. If any
day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same
hour on the next succeeding business day. Notice of regular
meetings of the Board need not be given except as otherwise
required by statute or these By-Laws.
SECTION 7. Special Meetings. Special meetings of the
________________
Board may be called by the President or by a majority of the
entire Board.
SECTION 8. Notice of Meetings. Notice of each special
__________________
meeting of the Board (and of each regular meeting for which
notice shall be required) shall be given by the Secretary as
hereinafter provided in this Section 8, in which notice shall be
stated the time and place of the meeting. Except as otherwise
required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be
mailed, postage prepaid, to each director, addressed to him at
his residence or usual place of business, by first-class mail, at
least two days before the day on which such meeting is to be
held, or shall be sent addressed to him at such place by
facsimile telegraph, telex, cable or wireless, or be delivered to
him personally or by telephone, at least 24 hours before the time
at which such meeting is to be held. A written waiver of notice,
signed by the director entitled to notice, whether before or
after the time stated therein shall be deemed equivalent to
notice. Notice of any such meeting need not be given to any
director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice
to him.
SECTION 9. Quorum and Manner of Acting. Except as
___________________________
hereinafter provided, a majority of the entire Board shall be
present in person or by means of a conference telephone or
similar communications equipment which allows all persons
participating in the meeting to hear each other at the same time
at any meeting of the Board in order to constitute a quorum for
the transaction of business at such meeting; and, except as
otherwise required by statute or the Second Restated Certificate
of Incorporation, the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of
the Board. In the absence of a quorum at any meeting of the
Board, a majority of the directors present thereat may adjourn
such meeting to another time and place. Notice of the time and
place of any such adjourned meeting shall be given to the
directors who were not present at the time of the adjournment
and, unless such time and place were announced at the meeting at
which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and
the individual directors shall have no power as such.
SECTION 10. Action Without a Meeting. Any action
________________________
required or permitted to be taken by the Board at a meeting may
be taken without a meeting if all members of the Board consent in
writing to the adoption of the resolutions authorizing such
action. The resolutions and written consents thereto shall be
filed with the minutes of the Board.
SECTION 11. Telephonic Participation. One or more
________________________
members of the Board may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 12. Organization. At each meeting of the
____________
Board, the President or, in his absence, another director chosen
by a majority of the directors present shall act as chairman of
the meeting and preside thereat. The Secretary (or, in his
absence, any person who shall be an Assistant Secretary, if any
of them shall be present at such meeting appointed by the
chairman) shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 13. Resignations. Any director of the
____________
Corporation may resign at any time by giving written notice of
his resignation to the Board or the President or the Secretary.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt, and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective. The vacancy in the
Board of Directors caused by any such resignation shall be filled
by the affirmative vote of the stockholders of the Corporation.
SECTION 14. Vacancies. Vacancies and newly created
_________
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director. If there are no directors in office, then a
special meeting of stockholders for the election of directors may
be called and held in the manner provided by statute.
SECTION 15. Removal of Directors. Any director may be
____________________
removed, either with or without cause, at any time, by the
affirmative vote of the stockholders of the Corporation. The
vacancy in the Board of Directors caused by any such removal
shall be filled by the affirmative vote of the stockholders of
the Corporation.
SECTION 16. Compensation. The Board shall have
____________
authority to fix the compensation, including fees and
reimbursement of expenses, of directors for services to the
Corporation in any capacity.
ARTICLE III
Executive and Other Committees
______________________________
SECTION 1. Executive and Other Committees. The Board
______________________________
may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of
two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent
provided in the resolution shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such
committee or committees, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any
such absent or disqualified member. Each committee shall keep
written minutes of its proceedings and shall report such minutes
to the Board when required. All such proceedings shall be
subject to revision or alteration by the Board; provided,
however, that third parties shall not be prejudiced by such
revision or alteration.
SECTION 2. General. A majority of any committee may
_______
determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. Notice of such meeting
shall be given to each member of the committee in the manner
provided for in Article II, Section 7. The Board shall have any
power at any time to fill vacancies in, to change the membership
of, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such
committee shall have or may exercise any authority of the Board.
SECTION 3. Action Without a Meeting. Any action
________________________
required or permitted to be taken by any committee at a meeting
may be taken without a meeting if all of the members of the
committee consent in writing to the adoption of the resolutions
authorizing such action. The resolutions and written consents
thereto shall be filed with the minutes of the committee.
SECTION 4. Telephone Participation. One or more
_______________________
members of a committee may participate in a meeting by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at the meeting.
ARTICLE IV
Officers
________
SECTION 1. Number of Qualifications. The officers of
________________________
the Corporation shall include the President, one or more Vice
Presidents, the Treasurer, and the Secretary. Any two or more
offices may be held by the same person; except the offices of
President and Secretary; provided that when all of the issued and
outstanding stock of the Corporation is held by one person, such
person may hold all or any combination of offices. Such officers
shall be elected from time to time by the Board, each to hold
office until the meeting of the Board following the next annual
meeting of the stockholders, or until his successor shall have
been duly elected and shall have qualified or until his death, or
until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws. The Board may from time
to time elect, or delegate to the President the power to appoint,
such other officers (including one or more Assistant Treasurers
and one or more Assistant Secretaries) and such agents, as may be
necessary or desirable for the business of the Corporation. Such
other officers and agents shall have such duties and shall hold
their offices for such terms as may be prescribed by the Board or
by the appointing authority.
SECTION 2. Resignations. Any officer of the
____________
Corporation may resign at any time by giving written notice of
his resignation to the Board, the President or the Secretary.
Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3. Removal. Any officer or agent of the
_______
Corporation may be removed, either with or without cause, at any
time, by the Board at any meeting of the Board or, except in the
case of an officer or agent elected or appointed by the Board, by
the President.
SECTION 4. Vacancies. A vacancy in any office,
_________
whether arising from death, resignation, removal or any other
cause, may be filled for the unexpired portion of the term of the
office which shall be vacant, in the manner prescribed in these
By-Laws for the regular election or appointment to such office.
SECTION 5. The President. The President shall be the
_____________
chief executive officer of the Corporation and shall have general
and active management of the business and affairs of the
Corporation and general and active supervision and direction over
the other officers, agents and employees and shall see that their
duties are properly performed subject, however, to the control of
the Board. He shall perform all duties incident to the office of
President and such other duties as from time to time may be
assigned to him by the Board of these By-Laws.
SECTION 6. Vice Presidents. Each Vice President,
_______________
including any Executive Vice President, shall perform all such
duties as from time to time may be assigned to him by the Board.
SECTION 7. The Treasurer. The Treasurer shall
_____________
(a) have charge and custody of, and be
responsible for, all the funds and securities of the
Corporation;
(b) keep full and accurate accounts of receipts
and disbursements in books belonging to the
Corporation;
(c) deposit all monies and other valuables to the
credit of the Corporation in such depositaries as may
be designated by the Board;
(d) receive, and give receipts for, monies due
and payable to the Corporation from any source
whatsoever;
(e) disburse the funds of the Corporation and
supervise the investment of its funds as ordered or
authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident
to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board
or the President.
SECTION 8. The Secretary. The Secretary shall
_____________
(a) keep or cause to be kept in one or more books
provided for the purpose, the minutes of all meetings
of the Board, the committees of the Board and the
stockholders;
(b) see that all notices are duly given in
accordance with the provisions of these By-Laws and as
required by law;
(c) be the custodian of the records and the seal
of the Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal
of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed
on behalf of the Corporation under its seal;
(d) see that the books, reports, statements,
certificates and other documents and records required
by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident
to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board
or the President.
SECTION 9. Officers' Bonds or Other Security. If
_________________________________
required by the Board, any officer of the Corporation shall give
a bond or other security for the faithful performance of his
duties, in such amount and with such surety or sureties as the
Board may require.
SECTION 10. Compensation. The compensation of the
____________
officers of the Corporation for their services as such officers
shall be fixed from time to time by the Board; provided, however,
that the Board may delegate to the President the power to fix the
compensation of officers and agents appointed by him. An officer
of the Corporation shall not be prevented from receiving
compensation by reason of the fact that he is also a director of
the Corporation, but any such officer who shall also be a
director (except in the event that there is only one director of
the Corporation) shall not have any vote in the determination of
the amount of compensation paid to him.
ARTICLE V
Shares, Etc.
____________
SECTION 1. Stock Certificates. Each owner of stock of
__________________
the Corporation shall be entitled to have a certificate, in such
form as shall be approved by the Board, certifying the number of
shares of stock of the Corporation owned by him. The
certificates representing shares of stock shall be signed in the
name of the Corporation by the President or a Vice President and
by the Secretary, Treasurer or an Assistant Secretary and sealed
with the seal of the Corporation (which seal may be a facsimile,
engraved or printed). In case any officer who shall have signed
such certificates shall have ceased to be such officer before
such certificates shall be issued, they may nevertheless be
issued by the Corporation with the same effect as if such officer
were still in office at the date of their issue.
SECTION 2. Books of Account and Record of
______________________________
Stockholders. There shall be kept correct and complete books and
____________
records of account of all the business and transactions of the
Corporation. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other
officer or agent designated by the Board of Directors.
SECTION 3. Transfers of Shares. Transfers of shares
___________________
of stock of the Corporation shall be made on the stock records of
the Corporation only upon authorization by the registered holder
thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a
transfer agent or transfer clerk, and on surrender of the
certificate or certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. The person in whose name shares of
stock shall stand on the record of stockholders of the
Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation. Whenever any transfers of shares shall
be made for collateral security and not absolutely and written
notice thereof shall be given to the Secretary or to such
transfer agent or transfer clerk, such fact shall be stated in
the entry of the transfer.
SECTION 4. Regulations. The Board may make such
___________
additional rules and regulations, not inconsistent with these
By-Laws, as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of stock of the
Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. Fixing of Record Date. The Board may fix,
_____________________
in advance, a date not more than sixty nor less than ten days
before the date then fixed for the holding of any meeting of the
stockholders as the time as of which the stockholders entitled to
notice of and to vote at such meeting, shall be determined, and
all persons who were stockholders of record of capital stock
entitled to vote at such time, and no others, shall be entitled
to notice of and to vote at such meeting. The Board may fix, in
advance, a date not more than sixty nor less than ten days
preceding the date fixed for the payment of any dividend or the
making of any distribution or the allotment of rights to
subscribe for securities of the Corporation, or for the delivery
of evidence of rights or evidences of interest arising out of any
change, conversion or exchange of capital stock or other
securities, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution,
allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or
interests.
SECTION 6. Lost, Destroyed or Mutilated Certificate.
________________________________________
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of such certificate, and the
Corporation may issue a new certificate of stock in the place of
any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have
been mutilated, and the Board may, in its discretion, require
such owner or his legal representative to give to the Corporation
a bond in such sum, limited or unlimited, and in such form and
with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged
loss or destruction of any such certificate, or the issuance of
such new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
ARTICLE VI
Contracts, Checks, Drafts, Bank Accounts, Etc.
______________________________________________
SECTION 1. Execution of Contracts. Except as
______________________
otherwise required by statute, the Second Restated Certificate of
Incorporation or these By-Laws, any contract or other instrument
may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers (including any assistant
officer) of the Corporation as the Board may from time to time
direct. Such authority may be general or confined to specific
instances as the Board may determine. Unless authorized by the
Board or expressly permitted by these By-Laws, no officer or
agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
or to render it pecuniarily liable for any purpose or to any
amount.
SECTION 2. Loans. Unless the Board shall otherwise
_____
determine, the President or any Vice-President may effect loans
and advances at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or
individual, and for such loans and advances may make, execute and
deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, but no officer or
officers shall mortgage, pledge, hypothecate or transfer any
securities or other property of the Corporation other than in
connection with the purchase of chattels for use in the
Corporation's operations, except when authorized by the Board.
SECTION 3. Checks, Drafts, Etc. All checks, drafts,
____________________
bills of exchange or other orders for the payment of money out of
the funds of the Corporation, and all notes or other evidence of
indebtedness of the Corporation, shall be signed in the name and
on behalf of the Corporation by such persons and in such manner
as shall from time to time be authorized by the Board.
SECTION 4. Deposits. All funds of the Corporation not
________
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositaries as the Board may from time to time designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks,
drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned
and delivered by any officer or agent of the Corporation.
SECTION 5. General and Special Bank Accounts. The
_________________________________
Board may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust
companies or other depositaries as the Board may designate or as
may be designated by any officer or officers of the Corporation
to whom such power of designation may from time to time be
delegated by the Board. The Board may make such special rules
and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-Laws, as it may deem
expedient.
ARTICLE VII
Offices
_______
SECTION 1. Registered Office. The registered office
_________________
of the Corporation shall be as specified in the Second Restated
Certificate of Incorporation.
SECTION 2. Other Offices. The Corporation may also
_____________
have such offices, both within or without the State of Delaware,
as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE VIII
Fiscal Year
__________
The fiscal year of the Corporation shall be so
determined by the Board of Directors.
ARTICLE IX
Seal
____
The seal of the Corporation shall be circular in form,
shall bear the name of the Corporation and shall include the
words and numbers "Corporate Seal", "Delaware" and the year of
incorporation.
ARTICLE X
Indemnification
_______________
Any person made or threatened to be made a party to or
involved in any action, suit or proceeding, whether civil or
criminal, administrative or investigative (hereinafter,
"proceeding") by reason of the fact that he, his testator or
intestate, is or was a director, officer or employee of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation
to the fullest extent authorized by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be
amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide
broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment) against all
expense, loss and liability (including, without limitation,
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees), actually and necessarily
incurred or suffered by him in connection with the defense of or
as a result of such proceeding, or in connection with any appeal
therein. The Corporation shall have the power to purchase and
maintain insurance for the indemnification of such directors,
officers and employees to the full extent permitted under the
laws of the State of Delaware from time to time in effect. Such
right of indemnification shall not be deemed exclusive of any
other rights of indemnification to which such director, officer
or employee may be entitled.
The right to indemnification conferred in this By-Law
shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
________
however, that if the General Corporation Law of the State of
_______
Delaware requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which services were or
are rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall
be made only upon delivery to the Corporation of an undertaking
by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
By-Law or otherwise.
ARTICLE XI
Amendments
__________
These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted, either by the
Board or by the stockholders of the Corporation upon the
affirmative vote of the holders of at least 66-2/3% of the
outstanding capital stock entitled to vote thereon.
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is made as of December
20, 1993 by and among THE BANK OF NEW YORK COMMERCIAL CORPORATION
("Lender"), having offices at 530 Fifth Avenue, New York, New
York 10036, GENERAL BEARING CORPORATION ("General Bearing"), a
Delaware corporation and HYATT RAILWAY PRODUCTS CORP. ("Hyatt"),
a New York corporation, each having its principal place of
business at 616 Route 303, Blauvelt, New York 10913 (General
Bearing and Hyatt each a "Borrower" and jointly and severally
referred to as "Borrowers").
WHEREAS, Borrowers have requested that Lender make
loans and advances to Borrowers on the terms and conditions set
forth in this Agreement.
WHEREAS, Lender has agreed to make such loans and
advances to Borrower on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and undertakings and the terms and conditions contained
herein, the parties hereto agree as follows:
1. (A) GENERAL DEFINITIONS. When used in this
Agreement, the following terms shall have the following meanings:
"ADVANCE RATES" means the Inventory Advance Rate and
the Receivables Advance Rate.
"AFFILIATE" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in
control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i)
of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or
indirect, (i) to vote 5% or more of the securities having
ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or
otherwise.
"ALTERNATE BASE RATE" means, for any day, a rate per
annum equal to the higher of (i) the Prime Rate in effect on such
day and (ii) the Federal Funds Rate in effect on such day plus
1/2 of 1%.
"ANCILLARY AGREEMENTS" means all agreements,
instruments, and documents including, without limitation,
mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, trust agreements whether
heretofore, concurrently, or hereafter executed by or on behalf
of Borrowers or delivered to Lender, relating to this Agreement
or to the transactions contemplated by this Agreement.
"BORROWING AGENT" means General Bearing.
"BUSINESS DAY" means any day other than a day on which
commercial banks in New York are authorized or required by law to
close.
"CHANGE OF OWNERSHIP" means (a) any transfer (whether
in one or more transactions) of ownership of not less than 50% of
the common stock of any Borrower held collectively by the
Original Owners (including for the purposes of the calculation of
percentage ownership, any shares of common stock into which any
capital stock of any Borrower held by any of the Original Owners
is convertible or for which any such shares of the capital stock
of any Borrower or of any other Person may be exchanged and any
shares of common stock issuable to such Original Owners upon
exercise of any warrants, options or similar rights which may at
the time of calculation be held by such Original Owners) to a
Person who is neither an Original Owner nor an Affiliate of an
Original Owner or (b) any merger, consolidation or sale of
substantially all of the property or assets of Borrower.
"CLOSING DATE" shall mean December 20, 1993 or such
other date as may be agreed upon by the parties hereto.
"COLLATERAL" shall mean and include:
(A) all Inventory;
(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all books, records, ledgercards, files,
correspondence, computer programs, tapes, disks and related data
processing software (owned by each Borrower or in which it has an
interest) which at any time evidence or contain information
relating to (A), (B), (C) and (D) above or are otherwise
necessary or helpful in the collection thereof or realization
thereupon;
(F) documents of title, policies and certificates
of insurance, securities, chattel paper, other documents or
instruments evidencing or pertaining to (A), (B), (C), (D) and
(E) above;
(G) all guaranties, liens on real or personal
property, leases, and other agreements and property which in any
way secure or relate to (A), (B), (C), (D), (E) and (F) above, or
are acquired for the purpose of securing and enforcing any item
thereof;
(H) (i) all cash held as cash collateral to the
extent not otherwise constituting Collateral, all other cash or
property at any time on deposit with or held by Lender for the
account of Borrowers (whether for safekeeping, custody, pledge,
transmission or otherwise), (ii) all present or future deposit
accounts (whether time or demand or interest or non-interest
bearing) of Borrowers with Lender or any other Person including
those to which any such cash may at any time and from time to
time be credited, (iii) all investments and reinvestments
(however evidenced) of amounts from time to time credited to such
accounts, and (iv) all interest, dividends, distributions and
other proceeds payable on or with respect to (x) such investments
and reinvestments and (y) such accounts; and
(I) all products and proceeds of (A), (B), (C),
(D), (E), (F), (G) and (H) above (including, but not limited to,
all claims to items referred to in (A), (B), (C), (D), (E), (F),
(G) and (H) above) and all claims of Borrower against third
parties (x) for (i) loss of, damage to, or destruction of, and
(ii) payments due or to become due under leases, rentals and
hires of, any or all of (A), (B), (C), (D), (E), (F), (G) and (H)
above and (y) proceeds payable under, or unearned premiums with
respect to policies of insurance in whatever form.
"CONTRACT RATE" means an interest rate per annum equal
to the (i) Alternate Base Rate PLUS (ii) two percent (2.00%).
"CONTROLLED GROUP" shall mean all members of a
controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which,
together with Borrower, are treated as a single employer under
Section 414 of the Code.
"CURRENT ASSETS" at a particular date, shall mean all
cash, cash equivalents, accounts and inventory of General Bearing
and its Subsidiaries on a consolidated basis and all other items
which would, in conformity with GAAP, be included under current
assets on a balance sheet of General Bearing and its Subsidiaries
on a consolidated basis as at such date; provided, however, that
such amounts shall not include (a) any amounts for any
indebtedness owing by an Affiliate of any Borrower, unless such
indebtedness arose in connection with the sale of goods or other
property in the ordinary course of business and would otherwise
constitute current assets in conformity with GAAP, (b) any shares
of stock issued by an Affiliate of any Borrower, (c) the cash
surrender value of any life insurance policy (d) any assets which
would be classified as intangible assets under GAAP, or (e) any
prepaid expenses.
"CURRENT LIABILITIES" at a particular date, shall mean
all amounts which would, in conformity with GAAP, be included
under current liabilities on a balance sheet of General Bearing
and its Subsidiaries on a consolidated basis as at such date, but
in any event including, without limitation, the amounts of (a)
all indebtedness payable on demand, or, at the option of the
Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any
indebtedness (whether installment, serial maturity, sinking fund
payment or otherwise) required to be made not more than twelve
(12) months after such date, (c) all reserves in respect of
liabilities or indebtedness payable on demand or, at the option
of the Person to whom such indebtedness is owed, not more than
twelve (12) months after such date, the validity of which is
contested at such date and (d) all accruals for federal or other
taxes measured by income payable within a twelve (12) month
period.
"CUSTOMER" means and includes the account debtor with
respect to any Receivable and/or the prospective purchaser of
goods, services or both with respect to any contract or contract
right, and/or any party who enters into or proposes to enter into
any contract or other arrangement with any Borrower, pursuant to
which such Borrower is to deliver any personal property or
perform any services.
"DEBT" of General Bearing and its Subsidiaries on a
consolidated basis at a particular date shall mean all
unsubordinated amounts which would, in conformity with GAAP, be
included under liabilities on a balance sheet of General Bearing
and its Subsidiaries on a consolidated basis at such date.
"DEFAULT RATE" means a rate equal to two (2%) percent
per annum in excess of the Contract Rate.
"ELIGIBLE INVENTORY" means Inventory which the Lender,
in its sole and absolute discretion, determines: (a) is subject
to the security interest of Lender and is subject to no other
liens or encumbrances whatsoever (other than Permitted Liens);
(b) is in good condition and meets all standards imposed by any
governmental agency, or department or division thereof having
regulatory authority over such Inventory, its use or sale
including but not limited to the Federal Fair Labor Standards Act
of 1938 as amended, and all rules, regulations and orders
thereunder; (c) is currently either usable or salable in the
normal course of Borrower's business; and (d) is not determined
by the Lender, in its sole discretion, to be ineligible for any
other reason.
"ELIGIBLE RECEIVABLES" shall mean and include each
Receivable which conforms to the following criteria: (a)
shipment of the merchandise or the rendition of services has been
completed; (b) no return, rejection or repossession of the
merchandise has occurred; (c) merchandise or services shall not
have been rejected or disputed by the Customer and there shall
not have been asserted any offset, defense or counterclaim; (d)
continues to be in full conformity with the representations and
warranties made by Borrowers to the Lender with respect thereto;
(e) Lender is, and continues to be, satisfied with the credit
standing of the Customer in relation to the amount of credit
extended; (f) is documented by an invoice in a form approved by
Lender and shall not be unpaid more than ninety (90) days from
invoice date; (g) less than 25% of the unpaid amount of invoices
due from such Customer remain unpaid more than ninety (90) days
from invoice date; (h) is not evidenced by chattel paper or an
instrument of any kind with respect to or in payment of the
Receivable unless such instrument is duly endorsed to and in
possession of the Lender or represents a check in payment of a
Receivable; (i) if the Customer is located outside of the United
States, the goods which gave rise to such Receivable were shipped
after receipt by Borrower from or on behalf of the Customer of an
irrevocable letter of credit, assigned and delivered to the
Lender and confirmed by a financial institution acceptable to the
Lender and is in form and substance acceptable to the Lender,
payable in the full amount of the Receivable in United States
dollars at a place of payment located within the United States;
(j) such Receivable is not subject to any lien, other than
Permitted liens; (k) does not arise out of transactions with any
employee, officer, agent, director, stockholder or Affiliate of
any Borrower; (l) is payable to any Borrower; (m) does not arise
out of a bill and hold sale prior to shipment and, if the
Receivable arises out of a sale to any Person to which any
Borrower is indebted, the amount of such indebtedness, and any
anticipated indebtedness, is deducted in determining the face
amount of such Receivable; (n) is net of any returns, discounts,
claims, credits and allowances; (o) if the Receivable arises out
of contracts between any Borrower and the United States, any
state, or any department, agency or instrumentality of any of
them, such Borrower has so notified Lender, in writing, prior to
the creation of such Receivable, and, if Lender so requests,
there has been compliance with any governmental notice or
approval requirements, including without limitation, compliance
with the Federal Assignment of Claims Act; (p) is a good and
valid account representing an undisputed bona fide indebtedness
incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto with respect to an
unconditional sale and delivery upon the stated terms of goods
sold by any Borrower, or work, labor and/or services rendered by
any Borrower; and (q) is otherwise satisfactory to the Lender as
determined in good faith by the Lender in the reasonable exercise
of its discretion.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules
and regulations promulgated thereunder.
"EQUIPMENT" means and includes all of Borrowers' now
owned or hereafter acquired equipment, machinery and goods
(excluding Inventory), whether or not constituting fixtures,
including, without limitation: plant and office equipment,
tools, dies, parts, data processing equipment, furniture and
trade fixtures, trucks, trailers, loaders and other vehicles and
all replacements and substitutions therefore and all accessions
thereto.
"EVENT OF DEFAULT" shall mean the occurrence of any of
the events set forth in paragraph 18.
"FEDERAL FUNDS RATE" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or if such day is not a
Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for
such day on such transactions received by The Bank of New York
from three Federal funds brokers of recognized standing selected
by The Bank of New York.
"FIXED CHARGE COVERAGE" means and includes, with
respect to General Bearing and its Subsidiaries on a consolidated
basis for any fiscal period, the ratio of (a) net income before
taxes PLUS interest PLUS depreciation and amortization MINUS
capital expenditures to (b) the sum of interest payments PLUS tax
payments PLUS long term debt amortization plus dividends paid by
General Bearing for such period.
"FORMULA AMOUNT" shall have the meaning set forth in
paragraph 2(a).
"GAAP" means generally accepted accounting principles,
practices and procedures in effect from time to time.
"GENERAL INTANGIBLES" means and includes all of
Borrowers' now owned or hereafter acquired general intangibles as
said term is defined in the Uniform Commercial Code in effect in
the State of New York including, without limitation, trademarks,
tradenames, tradestyles, trade secrets, equipment formulation,
manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights,
registrations, contract rights, choses in action, causes of
action, corporate or other business records, inventions, designs,
goodwill, claims under guarantees, licenses, franchises, tax
refunds, tax refund claims, computer programs, computer data
bases, computer program flow diagrams, source codes, object codes
and all other intangible property of every kind and nature.
"GUARANTOR" means individually, General Bearing, Hyatt,
Fisco and Seymour Gussack and any other Person who may hereafter
guarantee payment or performance of the whole or any part of the
Obligations and "GUARANTORS" means collectively all such Persons.
"GUARANTY AGREEMENTS" means the Guaranty Agreements
dated the Closing Date which are executed by each Guarantor in
favor of Lender.
"HAZARDOUS SUBSTANCE" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos,
urea formaldehyde foam insulation, polychlorinated byphenyls,
petroleum and petroleum products, methane, hazardous materials,
hazardous wastes, hazardous or toxic substances or related
materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, ET
SEQ.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant
thereto.
"IDB BONDS" means those certain Industrial Development
Bonds (General Bearing Corporation Project 1983 Series) issued by
The County of Rockland Industrial Development Agency.
"INCIPIENT EVENT OF DEFAULT" means any act or event
which, with the giving of notice or passage of time or both,
would constitute an Event of Default.
"INTERCREDITOR AGREEMENT" means that certain
Intercreditor Agreement dated the Closing Date and executed by
Lender and World Machinery Corporation which sets forth the
relative priority of their respective liens in the Collateral.
"INVENTORY" means and includes all of Borrowers' now
owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind,
nature or description which are or might be used or consumed in
each Borrower's business or used in selling or furnishing such
goods, merchandise and other personal property, and all documents
of title or other documents representing them.
"INVENTORY ADVANCE RATE" means (i) 40% of the amount of
Eligible Inventory consisting of raw materials; PLUS (ii) (a)
from the Closing Date through and including February 28, 1994,
45% of the amount of Eligible Inventory consisting of finished
goods (b) from March 1, 1994 until the expiration of the Term,
40% of the amount of Eligible Inventory consisting of finished
goods; PLUS (iii) (a) from the Closing Date through and including
February 28, 1994, 45% of the amount of Eligible Inventory in
transit under Letters of Credit and (b) from March 1, 1994 until
the expiration of the Term, 40% of the amount of Eligible
Inventory in transit under Letters of Credit.
"INVENTORY AVAILABILITY" means the amount of Revolving
Credit Advances against Eligible Inventory Lender may from time
to time during the Term make available to Borrowers based upon
the Inventory Advance Rate (calculated on the basis of the lower
of cost or market, on a first-in first-out basis) but which shall
not, in any event, exceed $3,400,000 at any time outstanding.
"LETTERS OF CREDIT" shall have the meaning set forth in
paragraph 2(h).
"LETTER OF CREDIT FEES" shall have the meaning set
forth in paragraph 5(b)(iv).
"LOANS" means the Revolving Credit Advances and all
other extensions of credit hereunder (including Letters of
Credit).
"MAXIMUM LOAN AMOUNT" means $7,000,000.
"MAXIMUM REVOLVING AMOUNT" means $7,000,000.
"OBLIGATIONS" means and includes all Loans, all
advances, debts, liabilities, obligations, covenants and duties
owing by Borrowers to Lender (or any corporation that directly or
indirectly controls or is controlled by or is under common
control with Lender) of every kind and description (whether or
not evidenced by any note or other instrument and whether or not
for the payment of money or the performance or non-performance of
any act), direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated,
whether existing by operation of law or otherwise now existing or
hereafter arising including, without limitation, any debt,
liability or obligation owing from Borrowers to others which
Lender may have obtained by assignment or otherwise and further
including, without limitation, all interest, charges or any other
payments Borrowers are required to make by law or otherwise
arising under or as a result of this Agreement and the Ancillary
Agreements, together with all reasonable expenses and reasonable
attorneys' fees chargeable to Borrowers' account or incurred by
Lender in connection with Borrowers' account whether provided for
herein or in any Ancillary Agreement.
"ORIGINAL OWNERS" means World Machinery Corporation
with respect to General Bearing, and General Bearing with respect
to Hyatt and Fisco.
"PERMITTED LIENS" means (i) liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary
course of business securing sums not overdue; (ii) liens incurred
in the ordinary course of business in connection with workmen's
compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees,
securing sums (a) not overdue or (b) being diligently contested
in good faith provided that adequate reserves with respect
thereto are maintained on the books of Borrowers in conformity
with GAAP, (iii) liens in favor of Lender, (iv) liens for taxes
(a) not yet due or (b) being diligently contested in good faith,
provided that adequate reserves with respect thereto are
maintained on the books of Borrowers in conformity with GAAP and
(v) liens specified on SCHEDULE 1(A) hereto.
"PERSON" means an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency
or political subdivision thereof.
"PLAN" shall mean any employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained for employees of
Borrower or any member of the Controlled Group or any such Plan
to which Borrower or any member of the Controlled Group is
required to contribute on behalf of any of its employees.
"PRIME RATE" means the prime commercial lending rate of
The Bank of New York as publicly announced in New York, New York
to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from
time to time and is neither tied to any external rate of interest
or index nor does it necessarily reflect the lowest rate of
interest actually charged to any particular class or category of
customers.
"RECEIVABLES" means and includes all of Borrowers' now
owned or hereafter acquired accounts and contract rights,
instruments, insurance proceeds, documents, chattel paper,
letters of credit and Borrowers' rights to receive payment
thereunder, any and all rights to the payment or receipt of money
or other forms of consideration of any kind at any time now or
hereafter owing or to be owing to Borrowers, all proceeds thereof
and all files in which Borrower has any interest whatsoever
containing information identifying or pertaining to any of
Borrowers' Receivables, together with all of Borrowers' rights to
any merchandise which is represented thereby, and all Borrowers'
right, title, security and guaranties with respect to each
Receivable, including, without limitation, all rights of stoppage
in transit, replevin and reclamation and all rights as an unpaid
vendor.
"RECEIVABLES ADVANCE RATE" shall have the meaning set
forth in the definition of Receivables Availability.
"RECEIVABLES AVAILABILITY" means the amount of
Revolving Credit Advances against Eligible Receivables Lender may
from time to time during the term of this Agreement make
available to Borrowers up to 80% ("Receivables Advance Rate") of
the net face amount of Borrower's Eligible Receivables.
"REVOLVING CREDIT ADVANCES" shall have the meaning set
forth in paragraph 2(a).
"SUBORDINATION AGREEMENT" means that certain
Subordination Agreement dated the Closing Date and executed by
Lender and World Machinery Corporation.
"SUBSIDIARY" of any Person shall mean a corporation or
other entity of whose shares of stock or other ownership
interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by
such Person.
"TANGIBLE NET WORTH" at a particular date means (a) the
aggregate amount of all assets of General Bearing and its
Subsidiaries on a consolidated basis as may be properly
classified as such in accordance with GAAP consistently applied
excluding such other assets as are properly classified as
intangible assets under GAAP, less (b) the aggregate amount of
all liabilities of General Bearing and its Subsidiaries on a
consolidated basis PLUS (c) the Subordinated Indebtedness as
defined in the Subordination Agreement.
"TERM" means the Closing Date through December 19, 1994
subject to acceleration upon the occurrence of an Event of
Default hereunder or other termination hereunder.
"UNDRAWN AVAILABILITY" means the amount which is (i)
the aggregate Receivable Availability and Inventory Availability
MINUS (ii) all Loans which are outstanding MINUS (iii)
indebtedness more than thirty (30) days past due.
(B) ACCOUNTING TERMS. Any accounting terms used in
this Agreement which are not specifically defined shall have the
meanings customarily given them in accordance with GAAP.
(C) OTHER TERMS. All other terms used in this
Agreement and defined in the Uniform Commercial Code as adopted
in the State of New York, shall have the meaning given therein
unless otherwise defined herein.
2. LOANS.
(a) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender may, in its sole
discretion, make revolving credit advances (the "Revolving Credit
Advances") to Borrowers from time to time during the term of this
Agreement which, in the aggregate at any time outstanding, will
not exceed the lesser of (x) the Maximum Revolving Amount less
the aggregate amount of outstanding Letters of Credit or (y) an
amount equal to the sum of:
(i) Receivables Availability, PLUS
(ii) 40% of the amount of Eligible Inventory
consisting of raw materials; PLUS
(iii) (a) from the Closing Date through and including
February 28, 1994, 45% of the amount of Eligible
Inventory consisting of finished goods and (b) from
March 1, 1994 until the expiration of the Term, 40% of
the amount of Eligible Inventory consisting of finished
goods; PLUS
(iv) (a) from the Closing Date through and including
February 28, 1994, 45% of the amount of Eligible
Inventory in transit under Letters of Credit and (b)
from March 1, 1994 until the expiration of the Term,
40% of the amount of Eligible Inventory in transit
under Letters of Credit; MINUS
(v) the aggregate amount of outstanding Letters of
Credit; MINUS
(vi) such reserves as Lender may reasonably deem proper
and necessary from time to time.
The sum of 2(a)(i), plus (ii), plus (iii), plus (iv) shall
be referred to as the "Formula Amount".
(b) Notwithstanding the limitations set forth above,
Lender retains the right to lend Borrowers from time to time such
amounts in excess of such limitations as Lender may determine in
its sole discretion.
(c) Each Borrower acknowledges that the exercise of
Lender's discretionary rights hereunder may result during the
term of this Agreement in one or more increases or decreases in
the Advance Rates and each Borrower hereby consents to any such
increases or decreases which may limit or restrict advances
requested by Borrowers.
(d) If Borrowers do not pay any interest, fees, costs
or charges to Lender when due, Borrowers shall thereby be deemed
to have requested, and Lender is hereby authorized, at its
discretion, to make and charge to Borrowers' account a Revolving
Credit Advance to Borrowers as of such date in an amount equal to
such unpaid interest, fees, costs or charges.
(e) Any sums expended by Lender due to any Borrower's
failure to perform or comply with its obligations under this
Agreement, including but not limited to the payment of taxes,
insurance premiums or leasehold obligations, shall be charged to
Borrowers' account as a Revolving Credit Advance and added to the
Obligations.
(f) Lender will account to Borrowers monthly with a
statement of all Loans and other advances, charges and payments
made pursuant to this Agreement, and such account rendered by
Lender shall be deemed final, binding and conclusive unless
Lender is notified by any Borrower in writing to the contrary
within thirty (30) days of the date each account was rendered
specifying the item or items to which objection is made.
(g) During the Term, Borrowers may borrow, prepay and
reborrow Revolving Credit Advances, all in accordance with the
terms and conditions hereof.
(h) Subject to the terms and conditions hereof, Lender
shall (a) issue or cause the issuance of Letters of Credit
("Letters of Credit"); PROVIDED, HOWEVER, that Lender will not be
required to issue or cause to be issued any Letters of Credit to
the extent that the face amount of such Letters of Credit would
then cause the sum of (i) the outstanding Revolving Credit
Advances PLUS (ii) outstanding Letters of Credit (with the
requested Letter of Credit being deemed to be outstanding for
purposes of this calculation) to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount (which
is calculated as if the requested Letter of Credit has been
issued). The maximum amount of outstanding Letters of Credit
shall not exceed $1,000,000 in the aggregate at any time. All
disbursements or payments related to Letters of Credit shall be
deemed to be Revolving Credit Advances and shall bear interest at
the applicable Contract Rate; Letters of Credit that have not
been drawn upon shall not bear interest. Letters of Credit shall
be subject to the terms and conditions set forth in the Letter of
Credit and Security Agreement attached hereto as EXHIBIT 2(H).
(i) Borrowers may request Lender to issue or cause the
issuance of a Letter of Credit by delivering to Lender at the
Payment Office, Lender's standard form of Letter of Credit and
Security Agreement together with Bank's standard form of Letter
of Credit Application (collectively, the "Letter of Credit
Application") completed to the satisfaction of Lender and, such
other certificates, documents and other papers and information as
Lender may reasonably request.
(j) Each Letter of Credit shall, among other things,
(i) provide for the payment of sight drafts when presented for
honor thereunder in accordance with the terms thereof and when
accompanied by the documents described therein and (ii) have an
expiry date not later than six months after such Letter of
Credit's date of issuance and in no event later than the last day
of the Term. Each Letter of Credit Application and each Letter
of Credit shall be subject to the Uniform Customs and Practice
for Documentary Credits (1983 Revision), International Chamber of
Commerce Publication No. 400, and any amendments or revision
thereof and, to the extent not inconsistent therewith, the laws
of the State of New York.
(k) In connection with the issuance of any Letter of
Credit, Borrowers shall indemnify, save and hold Lender harmless
from any loss, cost, expense or liability, including, without
limitation, payments made by Lender, and expenses and reasonable
attorneys' fees incurred by Lender arising out of, or in
connection with, any Letter of Credit to be issued or created for
Borrowers. Each Borrower shall be bound by Lender's or any
issuing or accepting Bank's regulations and good faith
interpretations of any Letter of Credit issued or created for
Borrowers' account, although this interpretation may be different
from Borrowers' own, and, neither Lender, the Bank which opened
the Letter of Credit, nor any of its correspondents shall be
liable for any error, negligence, or mistakes, whether of
omission or commission, in following Borrowing Agent's
instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or
paying any Letter of Credit, except for Lender's or such
correspondents' willful misconduct.
(l) Borrowers shall authorize and direct any Bank
which issues a Letter of Credit to name the applicable Borrower
as the "Account Party" therein and to deliver to Lender all
instruments, documents, and other writings and property received
by the Bank pursuant to the Letter of Credit and to accept and
rely upon Lender's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit or
the application therefor.
(m) In connection with all Letters of Credit issued or
caused to be issued by Lender under this Agreement, each Borrower
hereby appoints Lender, or its designee, as its attorney, with
full power and authority upon the occurrence and during the
continuation of an Event of Default (i) to sign and/or endorse
any Borrower's name upon any warehouse or other receipts, letter
of credit applications and acceptances; (ii) to sign any
Borrower's name on bills of lading; (iii) to clear Inventory
through the United States of America Customs Department
("Customs") in the name of any Borrower or Lender or Lender's
designee, and to sign and delivery to Customs officials powers of
attorney in the name of any Borrower for such purpose; and (iv)
to complete in any Borrower's name or Lender's, or in the name of
Lender's designee, any order, sale or transaction, obtain the
necessary documents in connection therewith, and collect the
proceeds thereof. Neither Lender nor its attorneys will be
liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Lender's or its attorney's
willful misconduct. This power, being coupled with an interest,
is irrevocable as long as any Letters of Credit remain
outstanding.
(n) The aggregate balance of Loans outstanding at any
time shall not exceed the lesser of (x) the Maximum Loan Amount
or (y) the Formula Amount.
3. REPAYMENT OF LOANS.
Borrowers shall be required to (i) make a
mandatory prepayment hereunder at any time that the aggregate
outstanding principal balance of the Loans made by Lender to
Borrowers hereunder is in excess of the lesser of (x) the Maximum
Loan Amount or (y) the Formula Amount, in an amount equal to such
excess, and (ii) repay on the expiration of the Term (x) the then
aggregate outstanding principal balance of Revolving Credit
Advances made by Lender to Borrowers hereunder together with
accrued and unpaid interest, fees and charges and (y) all other
amounts owed Lender under this Agreement and the Ancillary
Agreements, including the aggregate outstanding amount of Letters
of Credit.
4. PROCEDURE FOR REVOLVING CREDIT ADVANCES.
Borrowing Agent may by written notice request a borrowing of
Revolving Credit Advances prior to 1:00 P.M. New York time on the
Business Day of its request to incur, on that day, a Revolving
Credit Advance. All Revolving Credit Advances shall be disbursed
from whichever office or other place Lender may designate from
time to time and, together with any and all other Obligations of
Borrowers to Lender, shall be charged to Borrowers' account on
Lender's books. The proceeds of each Revolving Credit Advance
made by the Lender shall be made available to Borrowing Agent on
the day so requested by way of credit to Borrowers' operating
account maintained with such bank as Borrowers designate to
Lender. Any and all Obligations due and owing hereunder may be
charged to Borrowers' account and shall constitute Revolving
Credit Advances.
5. INTEREST AND FEES.
(a) Interest.
(i) Except as modified by paragraph 5(a)(iii) below,
Borrowers shall pay interest on the unpaid principal balance of
the (x) Revolving Credit Advances for each day they are
outstanding at the Contract Rate.
(ii) Interest shall be computed on the basis of actual
days elapsed over a 360-day year. Interest shall be computed by
Lender and billed to Borrowers monthly, and shall be payable in
arrears on the last day of each month, or, at Lender's option,
Lender may charge Borrowers' account for said interest.
(iii) Upon the occurrence and during the continuance of
an Event of Default, interest shall be payable at the Default
Rate.
(iv) Notwithstanding the foregoing, in no event shall
interest exceed the maximum rate permitted under any applicable
law or regulation, and if any provision of this Agreement or an
Ancillary Agreement is in contravention of any such law or
regulation, such provision shall be deemed amended to provide for
interest at said maximum rate and any excess amount shall either
be applied, at Lender's option, to the outstanding Loans in such
order as Lender shall determine or refunded by Lender to
Borrowers.
(v) Borrowers shall pay principal, interest and all
other amounts payable hereunder, or under any Ancillary
Agreement, without any deduction whatsoever, including, but not
limited to, any deduction for any set-off or counterclaim.
(b) Fees.
(i) AMENDMENT FEE. Upon execution of this Agreement,
Borrowers shall pay to Lender a fee in an amount equal to $70,000
payable in four (4) equal installments of $17,500 each commencing
on the Closing Date and continuing on the first Business Day of
each month thereafter, for a period of three consecutive (3)
months.
(ii) COLLATERAL MONITORING FEE. Upon Lender's
performance of any collateral monitoring namely any field
examination, collateral analysis or other business analysis, the
need for which is to be determined by Lender and which monitoring
is undertaken by Lender or for Lender's benefit, an amount equal
to $600.00 per day, per person, for each person employed to
perform such monitoring together with all costs, disbursements
and expenses incurred by the Lender and the person performing
such collateral monitoring shall be charged to Borrowers'
account.
(iii) COLLATERAL EVALUATION FEE. Borrowers shall pay a
monthly fee to Lender for the evaluation of the collateral in an
amount equal to $2,000 per month payable in arrears on the first
day of each month after the Closing Date.
(iv) LETTER OF CREDIT FEES. Borrowers shall pay
Lender (i) (A) for issuing or causing the issuance of a standby
Letter of Credit, a fee computed at a rate per annum of two and
one-half (2.50%) percent on the outstanding amount thereof from
time to time, (B) for issuing or causing the issuance of a Letter
of Credit that is not a standby Letter of Credit, a fee computed
at a rate per annum equal to one half of one (.50%) percent of
the original and each increase in the face amount thereof for
each 90 days or part thereof of its term (the fees set forth in
(A) and (B) referred to as "Letter of Credit Fees"). Such fees
and charges shall be payable (i) in the case of any Letter of
Credit, on its opening (ii) in the case of a standby Letter of
Credit, (A) monthly thereafter in advance and (B) upon each
increase in the outstanding amount thereof, (iii) in the case of
any Letter of Credit that is not a standby Letter of Credit, at
the time of each increase in face amount thereof. Any such
charge in effect at the time of a particular transaction shall be
the charge for that transaction, notwithstanding any subsequent
change in Bank's prevailing charges for that type of transaction.
All Letter of Credit Fees payable hereunder shall be deemed
earned in full on the date when the same are due and payable
hereunder and shall not be subject to rebate or proration upon
the termination of this Agreement for any reason.
Following the declaration of an Event of Default or
upon expiration of the Term, on demand, Borrowers will cause cash
collateral, in an amount equal to outstanding Letters of Credit,
to be deposited and maintained in an account with Lender.
Borrowers may not receive any such cash except upon payment and
performance in full of all Obligations and termination of this
Agreement.
(c) INCREASED COSTS. In the event that any applicable
law, treaty or governmental regulation, or any change therein or
in the interpretation or application thereof, or compliance by
Lender (for purposes of this Section 5(c), the term "Lender"
shall include Lender and any corporation or bank controlling
Lender) with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary
or other authority, shall:
(i) subject Lender to any tax of any kind whatsoever
with respect to this Agreement or change the basis of taxation of
payments to Lender of principal, fees, interest or any other
amount payable hereunder or under any Ancillary Agreements
(except for changes in the rate of tax on the overall net income
of Lender by the jurisdiction in which it maintains its principal
office);
(ii) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against assets
held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of Lender, including
(without limitation) pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with
respect to this Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining its Loans hereunder by
an amount that Lender deems to be material or to reduce the
amount of any payment (whether of principal, interest or
otherwise) in respect of any of the Loans by an amount that
Lender deems to be material, then, in any case Borrower shall
promptly pay Lender, upon its demand, such additional amount as
will compensate Lender for such additional cost or such
reduction, as the case may be. Lender shall certify the amount of
such additional cost or reduced amount to Borrowing Agent, and
such certification shall be conclusive absent manifest error.
(d) CAPITAL ADEQUACY.
(i) In the event that Lender shall have determined
that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender
(for purposes of this Section 5(d), the term "Lender" shall
include Lender and any corporation or bank controlling Lender)
with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of
reducing the rate of return on Lender's capital as a consequence
of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance
(taking into consideration Lender's policies with respect to
capital adequacy) by an amount deemed by Lender to be material,
then, from time to time, Borrowers shall pay upon demand to
Lender such additional amount or amounts as will compensate
Lender for such reduction. In determining such amount or
amounts, Lender may use any reasonable averaging or attribution
methods. The protection of this Section shall be available to
Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or
condition.
(ii) A certificate of Lender setting forth such amount
or amounts as shall be necessary to compensate Lender with
respect to Section 5(d) hereof when delivered to Borrowing Agent
shall be conclusive absent manifest error.
6. SECURITY INTEREST.
(a) To secure the prompt payment to Lender of the
Obligations, each Borrower hereby acknowledges and confirms that
Lender has and shall continue to have a lien in all Collateral
heretofore granted by Borrowers pursuant to the Original Loan
Agreement and to the extent not otherwise granted thereunder each
Borrower hereby assigns, pledges and grants to Lender a
continuing security interest in and to the Collateral, whether
now owned or existing or hereafter acquired or arising and
wheresoever located (whether or not the same is subject to
Article 9 of the Uniform Commercial Code). All of Borrowers'
ledger sheets, files, records, books of account, business papers
and documents relating to the Collateral shall, until delivered
to or removed by Lender, be kept by Borrowers in trust for Lender
until all Obligations have been paid in full. Each confirmatory
assignment schedule or other form of assignment hereafter
executed by Borrowers shall be deemed to include the foregoing
grant, whether or not the same appears therein.
(b) Lender may file one or more financing statements
disclosing Lender's security interest in the Collateral without
any of Borrower's signature appearing thereon or Lender may sign
on Borrowers' behalf as provided in paragraph 13 hereof. The
parties agree that a carbon, photographic or other reproduction
of this Agreement shall be sufficient as a financing statement.
If any Receivable becomes evidenced by a promissory note or any
other instrument for the payment of money, Borrowers will
immediately deliver such instrument to Lender appropriately
endorsed.
7. REPRESENTATIONS CONCERNING THE COLLATERAL. Each
Borrower represents and warrants (each of which such
representations and warranties shall be deemed repeated upon the
making of each request for a Revolving Credit Advance and made as
of the time of each and every Revolving Credit Advance
hereunder):
(a) all the Collateral (i) is owned by Borrowers free
and clear of all claims, liens, security interests and
encumbrances (including without limitation any claims of
infringement) except (A) those in Lender's favor and (B)
Permitted Liens and (ii) is not subject to any agreement
prohibiting the granting of a security interest or requiring
notice of or consent to the granting of a security interest;
(b) all Receivables (i) represent complete bona fide
transactions which require no further act under any circumstances
on Borrowers' part to make such Receivables payable by the
account debtors, (ii) to the best of each Borrower's knowledge,
are not subject to any present, future or contingent offsets or
counterclaims, and (iii) do not represent bill and hold sales,
consignment sales, guaranteed sales, sale or return or other
similar understandings or obligations of any Affiliate or
Subsidiary of Borrowers.
8. COVENANTS CONCERNING THE COLLATERAL. During the
Term, each Borrower covenants that it shall:
(a) not dispose of any of the Collateral whether by
sale, lease or otherwise except for (i) the sale of Inventory in
the ordinary course of business, and (ii) the disposition or
transfer of Equipment in the ordinary course of business during
the Term aving an aggregate fair market value of not more than
$200,000 so long as such disposition does not adversely affect
the business, prospects, profits or condition (financial or
otherwise) of Borrowers and only to the extent that (x) the
proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Lender's first priority security
interest, subject to the Intercreditor Agreement or (y) the
proceeds of which are remitted to Lender in reduction of the
Obligations, subject to the Intercreditor Agreement;
(b) not encumber, mortgage, pledge, assign or grant
any security interest in any Collateral or any of Borrowers'
other assets to anyone other than Lender except as set forth on
SCHEDULE 1(A) attached hereto and made a part hereof;
(c) place notations upon Borrowers' books of account
and any financial statement prepared by Borrowers to disclose
Lender's security interest in the Collateral;
(d) defend the Collateral against the claims and
demands of all parties;
(e) keep and maintain the Equipment in good operating
condition, except for ordinary wear and tear, and shall make all
necessary repairs and replacements thereof so that the value and
operating efficiency shall at all times be maintained and
preserved. Borrowers shall not permit any such items to become a
fixture to real estate or accessions to other personal property;
(f) not extend the payment terms of any Receivable
without prompt notice thereof to Lender; and
(g) perform all other steps requested by Lender to
create and maintain in Lender's favor a valid perfected first
security interest in all Collateral.
9. COLLECTION AND MAINTENANCE OF COLLATERAL AND
RECORDS.
Lender may at any time verify Borrowers' Receivables
utilizing an audit control company or any other agent of Lender.
Lender or Lender's designee may, upon the occurrence and during
the continuation of an Event of Default, notify customers or
account debtors of Lender's security interest in Receivables,
collect them directly and charge the collection costs and
expenses to Borrowers' account, but, until Lender gives Borrowing
Agent other instructions, Borrowers shall collect all Receivables
for Lender, receive all payments thereon for Lender's benefit in
trust as Lender's trustee and immediately deliver them to Lender
in their original form with all necessary endorsements or, as
directed by Lender, deposit such payments as directed by Lender
pursuant to paragraphs 23 or 24 hereof. Lender will credit
(conditional upon final collection) all such payments to
Borrowers' account two (2) Business Days after receipt. Promptly
after the creation of any Receivables, Borrowers shall provide
Lender with schedules describing all Receivables created or
acquired by Borrowers and shall execute and deliver confirmatory
written assignments of such Receivables to Lender, but Borrowers'
failure to execute and deliver such schedules or written
confirmatory assignments of such Receivables shall not affect or
limit Lender's security interest or other rights in and to the
Receivables. Borrowers shall furnish, at Lender's request,
copies of contracts, invoices or the equivalent, and any original
shipping and delivery receipts for all merchandise sold or
services rendered and such other documents and information as
Lender may require. Borrowers shall also provide Lender on a
monthly (within ten (10) days after the end of each month) or
more frequent basis, as requested by Lender, a detailed or aged
trial balance of all of Borrowers' existing Receivables
specifying the names and balances due for each account debtor and
such other information pertaining to the Receivables as Lender
may request. Borrowers shall provide Lender on a monthly (within
ten (10) days after the end of each month), or more frequent
basis, as requested by Lender, a summary report of Borrowers'
current Inventory, certified as true and accurate by Borrowing
Agent's President or Chief Financial Officer, as well as an aged
trial balance of Borrower's existing accounts payable. Borrowers
shall provide Lender, as requested by Lender, such other
schedules, documents and/or information regarding the Collateral
as Lender may require.
10. INSPECTIONS. At all times during normal business
hours, Lender shall have the right to (a) visit and inspect
Borrowers' properties and the Collateral, (b) inspect, audit and
make extracts from Borrowers' relevant books and records,
including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrowers'
principal officers, and independent accountants, Borrowers'
business, assets, liabilities, financial condition, results of
operations and business prospects. Borrowers will deliver to
Lender any instrument necessary for Lender to obtain records from
any service bureau maintaining records for Borrowers.
11. FINANCIAL INFORMATION. Borrowers shall provide
Lender (a) as soon as available, but in any event within ninety
(90) days after the end of each fiscal year of Borrowers, the
balance sheet of General Bearing and its Subsidiaries on a
consolidated basis as at the end of such fiscal year and the
related statements of income, retained earnings and changes in
cash flow for such fiscal year, setting forth in comparative form
the figures as at the end of and for the previous fiscal year,
which shall have been reported on by independent certified public
accountants who shall be satisfactory to Lender and shall be
accompanied by an unqualified audit report issued by such
independent certified public accountants; (b) as soon as
available, drafts of the balance sheet of General Bearing and its
Subsidiaries on a consolidated basis as at the end of each fiscal
year of Borrowers and the related statements of income, retained
earnings and changes in cash flow for such fiscal year, which
have been internally prepared by Borrowers; (c) as soon as
available, but in any event within thirty (30) days after the
close of each month and quarter, the balance sheet of General
Bearing and its Subsidiaries on a consolidated basis as at the
end of such month and quarter and the related statements of
income, retained earnings and changes in cash flow for such month
and quarter, which have been internally prepared by Borrowers.
All financial statements required under (a), (b) and (c) above
shall be prepared in accordance with GAAP, subject to year-end
adjustments in the case of monthly and quarterly statements.
Together with the financial statements furnished pursuant to (a)
above, Borrowers shall deliver a certificate of Borrowers'
certified public accountants addressed to Lender stating that (i)
they have caused this Agreement and the Ancillary Agreements to
be reviewed and (ii) in making the examination necessary for the
issuance of such financial statements, nothing has come to their
attention to lead them to believe that any Event of Default or
Incipient Event of Default exists and, in particular, they have
no knowledge of any Event of Default or Incipient Event of
Default or, if such is not the case, specifying such Event of
Default or Incipient Event of Default and its nature, when it
occurred and whether it is continuing. At the times the
financial statements are furnished pursuant to (a), (b) and (c)
above, a certificate of Borrowing Agent's President or Chief
Financial Officer shall be delivered to Lender stating that,
based on an examination sufficient to enable him to make an
informed statement, no Event of Default or Incipient Event of
Default exists, or, if such is not the case, specifying such
Event of Default or Incipient Event of Default and its nature,
when it occurred, whether it is continuing and the steps being
taken by Borrower with respect to such event. If any internally
prepared financial information, including that required under
this paragraph, is unsatisfactory in any manner to Lender, Lender
may request that Borrowers' independent certified public
accountants review same.
In addition to the foregoing financial statements,
Borrowers shall furnish Lender no less than thirty (30) days
prior to the beginning of each fiscal year commencing with fiscal
year 1994, a month by month projected operating budget and cash
flow of General Bearing and its Subsidiaries on a consolidated
basis for such fiscal year (including an income statement for
each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a
certificate signed by Borrowing Agent's President or Chief
Financial Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any
material assumptions on which such projections were prepared.
12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each Borrower represents and warrants (each of which
such representations and warranties shall be deemed repeated upon
the making of a request for a Revolving Credit Advance and made
as of the time of each Revolving Credit Advance made hereunder),
and covenants that:
(a) Each Borrower is a corporation duly organized and
validly existing under the laws of the State of its incorporation
and duly qualified and in good standing in every other state or
jurisdiction in which the nature of such Borrower's business
requires such qualification;
(b) the execution, delivery and performance of this
Agreement and the Ancillary Agreements (i) have been duly
authorized, (ii) are not in contravention of any of Borrower's
certificates of incorporation, by-laws or of any indenture,
agreement or undertaking to which any Borrower is a party or by
which any Borrower is bound and (iii) are within each Borrower's
corporate powers;
(c) this Agreement and the Ancillary Agreements
executed and delivered by each Borrower are each Borrower's
legal, valid and binding obligations, enforceable in accordance
with their terms;
(d) it keeps and will continue to keep all of its
books and records concerning the Collateral at Borrowers'
executive offices located at the address set forth in the
introductory paragraph of this Agreement and will not move such
books and records without giving Lender at least thirty (30) days
prior written notice;
(e) (i) the operation of each Borrower's business is
and will continue to be in compliance in all material respects
with all applicable federal, state and local laws, including but
not limited to all applicable environmental laws and regulations;
(ii) Borrowers will establish and maintain a
system to assure and monitor continued compliance with all
applicable environmental laws, which system shall include
periodic reviews of such compliance.
(iii) In the event any Borrower obtains, gives or
receives notice of any release or threat of release of a
reportable quantity of any Hazardous Substances on its property
(any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible
for investigation or cleanup of environmental conditions on its
property, demand letter or complaint, order, citation, or other
written notice with regard to any Hazardous Discharge or
violation of any environmental laws affecting its property or any
Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person or
entity, including any state agency responsible in whole or in
part for environmental matters in the state in which such
property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"),
then such Borrower shall, within five (5) Business Days, give
written notice of same to the Lender detailing facts and
circumstances of which such Borrower is aware giving rise to the
Hazardous Discharge or Environmental Complaint and periodically
inform Lender of the status of the matter. Such information is
to be provided to allow the Lender to protect its security
interest in the Collateral and is not intended to create nor
shall it create any obligation upon the Lender with respect
thereto.
(iv) Borrowers shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all
necessary action in order to safeguard the health of any Person
and to avoid subjecting the Collateral to any lien, charge, claim
or encumbrance. If any Borrower shall fail to respond promptly
to any Hazardous Discharge or Environmental Complaint or any
Borrower shall fail to comply with any of the requirements of any
environmental laws, the Lender may, but without the obligation to
do so, for the sole purpose of protecting the Lender's interest
in Collateral: (A) give such notices or (B) enter onto
Borrowers' property (or authorize third parties to enter onto
such property) and take such actions as the Lender (or such third
parties as directed by the Lender) deem reasonably necessary or
advisable, to clean up, remove, mitigate or otherwise deal with
any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by the Lender (or such
third parties) in the exercise of any such rights, including any
sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with
interest thereon from the date expended at the Default Rate for
Revolving Credit Advances shall be paid upon demand by Borrowers,
and until paid shall be added to and become a part of the
Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Lender and Borrower.
(v) Borrowers shall defend and indemnify the
Lender and hold the Lender harmless from and against all loss,
liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by the
Lender under or on account of any environmental laws, including,
without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge, the presence of any hazardous
substances affecting Borrowers' property, whether or not the same
originates or emerges from Borrowers' property or any contiguous
real estate, including any loss of value of the Collateral as a
result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous
Discharge resulting from actions on the part of the Lender.
Borrowers' obligations under this paragraph 12(e) shall arise
upon the discovery of the presence of any Hazardous Substances on
Borrowers' property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in
connection with the presence of any hazardous substances.
Borrowers' obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(vi) For purposes of paragraph 12(e) all
references to Borrowers' property shall be deemed to include all
of Borrowers' right, title and interest in and to all owned
and/or leased premises.
(f) (x) based upon the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the regulations and published
interpretations thereunder: (i) no Borrower has engaged in any
Prohibited Transactions as defined in paragraph 406 of ERISA and
paragraph 4975 of the Internal Revenue Code, as amended; (ii)
each Borrower has met all applicable minimum funding requirements
under paragraph 302 of ERISA in respect of its plans; (iii) no
Borrower has knowledge of any event or occurrence which would
cause the Pension Benefit Guaranty Corporation to institute
proceedings under Title IV of ERISA to terminate any Plan; (iv)
no Borrower has fiduciary responsibility for investments with
respect to any Plan existing for the benefit of persons other
than Borrower's employees; and (v) no Borrower has withdrawn,
completely or partially, from any multi-employer pension plan so
as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980; and (y) Borrower does not maintain or
contribute to any Plan other than those listed on SCHEDULE 12(F);
(g) it is solvent, able to pay its debts as they
mature, has capital sufficient to carry on its business and all
businesses in which it is about to engage and the fair saleable
value of its assets (calculated on a going concern basis) is in
excess of the amount of its liabilities;
(h) there is no pending or threatened litigation,
actions or proceeding which involve the possibility of materially
and adversely affecting Borrowers' business, assets, operations,
condition or prospects, financial or otherwise, or the Collateral
or the ability of Borrowers to perform this Agreement;
(i) all balance sheets and income statements which
have been delivered to Lender fairly, accurately and properly
state the financial condition of Borrowers on a basis consistent
with that of previous financial statements and there has been no
material adverse change in the financial condition of Borrowers
as reflected in such statements since the date thereof and such
statements do not fail to disclose any fact or facts which might
materially and adversely affect Borrowers' financial condition;
(j) (x) it possesses all of the licenses, patents,
copyrights, trademarks, tradenames and permits necessary to
conduct its business, (y) there has been no assertion or claim of
violation or infringement with respect thereof and (z) all such
licenses, patents, copyrights, trademarks, tradenames and permits
are listed on SCHEDULE 12(J);
(k) it will pay or discharge when due all taxes,
assessments and governmental charges or levies imposed upon it;
(l) it will promptly inform Lender in writing of: (i)
the commencement of all proceedings and investigations by or
before and/or the receipt of any notices from, any governmental
or nongovernmental body and all actions and proceedings in any
court or before any arbitrator against or in any way concerning
any of Borrowers' properties, assets or business, which might
singly or in the aggregate, have a materially adverse effect on
Borrowers; (ii) any amendment of any of Borrower's certificates
of incorporation or by-laws; (iii) any change in Borrowers'
business, assets, liabilities, condition (financial or
otherwise), results of operations or business prospects which has
had or might have a materially adverse effect on Borrowers; (iv)
any Event of Default or Incipient Event of Default; (v) any
default or any event which with the passage of time or giving of
notice or both would constitute a default under any agreement for
the payment of money to which Borrowers are a party or by which
Borrowers or any of Borrowers' properties may be bound which
would have a material adverse effect on Borrowers' business,
operations, property or condition (financial or otherwise) or the
Collateral; (vi) any change in the location of Borrowers'
executive offices; (vii) any change in the location of any
Borrower's Inventory or Equipment from the locations listed on
SCHEDULE 12(L) attached hereto, (viii) any change in any
Borrower's corporate name; (ix) any material delay in any
Borrower's performance of any of its obligations to any account
debtor and of any assertion of any material claims, offsets or
counterclaims by any account debtor and of any allowances,
credits and/or other monies granted by it to any account debtor;
(x) furnish to and inform Lender of all material adverse
information relating to the financial condition of any account
debtor; and (xi) any material return of goods;
(m) it will not (i) create, incur, assume or suffer to
exist any indebtedness (exclusive of trade debt) whether secured
or unsecured other than Borrowers' indebtedness to Lender and as
set forth on SCHEDULE 12(M) attached hereto and made a part
hereof; (ii) declare, pay or make any dividend or distribution on
any shares of the common stock or preferred stock of Borrowers or
apply any of its funds, property or assets to the purchase,
redemption or other retirement of any common or preferred stock
of Borrowers; (iii) directly or indirectly, prepay any
indebtedness (other than to Lender), or repurchase, redeem,
retire or otherwise acquire any indebtedness of Borrowers; (iv)
makes advances, loans or extensions of credit to any Person; (v)
become either directly or contingently liable upon the
obligations of any Person by assumption, endorsement or guaranty
thereof or otherwise; (vi) enter into any merger, consolidation
or other reorganization with or into any ther Person or acquire
all or a portion of the assets or stock of any Person or permit
any other Person to consolidate with or merge with it; (vii) form
any Subsidiary or enter into any partnership, joint venture or
similar arrangement; (viii) materially change the nature of the
business in which it is presently engaged; (ix) change its fiscal
year or make any changes in accounting treatment and reporting
practices without prior written notice to Lender except as
required by GAAP or in the tax reporting treatment or except as
required by law; (x) enter into any transaction with any
Affiliate, except in ordinary course on arms-length terms; or
(xi) bill Receivables under any name except the present names of
Borrowers;
(n) it shall not permit Tangible Net Worth at the end
of each fiscal quarter set forth below to be less than the amount
set opposite such date:
DATE TANGIBLE NET WORTH
December 31, 1993 5,735,000
March 31, 1994 5,775,000
June 30, 1994 5,800,000
September 30, 1994 5,850,000
(o) all financial projections of Borrowers'
performance prepared by Borrowers or at Borrowers' direction and
delivered to Lender will represent, at the time of delivery to
Lender, Borrowers' best estimate of Borrowers' future financial
performance and will be based upon assumptions which are
reasonable in light of Borrowers' past performance and then
current business conditions;
(p) it will not make capital expenditures in any
fiscal year which, when aggregated with capital expenditures for
all other Borrowers, would exceed $200,000;
(q) it shall not permit the Fixed Charge Coverage at
the end of each fiscal quarter set forth below to be less than
the amount set opposite such date:
DATE FIXED CHARGE COVERAGE
December 31, 1993 1.75 to 1.00
March 31, 1994 1.75 to 1.00
June 30, 1994 1.90 to 1.00
September 30, 1994 1.90 to 1.00
(r) it shall not permit the ratio of Current Assets to
Current Liabilities at the end of each fiscal quarter set forth
below to be less than the amount set opposite such date:
DATE RATIO
December 31, 1993 1.10 to 1.00
March 31, 1994 1.10 to 1.00
June 30, 1994 1.15 to 1.00
September 30, 1994 1.15 to 1.00
(s) none of the proceeds of the Loans hereunder will
be used directly or indirectly to "purchase" or "carry" "margin
stock" or to repay indebtedness incurred to "purchase" or "carry"
"margin stock" within the respective meanings of each of the
quoted terms under Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in
effect; and
(t) it will bear the full risk of loss from any loss
of any nature whatsoever with respect to the Collateral. At it's
own cost and expense in amounts and with carriers acceptable to
Lender, it shall (i) keep all its insurable properties and
properties in which it has an interest insured against the
hazards of fire, flood, sprinkler leakage, those hazards covered
by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of companies engaged in
businesses similar to Borrowers' including, without limitation,
business interruption insurance; (ii) maintain a bond in such
amounts as is customary in the case of companies engaged in
businesses similar to Borrowers' insuring against larceny,
embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with
others at any time have access to the assets or funds of
Borrowers either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets;
(iii) maintain public and product liability insurance against
claims for personal injury, death or property damage suffered by
others; (iv) maintain all such workmen's compensation or similar
insurance as may be required under the laws of any state or
jurisdiction in which Borrowers are engaged in business; (v)
furnish Lender with (x) copies of all policies and evidence of
the maintenance of such policies at least thirty (30) days before
any expiration date, and (y) appropriate loss payable
endorsements in form and substance satisfactory to Lender, naming
Lender as loss payee and providing that as to Lender the
insurance coverage shall not be impaired or invalidated by any
act or neglect of any Borrower and the insurer will provide
Lender with at least thirty (30) days notice prior to
cancellation. Borrowers shall instruct the insurance carriers
that in the event of any loss thereunder, the carriers shall make
payment for such loss to lender and not to Borrowers and Lender
jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Lender jointly,
Lender may endorse such Borrower's name thereon and do such other
things as Lender may deem advisable to reduce the same to cash.
Lender is hereby authorized to adjust and compromise claims. All
loss recoveries received by Lender upon any such insurance may be
applied to the Obligations, in such order as Lender in its sole
discretion shall determine. Any surplus shall be paid by Lender
to Borrowers or applied as may be otherwise required by law. Any
deficiency thereon shall be paid by Borrower to Lender, on
demand.
13. POWER OF ATTORNEY. Each Borrower hereby appoints
Lender or any other Person whom Lender may designate as each
Borrower's attorney, with power to verify the validity, amount or
any other matter relating to any Receivable by mail, telephone,
telegraph or otherwise with account debtors and, upon the
occurrence and during the continuation of an Event of Default,
with power to (i) endorse any Borrower's name on any checks,
notes, acceptances, money orders, drafts or other forms of
payment or security that may come into Lender's possession; (ii)
sign any Borrower's name on any invoice or bill of lading
relating to any Receivables, drafts against customers, schedules
and assignments of Receivables, notices of assignment, financing
statements and other public records, verifications of account and
notices to or from customers; (iii) execute customs declarations
and such other documents as may be required to clear Inventory
through Customs; (iv) do all things necessary to carry out this
Agreement, any Ancillary Agreement and all related documents; and
(v) notify the post office authorities to change the address for
delivery of Borrowers' mail to an address designated by Lender,
and to receive, open and dispose of all mail addressed to any
Borrower. Each Borrower hereby ratifies and approves all acts of
the attorney. Neither Lender nor the attorney will be liable for
any acts or omissions or for any error of judgment or mistake of
fact or law. This power, being coupled with an interest, is
irrevocable so long as any Receivable which is assigned to Lender
or in which Lender has a security interest remains unpaid and
until the Obligations have been fully satisfied.
14. EXPENSES. Borrowers shall pay all of Lender's
out-of-pocket costs and expenses, including without limitation
reasonable fees and disbursements of counsel and appraisers, in
connection with the preparation, execution and delivery of this
Agreement and the Ancillary Agreements, and in connection with
the prosecution or defense of any action, contest, dispute, suit
or proceeding concerning any matter in any way arising out of,
related to or connected with this Agreement or any Ancillary
Agreement. Borrowers shall also pay all of Lender's out-of-
pocket costs and expenses, including without limitation
reasonable fees and disbursements of counsel, in connection with
(a) the preparation, execution and delivery of any waiver, any
amendment thereto or consent proposed or executed in connection
with the transactions contemplated by this Agreement or the
Ancillary Agreements, (b) Lender's obtaining performance of the
Obligations under this Agreement and any Ancillary Agreements,
including, but not limited to, the enforcement or defense of
Lender's security interests, assignments of rights and liens
hereunder as valid perfected security interests, (c) any attempt
to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of any Collateral, and (d) any consultations in
connection with any of the foregoing. Borrowers shall also pay
Lender's customary bank charges for all bank services performed
or caused to be performed by Lender for Borrowers at Borrowers'
request. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by
Borrowers to Lender shall be payable on demand and shall be
secured by the Collateral. If any tax by any governmental
authority is or may be imposed on or as a result of any
transaction between Borrowers and Lender which Lender is or may
be required to withhold or pay, Borrowers agree to indemnify and
hold Lender harmless in respect of such taxes, and Borrowers will
repay to Lender the amount of any such taxes which shall be
charged to Borrowers' account; and until Borrower shall furnish
Lender with indemnity therefor (or supply Lender with evidence
satisfactory to it that due provision for the payment thereof has
been made), Lender may hold without interest any balance standing
to Borrowers' credit and Lender shall retain its security
interests in any and all Collateral.
15. ASSIGNMENT BY LENDER. Lender may assign any or
all of the Obligations together with any or all of the security
therefor and any transferee shall succeed to all of Lender's
rights with respect thereto. Upon such transfer, Lender shall be
released from all responsibility for the Collateral to the extent
same is assigned to any transferee. Lender may from time to time
sell or otherwise grant participations in any of the Obligations
and the holder of any such participation shall, subject to the
terms of any agreement between Lender and such holder, be
entitled to the same benefits as Lender with respect to any
security for the Obligations in which such holder is a
participant. Each such holder may exercise any and all rights of
banker's lien, set-off and counterclaim with respect to its
participation in the Obligations as fully as though Borrowers
were directly indebted to such holder in the amount of such
participation.
16. WAIVERS. Each Borrower waives presentment and
protest of any instrument and notice thereof, notice of default
and all other notices to which each Borrower might otherwise be
entitled.
17. TERM OF AGREEMENT. This Agreement shall continue
in full force and effect until the expiration of the Term.
Borrowing Agent may terminate this Agreement at any time upon
ninety (90) days' prior written notice ("Termination Date") upon
payment in full of the Obligations; PROVIDED, that Borrowers pay
an early termination fee in an amount equal to $70,000.
18. EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an Event of Default:
(a) failure to make payment of any of the Obligations
when required hereunder;
(b) failure to pay any taxes when due unless such
taxes are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been
provided on Borrowers' books;
(c) failure to perform under and/or committing any
breach of this Agreement or any Ancillary Agreement or any other
agreement between Borrowers and Lender;
(d) occurrence of a default under any agreement to
which any Borrower is a party with third parties which has a
material adverse affect upon such Borrower's business,
operations, property or condition (financial or otherwise)
including all leases for any premises where Inventory or
Equipment is located;
(e) any representation, warranty or statement made by
any Borrower hereunder, in any Ancillary Agreement, any
certificate, statement or document delivered pursuant to the
terms hereof, or in connection with the transactions contemplated
by this Agreement should at any time be false or misleading in
any material respect;
(f) an attachment or levy is made upon any of any
Borrower's assets having an aggregate value in excess of $10,000,
or a judgment is rendered against any Borrower or any of any
Borrower's property involving a liability of more than $10,000,
which shall not have been vacated, discharged, stayed or bonded
pending appeal within thirty (30) days from the entry thereof;
(g) any change in any Borrower's condition or affairs
(financial or otherwise) which in Lender's opinion impairs the
Collateral or the ability of Borrowers to perform its
Obligations;
(h) any lien created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and
perfected lien having a first priority interest except for
Permitted Liens;
(i) if any Borrower shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) commence a voluntary case
under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for
the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it
in any involuntary case under such bankruptcy laws, or (vii) take
any action for the purpose of effecting any of the foregoing;
(j) any Borrower shall admit in writing its inability,
or be generally unable, to pay its debts as they become due or
cease operations of its present business;
(k) any Affiliate or any Subsidiary or any Guarantor
shall (i) apply for or consent to the appointment of, or the
taking possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition seeking
to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within
thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, (viii) take any
action for the purpose of effecting any of the foregoing;
(l) any Borrower directly or indirectly sells,
assigns, transfers, conveys, or suffers or permits to occur any
sale, assignment, transfer or conveyance of any assets of such
Borrower or any interest therein, except as permitted herein;
(m) any Borrower fails to operate in the ordinary
course of business;
(n) Lender shall in good faith deem itself insecure or
unsafe or shall fear diminution in value, removal or waste of the
Collateral;
(o) a default by Borrowers in the payment, when due,
of any principal of or interest on any indebtedness for money
borrowed;
(p) if any Guarantor attempts to terminate, challenges
the validity of, or its liability under any Guaranty Agreement;
(q) should any Guarantor default in its obligations
under any Guaranty Agreement or if any proceeding shall be
brought to challenge the validity, binding effect of any Guaranty
Agreement, or should any Guarantor breach any representation,
warranty or covenant contained in any Guaranty Agreement or
should any Guaranty Agreement cease to be a valid, binding and
enforceable obligation; or
(r) any Change of Ownership.
19. REMEDIES. (a) Upon the occurrence of an Event of
Default pursuant to paragraph 18(i) herein, all Obligations shall
be immediately due and payable and this Agreement shall be deemed
terminated; upon the occurrence and continuation of any other of
the Events of Default, Lender shall have the right to demand
repayment in full of all Obligations, whether or not otherwise
due. Until all Obligations have been fully satisfied, Lender
shall retain its security interest in all Collateral. Lender
shall have, in addition to all other rights provided herein, the
rights and remedies of a secured party under the Uniform
Commercial Code, and under other applicable law, all other legal
and equitable rights to which Lender may be entitled, including
without limitation, the right to take immediate possession of the
Collateral, to require Borrowers to assemble the Collateral, at
Borrowers' expense, and to make it available to Lender at a place
designated by Lender which is reasonably convenient to both
parties and to enter any of the premises of Borrowers or wherever
the Collateral shall be located, with or without force or process
of law, and to keep and store the same on said premises until
sold (and if said premises be the property of any Borrower, such
Borrower agrees not to charge Lender for storage thereof for a
period up to at least sixty (60) days after sale or disposition
of said Collateral). Further, Lender may, at any time or times
after default by Borrowers, sell and deliver all Collateral held
by or for Lender at public or private sale for cash, upon credit
or otherwise, at such prices and upon such terms as Lender, in
Lender's sole discretion, deems advisable or Lender may otherwise
recover upon the Collateral in any commercially reasonable manner
as Lender, in its sole discretion, deems advisable. Except as to
that part of the Collateral which is perishable or threatens to
decline speedily in nature or is of a type customarily sold on a
recognized market, the requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to Borrowing Agent
at Borrowing Agent's address as shown in Lender's records, at
least ten (10) days before the time of the event of which notice
is being given. Lender may be the purchaser at any sale, if it
is public. In connection with the exercise of the foregoing
remedies, Lender is granted permission to use all of Borrowers'
trademarks, tradenames, tradestyles, patents, patent
applications, licenses, franchises and other proprietary rights
which are used in connection with (a) Inventory for the purpose
of disposing of such Inventory and (b) Equipment for the purpose
of completing the manufacture of unfinished goods. The proceeds
of sale shall be applied first to all costs and expenses of sale,
including attorneys' fees, and second to the payment (in whatever
order Lender elects) of all Obligations. Lender will return any
excess to Borrowing Agent and Borrowers shall remain liable to
Lender for any deficiency.
20. WAIVER; CUMULATIVE REMEDIES. Failure by Lender to
exercise any right, remedy or option under this Agreement or any
supplement hereto or any other agreement between Borrowers and
Lender or delay by Lender in exercising the same, will not
operate as a waiver; no waiver by Lender will be effective unless
it is in writing and then only to the extent specifically stated.
Lender's rights and remedies under this Agreement will be
cumulative and not exclusive of any other right or remedy which
Lender may have.
21. CONDITIONS TO INITIAL ADVANCES. The agreement of
Lender to make the initial Loans requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Lender,
immediately prior to or concurrently with the making of such
Loans, of the following conditions precedent:
(a) Lender shall have received executed Guaranty
Agreements from each Guarantor in form and substance satisfactory
to Lender in its sole discretion.
(b) Lender shall have received the Intercreditor
Agreement and the Subordination Agreement, both in form and
substance satisfactory to Lender in its sole discretion.
(c) Lender shall have received a certificate from
Borrowing Agent's chief financial officer or president certifying
that Borrowers have received not less than $500,000 in cash as a
capital contribution from a third party.
(d) Lender shall have received the executed legal
opinion of Kurtzman, Haspel & Stein in form and substance
satisfactory to Lender which shall cover such matters incident to
the transactions contemplated by this Agreement and related
agreements as Lender may reasonably require.
(e) On the Closing Date, after giving effect to all
Loans which are outstanding, Undrawn Availability shall be in
excess of $500,000.
(f) Lender shall have received appraisals, the results
of which shall be in form and substance satisfactory to Lender,
of Borrowers' assets and all books and records in connection
therewith.
(g) The Plan shall (a) provide that Borrowers assume
and/or adopt all executory contracts and unexpired leases arising
from or relating to (i) the improved real property located at
Blauvelt, New York and (ii) the IDB Bonds and (b) ratify and
reaffirm all of Borrowers' obligations arising from or relating
to the IDB Bonds.
22. APPLICATION OF PAYMENTS. Each Borrower
irrevocably waives the right to direct the application of any and
all payments at any time or times hereafter received by Lender
from or on any Borrower's behalf and each Borrower hereby
irrevocably agrees that Lender shall have the continuing
exclusive right to apply and reapply any and all payments
received at any time or times hereafter against Borrowers'
Obligations hereunder in such manner as Lender may deem advisable
notwithstanding any entry by Lender upon any of Lender's books
and records.
23. DEPOSITORY ACCOUNTS. Any payment received by
Borrowers on account of any Collateral shall be held by Borrowers
in trust for Lender and Borrowers shall promptly deliver same in
kind to Lender or deposit all such payments into a cash
collateral account at such bank as Lender may designate for
application to payment of the Obligations. Each Borrower shall
also execute such further documents as Lender may deem necessary
to establish such an account and all funds deposited in such
account shall immediately be deemed Lender's property.
24. LOCK BOX ACCOUNTS. Each Borrower shall, at
Lender's request, instruct all of its customers and account
debtors to make such payments on account of Receivables to an
account under Lender's dominion and control at such bank as
Lender may designate. Each Borrower shall also execute such
further documents as Lender may deem necessary to establish such
an account and all funds deposited in such account shall
immediately be deemed Lender's property.
25. REVIVAL. Borrowers further agree that to the
extent Borrower makes a payment or payments to Lender, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy act, state or federal law, common law
or equitable cause, then, to the extent of such payment or
repayment, the obligation or part thereof intended to be
satisfied shall be revived and continued in full force and effect
as if said payment had not been made.
26. APPOINTMENT. (a) Each Borrower hereby irrevocably
designates Borrowing Agent as its attorney and agent to borrow,
sign and endorse notes, and execute and deliver all instruments,
documents, writings and further assurances now or hereafter
required hereunder, on behalf of each Borrower, and does hereby
authorize Lender to pay over or credit all loan proceeds
hereunder in accordance with the advance request made by
Borrowing Agent.
(b) It is understood and agreed by each Borrower
that the handling of this credit facility in the manner set forth
in this Agreement is solely as an accommodation to Borrowers and
at their request. Lender shall not incur any liability to
Borrowers as a result thereof. To induce Lender to do so and in
consideration thereof, each Borrower hereby agrees to indemnify
Lender and to hold Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or
injury asserted against Lender by any Person arising from or
incurred by reason of Lender's handling of the financing
arrangements of the Borrowers as provided herein, reliance by
Lender on any request or instruction from Borrowing Agent or any
other action taken by Lender with respect to this Paragraph 26
except due to the gross (not mere) negligence or willful
misconduct by the indemnified party.
(c) Each Borrower represents and warrants to
Lender that (i) the Borrowers have one or more common
shareholders, directors and officers, (ii) the businesses and
corporate activities of the other Borrowers are closely related
to, and substantially benefit, the business and corporate
activities of such Borrower, (iii) the financial and other
operations of the Borrowers are performed on a combined basis as
if the Borrowers constituted a consolidated corporate group, (iv)
such Borrower has received substantial economic benefit from
entering into this Agreement and shall receive substantial
economic benefit from the application of each Loan hereunder, in
each case whether or not such amount is used directly by such
Borrower, and (v) all extensions of credit hereunder by the
Borrowing Agent are for the exclusive and indivisible benefit of
all Borrowers as though, for purposes of this Agreement and the
Ancillary Agreements and the allocation of any Collateral
thereunder, the Borrowers constituted a single entity.
27. JOINT AND SEVERAL OBLIGATIONS. Each Borrower
further agrees that all Obligations shall be joint and several,
and that each Borrower shall make payment upon any of the
Obligations upon their maturity by acceleration or otherwise, and
that such obligation and liability on the part of each Borrower
shall in no way be affected by any extensions, renewals and
forbearances granted by Lender to any Borrower, failure of Lender
to give any Borrower notice of borrowing or any other notice, any
failure of Lender to pursue or preserve its rights against the
other Borrower, the release by Lender of any Collateral now or
hereafter acquired from any Borrower, failure of Lender to
realize upon such Collateral in a commercially reasonably manner,
and that such agreement by each Borrower to pay upon any notice
issued pursuant hereto is unconditional and unaffected by prior
recourse by Lender to the other Borrower or any Collateral or the
lack thereof.
28. WAIVER OF SUBROGATION. Each Borrower expressly
waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which
such Borrower may now or hereafter have against any Borrower or
other Person directly or contingently liable for the obligations
hereunder, or against or with respect to any Borrower's property
(including, without limitation, any property which is
Collateral), arising from the existence or performance of this
Agreement.
29. NOTICES. Any notice or request hereunder may be
given to Borrowing Agent or Lender at the respective addresses
set forth below or as may hereafter be specified in a notice
designated as a change of address under this paragraph. Any
notice or request hereunder shall be given by registered or
certified mail, return receipt requested, or by overnight mail or
by telecopy (confirmed by mail). Notices and requests shall be,
in the case of those by mail or overnight mail, deemed to have
been given when deposited in the mail or with the overnight mail
carrier, and, in the case of a telecopy, when confirmed.
Notices shall be provided as follows:
If to the Lender: The Bank of New York Commercial Corporation
530 Fifth Avenue
New York, New York 10036
Attention: Robert Nuytkens
Telephone: (212) 852-4207
Telecopy: (212) 852-4013
with a copy to: Hahn & Hessen
350 Fifth Avenue
New York, New York 10118
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopy: (212) 594-7167
If to Borrowing General Bearing Corporation
Agent: 44 High Street
West Nyack, New York 10994
Attention: David Gussack
Telephone: (914) 358-6000
Telecopy: (914) 358-6277
With a copy to: Kurtzman, Haspel & Stein
9 Perlman Drive
Spring Valley, New York 10977
Attention: Eric Kurtzman, Esq.
Telephone: (914) 352-8800
Telecopy: (914) 352-8865
30. GOVERNING LAW AND WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. LENDER SHALL
HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER APPLICABLE
LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE OF
NEW YORK. EACH BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS
RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS SHALL BE LITIGATED
IN THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW
YORK OR, AT LENDER'S OPTION, IN ANY OTHER COURTS LOCATED IN NEW
YORK STATE OR ELSEWHERE AS LENDER MAY SELECT AND THAT SUCH COURTS
ARE CONVENIENT FORUMS AND EACH BORROWER SUBMITS TO THE PERSONAL
JURISDICTION OF SUCH COURTS. EACH BORROWER WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS UPON
BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO EACH BORROWER AT SUCH BORROWER'S
ADDRESS APPEA ING ON LENDER'S RECORDS, AND SERVICE SO MADE SHALL
BE DEEMED COMPLETED TWO (2) DAYS AFTER THE SAME SHALL HAVE BEEN
SO MAILED. BOTH PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BETWEEN BORROWERS AND LENDER AND
EACH BORROWER WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR
PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS AGREEMENT OR
ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY
HAVE.
31. LIMITATION OF LIABILITY. Each Borrower
acknowledges and understands that in order to assure repayment of
the Obligations hereunder Lender may be required to exercise any
and all of Lender's rights and remedies hereunder and agrees that
neither Lender nor any of Lender's agents shall be liable for
acts taken or omissions made in connection herewith or therewith
except for actual bad faith.
32. ENTIRE UNDERSTANDING. This Agreement and the
Ancillary Agreements contain the entire understanding between
Borrowers and Lender and any promises, representations,
warranties or guarantees not herein contained shall have no force
and effect unless in writing, signed by Borrowers' and Lender's
respective officers. Neither this Agreement, the Ancillary
Agreements, nor any portion or provisions thereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the party to be
charged.
33. MODIFICATION. This Agreement and the Ancillary
Agreements constitute the complete agreement between the parties
with respect to the subject matter hereof and thereof and may not
be modified, altered or amended except by an agreement in writing
signed by the parties hereto and thereto.
34. SEVERABILITY. Wherever possible each provision of
this Agreement or the Ancillary Agreements shall be interpreted
in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or the Ancillary
Agreements shall be prohibited by or invalid under applicable law
such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions thereof.
35. CAPTIONS. All captions are and shall be without
substantive meaning or content of any kind whatsoever.
36. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which taken together shall
constitute one and the same instrument.
37. CONSTRUCTION. The parties acknowledge that each
party and its counsel have reviewed this Agreement and that the
normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any
amendments, schedules or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the day and year first above written.
GENERAL BEARING CORPORATION
By:_________________________
Name:_______________________
Title:______________________
HYATT RAILWAY PRODUCTS CORP.
By:_________________________
Name:_______________________
Title:______________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By:__________________________
Name:________________________
Title:_______________________
[PAGE BREAK]
LIST OF SCHEDULES
Schedule 1(A) Permitted Liens
Schedule 12(f) Plans
Schedule 12(j) Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) Inventory Locations
Schedule 12(m) Permitted Indebtedness
[PAGE BREAK]
Schedule 12(f)
Plans
General Bearing Corporation and Hyatt Railway Products Corp.
maintain the General Bearing Corporation Profit Sharing Trust
which covers certain eligible salaried and nonunion employees.
[PAGE BREAK]
Schedule 12(j)
Licenses, Patents, Trademarks and Copyrights
[PAGE BREAK]
Schedule 12(m)
Permitted Indebtedness
Indebtedness owed by Borrowers to World Machinery Company in
the principal amount of $2,500,000.00
[PAGE BREAK]
AMENDMENT NO. 1
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment") is entered into as of
April __, 1994, by and among GENERAL BEARING CORPORATION
("General Bearing"), a Delaware corporation, HYATT RAILWAY
PRODUCTS CORP. ("Hyatt"), a New York corporation, each having its
principal place of business at 616 Route 303, Blauvelt, New York
(General Bearing and Hyatt each a "Borrower" and jointly and
severally referred to as "Borrowers") and THE BANK OF NEW YORK
COMMERCIAL CORPORATION having its principal place of business at
530 Fifth Avenue, New York, New York 10036 ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993 (as amended, supplemented
or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lender provided Borrowers with certain
financial accommodations.
Borrowers have requested that Lender amend the Loan
Agreement to (i) temporarily increase the Maximum Loan Amount and
the Inventory Advance Rate (ii) amend the definition of Inventory
Availability and (iii) increase the maximum amount of outstanding
Letters of Credit, and Lender is willing to do so on the terms
and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. The following defined terms in Section 1.2 are hereby
amended in their entirety to provide as follows:
"INVENTORY ADVANCE RATE" means (i) 40% of the amount of
Eligible Inventory consisting of raw materials; PLUS (ii)(a) from
the Closing Date through and including June 30, 1994, 45% of the
amount of Eligible Inventory consisting of finished goods
(b) from July 1, 1994 until the expiration of the Term, 40% of
the amount of Eligible Inventory consisting of finished goods;
PLUS (iii)(a) from the Closing Date through and including
June 30, 1994, 45% of the amount of Eligible Inventory in transit
under Letters of Credit and (b) from July 1, 1994 until the
expiration of the Term, 40% of the amount Eligible Inventory in
transit under Letters of Credit.
"INVENTORY AVAILABILITY" means the amount of Revolving
Credit Advances against Eligible Inventory Lender may from time
to time during the Term make available to Borrowers based upon
the Inventory Advance Rate (calculated on the basis of the lower
of cost or market, on a first-in first-out basis) but which shall
not, in any event exceed at any time outstanding the lesser of
(i) $4,000,000, and (ii) 50% of the then outstanding Loans.
"MAXIMUM LOAN AMOUNT" means (i) from April 14, 1994 through
and including June 30, 1994, $8,000,000 and (ii) at all other
times during the Term, $7,000,000.
"MAXIMUM REVOLVING AMOUNT" means (i) from April 14, 1994
through and including June 30, 1994, $8,000,000 and (ii) at all
other times during the Term, $7,000,000.
2.2. The second full sentence of Section 2(h) of the Loan
Agreement is hereby amended by deleting "$1,000,000" and
inserting "$1,600,000" in its place and stead.
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., Seymour Gussack,
General Bearing and Hyatt as guarantors and (ii) an amendment fee
in the amount of $10,000 which fee shall be charged to Borrowers'
account.
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment No. 1.
(d) No Borrower has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
6. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
7. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[PAGE BREAK]
8. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which taken
together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, this Amendment No. 1 has been duly
executed as of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
_____________________________
SEYMOUR GUSSACK
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
AMENDMENT NO. 2
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment") is entered into as of
May __, 1994, by and among GENERAL BEARING CORPORATION ("General
Bearing"), a Delaware corporation, HYATT RAILWAY PRODUCTS CORP.
("Hyatt"), a New York corporation, each having its principal
place of business at 616 Route 303, Blauvelt, New York (General
Bearing and Hyatt each a "Borrower" and jointly and severally
referred to as "Borrowers") and THE BANK OF NEW YORK COMMERCIAL
CORPORATION having its principal place of business at 530 Fifth
Avenue, New York, New York 10036 ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by an
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994 (as further amended, supplemented or otherwise modified
from time to time, the "Loan Agreement") pursuant to which Lender
provided Borrowers with certain financial accommodations.
Borrowers have requested that Lender amend the Loan
Agreement to (i) increase the Maximum Loan Amount, (ii) amend the
definition of Inventory Availability, (iii) increase the maximum
amount of outstanding Letters of Credit and (iv) amend certain
financial covenants, and Lender is willing to do so on the terms
and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. The following defined terms in Section 1.2 are hereby
amended in their entirety to provide as follows:
"INVENTORY AVAILABILITY" means the amount of Revolving
Credit Advances against Eligible Inventory Lender may from time
to time during the Term make available to Borrowers based upon
the Inventory Advance Rate (calculated on the basis of the lower
of cost or market, on a first-in first-out basis) but which shall
not, in any event exceed at any time outstanding the lesser of
(i) $5,000,000, and (ii) 50% of the then outstanding Loans.
"MAXIMUM LOAN AMOUNT" means $10,000,000.
"MAXIMUM REVOLVING AMOUNT" means $10,000,000.
2.2. The second full sentence of Section 2(h) of the Loan
Agreement is hereby amended by deleting "$1,600,000" and
inserting "$1,800,000" in its place and stead.
2.3. Subsections (n), (p), (q) and (r) of Section 12 of the
Loan Agreement are hereby amended in their entirety to provide as
follows:
(n) it shall not permit Tangible Net Worth at the end of
each fiscal quarter set forth below to be less than the
amount set opposite such date:
Tangible Net
DATE WORTH
December 31, 1993 $4,165,000
March 31, 1994 4,565,000
June 30, 1994 4,550,000
September 30, 1994 5,125,000
December 31, 1994 6,115,000
(p) it will not make capital expenditures in any fiscal
year which, when aggregated with capital expenditures
for all other Borrowers, would exceed $1,200,000 of
which up to $750,000 may be externally financed on
terms and acceptable to Lender;
(q) it shall not permit the Fixed Charge Coverage at the
end of each fiscal quarter set forth below to be less
than the amount set opposite such date:
DATE FIXED CHARGE COVERAGE
December 31, 1993 1.75:1.00
March 31, 1994 1.75:1.00
June 30, 1994 3.00:1.00
September 30, 1994 1.40:1.00
December 31, 1994 2.50:1.00
(r) it shall not permit the ratio of Current Assets to
Current Liabilities at the end of each fiscal quarter
set forth below to be less than the amount set opposite
such date:
DATE RATIO
December 31, 1993 1.10:1.00
March 31, 1994 1.10:1.00
June 30, 1994 1.05:1.00
September 30, 1994 1.00:1.00
December 31, 1994 1.05:1.00
2.4. A new subsection 12(r-1) is hereby inserted after
subsection 12(r) which provides as follows:
(r-1) it shall not permit the ratio of (x) the sum of
cash PLUS cash equivalents PLUS accounts receivable, to
(y) Current Liabilities, at the end of each fiscal
quarter set forth below to be less than the amount set
opposite such date:
DATE QUICK RATIO
June 30, 1994 .35 to 1.0
September 30, 1994 .35 to 1.0
December 31, 1994 .35 to 1.0
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., Seymour Gussack,
General Bearing and Hyatt as guarantors and (ii) the first
$10,000 installment of a total amendment fee in the amount of
$30,000 which installment shall be charged to Borrowers' account.
The second and third installments of the amendment fee, each in
the sum of $10,000, shall be due and payable on July 1, 1994 and
August 1, 1994, respectively, and shall be charged to Borrowers'
account.
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrower has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
6. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
7. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which taken
together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
_____________________________
SEYMOUR GUSSACK
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 ("Amendment") is entered into as
of November__, 1994, by and among GENERAL BEARING CORPORATION
("General Bearing"), a Delaware corporation, HYATT RAILWAY
PRODUCTS CORP. ("Hyatt"), a New York corporation, each having its
principal place of business at 616 Route 303, Blauvelt, New York
(General Bearing and Hyatt each a "Borrower" and jointly and
severally referred to as "Borrowers") and THE BANK OF NEW YORK
COMMERCIAL CORPORATION having its principal place of business at
1290 Avenue of the Americas, New York, New York 10104 ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994 and (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994 (as further amended, supplemented or
otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lender provided Borrowers with certain
financial accommodations.
Borrowers have requested that Lender amend the Loan
Agreement to (i) increase the Maximum Loan Amount and the
Inventory Advance Rate, (ii) amend the definition of Inventory
Availability, and (iii) amend the definition of Term, and Lender
is willing to do so on the terms and conditions hereafter set
forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. The following defined terms in Section 1.2 are hereby
amended in their entirety to provide as follows:
"INVENTORY ADVANCE RATE" means (i) 50% of the amount of
Eligible Inventory consisting of raw materials; PLUS (ii) 50% of
the amount of Eligible Inventory consisting of finished goods;
PLUS (iii) 50% of the amount of Eligible Inventory in transit
under Letters of Credit.
"INVENTORY AVAILABILITY" means the amount of Revolving
Credit Advances against Eligible Inventory Lender may from time
to time during the Term make available to Borrowers based upon
the Inventory Advance Rate (calculated on the basis of the lower
of cost or market, on a first-in first-out basis) but which shall
not, in any event exceed $8,000,000 at any time outstanding.
"MAXIMUM LOAN AMOUNT" means $15,000,000.
"MAXIMUM REVOLVING AMOUNT" means $15,000,000.
"RECEIVABLES AVAILABILITY" means the amount of Revolving
Credit Advances against Eligible Receivables Lender may from time
to time during the term of this Agreement make available to
Borrowers up to 85% ("Receivables Advance Rate") of the net face
amount of Borrower's Eligible Receivables.
"TERM" means the Closing Date through December 20, 1996
subject to acceleration upon the occurrence of an Event of
Default hereunder or other termination hereunder.
2.2. Section 1.2 is hereby further amended by adding the
following defined term in the appropriate alphabetical order:
"EFFECTIVE DATE" shall mean the date Amendment No. 3 to Loan
and Security Agreement becomes effective.
2.3. Section 2(a)(y) is hereby amended in its entirety to
provide as follows:
(y) an amount equal to the sum of:
(i) Receivables Availability; PLUS
(ii) Inventory Availability; MINUS
(iii) the aggregate amount of outstanding Letters of
Credit; MINUS
(iv) such reserves as Lender may reasonably deem proper
and necessary from time to time.
The sum of 2(a)(y)(i) plus (ii) shall be referred
to as the "Formula Amount".
2.4. Section 2(b) is hereby amended in its entirety to
provide as follows:
(i) Notwithstanding the limitations set forth above,
Lender retains the right to lend Borrowers from
time to time such amounts in excess of such
limitations as Lender may determine in its sole
discretion; and
(ii) Notwithstanding the Inventory Advance Rate set
forth in Section 1.2, Borrowers may elect to have
the Inventory Advance Rate permanently reduced to
45% of the Eligible Inventory consisting of raw
materials, 45% of the Eligible Inventory
consisting of finished goods, and 45% of the
Eligible Inventory in transit under Letters of
Credit at any time during the life of the Loan
Agreement. If Borrowers so elect, the Contract
Rate will be reduced by one quarter of one percent
(0.25%) per annum.
2.5. Section 5(a)(i) is hereby amended in its entirety to
provide as follows:
(i) Except as modified by paragraphs 5 (a) (iii), (vi)
and (viii) below, Borrowers shall pay interest on
the unpaid principal balance of the Revolving
Credit Advances for each day they are outstanding
at the Contract Rate.
2.6. Section 5(a) is hereby amended by inserting the
following provisions at the end thereof:
(vi) Notwithstanding the foregoing, if the Borrowers
elect under Section 2(b)(ii) to have the Inventory
Advance Rate permanently reduced, then the
Contract Rate will be reduced by one quarter of
one percent (0.25%) per annum.
(vii) Notwithstanding the foregoing, if the sales and
net income of Borrowers on a consolidated basis
for any rolling three (3) month period is at least
ninety five percent (95%) of the amounts projected
to be achieved by Borrowers for such rolling three
(3) month period as set forth on the October 1994
projections delivered by Borrowers to Lender and
annexed hereto as SCHEDULE 5(A)(VII) (the "October
Projections") and if the amount of Borrowers'
inventory for any rolling three (3) month period
does not vary from the amount projected by
Borrowers in the October Projections by more than
five percent (5%), then the Contract Rate will be
reduced by one quarter of one percent (0.25%) per
annum.
2.7. Section 5(b) is hereby amended by inserting the
following provision at the end thereof:
(v) RESTRUCTURING FEE. Borrowers shall pay to Lender a fee
in an amount equal to $50,000, of which $20,000 is
payable on the Effective Date, and $30,000 is payable
in two (2) consecutive equal monthly installments of
$15,000 each the first of which shall be paid thirty
(30) days after the Effective Date. Payments of this
fee may be charged to Borrowers' account.
2.8. The proviso appearing at the end of Section 17 is
hereby amended in its entirety to provide as follows:
PROVIDED, that if Borrowers voluntarily prepay the
Loans in full prior to the expiration of the Term, Borrowers at
the time of prepayment shall pay to Lender an early termination
fee in an amount equal to $300,000 if the Loans are prepaid in
full prior to December 20, 1995, or $150,000 if the Loans are
prepaid in full on or after December 21, 1995 and prior to the
end of the Term.
2.9. Subsections (n), (q) and (r) of Section 12 are hereby
amended in their entirety to provide as follows:
(n) it shall not permit Tangible Net Worth at the end of
each fiscal quarter set forth below to be less than the amount
set forth opposite such date:
DATE TANGIBLE NET WORTH
December 31, 1994 $5,315,000
March 31, 1995 5,695,000
June 30, 1995 5,745,000
September 30, 1995 6,275,000
December 31, 1995 6,840,000
and thereafter
(q) it shall not permit the Fixed Charge Coverage at the
end of each fiscal quarter set forth below to be less than the
amount set opposite such date:
DATE FIXED CHARGE COVERAGE
December 31, 1994 1.80 to 1.00
March 31, 1995 0.90 to 1.00
June 30, 1995 1.00 to 1.00
September 30, 1995 2.80 to 1.00
December 31, 1995 3.90 to 1.00
and thereafter
(r) it shall not permit the ratio of Current Assets to
Current Liabilities at the end of each fiscal quarter set forth
below to be less than the amount set forth opposite such date:
DATE RATIO
December 31, 1994 1.10 to 1.00
March 31, 1995 1.10 to 1.00
June 30, 1995 1.10 to 1.00
September 30, 1995 1.10 to 1.00
December 31, 1995 1.10 to 1.00
and thereafter
Lender agrees to consider adjusting the covenants set forth above
for each of Tangible Net Worth, Fixed Charge Coverage and ratio
of Current Assets to Current Liabilities for the fiscal quarters
ending March 31, 1996, June 30, 1996 and September 30, 1996.
Borrower shall provide Lender with fiscal projections for such
fiscal periods no later than November 15, 1995 to enable Lender
to make such determination. However, nothing contained herein
shall obligate Lender to amend any of the foregoing covenants.
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., General Bearing
and Hyatt as guarantors, (ii) four (4) copies of a guaranty
executed by David Gussack in form and substance satisfactory to
Lender, and (iii) the first $20,000 installment of a
total Restructuring Fee in the amount of $50,000 (which
installment shall be charged to Borrowers' account).
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrowers has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
6. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
7. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which taken
together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
AMENDMENT NO. 4
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 ("Amendment") is entered into as
of June __, 1995, by and among GENERAL BEARING CORPORATION
("General Bearing"), a Delaware corporation, HYATT RAILWAY
PRODUCTS CORP. ("Hyatt"), a New York corporation, each having its
principal place of business at 616 Route 303, Blauvelt, New York
(General Bearing and Hyatt each a "Borrower" and jointly and
severally referred to as "Borrowers") and THE BANK OF NEW YORK
COMMERCIAL CORPORATION having its principal place of business at
1290 Avenue of the Americas, New York, New York 10104 ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994, (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994 and (iii) Amendment No. 3 to Loan and
Security Agreement dated as of November 14, 1994 (as further
amended, supplemented or otherwise modified from time to time,
the "Loan Agreement") pursuant to which Lender provided Borrowers
with certain financial accommodations.
Borrowers have requested that Lender make a Term Loan to
them in the principal amount of $1,560,000, and Lender is willing
to do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. The following defined terms in Section 1.2 are hereby
amended in their entirety to provide as follows:
"EFFECTIVE DATE" shall mean the date Amendment No. 4 to the
Loan and Security Agreement becomes effective.
"LOANS" means the Revolving Credit Advances, the Term
Loan and all other extensions of credit hereunder (including
Letters of Credit).
"MAXIMUM REVOLVING AMOUNT" means $15,000,000 less the
outstanding principal amount of the Term Loan.
"TERM" means the Closing Date through the later of
(x) December 20, 1996, or (y) the third anniversary of the
advancing of the Term Loan.
2.2. Section 1.2 is hereby further amended by adding the
following defined term in the appropriate alphabetical order:
"TERM LOAN" shall mean the Loans made pursuant to Section
2(o) hereof.
"TERM LOAN RATE" shall mean an interest rate per annum equal
to the (i) Alternate Base Rate PLUS (ii) two percent (2.00%).
"TERM NOTE" shall mean the promissory note described in
Section 2(o).
2.3. A new Section 2(o) is hereby inserted in the Loan
Agreement to provide as follows:
(o) TERM LOAN. Subject to the terms and conditions of
this Agreement, Lender will make a Term Loan to Borrowers in
the sum of $1,560,000. The Term Loan shall be advanced on
the Effective Date and shall be, with respect to principal,
payable as follows, subject to acceleration upon the
occurrence of an Event of Default under this Agreement or
termination of this Agreement: thirty-six consecutive
monthly installments, the first thirty-five (35) of which
each shall be in the amount of $18,570.00 commencing on July
1, 1995 and payable on the first day of each month
thereafter with the thirty-sixth (36th) and final payment in
an amount equal to the unpaid principal amount of the Term
Loan plus all accrued interest payable on the last day of
the Term. The Term Loan shall be evidenced by and subject
to the terms and conditions set forth in the secured
promissory note ("Term Note") in substantially the form
attached hereto as EXHIBIT 2(O). The Term Loan may be
prepaid, in whole or in part, at the option of Borrowers but
only (i) with the proceeds of Equipment and of General
Intangibles relating to Equipment and/or (ii) except as
specifically provided in the foregoing subsection (ii), from
a source other than the proceeds of Collateral. All
prepayments shall be applied to installments of the Term
Loan in the inverse order of the maturities thereof.
2.4. Section 5(a)(i) is hereby amended in its entirety to
provide as follows:
(i) Except as modified by paragraphs 5 (a) (iii), (vi) and
(vii) below, Borrowers shall pay interest on the (X)
unpaid principal balance of the Revolving Credit
Advances for each day they are outstanding at the
Contract Rate and (Y) outstanding principal amount of
the Term Loan at the Term Loan Rate.
2.5. Section 5(a)(vii) is hereby amended by adding the
following sentence at the end thereof:
"Only one reduction to the Contract Rate pursuant to this
subsection (vii) shall occur while this Agreement is in
effect."
2.6. Section 5(b)(v) is hereby amended in its entirety to
provide as follows:
(v) RESTRUCTURING FEE. Borrowers shall pay to Lender on the
Effective Date a fee in an amount equal to $18,000
which fee may be charged to Borrowers' account.
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., General Bearing
and Hyatt as guarantors, (ii) four (4) copies of a limited
guaranty executed by David Gussack in form and substance
satisfactory to Lender and (iii) the Restructuring Fee in an
amount equal to $18,000 (which fee shall be charged to Borrowers'
account).
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrowers has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. NOTICE OF MOVE. Borrowers shall give Lender not less
than thirty (30) days' prior written notice of the date they will
move out of the premises in Blauvelt, New York to West Nyack, New
York, and Borrowers shall execute and deliver such UCC-3
financing statements amending Borrowers' mailing address as
Lender and its counsel deem necessary.
6. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
7. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
8. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
9. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall
constitute one and the same agreement.
[PAGE BREAK]
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
AMENDMENT NO. 5
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 ("Amendment") is entered into as
of March 1, 1996, by and among GENERAL BEARING CORPORATION
("General Bearing"), a Delaware corporation, HYATT RAILWAY
PRODUCTS CORP. ("Hyatt"), a New York corporation, each having its
principal place of business at 616 Route 303, Blauvelt, New York
(General Bearing and Hyatt each a "Borrower" and jointly and
severally referred to as "Borrowers") and THE BANK OF NEW YORK
COMMERCIAL CORPORATION having its principal place of business at
1290 Avenue of the Americas, New York, New York 10104 ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994, (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994, (iii) Amendment No. 3 to Loan and
Security Agreement dated as of November 14, 1994 and (iv)
Amendment No. 4 to Loan and Security Agreement dated as of June
19, 1995 (as may be further amended, supplemented or otherwise
modified from time to time, the "Loan Agreement") pursuant to
which Lender provided Borrowers with certain financial
accommodations.
Borrowers have requested that Lender provide an overadvance
facility for a ten (10) day period commencing on the Effective
Date (as defined below), and Lender is willing to do so on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. Paragraph 1.2 of the Loan Agreement is hereby amended
as follows:
(a) the following defined terms are hereby inserted in
appropriate alphabetical order:
"OVERADVANCE GUARANTY" shall mean the guaranty executed by
David Gussack guaranteeing to Lender the amount of $300,000.
"OVERADVANCE AMOUNT" shall mean for the period commencing on
the Effective Date through March 14, 1996, $300,000 and
thereafter, $0.
(b) the following defined terms are hereby amended in their
entirety:
"EFFECTIVE DATE" shall mean the date on which Amendment No.
5 to the Loan and Security Agreement becomes effective.
"LOANS" means the Revolving Credit Advances, the Term
Loan and all other extensions of credit hereunder (including
Letters of Credit and the Overadvance Amount).
2.2. Section 2(a)(y) is hereby amended in its entirety to
provide as follows:
(y) an amount equal to the sum of:
(i) Receivables Availability; PLUS
(ii) Inventory Availability; PLUS
(iii) the Overadvance Amount; MINUS"
(iv) the aggregate amount of outstanding Letters of
Credit; MINUS
(v) such reserves as Lender may reasonably deem proper
and necessary from time to time.
The sum of 2(a)(y)(i) plus (ii) plus (iii) plus
(v) shall be referred to as the "Formula Amount".
3. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., General Bearing
and Hyatt as guarantors, (ii) four (4) copies of the Overadvance
Guaranty executed by David Gussack in form and substance
satisfactory to Lender and (iii) an overadvance fee in an amount
equal to $3,000 (which fee shall be charged to Borrowers'
account).
4. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrowers has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
6. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
7. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall
constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed to be an
original signature hereto.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
WAIVER AND AMENDMENT NO. 6
TO
LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 6 ("Amendment") is
entered into as of March __, 1996, by and among GENERAL BEARING
CORPORATION ("General Bearing"), a Delaware corporation, HYATT
RAILWAY PRODUCTS CORP. ("Hyatt"), a New York corporation, each
having its principal place of business at 44 High Street, West
Nyack, New York (General Bearing and Hyatt each a "Borrower" and
jointly and severally referred to as "Borrowers") and THE BANK OF
NEW YORK COMMERCIAL CORPORATION having its principal place of
business at 1290 Avenue of the Americas, New York, New York 10104
("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994, (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994, (iii) Amendment No. 3 to Loan and
Security Agreement dated as of November 14, 1994, (iv) Amendment
No. 4 to Loan and Security Agreement dated as of June 19, 1995
and (v) Amendment No. 5 to Loan and Security Agreement dated as
of March 1, 1996 (as may be further amended, supplemented or
otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lender provided Borrowers with certain
financial accommodations.
Borrowers have requested that Lender provide an overadvance
facility for a certain period of time commencing on the Effective
Date (as defined below), and Lender is willing to do so on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction
of the conditions precedent set forth in Section 4 below, the
Loan Agreement is hereby amended as follows:
2.1. Paragraph 1.2 of the Loan Agreement is hereby amended
as follows:
(a) the following defined terms are hereby inserted in
appropriate alphabetical order:
"AMENDMENT TO OVERADVANCE GUARANTY" shall mean the Amendment
to the Overadvance Guaranty executed by David Gussack increasing
the amount guaranteed under the Overadvance Guaranty to
$1,700,000.
"CD PLEDGE" shall mean the Collateral Deposit Letter
executed by World pledging to Lender certificate of deposit
number ____ issued by The Bank of New York in the amount of
$250,000.00.
"MORTGAGE" shall mean the Mortgage and Security Agreement
executed by Realty granting Lender a first priority lien on the
Real Property in form and substance satisfactory to Lender.
"REAL PROPERTY" shall mean all of the right, title and
interest of Realty in and to the premises located at 217 Route
59, West Nyack, New York.
"REALTY" shall mean Gussack Realty Company, a ____
corporation.
"WORLD" shall mean World Machinery Company, a _______
corporation.
(b) the following defined terms are hereby amended in their
entirety:
"CONTRACT RATE" means an interest rate per annum equal to
the (i) Alternate Base Rate PLUS (ii) two and one-half percent
(2.50%), subject to adjustment pursuant to Section 5(a) hereof.
"EFFECTIVE DATE" shall mean the date on which Waiver and
Amendment No. 6 to the Loan and Security Agreement becomes
effective.
"OVERADVANCE AMOUNT" shall mean for the period commencing on
(i) the Effective Date through April 30, 1996, $1,700,000, (ii)
May 1, 1996 through May 31, 1996, $1,150,000, (iii) June 1, 1996
through June 30, 1996, $1,050,000, (iv) July 1, 1996 through
August 31, 1996, $700,000, (v) September 1, 1996 through
September 30, 1996, $650,000, (vi) October 1, 1996 through
October 31, 1996, $450,000, (vii) November 1, 1996 through
November 30, 1996, $300,000, (viii) December 1, 1996 through
December 31, 1996, $150,000 and (ix) at all times thereafter, $0.
2.2. Section 5(a) is hereby amended by inserting the
following provision at the end thereof:
"(viii) Notwithstanding the foregoing, at such time
that the Overadvance Amount is equal to the (i) dollar-for-
dollar amount of the certificate of deposit referenced in
the CD Pledge PLUS (ii) seventy percent (70%) of the fair
market value of the Real Property (the events set forth in
(i) and (ii) hereof shall be referred to as the "Reduction
Events"), then, so long as the Reduction Events are
continuous for the balance of the month in which the
Reduction Events occur, the Contract Rate will be reduced by
three-quarters of one percent (.75%) effective as of the
first day of the month following the month in which the
Reduction Events occur; PROVIDED, HOWEVER, if at any time
following a reduction in the Contract Rate the Reduction
Events are not satisfied, the Contract Rate will increase by
three-quarters of one percent (.75%) effective immediately."
2.3. Section 12 of the Loan Agreement is hereby amended as
follows:
(i) Subsections (n), (q) and (r) of Section 12 are hereby
amended in their entirety to provide as follows:
"(n) it shall not permit Tangible Net Worth at the end
of each fiscal quarter set forth below to be less than the
amount set forth opposite such date:
DATE TANGIBLE NET WORTH
March 31, 1996 $2,365,000
June 30, 1996 $2,576,000
September 30, 1996 $2,835,000
December 31, 1996 $3,096,000
and thereafter
(q) it shall not permit the Fixed Charge Coverage at
the end of each fiscal quarter set forth below to be less
than the amount set opposite such date:
DATE FIXED CHARGE COVERAGE
March 31, 1996 1.20 to 1.00
June 30, 1996 1.20 to 1.00
September 30, 1996 1.30 to 1.00
December 31, 1996 1.30 to 1.00
and thereafter
(r) it shall not permit the ratio of Current Assets to
Current Liabilities at the end of each fiscal quarter set
forth below to be less than the amount set forth opposite
such date:
DATE RATIO
March 31, 1996 1.00 to 1.00
June 30, 1996 1.00 to 1.00
September 30, 1996 .90 to 1.00
December 31, 1996 .90 to 1.00
and thereafter
Lender agrees to consider adjusting the covenants set forth
above for each of Tangible Net Worth, Fixed Charge Coverage
and ratio of Current assets to Current Liabilities for the
fiscal quarters ending March 31, 1997, June 30, 1997,
September 30, 1997, December 31, 1997 (collectively, the
"'97 Periods"), March 31, 1998 and June 30, 1998
(collectively, the "'98 Periods"). Borrower shall provide
Lender with fiscal projections for the (i) '97 Periods no
later than November 15, 1996 and (ii) '98 Periods no later
than November 15, 1997, to enable Lender to make such
determinations. However, nothing contained herein shall
obligate Lender to amend any of the foregoing covenants."
(ii) the "and" at the end of subsection (s) is hereby
deleted in its entirety;
(iii) the period at the end of subsection (t) is deleted and
"; and" inserted in its place and stead; and
(iv) a new subsection (u) is hereby added which provides as
follows:
"(u) it will, within forty-five (45) days of the
Effective Date, deliver to Lender (i) four (4) copies of the
fully-executed Mortgage, (ii) a survey for the Real
Property, (iii) an appraisal on the Real Property in form
and substance satisfactory to Lender and (iv) a fully paid
mortgagee title insurance policy (or binding commitment to
issue a title insurance policy, marked to Lender's
satisfaction to evidence the form of such policy to be
delivered with respect to the Mortgage), in standard ALTA
form, issued by a title insurance company satisfactory to
Lender, in an amount equal to not less than the fair market
value of the Real Property subject to the Mortgage, insuring
the Mortgage to create a valid lien on the Real Property
with no exceptions which Lender shall not have approved in
writing and no survey exceptions and it will pay all filing
fees and recording taxes related to the Mortgage; and"
3. WAIVER. Subject to satisfaction of the conditions
precedent set forth in Section 4 below, Lender hereby waives the
Events of Default which have occurred as a result of Borrower's
non-compliance with the following provisions of the Loan
Agreement:
(a) Section 12(n), to the extent such Event of Default arose
solely as a result of Borrower's failure to comply with the
Tangible Net Worth requirement as of December 31, 1995.
(b) Section 12(q), to the extent such Event of Default arose
solely as a result of Borrower's failure to comply with the Fixed
Charge Coverage requirement as of December 31, 1995.
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of Fisco Industries, Ltd., General Bearing
and Hyatt as guarantors, (ii) four (4) copies of the Amendment to
Overadvance Guaranty executed by David Gussack in form and
substance satisfactory to Lender, (iii) four (4) copies of the
executed CD Pledge and all related documents including, without
limitation, a Notice of Assignment from World to The Bank of New
York and a Confirmation of Assignment from The Bank of New York
to Lender, all in form and substance satisfactory to Lender,
(iv) an overadvance fee in an amount equal to $8,500 (which fee
shall be charged to Borrowers' account), and (v) a waiver fee in
the amount of $5,000 (which fee shall be charged to Borrower's
account).
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrowers has any defense, counterclaim or
offset with respect to the Loan Agreement.
6. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of SECTION 2 hereof, each
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided in SECTION 3
hereof, operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
7. GOVERNING LAW. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
8. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
9. COUNTERPARTS. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall
constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed to be an
original signature hereto.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
[PAGE BREAK]
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
[PAGE BREAK]
WAIVER AND AMENDMENT NO. 7
TO
LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 7 ("Amendment") is
entered into as of September 25, 1996, by and among GENERAL
BEARING CORPORATION ("General Bearing"), a Delaware corporation,
HYATT RAILWAY PRODUCTS CORP. ("Hyatt"), a New York corporation,
each having its principal place of business at 44 High Street,
West Nyack, New York (General Bearing and Hyatt each a "Borrower"
and jointly and severally referred to as "Borrowers") and THE
BANK OF NEW YORK COMMERCIAL CORPORATION having its principal
place of business at 1290 Avenue of the Americas, New York, New
York 10104 ("Lender").
BACKGROUND
----------
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994, (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994, (iii) Amendment No. 3 to Loan and
Security Agreement dated as of November 14, 1994, (iv) Amendment
No. 4 to Loan and Security Agreement dated as of June 19, 1995,
(v) Amendment No. 5 to Loan and Security Agreement dated as of
March 1, 1996 and (vi) Waiver and Amendment No. 6 to Loan and
Security Agreement dated as of March 22, 1996 (as may be further
amended, supplemented or otherwise modified from time to time,
the "Loan Agreement") pursuant to which Lender provided Borrowers
with certain financial accommodations.
Based upon an inventory audit, Lender has increased the slow
moving inventory reserve by $979,000 resulting in a loss of
availability of $480,000. Borrowers have requested that Lender
forbear from a scheduled reduction in the Overadvance Amount and
to increase the Overadvance Amount to $1,130,000 for a certain
period of time commencing on the Effective Date (as defined
below), and Lender is willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise
-----------
defined herein shall have the meanings given to them in the Loan
Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction
---------------------------
of the conditions precedent set forth in Section 3 below, the
Loan Agreement is hereby amended as follows:
2.1. Paragraph 1.2 of the Loan Agreement is hereby amended
by amending certain defined terms in their entirety as follows:
"Effective Date" shall mean the date on which Waiver and
--------------
Amendment No. 7 to the Loan and Security Agreement becomes
effective.
"Overadvance Amount" shall mean for the period commencing on
------------------
(i) March 22, 1996 through April 30, 1996, $1,700,000, (ii) May
1, 1996 through May 31, 1996, $1,150,000, (iii) June 1, 1996
through June 30, 1996, $1,050,000, (iv) July 1, 1996 through
August 31, 1996, $700,000, (v) September 1, 1996 through
September 24, 1996, $650,000, (vi) September 25, 1996 through
October 31, 1996, $1,130,000, (vii) November 1, 1996 through
November 30, 1996, $847,500, (viii) December 1, 1996 through
December 31, 1996, $565,000, (ix) January 1, 1997 through January
31, 1997, $282,500 and (x) at all times thereafter, $0.
2.2. Paragraph 2(a) is hereby amended by deleting "plus (v)"
in the last line thereof.
3. Conditions of Effectiveness. This Amendment shall
---------------------------
become effective when Lender shall have received (i) four (4)
copies of this Amendment executed by each Borrower and consented
and agreed to by each of David Gussack, Fisco Industries, Ltd.,
General Bearing and Hyatt as guarantors and by World Machinery
Company, as pledgor, and (ii) an amendment to Collateral Deposit
Letter executed by World Machinery Company in the form of Exhibit
A annexed hereto and made a part hereof.
4. Representations and Warranties. Each Borrower hereby
------------------------------
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
each Borrower and are enforceable against each Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) No Borrower has any defense, counterclaim or
offset with respect to the Loan Agreement.
5. Effect on the Loan Agreement.
----------------------------
(a) Upon the effectiveness of Section 2 hereof, each
---------
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided in Section 3
---------
hereof, operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Loan
Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon
-------------
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the
------------
parties hereto in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall
constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed to be an
original signature hereto.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
GENERAL BEARING CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
SIGNATURES CONTINUED ON NEXT PAGE
[PAGE BREAK]
HYATT RAILWAY PRODUCTS CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: _______________________________
Name: _____________________________
Title: ____________________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
________________________________
David Gussack, Limited Guarantor
WORLD MACHINERY COMPANY, as Pledgor
By:______________________________
Its______________________________
[PAGE BREAK]
EXHIBIT A
September __, 1996
The Bank of New York Commercial Corporation
1290 Avenue of the Americas
New York, NY 10104
Gentlemen:
Reference is made to the Collateral Deposit Letter dated
March 22, 1996 from the undersigned to you (the "Agreement").
Capitalized terms not otherwise defined herein shall have the
meaning given to them in the Agreement.
The last sentence of the Agreement is hereby amended in its
entirety to provide as follows:
"This Agreement shall remain in full force and effect until
(x) the value attributed to the Overadvance Amount (as such
term is defined in the Loan Agreement) is $0, and (y) the
amount of Revolving Credit Advances does not exceed the
amount permitted to be outstanding pursuant to paragraph
2(a) of the Loan Agreement, but in no event shall this
Agreement be terminated prior to January 31, 1997.
In all other respects, the Agreement is unamended and
remains in full force and effect and is hereby ratified and
confirmed.
Very truly yours,
WORLD MACHINERY COMPANY
By:___________________________
Its:__________________________
ACCEPTED:
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By:___________________________
Its:__________________________
[PAGE BREAK]
AMENDMENT NO. 8
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 8 ("Amendment") is entered into as
of October 31, 1996, by and among GENERAL BEARING CORPORATION
("General Bearing"), a Delaware corporation, HYATT RAILWAY
PRODUCTS CORP. ("Hyatt"), a New York corporation, each having its
principal place of business at 44 High Street, West Nyack, New
York (General Bearing and Hyatt each a "Borrower" and jointly and
severally referred to as "Borrowers") and THE BANK OF NEW YORK
COMMERCIAL CORPORATION having its principal place of business at
1290 Avenue of the Americas, New York, New York 10104 ("Lender").
BACKGROUND
----------
Borrowers and Lender are parties to a Loan and Security
Agreement dated as of December 20, 1993, as amended by (i)
Amendment No. 1 to Loan and Security Agreement dated as of April
__, 1994, (ii) Amendment No. 2 to Loan and Security Agreement
dated as of May 31, 1994, (iii) Amendment No. 3 to Loan and
Security Agreement dated as of November 14, 1994, (iv) Amendment
No. 4 to Loan and Security Agreement dated as of June 19, 1995,
(v) Amendment No. 5 to Loan and Security Agreement dated as of
March 1, 1996, (vi) Waiver and Amendment No. 6 to Loan and
Security Agreement dated as of March 22, 1996 and (vii) Waiver
and Amendment No. 7 to Loan and Security Agreement dated as of
September 25, 1996 (as may be further amended, restated,
supplemented or otherwise modified from time to time, the "Loan
Agreement") pursuant to which Lender provided Borrowers with
certain financial accommodations.
Borrowers have requested that Lender forbear from a
scheduled reduction in the Overadvance Amount and to increase the
Overadvance Amount to $1,500,000 for a certain period of time
commencing on the Effective Date (as defined below), and Lender
is willing to do so on the terms and conditions hereafter set
forth.
NOW, THEREFORE, in consideration of any loan or advance
or grant of credit heretofore or hereafter made to or for the
account of Borrowers by Lender, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
-----------
All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement.
---------------------------
Subject to satisfaction of the conditions
precedent set forth in Section 4 below, the Loan Agreement is
hereby amended as follows:
2.1. Paragraph 1.2 of the Loan Agreement is hereby
amended as follows:
(a) the following defined term is hereby inserted in
appropriate alphabetical order:
"Amendment No. 8 Effective Date" shall mean the date on
------------------------------
which Amendment No. 8 to the Loan and Security Agreement becomes
effective.
(b) the following defined term is hereby amended in
its entirety:
"Overadvance Amount" shall mean for the period
------------------
commencing on (i) the Amendment No. 8 Effective Date through
November 30, 1996, $1,500,000 (ii) December 1, 1996 through
December 31, 1996, $1,350,000, (iii) January 1, 1997 through
January 31, 1997, $1,200,000, (iv) February 1, 1997 through
February 28, 1997, $1,050,000 (v) March 1, 1997 through March 31,
1997, $1,000,000, (vi) April 1, 1997 through April 30, 1997,
$850,000, (vii) May 1, 1997 through May 31, 1997, $500,000,
(viii) June 1, 1997 through June 30, 1997, $200,000 and (ix) at
all times thereafter, $0 provided, that, the "Overadvance Amount"
-------- ----
shall be $0 at all times after the CD Pledge, as amended, has
been terminated.
2.2. The last line of Paragraph 2(a) is hereby amended
in its entirety as follows:
The sum of 2(a)(y)(i) plus (ii) plus (iii) minus (v)
shall be referred to as the "Formula Amount".
3. Section 5(b)(v) is hereby amended in its entirety
to provide as follows:
(v) Restructuring Fee. Borrowers shall pay to Lender
-----------------
on the Amendment No. 8 Effective Date a fee in an
amount equal to $7,500 (the "Restructuring Fee")
which may be charged to Borrowers' account.
4. Conditions of Effectiveness.
---------------------------
This Amendment shall become effective when Lender
shall have received (i) four (4) copies of this Amendment
executed by each Borrower and consented and agreed to by each of
David Gussack, Fisco Industries, Ltd., General Bearing and Hyatt
as guarantors and by World Machinery Company, as pledgor, (ii)
the Restructuring Fee and (iii) an amendment to Collateral
Deposit Letter executed by World Machinery Company in the form of
Exhibit A annexed hereto and made a part hereof.
5. Representations and Warranties.
------------------------------
Each Borrower hereby represents and warrants as
follows:
(a) This Amendment and the Loan Agreement, as
amended hereby, constitute legal, valid and binding
obligations of each Borrower and are enforceable
against each Borrower in accordance with their
respective terms.
(b) Upon the effectiveness of this Amendment,
each Borrower hereby reaffirms all covenants,
representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby
and agree that all such covenants, representations and
warranties shall be deemed to have been remade as of
the effective date of this Amendment.
(c) No Event of Default or Default has occurred
and is continuing or would exist after giving effect to
this Amendment.
(d) No Borrower has any defense, counterclaim or
offset with respect to the Loan Agreement.
6. Effect on the Loan Agreement.
----------------------------
(a) Upon the effectiveness of Section 2 hereof, each
---------
reference in the Loan Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of Lender, nor constitute a waiver of any provision of the
Loan Agreement, or any other documents, instruments or agreements
executed and/or delivered under or in connection therewith.
7. Governing Law. This Amendment shall be binding
-------------
upon and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
8. Headings. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
9. Counterparts. This Amendment may be executed by
------------
the parties hereto in one or more counterparts, each of which
shall be deemed an original and all of which taken together shall
constitute one and the same agreement. Any signature delivered by
a party by facsimile transmission shall be deemed to be an
original signature hereto.
IN WITNESS WHEREOF, this Amendment has been duly
executed as of the day and year first written above.
GENERAL BEARING CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
HYATT RAILWAY PRODUCTS CORP.
By: __________________________
Name: ________________________
Title: _______________________
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
CONSENTED AND AGREED TO:
FISCO INDUSTRIES, LTD.
By:___________________________
Name:_________________________
Title:________________________
GENERAL BEARING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
HYATT RAILWAY PRODUCTS CORP.
By:___________________________
Name:_________________________
Title:________________________
________________________________
David Gussack, Limited Guarantor
SIGNATURES CONTINUED ON NEXT PAGE
[PAGE BREAK]
WORLD MACHINERY COMPANY, as Pledgor
By:___________________________
Its___________________________
[PAGE BREAK]
EXHIBIT A
October 31, 1996
The Bank of New York Commercial Corporation
1290 Avenue of the Americas
New York, NY 10104
Gentlemen:
Reference is made to the Collateral Deposit Letter
dated March 22, 1996 as amended by the Letter Agreement dated
September 25, 1996 from the undersigned to you (the "Agreement").
Capitalized terms not otherwise defined herein shall have the
meaning given to them in the Agreement.
The last sentence of the Agreement is hereby amended in
its entirety to provide as follows:
"This Agreement shall remain in full force and effect
until (x) the value attributed to the Overadvance
Amount (as such term is defined in the Loan Agreement)
is $0 and the Borrowers notify Lender in writing that
the Overadvance Amount shall remain at $0 at all times
thereafter, and (y) the amount of Revolving Credit
Advances does not exceed the amount permitted to be
outstanding pursuant to paragraph 2(a) of the Loan
Agreement.
In all other respects, the Agreement is unamended and
remains in full force and effect and is hereby ratified and
confirmed.
Very truly yours,
WORLD MACHINERY COMPANY
By:___________________________
Its:__________________________
ACCEPTED:
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By:___________________________
Its:__________________________
EXHIBIT 10.2
Contract
Shanghai General Bearing Company, Ltd.
June 1988
<PAGE>
CONTENTS
--------
Chapter 1 General Provisions
Chapter 2 Parties to the Joint Venture
Chapter 3 Establishment of the Joint Venture Company
Chapter 4 Objective and Scope of Operation
Chapter 5 Total Investment and the Registered Capital
Chapter 6 Obligations of the Parties
Chapter 7 Sales of Product and Price
Chapter 8 The Board of Directors
Chapter 9 Managing Organization
Chapter 10 Purchasing of Materials
Chapter 11 Land Use
Chapter 12 Start-up of the Joint Venture Company
Chapter 13 Labour Management
Chapter 14 Taxation,Accounting, Audition
Chapter 15 Duration of the Joint Venture
Chapter 16 Liquidation of Assets after Expiration
Chapter 17 Insurance
Chapter 18 Trademark and Confidentiality
Chapter 19 The Amendment, Alteration and Discharge of
the Contract and Liabilties for
Breach of Contract
Chapter 20 Force Majeure
Chapter 21 Applicable Law
Chapter 22 Settlement of Disputes
Chapter 23 Language
Chapter 24 Effectiveness of the Contract Miscellaneous
<PAGE>
CHAPTER 1 GENERAL PROVISIONS
----------------------------
Shanghai Rolling Bearing Factery and General Bearing
Corporation, basing upon the 'Law of the People'S Republic of
China on Joint Venture Using Chinese and Foreign Investment' and
other relevant Chinese Laws and Rehulations and adhering to the
principle of equality and mutual benefit and thorugh friendly
consultation agree to jointly invest in setting up a joint
venture enterprise in Shanghai, the People's Republic of China.
The parties have agreed to enter into this Contract for the
purposes of regulating their respective interests in the joint
venture.
<PAGE>
CHAPTER 2 PARTIES TO THE JOINT VENTURE
--------------------------------------
Article 1
---------
The parties to the joint venture are:
(1) Shanghai Rolling Bearing Factory (hereinafter referred to as
Party A) registered in Shanghai, the People's Republic of China.
Legal representative: Mr. Yu You-Pin
Position: director
Nationality: Chinese
(2) General Bearing Corporation (hereinafter referred to as
Party B) registered in New York. United state, with its legal
address at 304 Route 303, Blauvely, New York 10913, United State.
Legal representative: Mr. Seymor Irving Gussack
Position: Chairman of the Board of GBC.
Nationality: America
<PAGE>
CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE COMPANY
----------------------------------------------------
Article 2
---------
In accordance with the 'Law of the People's Republic of
china on Joint Venture Using Chinese and Foreign Investment'and
other relevant Chinese Laws and Regulations, the above mentioned
two parties to the joint venture agree to set up in Shanghai, the
People's Republic of China, a joint venture limited liability
company, Shanghai General Bearing Company, LTD, (hereinafter
referred to as the Joint Venture Company or JVC).
Article 3
---------
The name of the Joint Venture Company is Shanghai General
Bearing Company Limited'. The legal address of the JVC is at
505-I, Humin Road, Shanghai, the people's Republic of china.
Both Chinese and English names of the JVC are only used
during the operation period of the JVC.
Article 4
---------
All activities of the Joint Venture Company shall be
governed by the laws, decrees and pertinent rules and regulations
of the People's Republic of China.
Article 5
---------
The organization form of Joint Venture Company is a limited
liability company. Each party to the Joint Venture Company is
respectively liable to the Joint Venture Company within the limit
of the capital subscribed by it. The profits, risks and losses
of the Joint Venture Company shall be shared by the parties in
proportion to their contributions of registered capital, but the
liabilities for risks and losses shall be within the limit of
their respective subscribed amounts to the registered capital.
In case guarantees are required in order to secure loans to
the Joint Venture Company, the parties shall provide such
guarantees in proportion to their respective contributions of the
registered capital of the Joint
<PAGE>
CHAPTER 4 OBJECTIVE AND SCOPE OF OPERATION
-----------------------------------------
Article 6
---------
The purpose of the parties to the Joint Venture Company is
in conformity wish of enhancing the exonomic cooperation and
technical exchanges, by adopting advanced and appropriate
technology and scientific management to improve the product
quality of the Bearing and other industrial products.to be
manufactured by the Joint Venture Company in China, develop new
products and gain competitive position in the world market in
quality, efficiency and price, so as to raise economic results
and ensure satisfactory benefits for all the parties hereto.
Article 7
---------
The scope of operation of the Joint Venture Company is:
(1) Manufacturing of bearinga; parts and compinents of bearings
and semi-finishod bearings.
(2) Other industrial products.
(3) Selling of all above-mentioned products.
<PAGE>
Chapter 5 Total AMOUNT of Investment and the
--------------------------------------------
Registered Capital
------------------
Article 8
---------
The total amount of investment of the JVC is US Dollar Four
Million and Mine Hundred Fifty Thousand ($4,950,000)
Article 9
---------
The total registered capital of the JVC. is US Dollar three
million ($3,000,000)
os which:
Party A shall pay US Dollars Two Million and Two Hundred
Fifty Thousand ($2,250,000), accounts for 75%.
Party B shallpay US Dollars Seven Hundred and Fifg Thousand
($750,000), accounts for 25%.
The registered capital contributed by each participant may
consist of cash and assets to be transferred and shall be paid in
all within ----month after issuance of the JVC.
Article 10
----------
Each party Shall contribute the followings as its registered
capital:
Party A:
Buildings and other equipment $1,500,000
(See detailed in Appendix 1)
Cash $750,000
i.e. fifty percent of $1,500,000 entrusted by Party B to purchase
the needed equipment and software of the JVC. (See detailed in
Appendix1 of the contract)
Aarty B:
Machinery and equipment $750,000
i.e. fifty percent of $1,500,000 to be jointlyused by Party A and
Party B to purchase the needed equipment and software of the JVC.
(See detailed in Appendx 2 of the contract).
Article 11
----------
The difference between the total amount of investment and
the registered captal equivalent to USD 1,950,000.
Article 12
----------
In case any party to the Joint Venture Company intends to
assign all or part of its investment to a third party, consent
shall be obtained from the other party of the Joint Venture
Company, and approval from the original examination and approval
authorities is required.
When one party to the Joint Venture Company assigns all or
part of its investment, the party shall have preemptive right for
a period of six months.
<PAGE>
CHAPTER 6 OBLIGATION OF THE PARTIES
-----------------------------------
Article 13
----------
Both paties shall respectively be responsible for the
following matters:
A. Responsibilities
--------------------
1) Handling of applications for approval, registration,
business license and other matters concerning the establishment
of the Joint Venture Company from relevant departments in charge
of China;
2) Processing and making the application for the right to the
use of a site at the authority in charge of the land;
3) Assisting the Joint Venture Company in designing and
constructing additional parts to the premises and other
engineering facilties, and thereupon negotiate and contract with
Chinese contractors;
4) Assisting the Joint Venture Company in purchasing or leasing
in China, equipments, materials, articles for office use, means
of transportation and communication facilities, ets;
5) Providing buildings, machinery and equipments, low cost
consumable article and cash in accordance with the stipulations
in Article 10;
6) Assisting the Joint Venture Company in contacting the
relevant departments and settling the fundamental facilities such
as water, electricity, transportation, etc;
7) Assisting the Joint Venture Company in recruiting Chinese
management personnnel, technical personnel, workers and other
presonnel needed;
8) Be responsible for mounting, commissioning and operation of
machines and equipment.
9) Handling other matters entrusted by the Joint Venture
Company.
B. Responsibilities of Party 3
--------------------------------
1) Providing equipment purchased by Party B (see detailed in
Appendix 2)
2) Providing all technical drawings, dies, fixtures, measuring
appliances for hot and cold forgings, automatic feeding pipes,
cutting tools and fittings in kinds in accordance with the
stipulations in Article (10)
3) Handling the matters entrusted by the JVC, such as selecting
and pruchasing equipment and materials outside China.
4) Assisting Chinese party for handling matters such as
dismantling and until shipping of the equipment.
5) Training the technical personnel and workers of the JVC.
6) Be liable to assist Party A for. accomplishing the
installing, testing and trial production of the equipment.
7) Responsible for handling other matters entrusted by the JVC.
<PAGE>
Chapter 7 Selling of Products and Price
---------------------------------------
Article 14
----------
PARTY B shall be responsible in principle for selling the
products of the JVC outside China. The inspection standard for
the quality of the products shall be conducted in accordance with
ISO standard or the standard of the correspondent components made
in China.
Party B has the right to export the products of the JVC.
being further machinedin China.
Article 15
----------
Party B will enjoy priority in selling the products of the
JVC outside China.
Article 16
----------
Selling pland and price
a. year 1: trial production for 3,000,000 sets
(Completed with lathe machining)
b. year 2: 8,000,000 sets (completed with lathe machining)
c. year 3: Come up to regular production at the beginning of
year 3 10,000,000 sets per year
(Completed with lathe machining)
Article 17
----------
a. The export price of the products in year 1 and 2 will be set
on the basis of the export price laid down in the Feasibility
Study Report in consideration of all factors of inflation.
b. The export price of the product manufactured during the
period of regular production until the expiration of the JVC will
be set on the basis of the cost of product. The 15% sales profit
will be ensured to be inclucled in the selling pricl of the
products.
<PAGE>
Chapter 8
----------
The Board of Directors
Article 18
----------
Both parties shall immediately submit a list of nominated
directors of the Board of Directors (hereinafter referred to as
BOD) upon signing of the Contract of the JVC. The first board
meeting shall be held in Shanghai within 14 days after the set up
of the BOD.
Article 19
----------
The BOD are composed of 8 directors (including one chairman
and one vice-chairman), of which 5 shall be appointed by Party A,
3 by Party B. The chairman of the board shall be appointed by
Party A, and its vice-chairman by Party B. The term of office
for the directors, chairman and vice-chairman is four years,
their term of office may be renewed if continuously appointed by
the relevant party. Should any of the directors be altered by
one party for some reasons, that party shall notify in written
form to other party of the JVC.
Article 20
----------
The highest authority of the JVC. is the Board of Dorectprs.
(1) The contents mentioned in Article 36 of the regulation for
the implementation of the Law of the People's Republic of China
on Joint Venture Using Chinese and Foreign Investment shall be
adopted unanimously by all directors, such as:
Amendment of the articles of association of the Joint
ventnre:
2) Termination and dissolution of the joint venture;
3) Increase or assignment of the registered capital of the
joint venture;
4) Merger of the joint venture with other economic
organization.
(2) The following issues shall be agreed upon through
consultation between the Chinese and foreign directors, and at
least one foreign director's vote is required.
a) Operating philosophy and management policy of the Joint
VENTURE Company;
b) Annual production plan, labor plan, sales plan, export plan
of products and import plan of equipment, parts and components.
c) Annual financial budget and final settlement, Profit and
Loss disposition;
d) Drafting and execution of Rules and Regulations of the Joint
Venture Company;
e) Increasing workshops as well as purchasing large number of
new equipment;
f) Establishment of branch office;
g) Appointment and dismissal of the general manager, deputy
general manager, chief accountant, chief engineer.
h) Any revision of stipulation regarding despatching oftrainees
and the acceptance of foreign engineers under the ContraCT. (see
Appendix 3)
i) Determination of different opinons between general manager
and deputy general mangers of the Joint Venture Company on daily
administrative and production matters.
(3) The wages and salaries of the employees and the issues other
than above mentioned (1) and (2) shall be adopted simply by a
majority vote.
Article 21
----------
The chairman of the Board is the legal representative of the
Joint Venture Company. Should the chairman be unable to perform
functions for some reasons, he shall authorize the vice chairman
or any other directors to represent the Joint Venture Company
temporarily.
Article 22
----------
The Board of Directors shall convene the meeting once every
year, in April. The chairman may convene an extra meeting based
upon a proposal made by more than one third of the total number
of directors.
Article 23
----------
The chairman of the Board shall no later than one month
prior to the date of each meeting notify directors with written
notice indicating the agenda, time,place and content of such
meeting.
Article 24
----------
If any director is unable to attend the meeting, he may, by
a formal written proxy, designate another person to attend the
meeting in his place and vote on his behalf. A quorum for a
meeting of the Board of Directors shall be constituted by the
presence of two thirds of the total munber of directors attending
in person or proxy. If any meeting in which the presence of
directors does not constitute a quorum or for which the directors
appointed by both parties have not been duly notified, or both
parties have not confirmed such notification, then any decision
passed by such meeting shall be null and void.
Article 25
----------
The resolution of each meeting shall be recorded in Chinese
and English. The Joint Venture Company and Party A, Party B
shall keep one copy of the resolution for file.
<PAGE>
CHARTER 9 MANAGING ORGANIZATION
-------------------------------
Article 26
----------
The Board of Directors shall appoint one general manager and
two deputy general managers to be responsbile for daily
management. Party A shall nominate one general manager and one
deputy general manger, and Party B shall nominate one deputy
general manager. The term of office for general manager and
deputy general managers shall be four years and may be renewed by
the Board of Directors.
Article 27
----------
The responsibility of the general manager is to carry out
the decisions of the Board of Directors and organize and conduct
the daily management of the Joint Venture Company. The deputy
general managers shall assist the general manager in his work.
In handling major issues, the general manager shall consult with
the two deputy general managers, and if there is a different
opinion between athe general manager and the deputy general
managers, the general manager's decision can be put into action
at first, provided either of the deputy general managers can
request the Board of Directors to solve such discrepancy by
Article 20 (2)of this contract.
Article 28
----------
The Board of Directors shall also appoint one chief
engineer, one chief accountant all under the leadership of the
general manager.
The chief engineer shall be responsible for organizing and
implementing the work on development of product, improvement of
technology and complete quality control, and approval of
important technical quality report during production.
The chief accountant shall be responsible for the financing
and accounting work of the Joint Venture Company, organizing the
Joint Venture Company to develop complete business accounting and
implementing the economic responsibility system.
Every year the Board of directors shall engage an
independent certified public accountant registered in Shanghai
for conducting financial checking and examination of the JVC and
an auditing report in written form shall be submitted to the
Board of Directors.
Article 29
----------
Should the general manager, deputy general managers, chief
engineer, chief accountant, wish to resign, written appliction
shall be submitted to the Board one month in advance.
<PAGE>
CHAPTER 10 PURCHASING OF MATERIALS
----------------------------------
Article 30
----------
In its purchase of required materials, parts and etc.
theJoint Venture Company shall give first priority to purchase in
China where quality, specifications and price are the same.
<PAGE>
CHAPTER 11 LAND USE
-------------------
Article 31
----------
Party A shall procure the right of using land required bythe
Joint Venture Company. The payment of using the land shall be
made to the Shanghai Branch of the People's Construction Bank of
China, The land use fee shall be implemented in accordarce with
relevant regulations stipulated by Chirese goverment.
<PAGE>
CHAPTER 12 Start-up OF THE JOINT VENTURE COMPANY
-----------------------------------------------
Article 32
----------
Both parties agree to set up a preparation office to handle
the establishment matters of the Joint Venture Company upon the
Joint Venture Company being approved by the government of the
People's Republic of China. The preparation office composed of
five (5) persons, among them four (4) persons from Party A and
one (1) person fromParty B.The preparation office shall have one
manager appointed by Party A andParty B. The preparation office
shall be under the leadership of the general manager of the Joint
Venture Company once the general manager is appointed.
Article 33
----------
The taske of the preparation office of the Joint Venture
Company are as follows:
1) Obtaining business license;
2) Checking up the investment contributed by both parties
3) Checking up the name lists of staffs and workers transferred
from Party A.
4) Contacting banks for opening accounts;
5) Preparation for the Board of Directors' meeting;
6) Other necessary works.
Article 34
----------
The budget of expenses of the preparation office shall be
made by the manager and be approved by both parties. After the
tasks of the preparation office being completed, the general
manager of the Joint Venture Company shall dissolve the
preparation office. The actual expenses incurred during
preparation time and the work done by thepreparation office shall
be transferred to the Joint Venture Company and be reported to
the general manager.
Article 35
----------
Both parties shall give full assistance and support to the
preparation office.
<PAGE>
CHAPTEDR 13 LABOUR MANAGEMENT
-----------------------------
Article 36
----------
The recruitment, employment, dismissal and resignation,
wages, labgour insurance, welfare, rewards, penalty and other
matters concerning the staffs and workers of the Joint Venture
Comany shall, in accordance with the "Regulations of the People's
Republic of China on Labour Management in Joint Venture Using
Chinese and Foreign Investment and its Implementation Rules",be
discussed and decided by the Board of Directors, and be
stipulated in the labour contract drawn up between the Joint
Venture Company and the Trade Union of the Joint Venture Company
as a whole or individual employees.
The labour contract shall, after being signed, be filed with
the loacl labour management department.
Article 37
----------
Party A shall transfer necessary employees of Shanghai
Rolling Bearing Factory to the Joint Venture Company as agreed
upon by parties.
Article 38
----------
The appointment of high-ranking administrative personnel
such as general manager, deputy general manager, chief engineer,
chief accountant recommended by both parties, their salaries,
welfare, social insurance and the standard of travelling expenses
etc. shall be decidedd by the meeting of the Board of Directors.
<PAGE>
CHAPTER 14 TAXATION, ACCOUNTING, AUDITLNG
-----------------------------------------
Artidle 39
----------
Joint Venture Company shall pay taxes in accordance with the
stipulations of Chinese laws and other relative regulations.
Article 40
----------
Staff menbers and workers of the Joint Venture Company shnll
pay individual income tax or individual incomre adjusting tax
according to the "Individual Income Tax Law of the People's
Republic of China".
Article 41
----------
Allocations for reserve funds, expansion funds of the Joint
Venture Company and welfare funds and bonuses for staffs and
workers shall be set aside in accordance with the stipulation in
the "Law ofthe People's Republic of China On Joint Venture Using
Chinese and Foreign Investment". The annual proportion of
allocations shall be decided by the Board of Directors according
to the business situations of the Joint Venture Company.
Article 42
----------
The fiscal year of the Joint Venture Company shall be from
January 1 to December 31. All documents, vouchers, statements
and accounting books shall be written in Chinese.
Article 43
----------
The certificate of investment of parties and annual fiscal
report of the Joint Venture company shall be valid only after
ratification by an accountant registered in China.
In case Party B considers it necessary to employ a foreign
auditor registered in other countries to undertake annual
financial checking and examination, Party A shall give its
consent. All the expenses thereof shall be borne by the
employing part.
Article 44
----------
The auditing work shall be done by an auditor (accountant)
registered in China. The auditor (accountant) shall report the
results to the Board of Directors after inspection and auditing
the annual fiscal reports of the Joint Venture Company.
Article 45
----------
In the first three months of each fiscal year, the general
manager shall prepare previous year's balance sheet, profit and
loss statement and proposal regarding the disposal of profits,
and submit them to the Board of Directors for examination and
approval.
<PAGE>
CHAPTER 15 DURATION OF THE JOINT VENTURE
----------------------------------------
Article 46
----------
The duration of the Joint Venture Company is ten (10) years,
starting from the date on which the business license of the Joint
Venture Company is issued.
An application for the extension of the duration, proposed
by one party and unaminously approved by the Board of Directors,
shall be submitted 6 months before the date of expiration to the
original examination and approval authorities for approval and
thereafter register with the administrative department for
industry and commerce. The extension of the duration shall be
effective only after approval by and registration with the
relevant authorities.
<PAGE>
CHAPTER 16 LIQUIDATION OR ASSETS AFTER EXPIRATION
-------------------------------------------------
Article 47
----------
Upon the expiration of the duration or termination before
the date of expiration of the Joint Yenture Company, liquidation
shall be carried out according to the relevant laws. The Joint
Venture Company shall be liable to its debts with all of its
property The remaining property, of the JVC, after the
liquidation for debts being conducted in accordance with the
principle of profits distribution stipulated in the Articles of
Association of the JVC shall be turned over to Party A.
<PAGE>
CHAPTER 17 INSURANCE
--------------------
Article 48
----------
Various kinds of insurance of the Joint Venture Company
shall be effected with the People's Insurance Company of China.
Types, values and duration of insurance shall be decided by the
Bosrd of Directors in accordance with the stipulations of the
Chinese goverment.
<PAGE>
CHAPTER 18 TRADE MARK AND CONFIDENTIALITY
-----------------------------------------
Article 49
----------
The trademark used on contract products shall be SGBC? GBC?
HYATT or other trademarks.
Article 50
----------
Information and materials relating to total invesment,
business management, technology, customers list, sales and
financial affairs of the Joint Venture Company shall not be
disclosed to any third party by Party A and Party B, except those
as required in reports to government authorities or unless such
information and materials have previously been made known to the
public and the subcontractors who make the parts and components
for the product of the Joint Venture Company.
The contents of this contract or any other understanding
between Party A and Partr B shall not be disclosed to other third
party without unanimous consent by the two parties.
After expiration of the Joint Venture Company, the documents
of business management, customers lists, sales and financial
affairs of the Joint Venture Company shall not be disclosed to
any third party, too.
<PAGE>
The Amendment, Alterstion and Discharge of the
----------------------------------------------
Contract and Liabilities for Breach of Contract
-----------------------------------------------
Article 51
----------
The amendment of the contract or other appendices shall come
into force only after the written agreement signed by Party A,
and Party B, and approved by the original examination and
approval authority.
Article 52
----------
In case of inability to fulfil the contract or to continue
operation due to heavy losses in successive years as a result of
force majeure, the duration of the Joint Venture Company and the
contract shall be terminated before the time of expiration after
unanimously agreed upon by the Board of Directors and approved by
the original examination and approval authority.
Article 53
----------
Should the Joint Venture Company be unable to continue its
operations or achieve the business purpose stipulated in the
contract due to the fact that one of the contracting parties
fails to fulfil the obligations prescribed by the Contract and
Articles of Association, or serioualy violate the stipulations of
the Contract and Articles of Association, the Board of Directors
of JVC shall hold a meeting immediately for trying to solve the
issues. If there is no result being reached and the fact of the
party who fails or violates the said obligations prescribed by
the Contract and Articles of Association is real, that party
shall be deemed as unilaterally terminates the contract. The
other party shall have the right to lodge a claim against
violation party and ask for compensation or payment payable to
other partiy to be made in US dolars and terminate the contract
in accordance with the provisions of the contract after approved
by the original examination and approval authority. If both
parties breach the contract, then each party shall undertake the
liabilities for breach of contract respectively.
Should the Joint Venture Company be unable to continue its
operations or achieve the business purpose stipulated in the
contract due to the heavy losses suffered, the Joint Venture
Company can terminate the contract subject to such a decision
being made out unanimously by the Board of Directors of the Joint
Venture Company and in accordance with the provisions of the
contract after approved by the original examination and approval
authority.
<PAGE>
CHAPTER 20 FORCE MAJEURE
------------------------
Article 54
----------
Should any of the parties to the contract be directly
prevented from executing or complete implementation of the
provisions of the contract by force majeure, such as earthquake,
typhoon, flood, fire and war and other unforeseen events, and
their happening and consequences are unpreventable and
unavoidable, the prevented party shall notify the other party by
cable without any delay, and within 15 days thereafter provide
the detailed information of the events and a valid document for
evidence issued by the relevant public notary organization, for
explaining the reason of its inability to execute or delay
theexecution of all or part of the contract. Both parties shall,
through consultations, decide whether to terminate the contract
or to exempt the part of obligations for implemention of the
contract or whether to delay the execution of the contract
according to the effects of the event on the performance of the
contract.
<PAGE>
CHAPTER 21 APPLICABLE LAW
-------------------------
Article 55
----------
The formation of this contract, its validity,
interpretation, execution and settlement of the disputes shall be
governed and be protected by the related laws of the People's
Republic of China.
<PAGE>
CHAPTER 22 SETTLEMENT OF DISPUTES
---------------------------------
Article 56
----------
Any disputes arising from the execution of, or in connection
with the contract shall be settled through friendly consultatlons
by both parties. In case no settlement can be reached through
consultations, the disputes shall be submitted to the Commerce
Arbitration Commission of Stockholm, Sweden for arbitration in
accordance with its rules of procedure.
The arbitral award is final and binding upon both parties.
<PAGE>
CHAPTER 23 LANGUAGE
-------------------
Article 57
----------
The contract shall be written in Chinese version and in
English version. Both versions are equally authentic.
<PAGE>
CHAPTER 24 EFFECTIVENESS OF THE CONTRACT AND MISCELLANEOUS
----------------------------------------------------------
Article 58
----------
The appendices drawn up ln accordance with the principles of
this contract are integral part of this contract, including:
Articles of Association, etc.
Article 59
----------
The contract and its appendices shall come into force
beginning from the date of approval of Shanghai Mechanical and
Electrical Industries Administration.
Article 60
----------
Should notices in connection with any party's rights and
obligations be sent by either party by telegram or telex in
English, the written letter confirmation in English too, shall
also be required afterwards.
The legal addresses of Party A and Party B listed in this
contract shall be the posting addresses.
Article 61
----------
The contract is signed in Shanghai, the People's Republic of
China, by the authorized representatives of parties on 25 June,
1988.
For Party A For Party B
Shanghai Rolling General Bearing
Bearing Factory Corporation
_________________________ _________________________
<PAGE>
Appendix 1
List of Buildings and Auxiliary Facilities Worth
US$ 1,500,000
1) Forging shop (civil construction) 4062m2 Y 1,500,000
2) Office building 1197m2 Y 420,000
3) Indoor rewage Y 20,000
4) Electric Wiring Y 300,000
5) Piping mounting Y 120,000
6) Lighting installation (indoor) Y 15,000
7) Inlet and outlet of water Y 10,000
8) Late machining shop 1987m2 Y 800,000
9) Electric wiring Y 240,000
10) Variance of materials Y 100,000
11) Dock (inside factory area) Y 150,000
12) Enclosing wall road and guard Room Y 250,000
13) Four (4) cranes (5 ton) Y 290,000
14) One (1) pallet Y 30,000
15) Rail mounting Y 100,000
16) Cable and transformer Y 150,000
17) Compressed air and steam pipe Y 60,000
18) One (1) compressor (20m) Y 50,000
19) Lighting instsllation (Factory area) Y 60,000
20) Fixed expenses needed for additional
power supply Y 600,000
21) Foundatlon for equipment and
installation Y 300,000
The total cost of the above-mentioned items (1)-(2) is
RMB 5,565,000. It is equivlant to US$ 1,500,000 whlch converted
at the exchange rate quoted on the day of the signing of the
Contract by the State Administration of Foreign Exchange Control
of PRC. ( $1= 3.71)
<PAGE>
SHANGHAI GENERAL BEARING CO. LTD.
AGREEMENT FOR THE REVISION AND AMENDMENT TO THE
CONTRACT AND ARTICLE OF THE COMPANY
According to the resolution of the first Board of Directors
meeting of Shanghai General Bearing Co. Ltd. the Company will
increase its capital. In order to clarify the rights,
obligations, responsibilities and profit shares of both parties
after the capital increase, the following agreement for the
revision of and amendment to the original Contract and Article of
Shanghai General Bearing Co. Ltd has been reached.
(1) To Contract Chapter 4, Article 7 and Article
Chapter 2 Article 7 the revisions are:
The scope of operation of the Joint Venture
Company is:
1. Manufacturing of bearings, bearing parts and
components, and semi-finished bearings.
2. Other industrial products for export which,
do not require export license.
3. The sale of above products.
(2) To Contract Chapter 5 Article 9, and Article
Chapter 3 Article 9 the revisions are:
The total amount of investment after reinvestment
of the JVC is U.S. Dollars, nine million nine
hundred thusand (U.S. $9,900.00). (Original total
investment was U.S. $4,950,000. New investment is
U.S. $4,950,000).
(3) To Contract Chapter 5 Article 9, and Article
Chapter 3 Article 9 the revisions are:
The total registered capital after reinvestment of
the JVC is U.S. $5,500,000. (Original registered
-----------
capital was U.S. $3,000,000, new investment is U.S.
$2,500,000) of which:
Party A shall pay U.S. $4,125,000 (Original
-----------
registered capital was $2,250,000, new investment
in U.S. $1,875,000), to account kfor 75% of the total
registered capital.
Party B shall pay U.S. $1,375,000 (Original
----------
registered capital was U.S. $750,000. New investment
is U.S. $625,000), to account for 25% of the total
registered capital.
(4) To Contract Chapter 5 Article 10, and Article
Chapter 3 Article 10, the amendments are:
Each party shall contribute as its new investment
of the registered capitals as follows:
Party A: Buildings, equipment installation and
start-up cost U.S. $ 1,000,000 and cash U.S.
$875,000 to be used to purchase part of the
equipment to be provided by party B of which
$500,000 shall be paid to party B within 10 days
after the approval of this Agreement, U.S.
$375,000 will be the loan without interest from
party B to party A, to be paid back to party B
from year 1989 through 1991, with a payment of
U.S. $125,000 each year.
Party B: Machinery and equipment U.S. $625,000
(For details see attachment 3). The new
investment of machinery and equipment from party B
has a total value of U.S. $1,500,000, of which:
U.S. $625,000 will be new investment of Party B.
U.S. $500,000 will be purchased in cash by party
A.
U.S. $ 375,000 will be purchased by party A of the
JVC by a loan granted by party B to Party A.
(5) To Contract Chapter 5 Article 11 and Article
Chapter 3 Article 11 the revisions are:
The difference between the total investment and
the registered investment, U.S. $4,400,000
(originally U.S. $1,950,000. New investment U.S.
$ 2,450,000), can be obtained through a loan to
the JVC when needed.
(6) To Contract Chapter 7 Article 16 the revisions
are:
Sales plan and Prices:
Annually to produce bearing rollers 100,000,000
pieces. For bearing rings the production plans
is:
A. First year 3,000,000 sets (to turning)
B. Second year 8,000,000 sets (to turning).
C. Third year to reach regular production of
10,000,000 sets of which 5,500,000 sets to be
further processed by JVC as finished bearings
to be sold by party B. The remainding
4,500,000 sets to be sold by party B as semi-
finished products.
(7) To Article Chapter 7 Article 39 the revisions are:
The JVC will pay taxes in accordance with the law.
The JVC will allocate the net profit, after paying
all necessary funds, and after obtaining approval
from the Board of Directors, to distribute the net
profit to parties A & B proportional to their
share of investment. Party B agrees that after
receiving U.S. $1,375,000 of profit (including the
profit from reinvestment) its right for receiving
any more dividend will terminate. All profits of
the JVC after that time will be distributed
exclusively to Party A. After termination of the
JVC, all equipment and machinery invested by Party
B and other assets shall be turned over to party A
without compensation.
(8) This agreement shall become effective after
approval by the Shanghai Mechanical & Electrical
Industries Administration. This agreement is as
legally binding as the contract and the Article of
Shanghai General Bearing Co. Ltd.
GENERAL BEARING CORPORATION SHANGHAI ROLLING BEARING
REPRESENTATIVE FACTORY REPRESENTATIVE
___________________________ _________________________
Vice President Director
EXHIBIT 10.3
LEASE AGREEMENT
This lease Agreement, made this 1st day of November, 1996,
Between GUSSACK REALTY COMPANY, residing or located at 44 High
Street, West Nyack, New York, 10994, herein designated as the
Landlord, and GENERAL BEARING CORPORATION, residing or located at
44 High Street, West Nyack, New York, 10994, herein designated as
the Tenant;
WITNESSETH that, the Landlord does hereby lease to the
Tenant and the Tenant does hereby rent from the Landlord, the
following described premises: 44 High Street, West Nyack, New
York 10994, consisting of approximately one hundred ninety
thousand (190,000) square feet situated on 18 acres, for a term
of seven years, commencing on November 1, 1996 and ending on
October 31, 2003, to be used and occupied only and for no other
purpose than offices, manufacturing, warehousing and other
incidental uses, at the following Annual Rents in the monthly
installments indicated:
November 1, 1996 October 31,1997-$912,840.00 payable at
$76,070.00 per month.
November 1, 1997 October 31,1998-$912,840.00 payable at
$76,070.00 per month.
Commencing on November 1, 1998 and every two years
thereafter (referred to as a new rent year), the annual rent
shall be increased to the greater of A) 106% of the next
preceding year's rent or B) said preceding year's rent multiplied
by a fraction, the numerator of which is the Consumer Price Index
(CPI) in effect ninety (90) days prior to November 1st of the new
rent year and the denominator of which is the CPI in effect (90)
days prior to November 1st of the preceding year. The Consumer
Price Index (CPI) used shall be as published by the United States
Government for the area including Rockland County, New York, or
if no such Index is published, then for northern New Jersey. If
no CPI is published specifically for any of the above dates, then
the CPI published for the most recent date before each such date
shall be used. The amount of rent for each year which is not a
"new rent" year shall be the same amount as that for the next
preceding year.
The tenant shall have the option of extending this lease for
an additional six years (the extended period) provided it
exercises such option and gives written notice thereof to the
landlord no later than 6 months prior to the expiration of the
lease term.
If the tenant exercises such option, the rent for first year
of the extended period shall be at fair market value (FMV) as
agreed upon by the parties. If the parties do not reach agreement
as to FMV by February 1, 2003, they shall jointly retain a
mutually acceptable appraiser to appraise FMV and whose appraisal
shall be binding. The landlord and the tenant shall each pay one
half the cost of the appraisal.
The third and fifth years of the extended period shall be
deemed "new rent years" for which the rent shall be increased
pursuant to the above formula applicable to "new rent years"
occurring during the base term of the lease.
All monthly rental installments shall be payable in advance
on the first day of the month. If Tenant defaults in any rent
payment for a period of 15 days, Tenant shall pay Landlord a late
charge of 5% (of the amount of rent due) which shall be payable
as "additional rent".
CONDITIONS AND COVENANTS:
FIRST.-The Tenant covenants and agrees to pay to the
Landlord the rent as above provided.
SECOND. Throughout said term the Tenant shall take good care
of the demised premises, fixtures and appurtenances, including
all heating, ventilating and air conditioning equipment (HVAC),
electrical systems, sprinkler system, plumbing and all
alterations, additions and improvements thereto, make all repairs
in and about same necessary to preserve them in good order and
condition, ordinary wear and tear and damage by fire or other
casualty excepted, which repairs shall be, in quality and class,
equal to the original work; promptly pay the expense of such
repairs; suffer no waste or injury; give notice to the Landlord
of any fire that may occur; execute and comply with all laws,
rules, orders, ordinances and regulations at any time issued or
in force (except those requiring structural alterations for which
tenant is not liable hereunder, if any) applicable to the demised
premises or to the Tenant's occupation thereof, of the Federal,
State and Local Governments, and of each and every department,
bureau and official thereof, and of the New York Board of Fire
Underwriters; permit at all times during usual business hours,
the Landlord and representatives of the landlord to enter the
demised premises for the purpose of inspection, and to exhibit
them for purposes of sale or rental; suffer the landlord to make
repairs and improvements to all parts of the building, and to
comply with all orders and requirements of governmental authority
applicable to said building or to any occupation thereof; suffer
the landlord to erect, use, maintain, repair and replace pipes
and conduits in the demised premises and to the floors above and
below; forever indemnify and save harmless the Landlord for and
against any and all liability, penalties, damages, expenses and
judgments arising from injury during said term to person or
property of any nature, occasioned wholly or in part by any act
or acts, omission or omissions of the Tenant, or of the
employees, guests, agents, assigns or sub-tenants of the Tenant
and also for any matter or thing growing out of the occupation of
the demised premises or of the streets, sidewalks or vaults
adjacent thereto; permit, during the six months next prior to the
expiration of the term the usual notice "To Let" or similar
language, to be placed and to remain unmolested in a conspicuous
place upon the exterior of the demised premises; repair, at or
before the end of the term, all injury done by the installation
or removal of furniture and property; and at the end of the term,
to quit and surrender the demised premises with all alterations,
additions and improvements in good order and condition.
The landlord shall be responsible for all structural repairs
to the walls of the premises (other than damage caused by Tenant,
its agents, servants or employees) except that Tenant shall be
responsible for maintenance, repair and replacement of the roof
and all HVAC equipment.
THIRD. Tenant will not perform any alterations or
renovations, shall not disfigure or deface any part of the
building; or suffer the same to be done, except so far as may be
necessary for its business purposes and as are specifically
consented to in advance by the Landlord; the Tenant will not
obstruct, or permit the obstruction of the street or the sidewalk
adjacent thereto; will not do anything, or suffer anything to be
done upon the demised premises which will increase the rate of
fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building; will not
permit the accumulation of waste or refuse matter, and will not,
without the prior written consent of the landlord (which consent
shall not be unreasonably withheld) in each case, either sell,
assign, mortgage or transfer this lease, sublet the demised
premises or any part thereof, permit the same or any part thereof
to be occupied by anybody other than the Tenant and the Tenant's
employees, make any alterations in the demised premises, use the
demised premises or any part thereof for any purpose other than
the one first above stipulated, or for any purpose deemed extra
hazardous on account of fire risk, nor in violation of any law or
ordinance. The Tenant will not obstruct or permit the obstruction
of the light, halls, stairway or entrances to the building, and
will not erect or inscribe any sign, signals or advertisements
unless and until the style and location thereof have been
approved by the Landlord; and if any be erected or inscribed
without such approval, the Landlord may remove the same. No water
cooler, air conditioning unit or system or other apparatus shall
be installed or used without the prior written consent of the
Landlord, which shall not be unreasonably withheld.
The tenant shall comply with the Rules and Regulations annexed to
this lease.
FOURTH.-If the demised premises shall be partially damaged
by fire or other cause without the fault or neglect of Tenant,
Tenant's servants, employees, agents, visitors or licensees, the
damages shall be repaired by and at the expense of the Landlord
and the rent until such repairs shall be made shall be
apportioned according to the part of the demised premises which
is usable by Tenant. But if such partial damage is due to the
fault or neglect of Tenant, Tenant's servants, employees, agents,
visitors or licensees, without prejudice to any other rights and
remedies of Landlord and without prejudice to the rights of
subrogation of Landlord's insurer, the damages shall be repaired
by the Landlord but there shall be no apportionment or abatement
of rent. No penalty shall accrue for reasonable delay which may
arise by reason of adjustment of insurance on the part of the
Landlord and/or Tenant, and for reasonable delay on account of
"labor troubles", or any other cause beyond Landlord's control.
If the demised premises are totally damaged or are rendered
wholly untenantable by fire or other cause, and if Landlord shall
decide not to restore or not to rebuild the same, or if the
building shall be so damaged that Landlord shall decide to
demolish it or to rebuild it, then or in any of such events
Landlord may, within ninety (90) days after such fire or other
cause, give Tenant a notice in writing of such decision, which
notice shall be given as in Paragraph Twelfth hereof provided,
and thereupon the term of this lease shall expire by lapse of
time upon the third day after such notice is given, and Tenant
shall vacate the demised premises and surrender the same to
Landlord. If Tenant shall not be in default under the lease then,
upon the termination of this lease under the conditions provided
for in the sentence immediately preceding, Tenant's liability for
rent shall cease as of the day following the casualty. Tenant
hereby expressly waives the provisions of Section 227 of the Real
Property Law and agrees that the foregoing provisions of this
Article shall govern and control in lieu thereof. If the damage
or destruction is due to the fault or neglect of Tenant the
debris shall be removed by, and at expense of Tenant.
FIFTH.-If the whole or any part of the premises hereby
demised shall be taken or condemned by any competent authority
for any public use or purpose then the term hereby granted shall
cease from the time when possession of the part so taken shall be
required for such public purpose and without apportionment of
award (except with regard to Tenant's trade fixtures), the Tenant
hereby assigning to the Landlord all right and claim to any such
award (other than for trade fixtures), the current rent, however,
in such case to be apportioned.
SIXTH.-If, before the commencement of the term, the Tenant
be adjudicated a bankrupt, or make a "general assignment", or
take the benefit of any insolvent act, or if a Receiver or
Trustee be appointed for the Tenant's property, or if this lease
or the estate of the Tenant hereunder be assigned, transferred or
pass to or devolve upon any other person or corporation,
voluntarily or involuntarily, or if the Tenant shall default in
the performance of any agreement by the Tenant contained in any
other lease between the Tenant and the Landlord or between Tenant
and any corporation of which an officer of the Landlord is a
Director, this lease shall thereby, at the option of the
Landlord, be terminated and in that case, neither the Tenant nor
anybody claiming under the Tenant shall be entitled to go into
possession of the demised premises. If after the commencement of
the term, any of the events mentioned above in this subdivision
shall occur, or if Tenant shall default in fulfilling any of the
covenants of this lease, other than the covenants for the payment
of rent or "additional rent" or if the demised premises become
vacant or deserted, The Landlord may give to the Tenant ten days'
notice of intention to end the term of this lease, and thereupon
at the expiration of said ten days (if said condition which was
the basis of said notice shall continue to exist) the term under
this lease shall expire as fully and completely as if that day
were the date herein definitely fixed for the expiration of the
term and Tenant will then quit and surrender the demised premises
to the Landlord, but the Tenant shall remain liable as
hereinafter provided.
If the Tenant shall default in the payment of the rent
reserved hereunder, or any item of "additional rent" herein
mentioned, or any part of either or in making any other payment
herein provided for, or if the notice last above provided for
shall have been given and if the condition for which the basis of
said notice shall exist at the expiration of said ten days'
period, the Landlord may immediately, or at any time thereafter,
re-enter the demised premises and remove all persons and all or
any property therefrom either by summary dispossess proceedings,
or by any suitable action or proceeding at law, or by force or
otherwise, without being liable to indictment, prosecution or
damages therefor, and re-possess and enjoy said premises together
with all additions, alterations and improvements. In any such
case or in the event that this lease be "terminated" before the
commencement of the term, as above provided, the Landlord may
either re-let the demised premises or any part or parts thereof
as the agent of the Tenant, and receive the rents therefor,
applying the same first to the payment of such expenses as the
Landlord may have incurred, and then to the fulfillment of the
covenants of the Tenant herein, and the balance, if any, at the
expiration of the term first above provided for, shall be paid to
the Tenant. Landlord may rent the premises for a term extending
beyond the term hereby granted without releasing Tenant from any
liability. In the event that the term of this lease shall expire
as above in this subdivision "Sixth" provided, or terminate by
summary proceedings or otherwise, and if the Landlord shall not
re-let, the Tenant shall remain liable for, and the Tenant hereby
agrees to pay to the Landlord, until the time when this lease
would have expired but for such termination or expiration, the
equivalent of the amount of all of the rent and "additional rent"
reserved herein, less the costs of reletting, if any, and the
same shall be due and payable by the Tenant to the Landlord on
the several rent days above specified, that is upon each of such
rent days the Tenant shall pay to the Landlord the amount of
deficiency then existing. The Tenant hereby expressly waives any
and all right of redemption in case the Tenant shall be
dispossessed by judgment or warrant of any court or judge, and
the Tenant waives and will waive all right to trial by jury in
any summary proceedings hereafter instituted by the Landlord
against the Tenant in respect to the demised premises. The words
"re-enter" and "re-entry" as used in this lease are not
restricted to their technical legal meaning.
In the event of a breach or threatened breach by the Tenant
of any of the covenants or provisions hereof, the Landlord shall
have the right of injunction and the right to invoke any remedy
allowed at law or in equity, as if re-entry, summary proceedings
and other remedies were not herein provided for.
SEVENTH.-If the Tenant shall default in the performance of
any covenant herein contained, the Landlord may immediately, or
at any time thereafter, without notice, perform the same for the
account of the Tenant. If a notice of mechanic's lien be filed
against the demised premises or against premises of which the
demised premises are part, for or purporting to be for, labor or
material alleged to have been furnished, or to be furnished to or
for the Tenant at the demised premises, and if the Tenant shall
fail to take such action as shall cause such lien to be
discharged within fifteen days after the filing of such notice,
the Landlord may pay the amount of such lien or discharge the
same by deposit or by bonding proceedings, and in the event of
such deposit or bonding proceedings, the Landlord may require the
lienor to prosecute an appropriate action to enforce the lienor's
claim. In such case, the Landlord may pay any judgment recovered
on such claim. Any amount paid or expense incurred by the
Landlord as in this subdivision of this lease provided, and any
amount as to which the Tenant shall at any time be in default for
or in respect to the use of water, electric current or sprinkler
supervisory service, and any expense incurred or sum of money
paid by the Landlord by reason of the failure of the Tenant to
pay any taxes, insurance or maintenance or repairs, or to comply
with any provision of this lease, or in defending any such
action, shall be deemed to be "additional rent" for the demised
premises, and shall be due and payable by the Tenant to the
Landlord on the first day of the next month, or, at the option of
the Landlord, on the first day of any succeeding month. The
receipt by the Landlord of any instalment of the regular
stipulated rent hereunder or any of said " additional rent" shall
not be a waiver of any other "additional rent" then due.
EIGHTH.-The failure of the Landlord to insist, in any one or
more instances upon a strict performance of any of the covenants
of this lease, or to exercise any option herein contained, shall
not be construed as a waiver or a relinquishment for the future
of such covenant or option, but the same shall continue and
remain in full force and effect. The receipt by the Landlord of
rent, with knowledge of the breach of any covenant hereof, shall
not be deemed a waiver of such breach and no waiver by the
Landlord of any provision hereof shall be deemed to have been
made unless expressed in writing and signed by the Landlord. Even
if the Landlord consents to an assignment hereof no further
assignment shall be made without further express consent in
writing by the Landlord. No waiver by Landlord or Tenant of any
provision hereof shall be deemed a waiver of any other provision
hereof or of any subsequent breach by the other party of any
other provision.
NINTH.-If this lease be assigned, or if the demised premises
or any part thereof be sublet or occupied by anybody other than
the Tenant the Landlord may collect rent from the assignee, sub-
tenant or occupant, and apply the net amount collected to the
rent herein reserved, and no such collection shall be deemed a
waiver of the covenant herein against assignment and subletting,
or the acceptance of the assignee, sub-tenant, or occupant as
tenant, or a release of the Tenant from the further performance
by the Tenant of the covenants herein contained on the part of
the Tenant.
TENTH.-This lease shall be subject and subordinate at all
times, to the lien of the mortgages now on the demised premises,
and to all advances made or hereafter to be made upon the
security thereof, and subject and subordinate to the lien of any
mortgage or mortgages which at any time may be made a lien upon
the premises, provided the holder of any such mortgage shall
execute and deliver to Tenant in a form reasonably acceptable to
Tenant an agreement that it will recognize this lease and not
disturb Tenant's possession of the premises in the event of
foreclosure if the Tenant is not then in default hereunder. The
Tenant will execute and deliver such further instrument or
instruments subordinating this lease to the lien of any such
mortgage or mortgages as shall be requested by the Landlord.
ELEVENTH.-All improvements made by the Tenant to or upon the
demised premises, except said trade fixtures and other non-
fixture property of Tenant necessary for the Tenant's business,
shall when made, at once be deemed to be attached to the
freehold, and become the property of the Landlord, and at the end
or other expiration of the term, shall be surrendered to the
Landlord in as good order and condition as they were when
installed, reasonable wear and damages by the elements excepted.
TWELFTH.-Any notice or demand which under the terms of this
lease or under any statute must or may be given or made by the
parties hereto shall be in writing and shall be given or made by
mailing the same by certified or registered mail addressed to the
respective parties at the following addresses:
Tenant: General Bearing Corporation
44 High Street
West Nyack, New York 10994
Attn: John E. Stein
Staff Counsel
Landlord: Gussack Realty Co.
44 High Street
West Nyack, New York 10994
THIRTEENTH.-The Landlord shall not be liable for any failure
of water supply or electrical current, sprinkler damage, or
failure of sprinkler service, nor for injury or damage to person
or property caused by the elements or by other tenants or persons
in said building, or resulting from steam, gas, electricity,
water, rain or snow, which may leak or flow from any part of said
buildings, or from the pipes, appliances or plumbing works of the
same, or from the street or sub-surface, or from any other place,
nor for interference with light or other incorporeal
hereditaments by anybody other than the Landlord, or caused by
operations by or for a governmental authority in construction of
any public or quasi-public work, neither shall the Landlord be
liable for any latent defect in the building, unless caused by
the Landlord's negligent acts or omissions and Landlord has not
cured the same within 15 days of notification thereof.
FOURTEENTH.-No diminution or abatement of rent, or other
compensation shall be claimed or allowed for inconvenience or
discomfort arising from the making of repairs or improvements to
the building or to its appliances, nor for any space taken to
comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein
expressly or impliedly agreed to be furnished by the Landlord to
the Tenant, it is agreed that there shall be no diminution or
abatement of the rent, or any other compensation, for
interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations
or repairs desirable or necessary to be made or to inability or
difficulty in securing supplies or labor for the maintenance of
such "service" or to some other cause not due to negligence on
the part of the Landlord. No such interruption or curtailment of
any such "service" shall be deemed a constructive eviction. The
Landlord shall not be required to furnish, and the Tenant shall
not be entitled to receive, any of such "services" during any
period wherein the Tenant shall be in default in respect to the
payment of rent. Neither shall there be any abatement or
diminution of rent because of making of repairs, improvements or
decorations to the demised premises after the date above fixed
for the commencement of the term, it being understood that rent
shall, in any event, commence to run at such date so above fixed.
FIFTEENTH.-In the event that an excavation shall be made for
building or other purposes upon land adjacent to the demised
premises or shall be contemplated to be made, the Tenant shall
afford to the person or persons causing or to cause such
excavation, license to enter upon the demised premises for the
purpose of doing such work as said person or persons shall deem
to be necessary to preserve the wall or walls, structure or
structures upon the demised premises from injury and to support
the same by proper foundations.
SIXTEENTH.-No vaults or space not within the property line
of the building are leased hereunder. Landlord makes no
representation as to the location of the property line of the
building. Such vaults or space as Tenant may be permitted to use
or occupy are to be used or occupied under a revocable license
and if such license be revoked by the Landlord as to the use of
part or all of the vaults or space Landlord shall not be subject
to any liability; Tenant shall not be entitled to any
compensation or reduction in rent nor shall this be deemed
constructive or actual eviction. Any tax, fee or charge of
municipal or other authorities for such vaults or space shall be
paid by the Tenant for the period of the Tenant's use or
occupancy thereof.
SEVENTEENTH .-That during six months prior to the expiration
of the term hereby granted, on reasonable advance notice,
applicants shall be admitted at all reasonable hours of the day
to view the premises until rented; and the Landlord and the
Landlord's agents shall be permitted at any time during the term
to visit and examine them at any reasonable hour of the day, and
workmen may enter at any time, when authorized by the Landlord or
the Landlord's agents, to make or facilitate repairs in any part
of the building; and if the said Tenant shall not be personally
present to open and permit an entry into said premises, at any
time, when for any reason an entry therein shall be necessary or
permissible hereunder, the Landlord or the Landlord's agents may
forcibly enter the same without rendering the Landlord or such
agents liable to any claim or cause of action for damages by
reason thereof (if during such entry the Landlord shall accord
reasonable care to the Tenant's property) and without in any
manner affecting the obligations and covenants of this lease; it
is, however, expressly understood that the right and authority
hereby reserved, does not impose, nor does the Landlord assume,
by reason thereof, any responsibility or liability whatsoever for
the care or supervision of said premises, or any of the pipes,
fixtures, appliances or appurtenances therein contained or
therewith in any manner connected.
EIGHTEENTH.-The Landlord has made no representations or
promises in respect to said building or to the demised premises
except those contained herein, and those, if any, contained in
some written communication to the Tenant, signed by the Landlord.
This instrument represents the entire agreement of the parties
and may not be changed, modified, discharged or terminated
orally.
NINETEENTH.-If the Tenant shall at any time be in default
hereunder, and if the Landlord shall institute an action or
summary proceeding against the Tenant based upon such default,
then the Tenant will reimburse the Landlord for the expense of
attorneys' fees and disbursements thereby incurred by the
Landlord, so far as the same are reasonable in amount. Also so
long as the Tenant shall be a tenant hereunder the amount of such
expenses shall be deemed to be "additional rent" hereunder and
shall be due from the Tenant to the Landlord on the first day of
the month following the incurring of such respective expenses.
TWENTIETH.-Landlord shall not be liable for failure to give
possession of the premises upon commencement date by reason of
the fact that premises are not ready for occupancy, if due to a
prior Tenant other than Landlord or its affiliates wrongfully
holding over in possession. In such event the rent shall not
commence until possession is given or is available, but the term
herein shall not be extended.
TWENTY-FIRST.-The Tenant will keep the sidewalk, roadways,
parking areas and curb clean at all times and free from snow and
ice and shall be solely responsible for all repairs and
maintenance thereto and for all landscaping. Landscape plants and
trees surrounding the building shall be maintained at a level
equivalent to that at the time of the commencement of this lease
and trees and shrubs that die are to be replaced by tenant.
Tenant acknowledges that at the commencement of this lease the
premises and surrounding grounds, including wooded areas, were
free of trash, debris and garbage and tenant shall maintain the
premises and grounds in such condition.
TWENTY-SECOND.-If a separate water meter be installed for
the demised premises, or any part thereof, the Tenant will keep
the same in repair and pay the charges made by the municipality
or water supply company for or in respect to the consumption of
water, as and when bills therefor are rendered. If the demised
premises, or any part thereof, be supplied with water through a
meter which supplies other premises, the Tenant will pay to the
Landlord, as and when bills are rendered therefor, the Tenant's
proportionate part of all charges which the municipality or water
supply company shall make for all water consumed through said
meter, as indicated by said meter. Such proportionate part shall
be fixed by apportioning the respective charge according to floor
area against all of the rentable floor area in the building
(exclusive of the basement) which shall have been occupied during
the period of the respective charges, taking into account the
period that each part of such area was occupied. Tenant agrees to
pay as additional rent the Tenant's proportionate part,
determined as aforesaid, of the sewer charge imposed or assessed
upon the building of which the premises are a part.
TWENTY-THIRD.-From the date of occupancy by Tenant, Tenant
shall pay all charges or fees for use or consumption of all
utilities provided to the premises occupied by Tenant including
water, gas, electricity, telephone and other utilities and
services together with any taxes thereon. In the event the
premises are not separately metered Landlord may secure an
independent audit of Tenant's consumption of such utilities or
install a device to monitor same, advising Tenant of the
percentage of such utilities used and consumed by Tenant.
Landlord shall thereupon invoice Tenant for Tenant's share of
such utilities on a monthly basis and Tenant shall reimburse the
Landlord for such expense. All utilities shall be paid to the
Landlord (if applicable) within ten days of receipt of billings.
TWENTY-FOURTH.-If there now is or shall be installed in said
building a "sprinkler system" the Tenant agrees to keep the
appliances thereto in the demised premises in repair and good
working condition, and if the New York Board of Fire Underwriters
of the New York Fire Insurance Exchange or any bureau, department
or official of the State or local government requires or
recommends that any changes, modifications, alterations or
additional sprinkler heads or other equipment be made or supplied
by reason of the Tenant's business, or the location of
partitions, trade fixtures, or other contents of the demised
premises, or if such changes, modifications, alterations,
additional sprinkler heads or other equipment in the demised
premises are necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the
fire insurance rate as fixed by said Exchange, or by any Fire
Insurance Company, the Tenant will at the Tenant's own expense,
promptly make and supply such changes, modifications,
alterations, additional sprinkler heads or other equipment.
TWENTY-FIFTH.-Tenant agrees that it will keep the leased
Premises insured, at a minimum, against loss or damage by fire
with extended coverage ("all risk") endorsement, vandalism and
malicious mischief coverage, and differences in conditions
coverage (for the perils of earthquake, surface water flood and
sudden and accidental collapse or rupture to non-pressurized
vessels). Such insurance shall be in an amount of the full
replacement value of the premises as determined from time to
time. Tenant shall name Landlord as a party insured and shall
require the insurer to give Landlord at least thirty (30) days
notice of cancellation. Landlord and Tenant acknowledge that as
of the date hereof the full replacement value of the premises is
Nine Million Dollars ($9,000,000.00).
Insurance Requirements. For purposes of this Section,
----------------------
the parties agree during the term hereof that Tenant shall
maintain adequate public liability and other insurance with
reputable insurance companies as hereinabove and hereinafter set
forth, shall furnish Landlord with certificates of insurance
properly executed by its insurance companies evidencing such
fact, and requiring their insurers to give at least thirty (30)
days notice in the event of cancellation. Such insurance shall
cover all damage or injury which results or is claimed to have
resulted from an act or omission on the part of Tenant, its
agents, employees or business invitees as well as environmental
clean up of damage done to Landlord's premises proven to have
occurred as a result of the use thereof by Tenant or others while
Tenant is a tenant at the premises.
TWENTY-SIXTH.-Tenant shall be responsible for the payment of
all real estate taxes and current installments of special
assessments levied against the premises which become due during
the term of the lease. Landlord shall notify Tenant and forward a
copy of each tax bill to Tenant upon Landlord's receipt thereof.
Tenant shall pay Landlord the amount of the tax or installment of
assessment set forth on the bill within seven (7) days of the
presentation by the Landlord thereof. Landlord shall present such
bill to Tenant within five (5) days of its receipt from the
taxing authority. Failure to pay Landlord such amount within the
time period set forth herein shall constitute a default pursuant
to the terms hereof. If the term of this lease shall not begin or
expire concurrently with the beginning or expiration of any tax
fiscal year, Tenant's liability for real estate taxes and current
installments of special assessments for any tax fiscal year
during which Tenant is not in possession of the premises for the
entire tax fiscal year shall be prorated. In the event the
premises constitute less than one entire taxable parcel, the real
estate taxes and current installments of special assessments
attributable to the premises shall be prorated on a square
footage basis comparing the square footage of the premises to the
square footage of the tax parcel of which the premises forms a
part. Landlord represents that there are no tax abatements or
exemptions effecting the premises and Landlord does not make
payments in lieu of taxes.
Excise Taxes. Tenant shall assume and pay to Landlord as
------------
additional rent any excise, sales, gross receipts, rent tax or
other taxes, if any (other than a net income or excess profits
tax), which may be imposed on or measured by the rent or may be
imposed on or on account of the letting, which Landlord may be
required to pay or collect under any law now in effect or
hereafter enacted, provided that such law places the primary
obligation to pay such tax on the Tenant.
In the event Tenant has made payment to Landlord of the
aforementioned taxes and Landlord has failed to make payment of
the same and due notice thereof has been given by the Tenant to
the Landlord, Tenant shall have the right to make such payments
directly to the taxing authorities and all interest and penalties
paid by the Tenant shall be the responsibility of the Landlord
and may be offset as against the rental herein. In the event that
Tenant fails to make payment of such taxes to Landlord, in
addition to any other remedies pursuant to this lease, Landlord
may pay such taxes and Tenant shall be responsible for any
interest or penalties that may be assessed. If the taxing
authorities permit taxes to be paid in less than annual
installments, Landlord will not object to Tenant's payment of
such taxes in a like manner.
Landlord shall not seek to accomplish or effect a change in
the tax assessment of the premises (except to seek a reduction of
same) without Tenant's approval.
TWENTY-SEVENTH.-Tenant will not use Hazardous Materials (as
defined hereinafter) on, from, or affecting the premises in any
manner which violates Federal, state or local laws, ordinances,
rules, regulations or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials. For purposes of
this paragraph, "Hazardous Materials" includes, without limit,
any flammable explosives, radioactive materials, hazardous
materials, hazardous or infectious wastes, hazardous or toxic
substances, or related materials defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 USC Secs. 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 USC Secs. 1801, et seq.), the
Resource Conservations and Recovery Act, as amended (42 USC Secs.
9601, et seq.) and in the regulations adopted and publications
promulgated pursuant thereto, or any other Federal, state or
local environmental law, ordinance, rule or regulation. Tenant
hereby indemnifies and agrees to hold Landlord free and harmless
from any liability whatsoever during and subsequent to the term
of this Lease as a result of Tenant's breach of the obligations
set forth in this paragraph. Landlord shall be responsible for
and shall indemnify and hold Tenant free and harmless from any
liability whatsoever during and subsequent to the terms of this
Lease with regard to any hazardous materials or environmental
condition effecting the demised premises not caused by Tenant,
Tenant's agents or employees and/or not occurring during the term
of the within lease.
TWENTY-EIGHTH.-The Tenant agrees that it will not require,
permit, suffer, nor allow the cleaning of any window, or windows,
in the demised premises from the outside (within the meaning of
Section 202 of the Labor Law) unless the equipment and safety
devices required by law, ordinance, regulation or rule,
including, without limitation, Section 202 of the New York Labor
Law, are provided and used, and unless the rules, or any
supplemental rules of the Industrial Board of the State of New
York are fully complied with; and the Tenant hereby agrees to
indemnify the Landlord, Owner, Agent, Manager and/or
Superintendent, as a result of the Tenant's requiring,
permitting, suffering, or allowing any window, or windows in the
demised premises to be cleaned from the outside in violation of
the requirements of the aforesaid laws, ordinances, regulation
and/or rules.
TWENTY-NINTH.-The invalidity or unenforceability of any
provision of this lease shall in no way affect the validity or
enforceability of any other provision hereof.
THIRTIETH.-The Landlord shall replace at the expense of the
Tenant any and all broken glass in the skylights, doors and walls
in and about the demised premises. The Landlord may insure and
keep insured all plate glass in the skylights, doors and walls in
the demised premises, for and in the name of the Landlord and
bills for the premiums therefor shall be rendered by the Landlord
to the Tenant at such times as the Landlord may elect, and shall
be due from and payable by the Tenant when rendered, and the
amount thereof shall be deemed to be, and shall be paid as
additional rent.
THIRTY-FIRST.-This lease and the obligation of Tenant to pay
rent hereunder and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall in
no way be affected, impaired or excused because Landlord is
unable to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed
in making any repairs, additions, alterations or decorations or
is unable to supply or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by
reason of governmental preemption in connection with a National
Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department
or subdivision thereof of any government agency or by reason of
the conditions of supply and demand which have been or are
affected by war or other emergency.
THIRTY-SECOND.-Landlord covenants that if and so long as the
Tenant pays the rent and "additional rent" reserved hereby, and
performs and observes the covenants and provisions hereof, the
Tenant shall quietly enjoy the demised premises, subject,
however, to the terms of this lease, and to the mortgages above
mentioned.
THIRTY-THIRD.-Tenant shall, at its sole cost and expense,
obtain all required Federal, State, County and/or Municipal
approvals, permits, licenses, including a Certificate of
Occupancy (if required), to conduct its business. Landlord shall
cooperate with Tenant in Tenant's effort to obtain any and all
necessary permits, licenses, and approvals and shall
expeditiously execute all necessary permit applications and
documents necessary to comply with all regulatory requirements
for the operation of Tenant's business and performance of
Tenant's improvements.
THIRTY-FOURTH. If Tenant remains in possession of the
premises or any part thereof after expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all of
the terms hereof applicable to a month to month tenancy except
that the monthly rent shall be increased to 120% of the rent for
the last month prior to such expiration. Landlord's failure to
object to such holding over shall not constitute a waiver of any
of Landlord's rights pursuant to this lease.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by
their proper corporate officers and their proper corporate seal
to be hereto affixed, the day and year first above written.
Signed, Sealed and
Delivered in the
presence of or
Attested by: Gussack Realty Co.
/s/ John E. Stein /s/ David Gussack
--------------------- ---------------------------------
Landlord
By: David Gussack
General Bearing Corporation
/s/ John E. Stein /s/Christopher Moore V.P. Finance
-------------------------- ------------------------------
Tenant
By: Christopher Moore
Vice President
<PAGE>
RULES AND REGULATIONS
1. Tenant shall keep all machinery and equipment free of
vibration and noise, and shall not do or permit anything to be
done in the Demised Premises which would constitute a nuisance in
the Building or Complex.
2. Tenant shall not cause to be discharged, spill or
dispose of on site any dangerous, hazardous, flammable, toxic,
combustible or explosive substance, material or object except
according to law and in an approved legal container.
3. Tenant shall not cause to be discharged or permit to be
discharged into the sewer system, waste lines, vents or flues of
the Demised Premises or the Complex any acids or hazardous or
toxic substances, except as allowed by law.
4. Tenant shall keep all exterior located garbage, trash,
rubbish and refuse in rat-proof containers and shall remove or
cause the same to be removed from the Demised Premises and the
Complex on a regular basis.
5. Tenant shall not store, stack or place or permit to be
stored, stacked or placed any machinery, equipment, goods or
merchandise outside of the Demised Premises except as authorized
by Landlord and permitted by law or the approvals obtained by the
Tenant from the applicable authorities.
6. A fire lane (12 foot width) around the entire facility
must be kept clear at all times.
7. No debris, garbage, spare parts or containers of any
kind may be left in the yard or on the roof, except a dumpster.
EXHIBIT 10.5
SUBLEASE AGREEMENT
This sublease Agreement, made this 1st day of November, 1996,
Between General Bearing Corporation residing or located at 44
High Street, West Nyack, New York, 10994, herein designated as
the Sublessor and World Machinery Company, residing or located at
44 High Street, West Nyack, New York, 10994, herein designated as
the Sublessee.
WITNESSETH that, the Sublessor does hereby lease to the
Sublessee and the Sublessee does hereby rent from the Sublessor,
the following described premises: a 5,500 sq. foot portion of the
190,000 sq. foot building at 44 High Street, West Nyack, New York
10994, for a term of seven years, commencing on November 1, 1996
and ending on October 31, 2003, to be used and occupied only and
for no other purpose than offices, warehousing, manufacturing,
distribution and other incidental uses, at the following Annual
Rents in the monthly installments indicated:
November 1, 1996-October 31, 1997 $33,000 payable at $2,750.00
per month.
November 1, 1997-October 31, 1998 $33,000 payable at $2,750.00
per month.
Commencing on November 1, 1998 and every two years
thereafter (referred to as a new rent year), the annual rent
shall be increased to the greater of A) 106% of the next
preceding year's rent or B) said preceding year's rent multiplied
by a fraction, the numerator of which is the Consumer Price Index
(CPI) in effect ninety (90) days prior to November 1st of the new
rent year and the denominator of which is the CPI in effect (90)
days prior to November 1st of the preceding year. The Consumer
Price Index (CPI) used shall be as published by the United States
Government for the area including Rockland County, New York, or
if no such Index is published, then for northern New Jersey. If
no CPI is published specifically for any of the above dates, then
the CPI published for the most recent date before each such date
shall be used. The amount of rent for each year which is not a
"new rent" year shall be the same amount as that for the next
preceding year.
In the event the Sublessor exercises its option to extend
its lease with Gussack Realty Company dated November 1, 1996, the
Sublessee shall have the option of extending this sublease for an
additional six years (the extended period) provided it exercises
such option and gives written notice thereof to the Sublessor no
later than 6 months prior to the expiration of the sublease term.
If the Sublessee exercises such option, the rent for the
first year of the extended period shall be at fair market value
(FMV) as agreed upon by the parties. If the parties do not reach
agreement as to FMV by February 1, 2003, they shall jointly
retain a mutually acceptable appraiser to appraise FMV and whose
appraisal shall be binding. The Sublessor and the Sublessee shall
each pay one half the cost of the appraisal.
The third and fifth years of the extended period shall be
deemed "new rent years" for which the rent shall be increased
pursuant to the above formula applicable to "new rent years"
occurring during the base term of the sublease.
All monthly rental installments shall be payable in advance
on the first day of the month. If Sublessee defaults in any rent
payment for a period of 15 days, Sublessee shall pay Sublessor a
late charge of 5% (of the amount of rent due) which shall be
payable as "additional rent".
The rent provided for herein is a gross amount comprised of
rent and sublessee's portion of taxes, maintenance, insurance and
utilities, as allocated by the sublessor in its sole discretion.
Notwithstanding the foregoing, if the premium paid by
sublessor for fire and/or other hazard insurance on the entire
building or any insurance under which sublessee is a named
insured is increased from its present rate due to (i) any change
in activities or of the sublessee or (ii) any increase in risk
attributed to sublessee by the insurance carrier, sublessee shall
pay, as additional rent, the full amount of such increase no
later than the date on which such premium is due to the insurance
carrier.
CONDITIONS AND COVENANTS:
FIRST.-The Sublessee covenants and agrees to pay to the
Sublessor the rent as above provided.
SECOND.-Throughout said term the Sublessee shall take good
care of the demised premises, fixtures and appurtenances,
including all heating, ventilating and air conditioning equipment
(HVAC), electrical systems, sprinkler system, plumbing and all
alterations, additions and improvements thereto, make all repairs
in and about same necessary to preserve them in good order and
condition, ordinary wear and tear and damage by fire or other
casualty excepted, which repairs shall be, in quality and class,
equal to the original work; promptly pay the expense of such
repairs; suffer no waste or injury; give notice to the Sublessor
of any fire that may occur; execute and comply with all laws,
rules, orders, ordinances and regulations at any time issued or
in force (except those requiring structural alterations for which
Sublessee is not liable hereunder, if any) applicable to the
demised premises or to the Sublessee's occupation thereof, of the
Federal, State and Local Governments, and of each and every
department, bureau and official thereof, and of the New York
Board of Fire Underwriters; permit at all times during usual
business hours, the Sublessor and representatives of the
Sublessor to enter the demised premises for the purpose of
inspection, and to exhibit them for purposes of sale or rental;
suffer the Sublessor to make repairs and improvements to all
parts of the building, and to comply with all orders and
requirements of governmental authority applicable to said
building or to any occupation thereof; suffer the Sublessor to
erect, use, maintain, repair and replace pipes and conduits in
the demised premises and to the floors above and below; forever
indemnify and save harmless the Sublessor for and against any and
all liability, penalties, damages, expenses and judgments arising
form injury during said term to person or property of any nature,
occasioned wholly or in part by any act or acts, omission or
omissions of the Sublessee, or of the employees, guests, agents,
assigns or sub-Sublessees of the Sublessee and also for any
matter or thing growing out of the occupation of the demised
premises or of the streets, sidewalks or vaults adjacent thereto;
permit, during the six months next prior to the expiration of the
term the usual notice "To Let" or similar language, to be placed
and to remain unmolested in a conspicuous place upon the exterior
of the demised premises; repair, at or before the end of the
term, all injury done by the installation or removal of furniture
and property; and at the end of the term, to quit and surrender
the demised premises with all alterations, additions and
improvements in good order and condition.
The Sublessor shall be responsible for all structural
repairs to the walls of the premises (other than damage caused by
Sublessee, its agents, servants or employees) except that
Sublessee shall be responsible for maintenance, repair and
replacement of the roof and all HVAC equipment.
THIRD.-Sublessee will not perform any alterations or
renovations, shall not disfigure or deface any part of the
building; or suffer the same to be done, except so far as may be
necessary for its business purposes and as are specifically
consented to in advance by the Sublessor; the Sublessee will not
obstruct, or permit the obstruction of the street or the sidewalk
adjacent thereto; will not do anything, or suffer anything to be
done upon the demised premises which will increase the rate of
fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building; will not
permit the accumulation of waste or refuse matter, and will not,
without the prior written consent of the Sublessor (which consent
shall not be unreasonably withheld) in each case, either sell,
assign, mortgage or transfer this sublease, sublet the demised
premises or any part thereof, permit the same or any part thereof
to be occupied by anybody other than the Sublessee and the
Sublessee's employees, make any alterations in the demised
premises, use the demised premises or any part thereof for any
purpose other than the one first above stipulated, or for any
purpose deemed extra hazardous on account of fire risk, nor in
violation of any law or ordinance. The Sublessee will not
obstruct or permit the obstruction of the light, halls, stairway
or entrances to the building, and will not erect or inscribe any
sign, signals or advertisements unless and until the style and
location thereof have been approved by the Sublessor; and if any
be erected or inscribed without such approval, the Sublessor may
remove the same. No water cooler, air conditioning unit or system
or other apparatus shall be installed or used without the prior
written consent of the Sublessor, which shall not be unreasonably
withheld.
The Sublessee shall comply with the Rules and Regulations annexed
to this sublease.
FOURTH.-If the demised premises shall be partially damaged
by fire or other cause without the fault or neglect of Sublessee,
Sublessee's servants, employees, agents, visitors or licensees,
the damages shall be repaired by and at the expense of the
Sublessor and the rent until such repairs shall be made shall be
apportioned according to the part of the demised premises which
is usable by Sublessee. But if such partial damage is due to the
fault or neglect of Sublessee, Sublessee's servants, employees,
agents, visitors or licensees, without prejudice to any other
rights and remedies of Sublessor and without prejudice to the
rights of subrogation of Sublessor's insurer, the damages shall
be repaired by the Sublessor but there shall be no apportionment
or abatement of rent. No penalty shall accrue for reasonable
delay which may arise by reason of adjustment of insurance on the
part of the Sublessor and/or Sublessee, and for reasonable delay
on account of "labor troubles", or any other cause beyond
Sublessor's control. If the demised premises are totally damaged
or are rendered wholly untenantable by fire or other cause, and
if Sublessor shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Sublessor shall
decide to demolish it or to rebuild it, then or in any of such
events Sublessor may, within ninety (90) days after such fire or
other cause, give Sublessee a notice in writing of such decision,
which notice shall be given as in Paragraph Twelfth hereof
provided, and thereupon the term of this sublease shall expire by
lapse of time upon the third day after such notice is given, and
Sublessee shall vacate the demised premises and surrender the
same to Sublessor. If Sublessee shall not be in default under the
sublease then, upon the termination of this sublease under the
conditions provided for in the sentence immediately preceding,
Sublessee's liability for rent shall cease as of the day
following the casualty. Sublessee hereby expressly waives the
provisions of Section 227 of the Real Property Law and agrees
that the foregoing provisions of this Article shall govern and
control in lieu thereof. If the damage or destruction is due to
the fault or neglect of Sublessee the debris shall be removed by,
and at expense of Sublessee.
FIFTH.-If the whole or any part of the premises hereby
demised shall be taken or condemned by any competent authority
for any public use or purpose then the term hereby granted shall
cease from the time when possession of the part so taken shall be
required for such public purpose and without apportionment of
award (except with regard to Sublessee's trade fixtures), the
Sublessee hereby assigning to the Sublessor all right and claim
to any such award (other than for trade fixtures), the current
rent, however, in such case to be apportioned.
SIXTH.-If, before the commencement of the term, the
Sublessee be adjudicated a bankrupt, or make a "general
assignment", or take the benefit of any insolvent act, or if a
Receiver or Trustee be appointed for the Sublessee's property, or
if this sublease or the estate of the Sublessee hereunder be
assigned, transferred or pass to or devolve upon any other person
or corporation, voluntarily or involuntarily, or if the Sublessee
shall default in the performance of any agreement by the
Sublessee contained in any other lease between the Sublessee and
the Sublessor or between Sublessee and any corporation of which
an officer of the Sublessor is a Director, this sublease shall
thereby, at the option of the Sublessor, be terminated and in
that case, neither the Sublessee nor anybody claiming under the
Sublessee shall be entitled to go into possession of the demised
premises. If after the commencement of the term, any of the
events mentioned above in this subdivision shall occur, or if
Sublessee shall default in fulfilling any of the covenants of
this sublease, other than the covenants for the payment of rent
or "additional rent" or if the demised premises become vacant or
deserted, The Sublessor may give to the Sublessee ten days'
notice of intention to end the term of this sublease, and
thereupon at the expiration of said ten days (if said condition
which was the basis of said notice shall continue to exist) the
term under this sublease shall expire as fully and completely as
if that day were the date herein definitely fixed for the
expiration of the term and Sublessee will then quit and surrender
the demised premises to the Sublessor, but the Sublessee shall
remain liable as hereinafter provided.
If the Sublessee shall default in the payment of the rent
reserved hereunder, or any item of "additional rent" herein
mentioned, or any part of either or in making any other payment
herein provided for, or if the notice last above provided for
shall have been given and if the condition for which the basis of
said notice shall exist at the expiration of said ten days'
period, the Sublessor may immediately, or at any time thereafter,
re-enter the demised premises and remove all persons and all or
any property therefrom either by summary dispossess proceedings,
or by any suitable action or proceeding at law, or by force or
otherwise, without being liable to indictment, prosecution or
damages therefor, and re-possess and enjoy said premises together
with all additions, alterations and improvements. In any such
case or in the event that this sublease be "terminated" before
the commencement of the term, as above provided, the Sublessor
may either re-let the demised premises or any part or parts
thereof as the agent of the Sublessee, and receive the rents
therefor, applying the same first to the payment of such expenses
as the Sublessor may have incurred, and then to the fulfillment
of the covenants of the Sublessee herein, and the balance, if
any, at the expiration of the term first above provided for,
shall be paid to the Sublessee. Sublessor may rent the premises
for a term extending beyond the term hereby granted without
releasing Sublessee from any liability. In the event that the
term of this sublease shall expire as above in this subdivision
"Sixth" provided, or terminate by summary proceedings or
otherwise, and if the Sublessor shall not re-let, the Sublessee
shall remain liable for, and the Sublessee hereby agrees to pay
to the Sublessor, until the time when this sublease would have
expired but for such termination or expiration, the equivalent of
the amount of all of the rent and "additional rent" reserved
herein, less the costs of reletting, if any, and the same shall
be due and payable by the Sublessee to the Sublessor on the
several rent days above specified, that is upon each of such rent
days the Sublessee shall pay to the Sublessor the amount of
deficiency then existing. The Sublessee hereby expressly waives
any and all right of redemption in case the Sublessee shall be
dispossessed by judgment or warrant of any court or judge, and
the Sublessee waives and will waive all right to trial by jury in
any summary proceedings hereafter instituted by the Sublessor
against the Sublessee in respect to the demised premises. The
words "re-enter" and "re-entry" as used in this sublease are not
restricted to their technical legal meaning.
In the event of a breach or threatened breach by the
Sublessee of any of the covenants or provisions hereof, the
Sublessor shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity, as if re-entry,
summary proceedings and other remedies were not herein provided
for.
SEVENTH.-If the Sublessee shall default in the performance
of any covenant herein contained, the Sublessor may immediately,
or at any time thereafter, without notice, perform the same for
the account of the Sublessee. If a notice of mechanic's lien be
filed against the demised premises or against premises of which
the demised premises are part, for or purporting to be for, labor
or material alleged to have been furnished, or to be furnished to
or for the Sublessee at the demised premises, and if the
Sublessee shall fail to take such action as shall cause such lien
to be discharged within fifteen days after the filing of such
notice, the Sublessor may pay the amount of such lien or
discharge the same by deposit or by bonding proceedings, and in
the event of such deposit or bonding proceedings, the Sublessor
may require the lienor to prosecute an appropriate action to
enforce the lienor's claim. In such case, the Sublessor may pay
any judgment recovered on such claim. Any amount paid or expense
incurred by the Sublessor as in this subdivision of this sublease
provided, and any amount as to which the Sublessee shall at any
time be in default by reason of the failure to comply with any
provision of this sublease, or in defending any such action,
shall be deemed to be "additional rent" for the demised premises,
and shall be due and payable by the Sublessee to the Sublessor on
the first day of the next month, or, at the option of the
Sublessor, on the first day of any succeeding month. The receipt
by the Sublessor of any instalment of the regular stipulated rent
hereunder or any of said " additional rent" shall not be a waiver
of any other "additional rent" then due.
EIGHTH.-The failure of the Sublessor to insist, in any one
or more instances upon a strict performance of any of the
covenants of this sublease, or to exercise any option herein
contained, shall not be construed as a waiver or a relinquishment
for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the
Sublessor of rent, with knowledge of the breach of any covenant
hereof, shall not be deemed a waiver of such breach and no waiver
by the Sublessor of any provision hereof shall be deemed to have
been made unless expressed in writing and signed by the
Sublessor. Even if the Sublessor consents to an assignment hereof
no further assignment shall be made without further express
consent in writing by the Sublessor. No waiver by Sublessor or
Sublessee of any provision hereof shall be deemed a waiver of any
other provision hereof or of any subsequent breach by the other
party of any other provision.
NINTH.-If this sublease be assigned, or if the demised
premises or any part thereof be sublet or occupied by anybody
other than the Sublessee the Sublessor may collect rent from the
assignee, sub-Sublessee or occupant, and apply the net amount
collected to the rent herein reserved, and no such collection
shall be deemed a waiver of the covenant herein against
assignment and subletting, or the acceptance of the assignee,
sub-Sublessee, or occupant as Sublessee, or a release of the
Sublessee from the further performance by the Sublessee of the
covenants herein contained on the part of the Sublessee.
TENTH.-This sublease shall be subject and subordinate at all
times, to the lien of the mortgages now on the demised premises,
and to all advances made or hereafter to be made upon the
security thereof, and subject and subordinate to the lien of any
mortgage or mortgages which at any time may be made a lien upon
the premises, provided the holder of any such mortgage shall
execute and deliver to Sublessee in a form reasonably acceptable
to Sublessee an agreement that it will recognize this sublease
and not disturb Sublessee's possession of the premises in the
event of foreclosure if the Sublessee is not then in default
hereunder. The Sublessee will execute and deliver such further
instrument or instruments subordinating this sublease to the lien
of any such mortgage or mortgages as shall be requested by the
Sublessor.
ELEVENTH.-All improvements made by the Sublessee to or upon
the demised premises, except said trade fixtures and other non-
fixture property of Sublessee necessary for the Sublessee's
business, shall when made, at once be deemed to be attached to
the freehold, and become the property of the Sublessor, and at
the end or other expiration of the term, shall be surrendered to
the Sublessor in as good order and condition as they were when
installed, reasonable wear and damages by the elements excepted.
TWELFTH.-Any notice or demand which under the terms of this
sublease or under any statute must or may be given or made by the
parties hereto shall be in writing and shall be given or made by
mailing the same by certified mail or FAX addressed to the
respective parties at the following addresses:
Sublessee: World Machinery Company
44 High Street
West Nyack, New York 10994
Attn: Seymour Gussack
FAX NO: 914-358-3619
Sublessor: General Bearing Corporation
44 High Street
West Nyack, New York 10994
ATTN: DAVID GUSSACK
FAX NO: 914-358-6277
THIRTEENTH.-The Sublessor shall not be liable for any
failure of water supply or electrical current, sprinkler damage,
or failure of sprinkler service, nor for injury or damage to
person or property caused by the elements or by other Sublessees
or persons in said building, or resulting from steam, gas,
electricity, water, rain or snow, which may leak or flow from any
part of said buildings, or from the pipes, appliances or plumbing
works of the same, or from the street or sub-surface, or from any
other place, nor for interference with light or other incorporeal
hereditaments by anybody other than the Sublessor, or caused by
operations by or for a governmental authority in construction of
any public or quasi-public work, neither shall the Sublessor be
liable for any latent defect in the building, unless caused by
the Sublessor's negligent acts or omissions and Sublessor has not
cured the same within 15 days of notification thereof.
FOURTEENTH.-No diminution or abatement of rent, or other
compensation shall be claimed or allowed for inconvenience or
discomfort arising from the making of repairs or improvements to
the building or to its appliances, nor for any space taken to
comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein
expressly or impliedly agreed to be furnished by the Sublessor to
the Sublessee, it is agreed that there shall be no diminution or
abatement of the rent, or any other compensation, for
interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations
or repairs desirable or necessary to be made or to inability or
difficulty in securing supplies or labor for the maintenance of
such "service" or to some other cause not due to negligence on
the part of the Sublessor. No such interruption or curtailment of
any such "service" shall be deemed a constructive eviction. The
Sublessor shall not be required to furnish, and the Sublessee
shall not be entitled to receive, any of such "services" during
any period wherein the Sublessee shall be in default in respect
to the payment of rent. Neither shall there be any abatement or
diminution of rent because of making of repairs, improvements or
decorations to the demised premises after the date above fixed
for the commencement of the term, it being understood that rent
shall, in any event, commence to run at such date so above fixed.
FIFTEENTH.-In the event that an excavation shall be made for
building or other purposes upon land adjacent to the demised
premises or shall be contemplated to be made, the Sublessee shall
afford to the person or persons causing or to cause such
excavation, license to enter upon the demised premises for the
purpose of doing such work as said person or persons shall deem
to be necessary to preserve the wall or walls, structure or
structures upon the demised premises from injury and to support
the same by proper foundations.
SIXTEENTH.-No vaults or space not within the property line
of the building are leased hereunder. Sublessor makes no
representation as to the location of the property line of the
building. Such vaults or space as Sublessee may be permitted to
use or occupy are to be used or occupied under a revocable
license and if such license be revoked by the Sublessor as to the
use of part or all of the vaults or space Sublessor shall not be
subject to any liability; Sublessee shall not be entitled to any
compensation or reduction in rent nor shall this be deemed
constructive or actual eviction. Any tax, fee or charge of
municipal or other authorities for such vaults or space shall be
paid by the Sublessee for the period of the Sublessee's use or
occupancy thereof.
SEVENTEENTH.-That during six months prior to the expiration
of the term hereby granted, on reasonable advance notice,
applicants shall be admitted at all reasonable hours of the day
to view the premises until rented; and the Sublessor and the
Sublessor's agents shall be permitted at any time during the term
to visit and examine them at any reasonable hour of the day, and
workmen may enter at any time, when authorized by the Sublessor
or the Sublessor's agents, to make or facilitate repairs in any
part of the building; and if the said Sublessee shall not be
personally present to open and permit an entry into said
premises, at any time, when for any reason an entry therein shall
be necessary or permissible hereunder, the Sublessor or the
Sublessor's agents may forcibly enter the same without rendering
the Sublessor or such agents liable to any claim or cause of
action for damages by reason thereof (if during such entry the
Sublessor shall accord reasonable care to the Sublessee's
property) and without in any manner affecting the obligations and
covenants of this sublease; it is, however, expressly understood
that the right and authority hereby reserved, does not impose,
nor does the Sublessor assume, by reason thereof, any
responsibility or liability whatsoever for the care or
supervision of said premises, or any of the pipes, fixtures,
appliances or appurtenances therein contained or therewith in any
manner connected.
EIGHTEENTH.-The Sublessor has made no representations or
promises in respect to said building or to the demised premises
except those contained herein, and those, if any, contained in
some written communication to the Sublessee, signed by the
Sublessor. This instrument represents the entire agreement of the
parties and may not be changed, modified, discharged or
terminated orally.
NINETEENTH.-If the Sublessee shall at any time be in default
hereunder, and if the Sublessor shall institute an action or
summary proceeding against the Sublessee based upon such default,
then the Sublessee will reimburse the Sublessor for the expense
of attorneys' fees and disbursements thereby incurred by the
Sublessor, so far as the same are reasonable in amount. Also so
long as the Sublessee shall be a Sublessee hereunder the amount
of such expenses shall be deemed to be "additional rent"
hereunder and shall be due from the Sublessee to the Sublessor on
the first day of the month following the incurring of such
respective expenses.
TWENTIETH.-Sublessor shall not be liable for failure to give
possession of the premises upon commencement date by reason of
the fact that premises are not ready for occupancy, if due to a
prior Sublessee other than Sublessor or its affiliates wrongfully
holding over in possession. In such event the rent shall not
commence until possession is given or is available, but the term
herein shall not be extended.
TWENTY-FIRST.-The Sublessee will keep the sidewalk,
roadways, parking areas and curb clean at all times and free from
snow and ice and shall be solely responsible for all repairs and
maintenance thereto and for all landscaping. Landscape plants and
trees surrounding the premises shall be maintained at a level
equivalent to that at the time of the commencement of this
sublease and trees and shrubs that die are to be replaced by
Sublessee. Sublessee acknowledges that at the commencement of
this sublease the premises and surrounding grounds, including
wooded areas, were free of trash, debris and garbage and
sublessee shall maintain the premises and grounds in such
condition.
TWENTY-SECOND.-If there now is or shall be installed in said
building a "sprinkler system" the Sublessee agrees that if the
New York Board of Fire Underwriters of the New York Fire
Insurance Exchange or any bureau, department or official of the
State or local government requires or recommends that any
changes, modifications, alterations or additional sprinkler heads
or other equipment be made or supplied by reason of the
Sublessee's business, or the location of partitions, trade
fixtures, or other contents of the demised premises, or if such
changes, modifications, alterations, additional sprinkler heads
or other equipment in the demised premises are necessary to
prevent the imposition of a penalty or charge against the full
allowance for a sprinkler system in the fire insurance rate as
fixed by said Exchange, or by any Fire Insurance Company, the
Sublessee will at the Sublessee's own expense, promptly make and
supply such changes, modifications, alterations, additional
sprinkler heads or other equipment.
TWENTY-THIRD. Excise Taxes. Sublessee shall assume and pay
------------
to Sublessor as additional rent any excise, sales, gross
receipts, rent tax or other taxes, if any (other than a net
income or excess profits tax), which may be imposed on or
measured by the rent or may be imposed on or on account of the
letting, which Sublessor may be required to pay or collect under
any law now in effect or hereafter enacted, provided that such
law places the primary obligation to pay such tax on the
Sublessee.
In the event Sublessee has made payment to Sublessor of the
aforementioned taxes and Sublessor has failed to make payment of
the same and due notice thereof has been given by the Sublessee
to the Sublessor, Sublessee shall have the right to make such
payments directly to the taxing authorities and all interest and
penalties paid by the Sublessee shall be the responsibility of
the Sublessor and may be offset as against the rental herein. In
the event that Sublessee fails to make payment of such taxes to
Sublessor, in addition to any other remedies pursuant to this
sublease, Sublessor may pay such taxes and Sublessee shall be
responsible for any interest or penalties that may be assessed.
If the taxing authorities permit taxes to be paid in less than
annual installments, Sublessor will not object to Sublessee's
payment of such taxes in a like manner.
TWENTY-FOURTH.-Sublessee will not use Hazardous Materials
(as defined hereinafter) on, from, or affecting the premises in
any manner which violates Federal, state or local laws,
ordinances, rules, regulations or policies governing the use,
storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials. For
purposes of this paragraph, "Hazardous Materials" includes,
without limit, any flammable explosives, radioactive materials,
hazardous materials, hazardous or infectious wastes, hazardous or
toxic substances, or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 USC Secs. 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 USC Secs.
1801, et seq.), the Resource Conservations and Recovery Act, as
amended (42 USC Secs. 9601, et seq.) and in the regulations
adopted and publications promulgated pursuant thereto, or any
other Federal, state or local environmental law, ordinance, rule
or regulation. Sublessee hereby indemnifies and agrees to hold
Sublessor free and harmless from any liability whatsoever during
and subsequent to the term of this sublease as a result of
Sublessee's breach of the obligations set forth in this
paragraph. Sublessor shall be responsible for and shall indemnify
and hold Sublessee free and harmless from any liability
whatsoever during and subsequent to the terms of this sublease
with regard to any hazardous materials or environmental condition
effecting the demised premises not caused by Sublessee,
Sublessee's agents or employees and/or not occurring during the
term of the within sublease.
TWENTY-FIFTH.-The Sublessee agrees that it will not require,
permit, suffer, nor allow the cleaning of any window, or windows,
in the demised premises from the outside (within the meaning of
Section 202 of the Labor Law) unless the equipment and safety
devices required by law, ordinance, regulation or rule,
including, without limitation, Section 202 of the New York Labor
Law, are provided and used, and unless the rules, or any
supplemental rules of the Industrial Board of the State of New
York are fully complied with; and the Sublessee hereby agrees to
indemnify the Sublessor, Owner, Agent, Manager and/or
Superintendent, as a result of the Sublessee's requiring,
permitting, suffering, or allowing any window, or windows in the
demised premises to be cleaned from the outside in violation of
the requirements of the aforesaid laws, ordinances, regulation
and/or rules.
TWENTY-SIXTH.-The invalidity or unenforceability of any
provision of this sublease shall in no way affect the validity or
enforceability of any other provision hereof.
TWENTY-SEVENTH.-This sublease and the obligation of
Sublessee to pay rent hereunder and perform all of the other
covenants and agreements hereunder on part of Sublessee to be
performed shall in no way be affected, impaired or excused
because Sublessor is unable to supply or is delayed in supplying
any service expressly or impliedly to be supplied or is unable to
make, or is delayed in making any repairs, additions, alterations
or decorations or is unable to supply or is delayed in supplying
any equipment or fixtures if Sublessor is prevented or delayed
from so doing by reason of governmental preemption in connection
with a National Emergency declared by the President of the United
States or in connection with any rule, order or regulation of any
department or subdivision thereof of any government agency or by
reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
TWENTY-EIGHTH.-Sublessor covenants that if and so long as
the Sublessee pays the rent and "additional rent" reserved
hereby, and performs and observes the covenants and provisions
hereof, the Sublessee shall quietly enjoy the demised premises,
subject, however, to the terms of this sublease, the mortgages
above mentioned and the Sublessor's lease with Gussack Realty
Company.
TWENTY-NINTH.-Sublessee shall, at its sole cost and expense,
obtain all required Federal, State, County and/or Municipal
approvals, permits, licenses, including a Certificate of
Occupancy (if required), to conduct its business. Sublessor shall
cooperate with Sublessee in Sublessee's effort to obtain any and
all necessary permits, licenses, and approvals and shall
expeditiously execute all necessary permit applications and
documents necessary to comply with all regulatory requirements
for the operation of Sublessee's business and performance of
Sublessee's improvements.
THIRTIETH.-If Sublessee remains in possession of the
premises or any part thereof after expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all of
the terms hereof applicable to a month to month tenancy except
that the monthly rent shall be increased to 120% of the rent for
the last month prior to such expiration. Sublessor's failure to
object to such holding over shall not constitute a waiver of any
of Sublessor's rights pursuant to this sublease.
THIRTY-FIRST.-Except as otherwise specifically set forth
herein, this sublease shall be subject to all of the terms and
conditions set forth in the lease between the Sublessor and
Gussack Realty Company dated November 1, 1996, and Sublessee
herein shall have no greater rights in the premises than the
Sublessor. In addition to any rights it may have independent of
this sublease, Gussack Realty Company shall be deemed a third
party beneficiary hereof, held harmless, indemnified and have the
right to seek enforcement of any provision hereof to the same
extent as Sublessor.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by
their proper corporate officers and their proper corporate seal
to be hereto affixed, the day and year first above written.
Signed, Sealed and Delivered
in the presence of or
Attested by: General Bearing Corporation
------------------------------ ---------------------------
Sublessor
By:
World Machinery Company
------------------------------ ---------------------------
Sublessee
By:
<PAGE>
RULES AND REGULATIONS
1. Sublessee shall keep all machinery and equipment free
of vibration and noise, and shall not do or permit anything to be
done in the Demised Premises which would constitute a nuisance in
the Building or Complex.
2. Sublessee shall not cause to be discharged, spill or
dispose of on site any dangerous, hazardous, flammable, toxic,
combustible or explosive substance, material or object except
according to law and in an approved legal container.
3. Sublessee shall not cause to be discharged or permit to
be discharged into the sewer system, waste lines, vents or flues
of the Demised Premises or the Complex any acids or hazardous or
toxic substances, except as allowed by law.
4. Sublessee shall keep all exterior located garbage,
trash, rubbish and refuse in rat-proof containers and shall
remove or cause the same to be removed from the Demised Premises
and the Complex on a regular basis.
5. Sublessee shall not store, stack or place or permit to
be stored, stacked or placed any machinery, equipment, goods or
merchandise outside of the Demised Premises except as authorized
by Sublessor and permitted by law or the approvals obtained by
the Sublessee from the applicable authorities.
6. A fire lane (12 foot width) around the entire facility
must be kept clear at all times.
7. No debris, garbage, spare parts or containers of any
kind may be left in the yard or on the roof, except a dumpster.
EXHIBIT 10.6
SUBLEASE AGREEMENT
This sublease Agreement, made this 1st day of November, 1996,
Between General Bearing Corporation residing or located at 44
High Street, West Nyack, New York, 10994, herein designated as
the Sublessor and WMW Machinery Company, Inc., residing or
located at 44 High Street, West Nyack, New York, 10994, herein
designated as the Sublessee.
WITNESSETH that, the Sublessor does hereby lease to the
Sublessee and the Sublessee does hereby rent from the Sublessor,
the following described premises: a 30,949 sq. foot portion of
the 190,000 sq. foot building at 44 High Street, West Nyack, New
York 10994, for a term of seven years, commencing on November 1,
1996 and ending on October 31, 2003, to be used and occupied only
and for no other purpose than offices, warehousing and
distribution of machinery and machinery parts and other
incidental uses, at the following Annual Rents in the monthly
installments indicated:
November 1, 1996-October 31, 1997-$170,220.00 payable at
$14,185.00.00 per month.
November 1, 1997-October 31, 1998-$170,220.00 payable at
$14,185.00 per month.
Commencing on November 1, 1998 and every two years
thereafter (referred to as a new rent year), the annual rent
shall be increased to the greater of A) 106% of the next
preceding year's rent or B) said preceding year's rent multiplied
by a fraction, the numerator of which is the Consumer Price Index
(CPI) in effect ninety (90) days prior to November 1st of the new
rent year and the denominator of which is the CPI in effect (90)
days prior to November 1st of the preceding year. The Consumer
Price Index (CPI) used shall be as published by the United States
Government for the area including Rockland County, New York, or
if no such Index is published, then for northern New Jersey. If
no CPI is published specifically for any of the above dates, then
the CPI published for the most recent date before each such date
shall be used. The amount of rent for each year which is not a
"new rent" year shall be the same amount as that for the next
preceding year.
In the event the Sublessor exercises its option to extend
its lease with Gussack Realty Company dated November 1, 1996, the
Sublessee shall have the option of extending this sublease for an
additional six years (the extended period) provided it exercises
such option and gives written notice thereof to the Sublessor no
later than 6 months prior to the expiration of the sublease term.
If the Sublessee exercises such option, the rent for first
year of the extended period shall be at fair market value (FMV)
as agreed upon by the parties. If the parties do not reach
agreement as to FMV by February 1, 2003, they shall jointly
retain a mutually acceptable appraiser to appraise FMV and whose
appraisal shall be binding. The Sublessor and the Sublessee shall
each pay one half the cost of the appraisal.
The third and fifth years of the extended period shall be
deemed "new rent years" for which the rent shall be increased
pursuant to the above formula applicable to "new rent years"
occurring during the base term of the sublease.
All monthly rental installments shall be payable in advance
on the first day of the month. If Sublessee defaults in any rent
payment for a period of 15 days, Sublessee shall pay Sublessor a
late charge of 5% (of the amount of rent due) which shall be
payable as "additional rent".
CONDITIONS AND COVENANTS:
FIRST.-The Sublessee covenants and agrees to pay to the
Sublessor the rent as above provided.
SECOND.-Throughout said term the Sublessee shall take good
care of the demised premises, fixtures and appurtenances,
including all heating, ventilating and air conditioning equipment
(HVAC), electrical systems, sprinkler system, plumbing and all
alterations, additions and improvements thereto, make all repairs
in and about same necessary to preserve them in good order and
condition, ordinary wear and tear and damage by fire or other
casualty excepted, which repairs shall be, in quality and class,
equal to the original work; promptly pay the expense of such
repairs; suffer no waste or injury; give notice to the Sublessor
of any fire that may occur; execute and comply with all laws,
rules, orders, ordinances and regulations at any time issued or
in force (except those requiring structural alterations for which
Sublessee is not liable hereunder, if any) applicable to the
demised premises or to the Sublessee's occupation thereof, of the
Federal, State and Local Governments, and of each and every
department, bureau and official thereof, and of the New York
Board of Fire Underwriters; permit at all times during usual
business hours, the Sublessor and representatives of the
Sublessor to enter the demised premises for the purpose of
inspection, and to exhibit them for purposes of sale or rental;
suffer the Sublessor to make repairs and improvements to all
parts of the building, and to comply with all orders and
requirements of governmental authority applicable to said
building or to any occupation thereof; suffer the Sublessor to
erect, use, maintain, repair and replace pipes and conduits in
the demised premises and to the floors above and below; forever
indemnify and save harmless the Sublessor for and against any and
all liability, penalties, damages, expenses and judgments arising
form injury during said term to person or property of any nature,
occasioned wholly or in part by any act or acts, omission or
omissions of the Sublessee, or of the employees, guests, agents,
assigns or sub-Sublessees of the Sublessee and also for any
matter or thing growing out of the occupation of the demised
premises or of the streets, sidewalks or vaults adjacent thereto;
permit, during the six months next prior to the expiration of the
term the usual notice "To Let" or similar language, to be placed
and to remain unmolested in a conspicuous place upon the exterior
of the demised premises; repair, at or before the end of the
term, all injury done by the installation or removal of furniture
and property; and at the end of the term, to quit and surrender
the demised premises with all alterations, additions and
improvements in good order and condition.
The Sublessor shall be responsible for all structural
repairs to the walls of the premises (other than damage caused by
Sublessee, its agents, servants or employees) except that
Sublessee shall be responsible for maintenance, repair and
replacement of the roof and all HVAC equipment.
THIRD.-Sublessee will not perform any alterations or
renovations, shall not disfigure or deface any part of the
building; or suffer the same to be done, except so far as may be
necessary for its business purposes and as are specifically
consented to in advance by the Sublessor; the Sublessee will not
obstruct, or permit the obstruction of the street or the sidewalk
adjacent thereto; will not do anything, or suffer anything to be
done upon the demised premises which will increase the rate of
fire insurance upon the building or any of its contents, or be
liable to cause structural injury to said building; will not
permit the accumulation of waste or refuse matter, and will not,
without the prior written consent of the Sublessor (which consent
shall not be unreasonably withheld) in each case, either sell,
assign, mortgage or transfer this sublease, sublet the demised
premises or any part thereof, permit the same or any part thereof
to be occupied by anybody other than the Sublessee and the
Sublessee's employees, make any alterations in the demised
premises, use the demised premises or any part thereof for any
purpose other than the one first above stipulated, or for any
purpose deemed extra hazardous on account of fire risk, nor in
violation of any law or ordinance. The Sublessee will not
obstruct or permit the obstruction of the light, halls, stairway
or entrances to the building, and will not erect or inscribe any
sign, signals or advertisements unless and until the style and
location thereof have been approved by the Sublessor; and if any
be erected or inscribed without such approval, the Sublessor may
remove the same. No water cooler, air conditioning unit or system
or other apparatus shall be installed or used without the prior
written consent of the Sublessor, which shall not be unreasonably
withheld.
The Sublessee shall comply with the Rules and Regulations annexed
to this sublease.
FOURTH.-If the demised premises shall be partially damaged
by fire or other cause without the fault or neglect of Sublessee,
Sublessee's servants, employees, agents, visitors or licensees,
the damages shall be repaired by and at the expense of the
Sublessor and the rent until such repairs shall be made shall be
apportioned according to the part of the demised premises which
is usable by Sublessee. But if such partial damage is due to the
fault or neglect of Sublessee, Sublessee's servants, employees,
agents, visitors or licensees, without prejudice to any other
rights and remedies of Sublessor and without prejudice to the
rights of subrogation of Sublessor's insurer, the damages shall
be repaired by the Sublessor but there shall be no apportionment
or abatement of rent. No penalty shall accrue for reasonable
delay which may arise by reason of adjustment of insurance on the
part of the Sublessor and/or Sublessee, and for reasonable delay
on account of "labor troubles", or any other cause beyond
Sublessor's control. If the demised premises are totally damaged
or are rendered wholly untenantable by fire or other cause, and
if Sublessor shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Sublessor shall
decide to demolish it or to rebuild it, then or in any of such
events Sublessor may, within ninety (90) days after such fire or
other cause, give Sublessee a notice in writing of such decision,
which notice shall be given as in Paragraph Twelfth hereof
provided, and thereupon the term of this sublease shall expire by
lapse of time upon the third day after such notice is given, and
Sublessee shall vacate the demised premises and surrender the
same to Sublessor. If Sublessee shall not be in default under the
sublease then, upon the termination of this sublease under the
conditions provided for in the sentence immediately preceding,
Sublessee's liability for rent shall cease as of the day
following the casualty. Sublessee hereby expressly waives the
provisions of Section 227 of the Real Property Law and agrees
that the foregoing provisions of this Article shall govern and
control in lieu thereof. If the damage or destruction is due to
the fault or neglect of Sublessee the debris shall be removed by,
and at expense of Sublessee.
FIFTH.-If the whole or any part of the premises hereby
demised shall be taken or condemned by any competent authority
for any public use or purpose then the term hereby granted shall
cease from the time when possession of the part so taken shall be
required for such public purpose and without apportionment of
award (except with regard to Sublessee's trade fixtures), the
Sublessee hereby assigning to the Sublessor all right and claim
to any such award (other than for trade fixtures), the current
rent, however, in such case to be apportioned.
SIXTH.-If, before the commencement of the term, the
Sublessee be adjudicated a bankrupt, or make a "general
assignment", or take the benefit of any insolvent act, or if a
Receiver or Trustee be appointed for the Sublessee's property, or
if this sublease or the estate of the Sublessee hereunder be
assigned, transferred or pass to or devolve upon any other person
or corporation, voluntarily or involuntarily, or if the Sublessee
shall default in the performance of any agreement by the
Sublessee contained in any other lease between the Sublessee and
the Sublessor or between Sublessee and any corporation of which
an officer of the Sublessor is a Director, this sublease shall
thereby, at the option of the Sublessor, be terminated and in
that case, neither the Sublessee nor anybody claiming under the
Sublessee shall be entitled to go into possession of the demised
premises. If after the commencement of the term, any of the
events mentioned above in this subdivision shall occur, or if
Sublessee shall default in fulfilling any of the covenants of
this sublease, other than the covenants for the payment of rent
or "additional rent" or if the demised premises become vacant or
deserted, The Sublessor may give to the Sublessee ten days'
notice of intention to end the term of this sublease, and
thereupon at the expiration of said ten days (if said condition
which was the basis of said notice shall continue to exist) the
term under this sublease shall expire as fully and completely as
if that day were the date herein definitely fixed for the
expiration of the term and Sublessee will then quit and surrender
the demised premises to the Sublessor, but the Sublessee shall
remain liable as hereinafter provided.
If the Sublessee shall default in the payment of the rent
reserved hereunder, or any item of "additional rent" herein
mentioned, or any part of either or in making any other payment
herein provided for, or if the notice last above provided for
shall have been given and if the condition for which the basis of
said notice shall exist at the expiration of said ten days'
period, the Sublessor may immediately, or at any time thereafter,
re-enter the demised premises and remove all persons and all or
any property therefrom either by summary dispossess proceedings,
or by any suitable action or proceeding at law, or by force or
otherwise, without being liable to indictment, prosecution or
damages therefor, and re-possess and enjoy said premises together
with all additions, alterations and improvements. In any such
case or in the event that this sublease be "terminated" before
the commencement of the term, as above provided, the Sublessor
may either re-let the demised premises or any part or parts
thereof as the agent of the Sublessee, and receive the rents
therefor, applying the same first to the payment of such expenses
as the Sublessor may have incurred, and then to the fulfillment
of the covenants of the Sublessee herein, and the balance, if
any, at the expiration of the term first above provided for,
shall be paid to the Sublessee. Sublessor may rent the premises
for a term extending beyond the term hereby granted without
releasing Sublessee from any liability. In the event that the
term of this sublease shall expire as above in this subdivision
"Sixth" provided, or terminate by summary proceedings or
otherwise, and if the Sublessor shall not re-let, the Sublessee
shall remain liable for, and the Sublessee hereby agrees to pay
to the Sublessor, until the time when this sublease would have
expired but for such termination or expiration, the equivalent of
the amount of all of the rent and "additional rent" reserved
herein, less the costs of reletting, if any, and the same shall
be due and payable by the Sublessee to the Sublessor on the
several rent days above specified, that is upon each of such rent
days the Sublessee shall pay to the Sublessor the amount of
deficiency then existing. The Sublessee hereby expressly waives
any and all right of redemption in case the Sublessee shall be
dispossessed by judgment or warrant of any court or judge, and
the Sublessee waives and will waive all right to trial by jury in
any summary proceedings hereafter instituted by the Sublessor
against the Sublessee in respect to the demised premises. The
words "re-enter" and "re-entry" as used in this sublease are not
restricted to their technical legal meaning.
In the event of a breach or threatened breach by the
Sublessee of any of the covenants or provisions hereof, the
Sublessor shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity, as if re-entry,
summary proceedings and other remedies were not herein provided
for.
SEVENTH.-If the Sublessee shall default in the performance
of any covenant herein contained, the Sublessor may immediately,
or at any time thereafter, without notice, perform the same for
the account of the Sublessee. If a notice of mechanic's lien be
filed against the demised premises or against premises of which
the demised premises are part, for or purporting to be for, labor
or material alleged to have been furnished, or to be furnished to
or for the Sublessee at the demised premises, and if the
Sublessee shall fail to take such action as shall cause such lien
to be discharged within fifteen days after the filing of such
notice, the Sublessor may pay the amount of such lien or
discharge the same by deposit or by bonding proceedings, and in
the event of such deposit or bonding proceedings, the Sublessor
may require the lienor to prosecute an appropriate action to
enforce the lienor's claim. In such case, the Sublessor may pay
any judgment recovered on such claim. Any amount paid or expense
incurred by the Sublessor as in this subdivision of this sublease
provided, and any amount as to which the Sublessee shall at any
time be in default for or in respect to the use of water,
electric current or sprinkler supervisory service, and any
expense incurred or sum of money paid by the Sublessor by reason
of the failure of the Sublessee to pay any taxes, insurance or
maintenance or repairs, or to comply with any provision of this
sublease, or in defending any such action, shall be deemed to be
"additional rent" for the demised premises, and shall be due and
payable by the Sublessee to the Sublessor on the first day of the
next month, or, at the option of the Sublessor, on the first day
of any succeeding month. The receipt by the Sublessor of any
instalment of the regular stipulated rent hereunder or any of
said " additional rent" shall not be a waiver of any other
"additional rent" then due.
EIGHTH.-The failure of the Sublessor to insist, in any one
or more instances upon a strict performance of any of the
covenants of this sublease, or to exercise any option herein
contained, shall not be construed as a waiver or a relinquishment
for the future of such covenant or option, but the same shall
continue and remain in full force and effect. The receipt by the
Sublessor of rent, with knowledge of the breach of any covenant
hereof, shall not be deemed a waiver of such breach and no waiver
by the Sublessor of any provision hereof shall be deemed to have
been made unless expressed in writing and signed by the
Sublessor. Even if the Sublessor consents to an assignment hereof
no further assignment shall be made without further express
consent in writing by the Sublessor. No waiver by Sublessor or
Sublessee of any provision hereof shall be deemed a waiver of any
other provision hereof or of any subsequent breach by the other
party of any other provision.
NINTH.-If this sublease be assigned, or if the demised
premises or any part thereof be sublet or occupied by anybody
other than the Sublessee the Sublessor may collect rent from the
assignee, sub-Sublessee or occupant, and apply the net amount
collected to the rent herein reserved, and no such collection
shall be deemed a waiver of the covenant herein against
assignment and subletting, or the acceptance of the assignee,
sub-Sublessee, or occupant as Sublessee, or a release of the
Sublessee from the further performance by the Sublessee of the
covenants herein contained on the part of the Sublessee.
TENTH.-This sublease shall be subject and subordinate at all
times, to the lien of the mortgages now on the demised premises,
and to all advances made or hereafter to be made upon the
security thereof, and subject and subordinate to the lien of any
mortgage or mortgages which at any time may be made a lien upon
the premises, provided the holder of any such mortgage shall
execute and deliver to Sublessee in a form reasonably acceptable
to Sublessee an agreement that it will recognize this sublease
and not disturb Sublessee's possession of the premises in the
event of foreclosure if the Sublessee is not then in default
hereunder. The Sublessee will execute and deliver such further
instrument or instruments subordinating this sublease to the lien
of any such mortgage or mortgages as shall be requested by the
Sublessor.
ELEVENTH.-All improvements made by the Sublessee to or upon
the demised premises, except said trade fixtures and other non-
fixture property of Sublessee necessary for the Sublessee's
business, shall when made, at once be deemed to be attached to
the freehold, and become the property of the Sublessor, and at
the end or other expiration of the term, shall be surrendered to
the Sublessor in as good order and condition as they were when
installed, reasonable wear and damages by the elements excepted.
TWELFTH.-Any notice or demand which under the terms of this
sublease or under any statute must or may be given or made by the
parties hereto shall be in writing and shall be given or made by
mailing the same by certified mail or FAX addressed to the
respective parties at the following addresses:
Sublessee: WMW Machinery Company, Inc.
44 High Street
West Nyack, New York 10994
Attn: Manfred Kuehnelt
FAX NO: 914-358-2378
Sublessor: General Bearing Corporation
44 High Street
West Nyack, New York 10994
ATTN: DAVID GUSSACK
FAX NO: 914-358-6277
THIRTEENTH.-The Sublessor shall not be liable for any
failure of water supply or electrical current, sprinkler damage,
or failure of sprinkler service, nor for injury or damage to
person or property caused by the elements or by other Sublessees
or persons in said building, or resulting from steam, gas,
electricity, water, rain or snow, which may leak or flow from any
part of said buildings, or from the pipes, appliances or plumbing
works of the same, or from the street or sub-surface, or from any
other place, nor for interference with light or other incorporeal
hereditaments by anybody other than the Sublessor, or caused by
operations by or for a governmental authority in construction of
any public or quasi-public work, neither shall the Sublessor be
liable for any latent defect in the building, unless caused by
the Sublessor's negligent acts or omissions and Sublessor has not
cured the same within 15 days of notification thereof.
FOURTEENTH.-No diminution or abatement of rent, or other
compensation shall be claimed or allowed for inconvenience or
discomfort arising from the making of repairs or improvements to
the building or to its appliances, nor for any space taken to
comply with any law, ordinance or order of a governmental
authority. In respect to the various "services," if any, herein
expressly or impliedly agreed to be furnished by the Sublessor to
the Sublessee, it is agreed that there shall be no diminution or
abatement of the rent, or any other compensation, for
interruption or curtailment of such "service" when such
interruption or curtailment shall be due to accident, alterations
or repairs desirable or necessary to be made or to inability or
difficulty in securing supplies or labor for the maintenance of
such "service" or to some other cause not due to negligence on
the part of the Sublessor. No such interruption or curtailment of
any such "service" shall be deemed a constructive eviction. The
Sublessor shall not be required to furnish, and the Sublessee
shall not be entitled to receive, any of such "services" during
any period wherein the Sublessee shall be in default in respect
to the payment of rent. Neither shall there be any abatement or
diminution of rent because of making of repairs, improvements or
decorations to the demised premises after the date above fixed
for the commencement of the term, it being understood that rent
shall, in any event, commence to run at such date so above fixed.
FIFTEENTH.-In the event that an excavation shall be made for
building or other purposes upon land adjacent to the demised
premises or shall be contemplated to be made, the Sublessee shall
afford to the person or persons causing or to cause such
excavation, license to enter upon the demised premises for the
purpose of doing such work as said person or persons shall deem
to be necessary to preserve the wall or walls, structure or
structures upon the demised premises from injury and to support
the same by proper foundations.
SIXTEENTH.-No vaults or space not within the property line
of the building are leased hereunder. Sublessor makes no
representation as to the location of the property line of the
building. Such vaults or space as Sublessee may be permitted to
use or occupy are to be used or occupied under a revocable
license and if such license be revoked by the Sublessor as to the
use of part or all of the vaults or space Sublessor shall not be
subject to any liability; Sublessee shall not be entitled to any
compensation or reduction in rent nor shall this be deemed
constructive or actual eviction. Any tax, fee or charge of
municipal or other authorities for such vaults or space shall be
paid by the Sublessee for the period of the Sublessee's use or
occupancy thereof.
SEVENTEENTH .-That during six months prior to the expiration
of the term hereby granted, on reasonable advance notice,
applicants shall be admitted at all reasonable hours of the day
to view the premises until rented; and the Sublessor and the
Sublessor's agents shall be permitted at any time during the term
to visit and examine them at any reasonable hour of the day, and
workmen may enter at any time, when authorized by the Sublessor
or the Sublessor's agents, to make or facilitate repairs in any
part of the building; and if the said Sublessee shall not be
personally present to open and permit an entry into said
premises, at any time, when for any reason an entry therein shall
be necessary or permissible hereunder, the Sublessor or the
Sublessor's agents may forcibly enter the same without rendering
the Sublessor or such agents liable to any claim or cause of
action for damages by reason thereof (if during such entry the
Sublessor shall accord reasonable care to the Sublessee's
property) and without in any manner affecting the obligations and
covenants of this sublease; it is, however, expressly understood
that the right and authority hereby reserved, does not impose,
nor does the Sublessor assume, by reason thereof, any
responsibility or liability whatsoever for the care or
supervision of said premises, or any of the pipes, fixtures,
appliances or appurtenances therein contained or therewith in any
manner connected.
EIGHTEENTH.-The Sublessor has made no representations or
promises in respect to said building or to the demised premises
except those contained herein, and those, if any, contained in
some written communication to the Sublessee, signed by the
Sublessor. This instrument represents the entire agreement of the
parties and may not be changed, modified, discharged or
terminated orally.
NINETEENTH.-If the Sublessee shall at any time be in default
hereunder, and if the Sublessor shall institute an action or
summary proceeding against the Sublessee based upon such default,
then the Sublessee will reimburse the Sublessor for the expense
of attorneys' fees and disbursements thereby incurred by the
Sublessor, so far as the same are reasonable in amount. Also so
long as the Sublessee shall be a Sublessee hereunder the amount
of such expenses shall be deemed to be "additional rent"
hereunder and shall be due from the Sublessee to the Sublessor on
the first day of the month following the incurring of such
respective expenses.
TWENTIETH.-Sublessor shall not be liable for failure to give
possession of the premises upon commencement date by reason of
the fact that premises are not ready for occupancy, if due to a
prior Sublessee other than Sublessor or its affiliates wrongfully
holding over in possession. In such event the rent shall not
commence until possession is given or is available, but the term
herein shall not be extended.
TWENTY-FIRST.-The Sublessee will keep the sidewalk,
roadways, parking areas and curb clean at all times and free from
snow and ice and shall be solely responsible for all repairs and
maintenance thereto and for all landscaping. Landscape plants and
trees surrounding the premises shall be maintained at a level
equivalent to that at the time of the commencement of this
sublease and trees and shrubs that die are to be replaced by
Sublessee. Sublessee acknowledges that at the commencement of
this sublease the premises and surrounding grounds, including
wooded areas, were free of trash, debris and garbage and
sublessee shall maintain the premises and grounds in such
condition.
TWENTY-SECOND.-If a separate water meter be installed for
the demised premises, or any part thereof, the Sublessee will
keep the same in repair and pay the charges made by the
municipality or water supply company for or in respect to the
consumption of water, as and when bills therefor are rendered. If
the demised premises, or any part thereof, be supplied with water
through a meter which supplies other premises, the Sublessee will
pay to the Sublessor, as and when bills are rendered therefor,
the "Sublessee's proportionate part" (as defined hereinafter) of
all charges which the municipality or water supply company shall
make for all water consumed through said meter, as indicated by
said meter. "Sublessee's proportionate part" shall be equal to
the ratio of the floor area subleased hereunder to all of the
rentable floor area in the building (exclusive of the basement)
which shall have been occupied during the period of the
respective charges, taking into account the period that each part
of such area was occupied. At the commencement of this sublease
the Sublessee's proportionate part is . Sublessee agrees to<PAGE>
pay as additional rent the Sublessee's proportionate part,
determined as aforesaid, of the sewer charges imposed or assessed
upon the building of which the premises are a part.
TWENTY-THIRD.-From the date of occupancy by Sublessee,
Sublessee shall pay all charges or fees for use or consumption of
all utilities provided to the premises occupied by Sublessee
including water, gas, electricity, telephone and other utilities
and services together with any taxes thereon. In the event the
premises are not separately metered Sublessee shall pay its
proportionate part (as defined in paragraph twenty-second
hereinabove) of each such unmetered charge. In the alternative,
Sublessor may secure an independent audit of Sublessee's
consumption of such utilities or install a device to monitor
same, advising Sublessee of the percentage of such utilities used
and consumed by Sublessee. Sublessor shall thereupon invoice
Sublessee for Sublessee's share of such utilities on a monthly
basis and Sublessee shall reimburse the Sublessor for such
expense. All utilities shall be paid to the Sublessor (if
applicable) within ten days of receipt of billings.
TWENTY-FOURTH.-If there now is or shall be installed in said
building a "sprinkler system" the Sublessee agrees to keep the
appliances thereto in the demised premises in repair and good
working condition, and if the New York Board of Fire Underwriters
of the New York Fire Insurance Exchange or any bureau, department
or official of the State or local government requires or
recommends that any changes, modifications, alterations or
additional sprinkler heads or other equipment be made or supplied
by reason of the Sublessee's business, or the location of
partitions, trade fixtures, or other contents of the demised
premises, or if such changes, modifications, alterations,
additional sprinkler heads or other equipment in the demised
premises are necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the
fire insurance rate as fixed by said Exchange, or by any Fire
Insurance Company, the Sublessee will at the Sublessee's own
expense, promptly make and supply such changes, modifications,
alterations, additional sprinkler heads or other equipment.
TWENTY-FIFTH.-Sublessee agrees that it will pay its
proportionate share (as defined in paragraph twenty-second
hereinabove) of the cost to keep the subleased Premises insured,
at a minimum, against loss or damage by fire with extended
coverage ("all risk") endorsement, vandalism and malicious
mischief coverage, and differences in conditions coverage (for
the perils of earthquake, surface water flood and sudden and
accidental collapse or rupture to non-pressurized vessels).
Notwithstanding the foregoing, if the premium for such insurance
on the entire building is increased from its present rate due to
any change in activities of the sublessee, sublessee shall pay
the full amount (not its "proportionate share") of such increase
attributable to such change. Such insurance shall be in an amount
of the full replacement value of the premises as determined from
time to time. Sublessee shall name Sublessor as a party insured
and shall require the insurer to give Sublessor at least thirty
(30) days notice of cancellation. Sublessor and Sublessee
acknowledge that as of the date hereof the full replacement value
of the entire building is Nine Million Dollars ($9,000,000.00).
Insurance Requirements. For purposes of this Section,
----------------------
the parties agree during the term hereof that Sublessee shall
maintain adequate public liability and other insurance with
reputable insurance companies as hereinabove and hereinafter set
forth, shall furnish Sublessor with certificates of insurance
properly executed by its insurance companies evidencing such
fact, and requiring their insurers to give at least thirty (30)
days notice in the event of cancellation. Such insurance shall
cover all damage or injury which results or is claimed to have
resulted from an act or omission on the part of Sublessee, its
agents, employees or business invitees as well as environmental
clean up of damage proven to have occurred as a result of the use
thereof by Sublessee or others while Sublessee is a Sublessee at
the premises.
TWENTY-SIXTH.-Sublessee shall be responsible for the payment
of its proportionate share (as defined in paragraph twenty-second
hereinabove) of all real estate taxes and current installments of
special assessments levied against the premises which become due
during the term of the sublease. Sublessor shall notify Sublessee
and forward a copy of each tax bill to Sublessee upon Sublessor's
receipt thereof. Sublessee shall pay Sublessor its share of the
amount of the tax or installment of assessment set forth on the
bill within seven (7) days of the presentation by the Sublessor
thereof. Sublessor shall present such bill to Sublessee within
five (5) days of its receipt from the taxing authority. Failure
to pay Sublessor such amount within the time period set forth
herein shall constitute a default pursuant to the terms hereof.
If the term of this sublease shall not begin or expire
concurrently with the beginning or expiration of any tax fiscal
year, Sublessee's liability for real estate taxes and current
installments of special assessments for any tax fiscal year
during which Sublessee is not in possession of the premises for
the entire tax fiscal year shall be prorated. Sublessor
represents that there are no tax abatements or exemptions
effecting the premises and Sublessor does not make payments in
lieu of taxes.
Excise Taxes. Sublessee shall assume and pay to Sublessor as
------------
additional rent any excise, sales, gross receipts, rent tax or
other taxes, if any (other than a net income or excess profits
tax), which may be imposed on or measured by the rent or may be
imposed on or on account of the letting, which Sublessor may be
required to pay or collect under any law now in effect or
hereafter enacted, provided that such law places the primary
obligation to pay such tax on the Sublessee.
In the event Sublessee has made payment to Sublessor of the
aforementioned taxes and Sublessor has failed to make payment of
the same and due notice thereof has been given by the Sublessee
to the Sublessor, Sublessee shall have the right to make such
payments directly to the taxing authorities and all interest and
penalties paid by the Sublessee shall be the responsibility of
the Sublessor and may be offset as against the rental herein. In
the event that Sublessee fails to make payment of such taxes to
Sublessor, in addition to any other remedies pursuant to this
sublease, Sublessor may pay such taxes and Sublessee shall be
responsible for any interest or penalties that may be assessed.
If the taxing authorities permit taxes to be paid in less than
annual installments, Sublessor will not object to Sublessee's
payment of such taxes in a like manner.
Sublessor shall not seek to accomplish or effect a change in
the tax assessment of the premises (except to seek a reduction of
same) without Sublessee's approval.
TWENTY-SEVENTH.-Sublessee will not use Hazardous Materials
(as defined hereinafter) on, from, or affecting the premises in
any manner which violates Federal, state or local laws,
ordinances, rules, regulations or policies governing the use,
storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials. For
purposes of this paragraph, "Hazardous Materials" includes,
without limit, any flammable explosives, radioactive materials,
hazardous materials, hazardous or infectious wastes, hazardous or
toxic substances, or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 USC Secs. 9601, et seq.), the
Hazardous Materials Transportation Act, as amended (49 USC Secs.
1801, et seq.), the Resource Conservations and Recovery Act, as
amended (42 USC Secs. 9601, et seq.) and in the regulations
adopted and publications promulgated pursuant thereto, or any
other Federal, state or local environmental law, ordinance, rule
or regulation. Sublessee hereby indemnifies and agrees to hold
Sublessor free and harmless from any liability whatsoever during
and subsequent to the term of this sublease as a result of
Sublessee's breach of the obligations set forth in this
paragraph. Sublessor shall be responsible for and shall indemnify
and hold Sublessee free and harmless from any liability
whatsoever during and subsequent to the terms of this sublease
with regard to any hazardous materials or environmental condition
effecting the demised premises not caused by Sublessee,
Sublessee's agents or employees and/or not occurring during the
term of the within sublease.
TWENTY-EIGHTH.-The Sublessee agrees that it will not
require, permit, suffer, nor allow the cleaning of any window, or
windows, in the demised premises from the outside (within the
meaning of Section 202 of the Labor Law) unless the equipment and
safety devices required by law, ordinance, regulation or rule,
including, without limitation, Section 202 of the New York Labor
Law, are provided and used, and unless the rules, or any
supplemental rules of the Industrial Board of the State of New
York are fully complied with; and the Sublessee hereby agrees to
indemnify the Sublessor, Owner, Agent, Manager and/or
Superintendent, as a result of the Sublessee's requiring,
permitting, suffering, or allowing any window, or windows in the
demised premises to be cleaned from the outside in violation of
the requirements of the aforesaid laws, ordinances, regulation
and/or rules.
TWENTY-NINTH.-The invalidity or unenforceability of any
provision of this sublease shall in no way affect the validity or
enforceability of any other provision hereof.
THIRTIETH.-The Sublessor shall replace at the expense of the
Sublessee any and all broken glass in the skylights, doors and
walls in and about the demised premises. The Sublessor may insure
and keep insured all plate glass in the skylights, doors and
walls in the demised premises, for and in the name of the
Sublessor and bills for the premiums therefor shall be rendered
by the Sublessor to the Sublessee at such times as the Sublessor
may elect, and shall be due from and payable by the Sublessee
when rendered, and the amount thereof shall be deemed to be, and
shall be paid as additional rent.
THIRTY-FIRST.-This sublease and the obligation of Sublessee
to pay rent hereunder and perform all of the other covenants and
agreements hereunder on part of Sublessee to be performed shall
in no way be affected, impaired or excused because Sublessor is
unable to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed
in making any repairs, additions, alterations or decorations or
is unable to supply or is delayed in supplying any equipment or
fixtures if Sublessor is prevented or delayed from so doing by
reason of governmental preemption in connection with a National
Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department
or subdivision thereof of any government agency or by reason of
the conditions of supply and demand which have been or are
affected by war or other emergency.
THIRTY-SECOND.-Sublessor covenants that if and so long as
the Sublessee pays the rent and "additional rent" reserved
hereby, and performs and observes the covenants and provisions
hereof, the Sublessee shall quietly enjoy the demised premises,
subject, however, to the terms of this sublease, the mortgages
above mentioned and the Sublessor's lease with Gussack Realty
Company.
THIRTY-THIRD.-Sublessee shall, at its sole cost and expense,
obtain all required Federal, State, County and/or Municipal
approvals, permits, licenses, including a Certificate of
Occupancy (if required), to conduct its business. Sublessor shall
cooperate with Sublessee in Sublessee's effort to obtain any and
all necessary permits, licenses, and approvals and shall
expeditiously execute all necessary permit applications and
documents necessary to comply with all regulatory requirements
for the operation of Sublessee's business and performance of
Sublessee's improvements.
THIRTY-FOURTH.-If Sublessee remains in possession of the
premises or any part thereof after expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all of
the terms hereof applicable to a month to month tenancy except
that the monthly rent shall be increased to 120% of the rent for
the last month prior to such expiration. Sublessor's failure to
object to such holding over shall not constitute a waiver of any
of Sublessor's rights pursuant to this sublease.
THIRTY-FIFTH.-Except as otherwise specifically set forth
herein, this sublease shall be subject to all of the terms and
conditions set forth in the lease between the Sublessor and
Gussack Realty Company dated November 1, 1996, and Sublessee
herein shall have no greater rights in the premises than the
Sublessor. In addition to any rights it may have independent of
this sublease, Gussack Realty Company shall be deemed a third
party beneficiary hereof, held harmless, indemnified and have the
right to seek enforcement of any provision hereof to the same
extent as Sublessor.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, or caused these presents to be signed by
their proper corporate officers and their proper corporate seal
to be hereto affixed, the day and year first above written.
Signed, Sealed and Delivered
in the presence of or
Attested by: General Bearing Corporation
------------------------------ ---------------------------
Sublessor
By:
WMW Machinery Company, Inc.
------------------------------ ---------------------------
Sublessee
By:
<PAGE>
RULES AND REGULATIONS
1. Sublessee shall keep all machinery and equipment free
of vibration and noise, and shall not do or permit anything to be
done in the Demised Premises which would constitute a nuisance in
the Building or Complex.
2. Sublessee shall not cause to be discharged, spill or
dispose of on site any dangerous, hazardous, flammable, toxic,
combustible or explosive substance, material or object except
according to law and in an approved legal container.
3. Sublessee shall not cause to be discharged or permit to
be discharged into the sewer system, waste lines, vents or flues
of the Demised Premises or the Complex any acids or hazardous or
toxic substances, except as allowed by law.
4. Sublessee shall keep all exterior located garbage,
trash, rubbish and refuse in rat-proof containers and shall
remove or cause the same to be removed from the Demised Premises
and the Complex on a regular basis.
5. Sublessee shall not store, stack or place or permit to
be stored, stacked or placed any machinery, equipment, goods or
merchandise outside of the Demised Premises except as authorized
by Sublessor and permitted by law or the approvals obtained by
the Sublessee from the applicable authorities.
6. A fire lane (12 foot width) around the entire facility
must be kept clear at all times.
7. No debris, garbage, spare parts or containers of any
kind may be left in the yard or on the roof, except a dumpster.
EXHIBIT 16
LETTER RE CHANGE IN CERTIFYING ACCOUNTANT
General Bearing Corporation
West Nyackm NEw York
We hereby concur wuith the statements made by you in the
Prospectus constituting a part of this Registration Statement concerning our
replacement as your principal accountant.
/s/ Ferro, Berdon & Company L.L.P.
---------------------------------
FERRO, BERDON & COMPANY L.L.P.
New York, New York
November 4, 1996
EXHIBIT 21
Jurisdiction of
Name: Incorporation
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Shanghai General Bearing People's Republic
Co. Ltd. of China
Alurop Trading Corp. Panama
Wyatt-ZWZ Bearing Corporation New York
Wafangdian-Hyatt Bearing People's Republic
Manufacturing Co. Ltd. of China
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
General Bearing Corporation
West Nyack, New York
We hereby consent to the use in the Prospectus constituting
a part of this Registration Statement of our report dated
March 24, 1995, relating to the consolidated financial
statements of General Bearing Corporaiton and Subsidiaries,
which is contained in that Prospectus, and of our report dated
March 24, 1995 relating to the schedule, which is contained in
Part II of the Registration Statement.
We also consent to the reference to us under the captions
"Experts", "Selected Financial Data", and "Change in Independent
Auditors" in the Prospectus.
/s/ Ferro Berdon LLP
---------------------
FERRO BERDON L.L.P.
New York, New York
November 4, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
General Bearing Corporation
West Nyack, New York
We hereby consent to the use in the Prospectus constituting
a part of this Registration Statement of our report dated
September 13, 1996, except for Note 15(a) which is as of October
10, 1996 relating to the consolidated financial statements of
General Bearing Corporation and Subsidiaries, which is contained
in that Prospectus, and of our report dated September 13, 1996,
except for Note 15(a) which is as of October 10, 1996 relating to
the schedule, which is contained in Part II of the Registration
Statement.
We also consent to the reference to us under the captions
"Experts", "Selected Financial Data", and "Change in Independent
Auditors" in the Prospectus.
/s/ BDO Seidman, LLP
--------------------
BDO SEIDMAN, L.L.P.
New York, New York
October 31, 1996
Exhibit 99.1
Harold S. Geneen
c/o General Bearing Corporation
44 High Street
West Nyack, New York 10994
November 1, 1996
General Bearing Corporation
44 High Street
West Nyack, New York 10994
Gentlemen:
I have received a copy of a registration statement
(without exhibits) identical in all material respects with the
Registration Statement prepared by General Bearing Corporation, a
Delaware corporation (the "Corporation"), to be filed with the
Securities and Exchange Commission on or about November 4, 1996
under the Securities Act of 1933, as amended, in connection with
the initial public offering (the "Public Offering") of the
Corporation's common stock, par value $.01 per share.
I hereby consent to being named in the Registration
Statement as a person designated to be elected to the Board of
Directors of the Corporation upon completion of the Public
Offering.
Very truly yours,
/s/ Harold S. Geneen
----------------------
Harold S. Geneen
