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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
/ X / Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended March 28, 1998 or
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 333-33085
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ROLLER BEARING COMPANY OF AMERICA, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-3426227
(State of Incorporation) (IRS Employer Identification Number)
60 Round Hill Road, Fairfield, CT 06430
(address of principal executive offices)
Registrant's Telephone Number: (203) 255-1511
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and, (2) has been subject to such filing
requirements for the past 90 days:
Yes / X / No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /
As of June 20, 1998, there were 100 shares of the registrant's Common Stock
outstanding, all of which were held by Roller Bearing Holding Company, Inc., a
Delaware corporation. There is no public market for the registrant's Common
Stock.
Documents Incorporated by Reference: None
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This Annual Report of Roller Bearing Company of America, Inc. (the
"Company") on Form 10-K contains various forward-looking statements, as
contemplated by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "should," "expect," "intend," "estimate" or
"continue" or the negative thereof or comparable terminology and may include,
among other things, expected growth, business strategies, future revenues,
future sales, future operating performance, plans, objectives, goals and
strategies of the Company. Such forward-looking statements are based upon
information currently available in which the Company's management shares its
knowledge and judgment about factors that it believes may materially affect the
Company's performance. The forward-looking statements are made in good faith by
the Company and are believed by the Company to have a reasonable basis. However,
such statements are speculative, speak only as of the date made and are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or expected. Factors that might cause actual results to differ materially from
those in such forward-looking statements include, but are not limited to, those
discussed in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Readers are urged to carefully review and consider disclosures made by the
Company in this and other reports that discuss factors germane to the Company's
business.
PART I
ITEM 1. BUSINESS
Overview
The Company is a manufacturer and distributor of highly engineered precision
roller, ball and plain bearings in the United States. Bearings, which are
integral to the manufacture and operation of most machines and mechanical
systems, reduce wear to moving parts, facilitate proper power transmission and
reduce damage and energy loss caused by friction. While the Company manufactures
products in all major bearing categories, the Company focuses primarily on
highly technical or regulated bearing products for niche markets. The Company
targets the higher end market segment of the domestic bearing market where it
believes its value added manufacturing and engineering capabilities enable it to
differentiate itself from its competitors and to enhance profitability. The
Company believes that it is the leading supplier to many of its targeted markets
and maintains secondary positions in other product niches where it believes
market share gains can be achieved.
The Company conducts and operates its business through three divisions: the
RBC division; the Heim Bearings ("Heim") division; the Transport Dynamics
Corporation ("TDC") division, and five wholly-owned subsidiaries: RBC Nice
Bearings, Inc. ("Nice"); RBC Linear Precision Products, Inc. ("LPP"); Bremen
Bearings, Inc. ("Bremen"); Industrial Tectonics Bearings Corporation ("ITB");
and Miller Bearing Company, Inc. ("Miller"). The Company also has a foreign
wholly owned subsidiary, Roller Bearing Company FSC, Inc. ("FSC").
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Formation; Corporate Structure; Acquisitions
The Company was incorporated in Delaware in 1987. In July 1991, the
Company's Chairman, President and Chief Executive Officer, Dr. Michael J.
Hartnett, teamed up with affiliates of Aurora Capital Partners, L.P.
("Aurora") to implement a plan to acquire a series of small to medium size
domestic companies in the roller and ball bearing industry. In March 1992,
the Company's capital stock was acquired for $52 million by RBC Acquisition
Company (which was incorporated in March 1992 as a Delaware corporation),
which was subsequently merged into the Company and the Company became a
wholly-owned subsidiary of Roller Bearing Holding Company, Inc. ("Holdings").
Since 1992, the Company has acquired TDC, a manufacturer of plain bearings,
for $5.8 million, Heim, a leading producer of rod end and ball bearings, for
$6.8 million, LPP, a pioneer in grinding techniques for precision ball
bearing screws, for $5.5 million, Nice, the oldest active brand name in the
domestic bearing industry, for $7.5 million and Bremen and Miller,
manufacturers of needle bearings, for approximately $5.3 million and $11.1
million, respectively.
The Company has historically acquired complementary bearing companies and
integrated them effectively into its existing operations. Following an
acquisition, management typically rationalizes operations, reduces overhead
costs, develops additional cross-selling opportunities and establishes new
customer relationships.
The Company believes that there will continue to be consolidation
opportunities within the bearing industry. The Company is currently in
discussion with several companies that meet its strategic goals. Priority will
be given to acquiring bearing companies with sales of between $15 million and
$25 million. Additionally, the Company will seek smaller "fold-in" acquisitions;
businesses whose products can be manufactured at the Company's existing
facilities.
While the Company believes that it has greatly benefited from the
consolidation opportunities in the bearing industry and the acquisitions that
the Company has pursued, there can be no assurance that such opportunities will
continue to materialize or that the Company will be able to successfully
capitalize on any such opportunities in the future.
Recent Developments
Recapitalization
On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement
(the "Recapitalization Agreement") dated May 20, 1997, Holdings effected a
recapitalization of its outstanding capital stock, including the financing and
other transactions consummated by Holdings, the Company and its subsidiaries in
connection therewith (the "Recapitalization"). In connection with the
Recapitalization, all of the outstanding preferred stock of Holdings ("Preferred
Stock") was redeemed by Holdings and substantially all of the outstanding common
stock of Holdings ("Holdings Common Stock") and warrants to purchase Holdings
Common Stock held by non-management stockholders of Holdings ("Holdings
Warrants") were redeemed or purchased by Holdings, or certain current
stockholders or warrantholders of Holdings (including certain affiliates
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of Credit Suisse First Boston ("CSFB") and one of the purchasers of the Discount
Debentures (as defined herein)).
The Recapitalization was financed with the proceeds from the issuance by
the Company of $110 million of 9 5/8% Senior Subordinated Notes Due 2007 (the
"Notes), the incurrence by the Company of $16 million of term loans (the
"Term Loans"), the issuance by Holdings of approximately $74.8 million in
Senior Secured Discount Debentures (the "Discount Debentures") and warrants
(the "Discount Warrants") to purchase 6,731 shares of Class A Common Stock,
par value $.01 per share, of Holdings ("Class A Common Stock") for an
aggregate gross consideration of $40 million. The Term Loans are a part of
senior credit facilities (the "Senior Credit Facilities") of the Company with
a group of lenders, which also include a $54 million revolving credit
facility (the "Revolving Credit Facility").
On January 22, 1998, the Company consummated an exchange of all of the
outstanding Notes for substantially identical Notes that were registered under
the Securities Act of 1933, as amended. Such exchange was undertaken pursuant to
obligations of the Company under the indenture governing the Notes (the
"Indenture") and certain other agreements entered into by the Company in
connection with the Recapitalization.
Additionally, in connection with the Recapitalization, (i) the Company paid
a dividend to Holdings in the amount of approximately $56.9 million (the
"Dividend") to finance the Recapitalization, (ii)Holdings used the proceeds of
the Dividend and the proceeds from the sale of the Discount Debentures and the
Discount Warrants, to redeem Holdings Common Stock and Preferred Stock and to
purchase Holdings Warrants for aggregate consideration of approximately $92.2
million, (iii)Holdings assigned its rights to purchase certain shares of
Holdings Common Stock and Holdings Warrants under the Recapitalization Agreement
to Dr. Michael J. Hartnett, certain affiliates of CSFB, OCM Principal
Opportunities Fund, L.P. (the "Oaktree Fund"), Kirk Morrison, The Sommers Family
Trust and Mitchell Quain, (iv) Holdings repurchased (the "Hartnett Repurchase")
1,250 Holdings Warrants from Dr. Hartnett for an amount per share of Holdings
Common Stock underlying such Holdings Warrants equal to $514 less the
approximately $77 exercise price of such warrants (an aggregate of approximately
$550,000), (v) Holdings issued warrants exercisable for 1,250 shares of Class B
Supervoting Common Stock, par value $.01 per share, of Holdings ("Class B Common
Stock") at an exercise price of $514 per share to Dr. Hartnett, (vi)Holdings
loaned $500,000 to Dr. Hartnett (the "Hartnett Loan") to finance a portion of
his purchase of Holdings Common Stock and Holdings Warrants referred to in
clause (iii)above, (vii)Holdings paid to Dr. Hartnett a fee of $1 million (the
"Hartnett Fee"), (viii)Holdings converted all of Dr. Hartnett's shares of
Holdings Common Stock into shares of Class B Common Stock, and amended all
Holdings Warrants held by Dr. Hartnett to provide that they be exercisable for
shares of Class B Common Stock, (ix)the Company repaid outstanding indebtedness
of approximately $52.1 million on its revolving credit facility (the "Existing
Revolving Credit Facility") and its term loan (the "Existing Term Loan") both
with Heller Financial, Inc., ("Heller") and (x) the Company and Holdings paid
certain other fees and expenses, in the approximate aggregate amount of $10.4
million, payable in connection with the foregoing.
Dr. Hartnett, the Chairman, President and Chief Executive Officer of the
Company, currently owns approximately 40% (approximately 39% on a fully diluted
basis) of the outstanding capital stock of Holdings, and, through the operation
of provisions of Holdings' certificate of incorporation, he has the power to
control a majority of the voting rights of all capital stock of
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Holdings. See "Item 12. Security Ownership of Certain Beneficial Owners and
Management" and "Item 13. Certain Relationships and Related Transactions."
As discussed herein, the Company incurred indebtedness in connection with
the Recapitalization and is highly leveraged. The degree to which the Company is
leveraged could have important consequences for the Company, including but not
limited to, (i) impairing the ability of the Company to obtain additional
financing for working capital, capital expenditures, acquisitions, debt service
requirements or other purposes, (ii) impacting the portion of cash flow from
operations available for general corporate needs (the obligations), (iii)
impacting the Company's ability to compete against its less leveraged
competitors and (iv) increasing the Company's vulnerability in the event of a
downturn in any industry to which the Company markets its products or a downturn
in the economy in general. Although the Company believes it will be able to pay
its obligations as they come due, there can be no assurance that it will
generate earnings in any future period sufficient to cover its fixed charges.
Bremen Acquisition
On August 8, 1997, Bremen, a wholly owned subsidiary of the Company,
completed the acquisition of Bremen Bearings Division of SKF USA, Inc., a
manufacturer of needle bearings with facilities in Bremen, Indiana. The purchase
was effective as of July 1, 1997. The Company paid approximately $5.6 million,
of which approximately $3.6 million was paid at the closing. The purchase price
for Bremen was financed by borrowings under the Term Loans.
Miller Acquisition
On June 3, 1998, Miller, a wholly-owned subsidiary of the Company, completed
the acquisition of Miller Bearing Company, Inc. ("MBC"), a manufacturer of pins,
rollers and screw machine products with facilities in Bremen, Indiana. The
aggregate purchase price for the acquisition, which was effective as of March 1,
1998, was approximately $11.1 million which included the assumption of certain
liabilities of MBC. Miller discharged an aggregate of approximately $1.7 million
of such assumed liabilities at closing, representing all notes payable assumed
in the transaction. The acquisition was financed from proceeds from the sale of
the Notes. Operations of Miller for March, 1998 were not material to the
consolidated financial results of the Company.
General
The Company is a manufacturer and distributor of highly engineered precision
roller, ball and plain bearings in the United States. Bearings, which are
integral to the manufacture and operation of most machines and mechanical
systems, reduce wear to moving parts, facilitate proper power transmission and
reduce damage and energy loss caused by friction. Many of the Company's products
are custom designed or highly engineered for specific applications to meet
demanding specifications. While the Company manufactures products in all major
bearing categories, the Company focuses primarily on highly technical or
regulated bearing products for niche markets.
The Company targets the higher end market segment of the domestic bearing
market where it believes its value added manufacturing and engineering
capabilities enable it to differentiate itself from its competitors and to
enhance profitability. The Company believes that it is the leading
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supplier to many of its targeted markets and maintains secondary positions in
other product niches where it believes market share gains can be achieved. In
fiscal 1998 (which commenced on March 30, 1997 and ended on March 28, 1998), the
Company had sales to more than 2,500 customers with no single customer amounting
to more than 8% of net sales. The Company believes its rapid turnaround on
orders, custom designed engineering and strict adherence to quality and
reliability provide it with significant competitive advantages. The Company's
key customers include Caterpillar, John Deere, Boeing, Pratt & Whitney, General
Electric, Bell Helicopter and Motion Industries.
The Company sells primarily to domestic Original Equipment Manufacturers
("OEMs") and distributors in three markets: industrial, aerospace and
government. Many of the Company's product offerings are in market segments
(market sizes between $30 million and $150 million) which require high service
levels, extensive technical engineering support, short lead times and small
production runs. In combination with the Company's efficient production
processes, targeting such market segments has allowed the Company to achieve its
plan. Additionally, in an effort to generate more stable revenues, the Company
has increased sales to the replacement market. Management estimates that
currently over 60% of the Company's products are sold directly or indirectly for
use in the replacement market.
Approximately 66% of the Company's fiscal 1998 net sales were to the
industrial market segment. The Company believes opportunities exist to increase
sales in this market segment as a result of (i)increasing demand for industrial
machinery in both the domestic and international markets, which is expected to
expand existing OEM selling opportunities, (ii)growth in aftermarket demand as
the installed base continues to expand and (iii)the increased emphasis being
placed on maintenance and repair of capital goods given the increasing cost of
such items.
Approximately 29% of the Company's fiscal 1998 net sales were to the
aerospace market segment for applications in commercial and military aviation.
According to Boeing, worldwide air travel is expected to grow 75% between 1996
and 2006 and the world commercial aircraft fleet is expected to double by 2016.
The Company provides bearings for virtually every model of commercial aircraft
in production, as well as many military applications, and its customers include
all major aerospace manufacturers. Sales to the aerospace market segment have
been increasing as a percentage of total sales, a trend which the Company
expects will continue.
Approximately 5% of the Company's fiscal 1998 net sales were to the
government market segment. The Company expects sales to this segment to remain
stable in the foreseeable future due to (i)increased emphasis on repair and
maintenance of existing military platforms, (ii) sole source supplier
relationships and replacement part sales for existing programs and (iii)long
product lives of existing programs, which should ensure steady sales relating to
such programs for several years.
Business Strategy
The Company has developed a business strategy that focuses on good
profitability while growing, both internally and through acquisitions.
Management believes that the Company's business strategy makes it well
positioned to achieve continued growth and market share gains through
(i)increasing sales to the aftermarket, (ii)continuing its focus on high margin
niche market segments where the Company believes it has a sustainable
competitive advantage, (iii)penetrating new markets with innovative products,
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(iv)expanding international OEM and distributor sales and (v)acquiring other
manufacturers which have complementary products, similar distribution channels
or provide significant potential for margin enhancement.
Competitive Strengths
The Company believes that it has significant competitive strengths,
including a strong management team with extensive managerial experience in the
bearing industry, excellent design and manufacturing capabilities, long-term
customer relationships, the Company's focus on niche segments of the bearing
market, the Company's proprietary manufacturing processes, its low cost
operations and the Company's commitment to service.
Bearing Industry
Bearings are integral to the manufacture and operation of machines and
mechanical systems. Bearings serve to reduce the wear to moving parts, ensure
proper power transmission and reduce damage and energy loss caused by friction.
Demand for bearings generally follows the market for products in which bearings
are incorporated and the general economy as a whole. Purchasers of bearings
include (i)automotive manufacturers, (ii) industrial equipment and machinery
manufacturers, (iii)producers of commercial and military aerospace equipment,
(iv)agricultural machinery manufacturers and (v)construction and specialized
equipment manufacturers. The Company estimates that approximately one-third of
all bearings manufactured are for use in the automobile industry, a market in
which the Company does not currently compete.
The domestic bearing market is comprised of three primary product
categories: ball bearings, roller bearings and plain bearings. Ball bearings are
used for high speed applications; roller bearings for lower speed, heavily
loaded applications; and plain bearings for sliding action and misalignment
applications.
The domestic market for standard bearings is dominated by three major
international competitors: The Timken Company ("Timken"), Torrington Company
("Torrington") and SKF USA, Inc. ("SKF"). The balance of the domestic market,
consisting primarily of specialty and custom engineered bearings, is more
fragmented. Due to the shorter production runs and significant post-sale
technical support associated with these products, the Company believes they are
not the primary focus of the larger bearing manufacturers. A group of smaller
companies (including the Company) frequently establish leading positions, in
market share and reputation, in certain of these niche product lines.
Furthermore, competition in these niche markets is based on lead times and
reliability of product and service, and these markets are generally not as price
sensitive as the markets for standard bearings.
Customers and Markets
The Company supplies bearings to OEMs and distributors in the industrial,
aerospace and government markets. The industrial OEM market segment continues to
be the largest market segment for the Company, accounting for 46% of the
Company's fiscal 1998 net sales. While the Company's sales in its target markets
have historically been concentrated on OEMs, the Company has recently shifted
its focus in the aerospace and industrial market segments towards replacement
part sales. The Company believes this generates more stable revenues. The
Company's top ten customers were responsible for generating 39% of the Company's
fiscal 1998 net sales and no
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single customer was responsible for generating more than 8% of fiscal 1998 net
sales. Three of the Company's top ten customers are distributors and the
remaining seven are OEMs.
The Company does not believe that it is dependent upon a single customer or
a few customers. However, the loss of the Company's major customers or a
substantial decrease in such customers' purchases from the Company could have a
material adverse effect on the financial condition and results of operations of
the Company.
The aerospace, heavy equipment and other industries to which the Company
sells its products are, to varying degrees, cyclical and have experienced
periodic downturns, which have often had a negative effect on demand for the
Company's products. Although the Company believes that by concentrating on
products with a strong aftermarket demand it has reduced its exposure to such
business downturns, any future material weakness in demand in any of these
industries could have a material adverse effect on the financial condition and
results of operations of the Company.
Industrial
Industrial bearings are used in a wide range of industries such as heavy
equipment, machine tools, agricultural equipment, pumps and packaging. Nearly
all mechanical devices and machinery require bearings to relieve friction where
one part moves relative to another. The Company's products target existing
market applications in which the Company's engineering and manufacturing
capabilities provide it with a competitive advantage in the marketplace.
The Company manufactures a wide range of roller, ball and plain bearings for
industrial uses by customers including Caterpillar, John Deere, Euclid Hitachi,
Motion Industries, Applied Industrial Technologies, and Kaman. See "Products."
Sales to the industrial market segment accounted for 66% of the Company's fiscal
1998 net sales. Approximately 69% of such sales were to OEMs while 31% were to
distributors. Within the industrial market, the Company sells to the
construction and mining equipment, material handling, machine tools and energy
and natural resources market segments. The Company believes that the
diversification of its sales among the various market segments of the industrial
bearings market reduces its exposure to downturns in any individual market
segment.
Aerospace
Bearings are used in numerous applications within airplanes, helicopters and
aircraft engines. The aerospace market segment utilizes spherical plain
bearings, rod ends, journal bearings and thin section ball bearings. Bearings
are regularly replaced on aircraft in conjunction with routine maintenance
procedures and include such items as high precision ball and roller bearings and
metal-to-metal and self-lubricating plain bearings. Commercial aerospace
customers generally require precision products, often of special materials, made
to unique designs and specifications.
The Company's penetration of the commercial aerospace market segment
expanded through the acquisitions of TDC and Heim. Sales to the aerospace market
segment accounted for 29% of the Company's fiscal 1998 net sales. Of this total,
67% reflected sales to OEMs and the remaining 33% were to distributors.
Management estimates that over 75% of commercial aerospace net sales are
actually used as replacement parts since a portion of OEM sales also are
ultimately intended for replacement market use. Sales of products for use in the
aftermarket helped the Company's sales
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over the past five years, despite the depressed levels of new aircraft
construction. The Company supplies bearings for commercial aircraft, commercial
aircraft engines and private aircraft manufacturers, as well as to various
military contractors for airplanes, helicopters and missile systems. Aerospace
customers include Boeing, Lockheed-Martin, Bell Helicopter, General Electric,
Pratt & Whitney, Allied Signal, Aviation Sales and WS Wilson.
Essential to servicing the aerospace market is the ability to obtain product
approvals. The Company has in excess of 20,000 product approvals, which enable
it to provide products used in virtually all domestic aircraft platforms
presently in production or operation. Product approvals are typically issued by
the Federal Aviation Administration ("FAA") designated OEMs who are Production
Approval Holders ("PAHs") of FAA approved aircraft. These PAHs provide quality
control oversight and generally limit the number of suppliers directly servicing
the commercial aerospace aftermarket. Recent regulatory changes enacted by the
FAA provide for an independent process (the PMA process), which enables
suppliers who currently sell their products to the PAH, to sell products to the
aftermarket. The Company has submitted over 6,100 PMA applications and has
received over 900 approvals to date. There is no assurance that the Company will
receive approvals on its submissions. To the extent that such approvals do not
materialize, the Company's ability to service the aerospace market could be
adversely affected.
Government
The Company manufactures high precision ball and roller bearings, commercial
ball bearings and metal-to-metal and self-lubricating plain bearings for all
branches of the United States military, and certain foreign military forces. In
addition to products that meet military specifications, these customers often
require precision products made of specialized materials to custom designs and
specifications. The Company manufactures an extensive line of standard products
that conform to many domestic military application requirements, as well as
customized products designed for unique applications. Product approval for use
on military equipment is often a lengthy process ranging from six months to
three years, and represents a significant barrier to new entrants.
Government sales accounted for 5% of the Company's fiscal 1998 net sales,
consisting primarily of replacement bearings on programs for which the Company
is the sole source supplier. Despite cutbacks in the overall defense budget
during the 1990s, appropriations for maintenance and repairs for product
platforms serviced by the Company have remained stable. Military programs for
which the Company supplies component products include airplanes, helicopters,
turbine engines and armored vehicles.
While a significant portion of the Company's sales are directly or
indirectly to the government, related military or other government projects, no
significant portion of such sales are subject to renegotiation of profits or
termination of contracts at the election of the government. However, compliance
with various government regulations may be required. Violations of such
regulations could result in termination of the Company's contracts, which may
have material adverse effects on the Company's operations. In addition,
consolidation and combination which is occurring in the defense industry may
eliminate customers from the industry and/or put downward pricing pressures on
sales of component parts sold by the Company. Such factors could result in a
material adverse effect on the Company.
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Products
The Company's product lines include four broad categories: plain bearings,
roller bearings, ball bearings and linear precision products, each of which
includes both standard and highly specialized and customized products. Within
the four major categories that encompass the Company's product offerings, its
major bearing products include heavy duty needle roller bearings, cam follower
bearings, metal-to-metal and self-lubricating rod ends and spherical bearings,
high precision ball and roller bearings and semi-precision unground ball
bearings. Bearings are employed to fulfill several functions including
reduction of friction, transfer of motion and carriage of loads.
Plain Bearings
Plain bearings accounted for approximately 41% of the Company's fiscal
1998 net sales. In general, plain bearings are produced with either
self-lubricating or metal to metal designs and consist of several
sub-classes, including rod end bearings, spherical plain bearings and journal
bearings. Unlike ball bearings, which are used in high speed rotational
applications, plain bearings are primarily used to rectify inevitable
misalignments in various mechanical components. Such misalignments are either
due to machining inaccuracies or result when components change position
relative to each other. Spherical plain bearings are designed for heavy
equipment applications. Spherical plain bearings and rod end bearings are
used in the aerospace market segment in the same applications as airframe
control ball bearings. Heim and TDC produce teflon fabric lined sleeves for
the aerospace market segment.
Roller Bearings
Roller bearings are anti-friction bearings that use rollers instead of
balls. The Company manufactures three basic types of roller bearings: heavy duty
needle roller bearings with inner rings, cam followers and mast guides and
aircraft roller bearings. The sale of roller bearings accounted for 29% of the
Company's fiscal 1998 net sales. Cam followers and mast guides have widespread
use in heavy industrial machinery applications. The Company is a leading
producer of roller bearings for use in helicopters. The Company offers several
heavy duty needle roller bearing designs produced at the Bremen and Miller
facilities. Needle bearings are used in various industrial applications and in
certain U.S. military aircraft platforms bearing applications that require high
load carrying capability in a confined space. The Company is the sole source
supplier of rotor head bearings for certain military helicopter platforms. The
product is also used as a shaft for another type of bearing or to support
rotating components in mechanical or electromechanical devices. The Company
produces this product in bearing quality steel but also has the capability to
produce this product from various grades of low carbon, stainless or tool steel.
Ball Bearings
The Company manufactures four basic types of ball bearings: high precision
aerospace, airframe control, thin section and commercial ball bearings. Ball
bearings accounted for 26% of the Company's fiscal 1998 net sales. High
precision aerospace bearings are primarily sold to customers in government or
the defense industry that require more technically sophisticated bearing
products providing higher degrees of fault tolerance given the criticality of
the applications in which they are used. Airframe control ball bearings are
precision ball bearings that are plated to resist corrosion
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and are qualified under a military specification. Thin section ball bearings are
specialized bearings which use extremely thin cross sections and give
specialized machinery manufacturers many advantages. The Company is also
involved in two niche market segments: unground ball bearings and specialty inch
and metric ball bearings.
Linear Precision Products
LPP produces precision ground ball bearing screws that offer repeatable
accuracy in machine tools, transfer lines, robotic handling and semiconductor
equipment. Linear precision products accounted for approximately 4% of the
Company's fiscal 1998 net sales. LPP's products are primarily used in the
machine tool industry where the Company believes significant opportunities to
cross-sell the Company's other products exist. LPP also serves many new,
replacement and repair markets through an agreement with Warner Electric, a
division of Dana Corporation.
New Products
The Company aggressively develops and acquires new products and determines
new applications for existing products. Some of the Company's recent new product
introductions in the industrial market segment include: the RBC self-lubricated,
fibrinoid lined spherical plain bearing, designed to meet an increasing demand
for products that are not lubricated and totally maintenance free; the NBC heavy
duty needle roller bearing series; a commercial thin section ball bearing, which
the Company developed by capitalizing on ITB's expertise in the aerospace
industry and adapted for industrial use; and the Spherco self-lubricated
fiberglide rod end, a maintenance-free rod end with reduced radial play.
In the aerospace and defense markets, the Company's new products include the
ITB swashplate thin section ball bearings and Heim ball bearing rod ends. The
Company is also concurrently working with Boeing to develop weight saving
products. The Company has submitted samples and test data to the Department of
the Navy for military approval, which is required for the sale of the Company's
aircraft cam follower product line to the aerospace industry.
Bearing Refurbishment Program
ITB has developed a bearing refurbishment center which commenced operations
in April 1997. Management estimates this to be a $100 million market which
historically has not been well served. The Company believes that, as an OEM
manufacturer of bearing components, it is well positioned to service this
industry. With new bearing lead times for some products that will be served by
this facility in excess of 430 days, the Company believes bearing refurbishment
will continue to be a growing market segment. As material costs are minimal and
most primary machining and grinding operations are not required to operate in
this market, the opportunity exists for higher margins. The Company does not
currently expect this program to have a material impact upon its results of
operations or liquidity for at least the next three to five years.
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Manufacturing and Operations
The Company's production processes are designed to reduce costs and improve
overall profitability. Using its operating strategy, the Company endeavors to
design its manufacturing process so that machine and labor utilization are
optimized and total costs are reduced. Cost savings are generated through
effective management of monthly product line profit and loss. On a monthly
basis, gross margins of every product line within each product group are
reviewed. The Company monitors the progress of its efficiency efforts on an
ongoing basis, both monthly and quarterly, and reacts quickly to resolve
problems or capitalize on unanticipated opportunities.
Custom products are sold at a premium based on factors such as lot size and
availability. Management believes it has a thorough understanding of the
products and customers in the markets it serves, allowing the Company to utilize
aggressive and competitive pricing practices.
Capacity
The Company's plants currently run on a single shift and a light second
shift at selected locations to meet the demands of its customers. Management
believes that current capacity levels, with annual capital expenditures equal to
approximately 5% of sales in turning and grinding equipment in the future, will
permit the Company to effectively meet demand levels through at least 2002.
Management also believes that as it continues to invest in bearing
professionals, the ability to increase capacity and move to full second shifts,
if required, could be accomplished without compromising product quality or
involving significant additional capital expenditure.
Inventory Management
The Company's increasing emphasis on the distributor/aftermarket has
required it to maintain greater inventories of a broader range of products than
the OEM market historically demanded. As a result, the Company has implemented
an inventory management program designed to balance customer delivery
requirements with economically optimal inventory levels. In this program, each
product is categorized based on characteristics including order frequency,
number of customers and sales volume. Using this classification system,
management's primary goal is to maintain a sufficient supply of standard items
while minimizing warehousing costs. In addition, production cost savings are
achieved by optimizing plant scheduling around inventory levels and customer
delivery requirements. This leads to more efficient utilization of manufacturing
facilities and minimized plant production changes while maintaining sufficient
inventories to service customer needs.
Integration of Acquisitions
The Company has demonstrated an ability to quickly institute programs which
improve the performance of acquired companies. The process involves applying the
Company's operating strategy, rationalizing the product offerings and
appropriately capitalizing the acquisition.
Marketing
The Company's marketing strategy is aimed at increasing sales within its
three primary market sectors and targeting specific profitable niche products.
To effect this strategy, the Company seeks to expand into geographic areas not
previously served by it and continues to
11
<PAGE>
exploit new markets and industries for existing and new products. The Company
employs a technically proficient sales force and also utilizes marketing
managers, product managers, customer service representatives and product
application engineers in its selling efforts.
Despite the difficulties inherent in the development of a quality,
technically astute, sales force in the bearing industry, the Company has been
able to accelerate the growth of its sales force through the hiring of sales
personnel with prior bearing industry experience, complemented by an in-house
training program, implemented in 1995, which has graduated 13 professionals. The
Company will continue to hire and develop expert sales professionals and
strategically locate them to implement its expansion strategy. Today, the
Company employs strategically located sales professionals nationwide in its
sales and marketing effort.
The Company has placed an emphasis on increasing sales to distributors
serving the spare parts aftermarket in the Company's key industry markets. Sales
to this market tend to be less cyclical as they arise out of end users' needs
for replacement bearings on existing equipment. See "Customers and Markets."
Management estimates that sales to the replacement market exceeded 60% of the
Company's fiscal 1998 net sales. Management intends to continue to focus on
building distributor sales volume.
With regard to its OEM customers, the Company has and continues to focus on
establishing and maintaining relationships with OEMs that produce products with
strong aftermarket demand characteristics for the Company's products. The
Company's OEM relationships also provide it with extensive cross-selling
opportunities, as many OEM products utilize several types of bearings
manufactured by the Company.
Competition
Competition in the bearing industry is based on a number of factors,
including price, product line offering, technical service and timeliness of
supply. The Company believes that it is well positioned to compete with regard
to each of these factors in each of the markets in which it operates.
For large run bearing products, price is a very important factor. Larger
manufacturers generally are relative low cost producers in the more standard
bearing product lines and are thus able to attain extensive market shares.
However, with niche product lines, when the production runs are smaller,
larger manufacturers are often unable to achieve the economies of scale
needed to maintain their low-cost producer status. As a result, while the
Company competes with the larger bearing manufacturers in some of the more
standard bearing product markets, its primary competition includes smaller
niche companies such as Kaydon Corporation, New Hampshire Ball Bearings and
McGill Manufacturing Company, Inc. Competitors to the Company's ballscrew
product line are 20th Century and Thompson.
Bearings manufacturers operating in the more specialized market compete by
maintaining a broad product line and adequate inventories to service the
aftermarket. This enables such manufacturers to exploit the trend of OEMs
towards sourcing a broader range of products from a small number of suppliers.
Additionally, in certain industries and groups, purchasers require product
approval on an industry or company specific level for their component parts.
12
<PAGE>
Other factors in the more specialized bearing market include strong
distribution channels, quality product, strong technical product service,
customer support and long-term customer relationships.
While the Company believes that it has significant strengths over several of
its competitors, many of its competitors are more diversified than the Company,
have greater resources than the Company and possess greater market share in many
segments of the bearing industry. In addition, the Company relies on certain of
its competitors for its own raw materials and in certain circumstances, produces
products for and sells products to its competitors for resale under such
competitors names. See "Suppliers and Raw Materials."
Backlog
As of March 28, 1998, the Company had a backlog of $78.2 million as compared
to a backlog of $63.1 million as of March 29, 1997. The 1998 backlog includes
$4.2 million in Bremen orders which had no comparable balance at March 29, 1997.
The Company has historically maintained a strong backlog of orders. The Company
sells many of its products pursuant to contractual agreements, single source
relationships or long-term purchase orders, each of which may permit early
termination by the customer. However, due to the nature of many of the products
supplied by the Company and the lack of availability of alternative suppliers to
meet the demands of such customers' orders in a timely manner, the Company
believes that it is not practical or prudent for most customers, including many
of the Company's largest customers, to shift their bearing business to other
suppliers.
Employees
The Company had approximately 1,200 employees at March 28, 1998.
Currently, collective bargaining agreements with the UAW cover
substantially all the hourly employees at the Company's West Trenton, New
Jersey, Fairfield, Connecticut and Bremen, Indiana plants, and a collective
bargaining agreement with the USWA covers substantially all the hourly
employees at the Company's Kulpsville, Pennsylvania plant. The West Trenton
agreement expires on May 31, 1999, the Fairfield Agreement expires on January
31, 1999, the Kulpsville agreement expires on October 23, 1999 and the Bremen
agreement expires on July 16, 1999. All other hourly employees are
non-unionized.
The Company considers its relations with its employees to be satisfactory
and has not experienced a significant work stoppage in over twelve years.
However, there can be no assurance that additional employees who are not
represented by unions will not elect to be so represented in the future or that
any of the collective bargaining agreements will be renewed when they expire or
that the Company will not experience strikes, work stoppages or other
situations.
In addition, the Company business is managed by a small number of key
executive officers. Accordingly, the loss of services of certain of these
executives, including Dr. Hartnett, could have a material adverse impact on the
financial condition and results of operations of the Company. There can be no
assurance that the services of such personnel will continue to be made
available.
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Suppliers and Raw Materials
The Company obtains raw materials, component parts and supplies from a
variety of sources and generally from more than one supplier. The Company's
principal raw material is steel. The Company's suppliers and sources of raw
materials are based in the United States. The Company believes that its sources
are adequate for its needs in the foreseeable future, that there exist
alternative suppliers for its raw materials and that in most cases readily
available alternative materials can be used for most of its raw materials. The
Company does not believe that the loss of any one supplier would have a material
adverse effect on the financial condition or results of operations of the
Company.
Notwithstanding the foregoing, the Company relies on certain of its
competitors for its own raw materials. There is no assurance that such
competitors will continue to supply raw materials to the Company in the future.
Intellectual Property
The Company's policy is to file patent applications to protect its
technology, inventions and improvements that are important to the development of
its business, and to seek trademark protection with respect to its product
titles that have achieved brand name recognition. The Company also relies upon
trade secrets, know-how and continuing technological innovation to develop and
maintain its competitive position. The Company holds six United States patents
(including those covering the RBC Roller(TM) cam follower and Quadlube(TM)
spherical plain bearing) and has three additional United States patent
applications pending. The Company has registered twelve trademarks in the United
States. There can be no assurance that such rights will not be infringed upon,
that additional patents will be issued as a result of the Company's applications
and that the Company's trade secrets will not otherwise become known to or
independently developed by competitors. The Company believes that it would have
adequate remedies for any such infringement or use or that claims allowed under
such patents or any existing patents will not be challenged or invalidated or
would be of adequate scope to protect the Company's technology. The Company does
not believe that any individual item of intellectual property is material to its
business.
Environmental Compliance
The Company is subject to various federal, state and local environmental
laws, ordinances and regulations, including those governing discharges of
pollutants into the air and water, the storage, handling and disposal of solid
wastes, hazardous wastes and hazardous substances and the health and safety of
employees ("Environmental Laws"). Agencies responsible for enforcing
Environmental Laws have authority to impose significant civil or criminal
penalties for non-compliance. The Company believes it is currently in material
compliance with all applicable requirements of Environmental Laws, but there can
be no assurance that some future non-compliance will not result in the
imposition of significant liabilities.
The Company also may be liable under Environmental Laws, including the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA"), state analogs to CERCLA and certain state property transfer laws,
for the costs of investigation and remediation of contamination at facilities
owned or operated by the Company, or at other facilities at which the Company
has disposed of hazardous substances. In connection with such contamination, the
14
<PAGE>
Company may also be liable for natural resource damages, government penalties
and claims by third parties for personal injury and property damage.
State agencies are currently overseeing investigation, remediation and/or
monitoring activities at the Company's facilities in Fairfield, Connecticut,
West Trenton, New Jersey, Santa Ana, California, Rancho Dominguez, California
and Hartsville, South Carolina and the prior property owner has conducted
limited remediation at the Company's Kulpsville, Pennsylvania facility. The
former owners of these facilities have agreed to indemnify the Company for
liabilities arising from environmental conditions that existed prior to the date
of purchase of such facilities by the Company, which has covered most of the
costs of ongoing activities to date, although the Company has relinquished the
indemnity for the Fairfield, Connecticut facility. Moreover, there can be no
assurance that the indemnities relating to the other facilities, all of which
contain negotiated dollar limits, will be adequate to resolve any remaining
cleanup liabilities or that the indemnifying parties will continue to perform
their indemnification obligations.
In March 1996, the Company entered into a stipulated settlement agreement
with the New Jersey Attorney General settling its liability for an unpermitted
release of pollutants in July 1994 from its West Trenton, New Jersey facility
resulting in a fish kill in a tributary to the Delaware River. Under the terms
of the agreement, the Company paid a $150,000 civil penalty to the State of New
Jersey and made a $50,000 donation to a local conservation group. The Company
does not believe that any further liability will result from this event.
At the Company's two facilities located in California and its facility in
New Jersey, the previous owners of the assets purchased by the Company
indemnified the Company for liabilities arising from environmental conditions
that existed prior to the date of the Company's purchase of such assets, subject
to certain thresholds, limitations and caps, and are undertaking cleanup in
fulfillment of those indemnification obligations. With respect to the Rancho
Dominguez, California facility, the Company has contributed a total of
approximately $100,000 toward the cost of the on-going cleanup. Under the
acquisition agreement, the previous facility owner is responsible for all
further costs to cleanup conditions existing at the time of the transfer of the
facility, up to a maximum of the full purchase price. The previous owner is
continuing to undertake cleanup activities at this facility. To the Company's
knowledge, cleanup costs are not expected to approach the indemnification cap
limit.
Cleanup has been completed at the Company's Santa Ana, California facility,
although standard monitoring continues as required by the regional regulatory
authority. Currently, the previous owner is working with this regulatory
authority to obtain final approval and closure of the now-concluded cleanup
activities at this facility. The Company did not contribute toward the costs of
cleanup, and has not contributed toward the ongoing monitoring costs. To the
Company's knowledge, cleanup and monitoring costs have not approached the
$4.5 million limit on the previous owner's liability under the acquisition
agreement for this facility.
At the West Trenton, New Jersey facility, the previous facility owner has
been investigating and remediating the land where the facility is located since
the mid-1980s. The previous owner, who still owns the real property on which the
facility is located, both indemnified the Company with respect to its cleanup
obligations and is performing the cleanup pursuant to a consent order with the
New Jersey Department of Environmental Protection. The Company has not
contributed to the costs of remediation at this facility, and does not expect to
do so with respect to conditions existing at the time the Company acquired the
facility.
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Finally, limited environmental activities have been conducted at the
Company's Kulpsville, Pennsylvania and Hartsville, South Carolina facilities.
The prior owner of the Kulpsville facility is undertaking limited remediation at
that facility in fulfillment of its indemnification obligations. Also, at the
request of the state regulatory agency, the Company is monitoring trace level
contamination at its Hartsville, South Carolina facility. This contamination
resulted from operations prior to the Company's acquisition of the facility.
Because the contamination has been detected at very low levels which are
decreasing, the state has not required cleanup activities beyond monitoring.
Monitoring costs have remained minimal and are being paid by the Company.
However, if the state regulatory agency were to require cleanup activities in
the future, the cost of that cleanup would be covered by an indemnity with the
prior facility owner. There can be no assurance that the cost of such a cleanup,
if required, would not exceed the limits of the prior owner's indemnification
obligation to the Company.
Certain types of property transactions in Connecticut and New Jersey may
trigger investigation and cleanup obligations under the Connecticut Transfer
Act (the "CTA") or the New Jersey Industrial Site Recovery Act (the
"IRSA"), respectively. In connection with the purchase of its Fairfield,
Connecticut facility in 1996, the Company was required by the CTA to submit
an investigation and remediation plan for known environmental contamination
at that facility. Although this known contamination had been the result of
operations conducted by the facility's prior owner, the Company agreed to
assume responsibility for completing cleanup efforts previously initiated by
that owner. In 1996, the Company submitted and obtained regulatory approval
for its investigation and remediation plan as required by the CTA. In 1997,
the Company's Recapitalization required an additional CTA investigation of
the Fairfield facility. The Company's 1997 CTA investigation found that
residual soil and ground water contamination attributable to the prior
owner's operations continued to be present at the facility. In February 1998,
the Company submitted these findings to the Connecticut regulatory
authorities. While the Company believes that its total investigation and
cleanup costs will not exceed $50,000 (including attorney's fees), and that
its findings will not result in any further investigation or remediation
obligations, Connecticut regulators may require additional cleanup or
monitoring of the residual contamination at this facility. If such
activities are required, there can be no assurance that the Company's total
investigation and remediation costs will not exceed its $50,000 estimate.
The Company's Recapitalization in 1997 also triggered ISRA obligations at
its West Trenton facility, obligating the Company to investigate all possible
past hazardous substance releases, and to cleanup any resulting
contamination, at that facility. Under ISRA, investigation requirements for
facilities that are currently being remediated pursuant to an earlier
ISRA-triggering transaction may be merged into that ongoing ISRA
investigation. In this case, the West Trenton facility has been the subject
of an ongoing ISRA (and its predecessor statute) groundwater investigation
and remediation by the facility's prior owner since the Company's acquisition
of the facility in 1987. Accordingly, the New Jersey regulatory authorities
have informed the Company that its ISRA obligations triggered by the 1997
Recapitalization are being satisfied by the prior owner's ongoing ISRA
investigation and remediation. That investigation has not found any
additional contamination that would require remediation beyond that which
continues to be performed by the facility's prior owner.
In connection with the Recapitalization and the redemption of certain shares
of Preferred Stock by Holdings pursuant thereto, Holdings released certain
preferred stockholders, who were prior stockholders of the Company, from certain
indemnification obligations owed to Holdings. Such obligations arose under the
agreement pursuant to which Holdings purchased the Company from such
stockholders. The shares of Preferred Stock were held in escrow in connection
with the stockholders' obligations under such indemnification provisions. The
provisions of the escrow provided that the escrowed shares were to be released
upon any transaction involving a change in control of Holdings, except to the
extent of claims previously made. As there were no pending claims upon
consummation of the Recapitalization, such shares were released from escrow and
redeemed by Holdings. Any claims for environmental remediation at the facilities
covered by the
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released indemnification are being covered by other indemnifying parties, and
the Company believes that such other indemnification obligations should be
sufficient to cover all costs associated with the known or likely environmental
conditions at such facilities.
Under applicable Connecticut law, the purchase by the Company of its
Fairfield facility in 1996 necessitated the undertaking of an environmental
investigation of the facility. The results of such investigation revealed the
presence of certain low level soil and groundwater contamination, the
remediation of which had been commenced by the previous owner of the facility.
In 1996, the Company received regulatory approval of an investigation and
remediation plan, and has implemented that plan at a total cost that the Company
estimates will reach $50,000 (including attorney's fees). All costs incurred to
date in connection with such remediation activities have been satisfied out of
current operations of the Company. As the magnitude of such costs, if any, is
impossible to determine at this time, the Company has not made any reserves or
taken any charges in connection therewith.
Prior to, and in connection with, the acquisition of a facility or business,
the Company endeavors to obtain indemnification from parties whom the Company
believes to be able to support such indemnities. Further, the Company takes such
actions as it deems warranted to establish the scope of any environmental issues
that exist as of such purchase, as well as to assess what potential
environmental liabilities exist. Such actions include investigations by members
of management of the Company of the records and facilities relating to the plant
or business to be acquired, analysis of existing investigations, analyses and
compliance work done by the sellers and commissioning its own studies,
investigations or analyses.
The Company monitors its various facilities and operations for compliance
with Environmental Laws and exposure to environmental claims, including, where
deemed necessary, the hiring of outside consultants to conduct surveys and
tests. When presented with a potential violation or claim, the manager of the
facility in question will, in coordination and consultation with management of
the Company, endeavor to establish the scope and nature of the issue, and, if
possible, resolve the issue without resort to litigation or formal proceedings.
The Company also undertakes an analysis of the various indemnification
obligations owed to it to ascertain which, if any, would apply, and the
procedures to be followed to perfect its rights with respect to potential
recoveries. Several members of management of the Company have experience in
dealing with such issues and take a leading role in resolving issues that arise.
Future events, such as new releases of hazardous substances, new information
concerning past releases of hazardous substances, changes in existing
Environmental Laws or their interpretation, and more rigorous enforcement by
regulatory authorities, may give rise to additional expenditures, compliance
requirements or liabilities that could have a material adverse effect on the
financial condition and results of the operations of the Company. See "Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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ITEM 2. PROPERTIES
The principal executive offices of the Company are comprised of 13,728
square feet of owned office space located at the Heim division in Fairfield,
Connecticut which it owns. The Company conducts manufacturing in approximately
80,000 square feet at such facility where it manufactures plain bearing product,
both teflon lined and metal to metal and commercial ball bearings. The Company
also owns: (i) a facility in Hartsville, South Carolina, consisting of
approximately 104,000 square feet of manufacturing space, occupied by the RBC
division, at which facility the Company manufacturers the smaller end of all of
the RBC division's product lines, and performs the initial machining operations
for a large percentage of the product manufactured in the West Trenton, New
Jersey facility; (ii) a facility in Kulpsville, Pennsylvania, consisting of
approximately 130,000 square feet of manufacturing space, occupied by Nice, at
which facility the Company manufactures commercial ground and unground ball
bearings; (iii) a facility in Rancho Dominguez, California, consisting of
approximately 69,100 square feet of manufacturing space, occupied by the ITB
division, at which facility the Company manufactures high precision ball and
roller bearings for the aerospace industry, thin section ball bearings and large
diameter cam followers (iv) a facility in Walterboro, South Carolina, consisting
of approximately 40,000 square feet of manufacturing space, occupied by LPP, at
which facility the Company manufactures ball screws, ball spline and ball screw
actuator product lines and (v) 48,000 square feet of manufacturing space in
Bremen, Indiana, occupied by Miller, at which facility the Company produces
needle bearings. Additionally the Company leases: (i) 55,000 square feet of
manufacturing space in West Trenton, New Jersey, occupied by the RBC division,
at which facility the Company manufactures heavy duty needle roller bearings for
the aerospace industry as well as the RBC division's larger diameter heavy duty
needle roller bearings and single fracture spherical plain bearings (ii) 22,000
square feet of space in Waterbury, Connecticut and (iii) a facility in Bremen,
Indiana consisting of approximately 64,000 square feet of manufacturing space,
occupied by Bremen, at which facility the Company manufacturers needle roller
bearings.
The lease for the West Trenton, New Jersey facility expires on July 31, 2000
and the lease for the Waterbury, Connecticut facility expires on March 31, 2001.
At the Company's facility in Waterbury, Connecticut, its Engineered
Components Division ("ECD"), has recently come on line as a Computer Numerically
Controlled Turning center. The mission of ECD is to be a manufacturer of turned
rings for the other operating units of the Company. The operation currently has
15 employees and approximately $1.5 million in equipment.
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ITEM 3. LEGAL PROCEEDINGS
There are various claims and legal proceedings against the Company relating
to its operations in the normal course of business, none of which the Company
believes to be material. The Company currently maintains insurance coverage for
product liability claims. There can be no assurance that indemnification from
its customers and coverage under insurance policies will be adequate to cover
any future product liability claims against the Company.
19
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information
As of March 28, 1998, there were 100 shares of common stock, par value $.01
per share, of the Company ("Company Common Stock") outstanding, all of which
were held by Holdings. There is no established public trading market for the
Company Common Stock.
As of March 28, 1998, there were 5,875 shares of Holdings Class A Common
Stock outstanding, held by sixteen holders and 3,948 shares of Class B Common
Stock held by Michael J. Hartnett. In addition, as of March 28, 1998, there were
outstanding warrants and options to purchase up to an additional 15,915 shares
of Class A Common Stock and 10,077 shares of Class B Common Stock.
Dividends
The Company, as a wholly-owned subsidiary of Holdings, from time to time
will pay dividends (including the payment of the Dividend in connection with the
Recapitalization) to Holdings from funds legally available therefor to fund
Holdings' operations. No cash dividends have been declared by Holdings on the
Common Stock in the last three (3) years. Holdings intends to retain earnings to
finance the development and growth of its business. Accordingly, Holdings does
not anticipate that any dividends will be declared on the Holdings Common Stock
for the foreseeable future. Future payments of cash dividends, if any, will
depend on the financial condition, results or operations, business conditions,
capital requirements, restrictions contained in agreements, future prospects and
other factors deemed relevant by the Board of Directors of the Company and
Holdings. Further, the Company's ability to declare and pay dividends on the
Company Common Stock is restricted by certain covenants in the credit agreement
relating to the Senior Credit Facilities (the "Credit Agreement") and the
Indenture. Holdings' ability to pay and declare dividends is restricted by
certain covenants in the indenture related to the Discount Debentures (the
"Discount Indenture").
Unregistered Sales of Stock
In connection with the Recapitalization, Holdings assigned its right
under the Recapitalization Agreement to purchase certain shares of Holdings
Common Stock and Holdings Warrants to Dr. Hartnett, certain affiliates of
CSFB, the Oaktree Fund, Kirk Morrison, The Sommers Family Trust and Mitchell
Quain. In addition, in connection with the Recapitalizaiton, Holdings issued
warrants to purchase 1,250 shares of Class B Common Stock to Dr. Hartnett and
issued the Discount Warrants to the Oaktree Fund and Northstar (as defined
herein). See "Item 1. Business -- Recent Developments--Recapitalization."
Pursuant to the Stock Option Plan (as defined herein), Holdings has issued
options to purchase 1,728 shares of Class A Common Stock, and as a result
thereof was obligated to issue additional warrants to purchase 432 shares of
Class A Common Stock to the Oaktree Fund and Northstar pursuant to certain
anti-dilution provisions of the Discount Warrants.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for the fiscal year ended March 28,
1998 has been derived from the Consolidated Financial Statements of the Company
which have been audited by Arthur Andersen LLP, and the selected financial data
presented below for each of the fiscal years in the four-year period ended March
29, 1997 has been derived from the Consolidated Financial Statements of the
Company, which have been audited by Ernst & Young, LLP. The information
presented below should be read in conjunction with the "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes to Consolidated Financial
Statements contained elsewhere in this Form 10-K.
Fiscal Year Ended
<TABLE>
<CAPTION>
April 2 April 1 March 30 March 29 March 28
1994(a) 1995 1996 1997(b) 1998( c)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Statement of Operations Data:
Net Sales $ 65,306 $ 73,904 $ 82,233 $ 93,427 $ 136,009
Operating Income (Loss) $ (3,185) $ 6,656 $ 9,687 $ 13,202 $ 10,600
Extraordinary Charge, Net $ -- $ -- $ 995 $ -- $ 625
Net Income (Loss) $ (4,797) $ 101 $ 827 $ 4,640 $ (1,917)
Balance Sheet Data:
Total Assets $ 96,761 $ 106,136 $ 110,182 $ 124,513 $ 156,405
Total Debt $ 51,254 $ 60,816 $ 56,079 $ 62,815 $ 136,200
Cash Dividends $ -- $ -- $ -- $ -- $ 56,977
Stockholder's Equity(Deficit) $ 20,432 $ 22,187 $ 35,785 $ 37,372 $ (14,922)
- --------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Includes the results of operations for Heim following the effective date of
its acquisition in May 1993.
(b) Includes the results of operations for LPP and Nice following their
respective effective dates of acquisition in October 1996 and February
1997.
(c) Includes the results of operations for Bremen following the effective date
of its acquisition in July 1997.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Fiscal 1998 Compared to Fiscal 1997
Net Sales
The Company's net sales increased by approximately 45.6%, or $42.6 million,
to $136.0 million in fiscal 1998 from $93.4 million in fiscal 1997. Net sales
growth in fiscal 1998 occurred both through internal growth in base business and
through acquisitions. The increase includes net sales from acquisitions totaling
approximately $35.5 million from LPP, Nice and Bremen, which included full year
results for LPP and Nice and nine months for Bremen. Net sales increased
approximately $13.2 million or 15.1% without LPP, Nice and Bremen sales. Fiscal
1997 net sales included $6.1 million for LPP and Nice, whose results of
operations were included for six months and two months, respectively. The
primary reason for the internal growth was due to strong performance,
particularly in the aerospace, airframe and construction and mining areas.
Gross Margin
Gross margin increased by approximately 32.5% or $9.5 million, to $38.7
million for fiscal 1998 from $29.2 million for fiscal 1997. Gross margin as a
percentage of net sales decreased by 2.8 percentage points to 28.5% for fiscal
1998 from approximately 31.3% for fiscal 1997, primarily due to changes in the
Company's product mix. This was primarily due to the lower gross profit margins
realized on sales from LPP, Nice and Bremen which are by their nature lower
margin businesses. Gross margins as a percentage of net sales, excluding sales
by these acquired companies was 30.4% for fiscal 1998.
Operating Expenses
Selling, general and administrative ("SG&A") expenses increased by
approximately 34.5%, or $5.0 million, to $19.5 million in fiscal 1998 from $14.5
million in fiscal 1997. The increase is primarily due to the additional expenses
incurred relating to the acquired companies and infrastructure costs to support
the expanded business. SG&A as a percentage of net sales decreased to 14.3% for
fiscal 1998 from 15.5% last year. The improvement of 1.2 percentage points is
primarily due to the fixed nature of certain SG&A costs compared to the higher
sales level.
The Company took a charge to operations of $7.1 million for compensation
expenses relating to the exercise of warrants in connection with the
Recapitalization of $0.5 million and the extension of the term of a number of
warrants of $6.6 million. This extension was deemed to constitute the issuance
of new warrants, with a resulting charge to earnings. Other operating expenses
increased to $1.5 million in fiscal 1998 from $ 1.4 million for fiscal 1997.
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Operating Income
Operating income decreased by $2.6 million to $10.6 million for the current
year versus $13.2 million for fiscal 1997. Excluding the $7.1 million
compensation charge, operating income increased by $4.5 million, or
approximately 34.3%, to $17.7 million for the current year compared to $13.2
million for last year. The increase is primarily related to the higher gross
margin resulting from higher sales volume, partially offset by higher SG&A
expenses.
Interest Expense
Interest expense for fiscal 1998 was $11.8 million as compared to $5.3
million for fiscal 1997. The increase of $6.5 million is primarily related to
the debt incurred in connection with the Recapitalization.
Income (Loss) Before Taxes and Extraordinary Charge
The Company had a loss before taxes and extraordinary charge of $(1.2)
million in fiscal 1998 as compared to income of $7.9 million in fiscal 1997.
This decrease of $9.1 million is primarily due to higher interest expense of
$6.5 million and the $7.1 million compensation charge partially offset by the
otherwise $4.5 million increase in operating income.
Extraordinary Charge
The Company took an extraordinary charge for the year ended March 28, 1998
related to the write off of unamortized deferred financing costs due to the
Company's early extinguishment of debt in connection with the Recapitalization.
The extraordinary charge was $1.0 million and is reflected net of the related
tax benefit of $0.4 million.
Net Income (Loss)
The Company had a net loss of $(1.9) million for fiscal 1998 compared to net
income of $4.6 million for the prior year. The $6.5 million decrease between
fiscal 1998 and fiscal 1997 is the result of the $9.0 million decrease in income
before taxes and extraordinary charge less the tax expense deduction of $3.1
million plus the extraordinary charge of $0.6 million related to the write-off
of deferred finance fees associated to debt retired as part of the
Recapitalization.
Fiscal 1997 Compared to Fiscal 1996
Net Sales
The Company's net sales increased by approximately 13.6% , or $11.2 million,
to $93.4 million for fiscal 1997 from $82.2 million for fiscal 1996. Net sales
growth in fiscal 1997 occurred both through internal growth in base business and
through acquisitions. The net sales figure for fiscal 1997 includes partial year
results for LPP, acquired effective October 1996, and Nice, acquired effective
February 1997. These acquisitions contributed approximately $3.2 million and
$2.9 million, respectively, to the Company's fiscal 1997 net sales. Net sales
for the Company
24
<PAGE>
without giving effect to such acquisitions increased by approximately 6.2%, or
$5.1 million, to $87.3 million for fiscal 1997 from $82.2 million for fiscal
1996. This increase in net sales of $5.1 million was primarily due to an
increase in aerospace OEM and aviation distribution sales.
Gross Margin
Gross margin increased by approximately 31.5%, or $7.0 million, to $29.2
million for fiscal 1997 from $22.2 million for fiscal 1996. Gross margin as a
percentage of sales increased from 27.0% to 31.3%. Fiscal 1996 gross margin
includes the effect of a write-down of inventory of $1.4 million. Excluding this
write-down, gross margin as a percentage of net sales in 1996 would have been
28.7% as compared to 31.3% in 1997. This improvement of 2.6% is primarily
attributed to overhead absorption, increased sales of custom products and
improved pricing and was partially offset by lower margins relating to the
acquisition of LPP and Nice.
Operating Expenses
SG&A expenses increased by approximately 30.9%, or $3.4 million, to $14.5
million for fiscal 1997 from $11.1 million in fiscal 1996. SG&A expenses as a
percentage of net sales increased from approximately 13.5% in fiscal 1996 to
approximately 15.5% in fiscal 1997. Fiscal 1996 selling, general and
administrative expenses reflect an adjustment of $1.2 million relating to a
reduction in other post-employment benefits ("OPEB") liability. Excluding this
adjustment, selling, general and administrative expenses in fiscal 1996 would
have been $12.3 million, or approximately 15.0% of net sales, as compared to
15.5% in fiscal 1997. The increase of 0.5% was primarily attributable to an
increase in selling expenditures to support geographic expansion and increased
corporate expenses to support the growing organizational infrastructure. Other
operating expenses increased by $0.1 million in fiscal 1997 from fiscal 1996 as
described in Note 12 to the Consolidated Financial Statements.
Operating Income
Operating income increased by approximately 36.3%, or $3.5 million, to $13.2
million for fiscal 1997 from $9.7 million for fiscal 1996. The increase in
income from operations was attributable to the same factors that contributed to
the increased gross profit less the increased selling, general and
administrative expenses. Income from operations increased to 14.1% of net sales
for fiscal 1997 from 11.8% for fiscal 1996. Operating earnings were reduced by a
one-time non-recurring estimated charge of $0.5 million related to the
termination of the West Trenton pension fund made and accrued for in fiscal
1997. Similarly, fiscal 1996 income from operations reflects a charge for
environmental expenditures of $0.4 million.
Interest Expense
Interest expense for the fiscal year was $5.3 million compared to $6.2
million for the prior year primarily related to lower rates.
Income Before Taxes and Extraordinary Charge
Income before taxes and extraordinary items increased by $4.4 million to
$7.9 million for fiscal year 1997 from $3.5 million in fiscal year 1996 with
higher gross profits and less interest expense offsetting the increased selling,
general and administrative expenses for the year.
25
<PAGE>
Net Income
Net income for fiscal year 1997 reflects a tax provision of $3.2 million
compared to $1.7 million for fiscal year 1996. Net income increased by $3.8
million to $4.6 million in the current year compared to $0.8 million last year.
Fiscal 1996 results include an extraordinary charge which resulted from the
write-off of unamortized deferred financing costs in connection with the
Company's early extinguishment of debt. The extraordinary charge was $1.7
million and is reflected net of the related income tax benefit of $0.7 million.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately $12.8 million
for fiscal 1998, an improvement of $0.1 million versus fiscal 1997.
Cash used in investing activities decreased by $7.2 million to $10.5 million
in fiscal 1998 from $17.7 million in fiscal 1997. The difference was a result of
a decrease in acquisition disbursements of $8.2 million offset by increased
capital expenditures of $0.7 million and an increase in restricted marketable
securities held by the Company of $0.3 million. The Company anticipates that
capital expenditures for fiscal 1999 will approximate $7 million.
The Company had net cash inflows from financing activities of $7.4
million primarily due to the Recapitalization. In connection with the
Recapitalization, the Company received gross proceeds of $110.0 million from
the sale of the Notes and $16 million under the Term Loans. The Company
utilized these funds to pay off the balance of the Company's then existing
revolving credit facility of $24.6 million and its then existing term debt of
$27.5 million. In addition, the Company paid a dividend to Holdings,
aggregating approximately $56.9 million; used by Holdings for the redemption
of Holdings Common Stock in the amount of $17.6 million, the redemption of
Preferred Stock in the amount of $37.0 million, and the redemption of
Holdings Warrants in the amount of $0.8 million; and approximately $1.5
million for professional and other fees paid by Holdings. Finally, the
Company paid approximately $8.4 million in fees related to the
Recapitalization, approximately $7.6 million of which have been capitalized
as deferred financing costs and are being amortized over the term of the
Notes and Term Loans. During the year, the Company also used $0.5 million for
principal payments on the Term Loans, and $1.4 million of funds for capital
lease obligations.
Principal and interest payments under the Senior Credit Facilities, interest
payments on the Notes, and the funding of acquisitions, represent significant
liquidity requirements for the Company. With respect to the Term Loans, the
Company began to make its required quarterly scheduled principal payments in
September 1997. The Term Loans bear interest at a floating rate based upon the
interest rate option elected by the Company. As a result of the indebtedness
incurred in connection with the Recapitalization, the Company's
post-Recapitalization interest expense will be higher and will have a greater
proportionate impact on net income in comparison to pre-Recapitalization
periods.
The Company believes that borrowings available under the Revolving Credit
Facility, cash flow from operations and cash on hand will provide adequate funds
for ongoing operations, planned capital expenditures and debt service payments
for the foreseeable future. The Company's
26
<PAGE>
ability to incur indebtedness is limited by the terms of the Credit Agreement,
the Indenture and the Discount Indenture.
Year 2000
The Company has made a comprehensive assessment of its computer operations
to identify systems that could be affected by the change in the millennium. The
Company has developed a detailed Year 2000 compliance plan and is utilizing both
internal and external resources to ensure Year 2000 compliance. The Company
expects its Year 2000 conversion to be completed on a timely basis. Costs
related to this conversion are not expected to have a material impact on the
financial results of the Company. However, there can be no assurance that the
systems of other companies on which the Company's systems rely will also be
converted on a timely basis. A failure to convert by another company could have
an adverse effect on the Company.
Environmental Compliance
The Company is subject to various federal, state and local environmental
laws, ordinances and regulations, including those governing discharges of
pollutants into the air and water, the storage, handling and disposal of solid
wastes, hazardous wastes and hazardous substances and the health and safety of
employees. Agencies responsible for enforcing Environmental Laws have authority
to impose significant civil or criminal penalties for non-compliance. The
Company believes it is currently in material compliance with all applicable
requirements of Environmental Laws, but there can be no assurance that some
future non-compliance will not result in the imposition of significant
liabilities.
Additionally, capital expenditures and operating costs associated with the
Company's compliance with Environmental Laws may increase in the future if
environmental laws become more stringent, are enforced more rigorously, or if
the Company's operations were to change.
Prior to, and in connection with, the acquisition of a facility or business,
the Company endeavors to obtain indemnification from parties whom the Company
believes to be able to support such indemnities. Further, the Company takes such
actions as it deems warranted to establish the scope of any environmental issues
that exist as of such purchase, as well as to project what potential
environmental liabilities exist. Such actions include investigations by members
of management of the Company of the records and facilities relating to the
facility or business to be acquired, analysis of existing investigations,
analyses and compliance work done by the sellers and commissioning its own
studies, investigations or analyses.
The Company monitors its various facilities and operations for compliance
with Environmental Laws and exposure to environmental claims, including, where
deemed necessary, the hiring of outside consultants to conduct surveys and
tests. When presented with a potential violation or claim, the manager of the
facility in question will, in coordination and consultation with management of
the Company, endeavor to establish the scope and nature of the issue, and, if
possible, resolve the issue without resort to litigation or formal proceedings.
The Company also undertakes an analysis of the various indemnification
obligations owed to it to ascertain which, if any, would apply, and the
procedures to be followed to perfect its rights with respect to potential
recoveries. Several members of management of the Company have experience in
dealing with such issues and take a leading role in resolving issues that arise.
27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Roller Bearing Company of America, Inc.
Index to Consolidated Financial Statements
Consolidated Financial Statements as of March 28, 1998 and March 29, 1997 and
for each of the three years in the period ended March 28, 1998
<TABLE>
<S> <C>
Report of Independent Accountants - Arthur Andersen, LLP F - 2
Report of Independent Accountants - Ernst & Young, LLP F - 3
Consolidated Statement of Operations F - 4
Consolidated Balance Sheet F - 5
Consolidated Statement of Cash Flows F - 6
Consolidated Statement of Stockholder's (Deficit)/Equity F - 7
Notes to Consolidated Financial Statements F - 8 to F - 21
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholder
Roller Bearing Company of America, Inc.
We have audited the accompanying consolidated balance sheet of Roller Bearing
Company of America, Inc. (a wholly owned subsidiary of Roller Bearing Holding
Company, Inc.) as of March 28, 1998, and the related consolidated statements of
operations, stockholder's (deficit) 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 financial statements referred to above present fairly, in
all material respects, the financial position of Roller Bearing Company of
America, Inc. as of March 28, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 12, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholder
Roller Bearing Company of America, Inc.
We have audited the accompanying consolidated balance sheet of Roller
Bearing Company of America, Inc. (a wholly-owned subsidiary of Roller Bearing
Holding Company, Inc.) as of March 29, 1997 and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
two years in the period ended March 29, 1997. 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 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roller Bearing Company of
America, Inc. at March 29, 1997 and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
March 29, 1997, in conformity with generally accepted accounting principles.
/s/ERNST & YOUNG, LLP
White Plains, New York
May 9, 1997
F-3
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Operations
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------
March 28, March 29, March 30,
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Net sales $ 136,009 $ 93,427 $ 82,233
Cost of sales 97,223 64,215 60,054
------------------------------------
Gross margin 38,786 29,212 22,179
Operating expenses:
Selling, general and administrative 19,492 14,537 11,104
Other expense, net of other income 1,547 1,473 1,388
Compensation related to warrants 7,147 -- --
------------------------------------
28,186 16,010 12,492
Operating income 10,600 13,202 9,687
Interest expense, net 11,761 5,338 6,165
------------------------------------
(Loss) income before taxes and extraordinary charge (1,161) 7,864 3,522
Income tax expense 131 3,224 1,700
------------------------------------
(Loss) income before extraordinary charge (1,292) 4,640 1,822
Extraordinary charge, net 625 -- 995
------------------------------------
Net (loss) income $ (1,917) $ 4,640 $ 827
------------------------------------
------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
March 28, March 29,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 10,625 $ 859
Accounts receivable, net 26,859 19,766
Inventories 38,563 36,852
Prepaid expenses and other current assets 1,996 764
--------- ---------
Total current assets 78,043 58,241
--------- ---------
Property, plant and equipment, net of accumulated depreciation of
$25,815 at March 1998, and $18,611 at March 1997 45,237 40,098
Restricted marketable securities 4,005 3,901
Excess of cost over net assets acquired, net of accumulated amortization
of $3,420 at March 1998, and $2,843 at March 1997 19,334 19,911
Deferred financing costs, net of accumulated amortization of $766 at
March 1998, and $337 at March 1997 7,147 1,383
Other assets 2,639 979
--------- ---------
Total assets $ 156,405 $ 124,513
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities:
Accounts payable $ 12,925 $ 9,644
Accrued expenses and other current liabilities 14,827 7,136
Current portion of long-term debt 1,490 2,500
Obligations under capital leases, current portion 1,585 1,325
--------- ---------
Total current liabilities 30,827 20,605
Long term debt 134,710 60,315
Capital lease obligations, less current portion 2,115 3,141
Other noncurrent liabilities 3,675 3,080
--------- ---------
Total liabilities 171,327 87,141
--------- ---------
Stockholder's (deficit) equity:
Common stock - $.01 par value; 1,000 shares
authorized; 100 shares issued and outstanding
at March 1998, and at March 1997 -- --
Additional paid-in capital 6,600 35,831
Retained (deficit) earnings (21,522) 1,541
--------- ---------
Total stockholder's (deficit) equity (14,922) 37,372
--------- ---------
Total liabilities and stockholder's (deficit) equity $ 156,405 $ 124,513
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
March 28, March 29, March 30,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (1,917) $ 4,640 $ 827
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Deferred income taxes (1,987) 934 2,104
Depreciation 7,137 5,348 4,954
Compensation related to warrants 6,600 -- --
Amortization of excess of cost over net assets acquired 577 578 670
Amortization of deferred financing costs 766 215 327
Extraordinary charge, net 625 -- 995
Changes in working capital, net of acquisition:
(Increase) in accounts receivable (6,622) (1,219) (1,532)
(Increase) in inventories (46) (1,118) (3,064)
(Increase) decrease in prepaid expenses & other current assets (433) 416 167
(Increase) decrease in other non current assets (38) 102 315
Increase (decrease) in accounts payable 1,163 3,014 (507)
Increase (decrease) in accrued expenses & other current liabilities 6,617 148 (2,249)
Increase (decrease) in other non-current liabilities 420 (358) (1,572)
--------- --------- ---------
Net cash provided by operating activities 12,862 12,700 1,435
Cash flows from investing activities:
Purchase of property, plant & equipment, net (6,510) (5,819) (4,857)
(Purchase) sale of restricted marketable securities, net (104) 263 208
Acquisition of subsidiaries (3,937) (12,121) --
--------- --------- ---------
Net cash used in investing activities (10,551) (17,677) (4,649)
Cash flows from financing activities:
Net (decrease) increase in revolving credit facility (24,627) 8,236 (4,225)
Proceeds from long-term debt 126,000 -- 29,300
Payments of long-term debt (27,488) -- (29,812)
Payments of bank term loan (500) (1,500) --
Principal payments on capital lease obligations (1,348) (1,266) (1,271)
Capital contibution from parent -- -- 12,000
Dividend paid to parent company (56,977) -- (1,000)
Financing fees paid in connection with the Recapitalization (7,605) -- (1,412)
--------- --------- ---------
Net cash provided by financing activities 7,455 5,470 3,580
Net increase in cash 9,766 493 366
Cash, at beginning of year 859 366 --
--------- --------- ---------
Cash, at end of year $ 10,625 $ 859 $ 366
--------- --------- ---------
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,826 $ 5,378 $ 6,277
--------- --------- ---------
--------- --------- ---------
Income taxes $ 1,107 $ 425 $ 576
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
Roller Bearing Company of America, Inc.
Consolidated Statements of Stockholders' (Deficit) Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Retained
Additional Earnings/ Minimum
Common Paid-in Accumulated Pension
Stock Capital (Deficit) Liability Total
----------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1995 $ -- $ 23,831 $ (2,926) $ (365) $ 20,540
Capital contribution from Parent -- 12,000 -- -- 12,000
Dividends paid to Parent -- -- (1,000) -- (1,000)
Minimum pension liability adjustment -- -- -- 365 365
Net income -- -- 827 -- 827
----------- ---------- ----------- --------- --------
Balance at March 30, 1996 -- 35,831 (3,099) -- 32,732
Net income -- -- 4,640 -- 4,640
----------- ---------- ----------- --------- --------
Balance at March 29, 1997 -- 35,831 1,541 -- 37,372
Dividend paid to Parent -- (35,831) (21,146) -- (56,977)
Warrant grant -- 6,600 -- -- 6,600
Net loss -- (1,917) -- (1,917)
----------- ---------- ----------- --------- --------
Balance at March 28, 1998 $ -- $ 6,600 $(21,522) $ -- $(14,922)
----------- ---------- ----------- --------- --------
----------- ---------- ----------- --------- --------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
Roller Bearing Company of America, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands)
1. Organization and Business
Roller Bearing Company of America, Inc., ("RBC" or the "Company") is a wholly
owned subsidiary of Roller Bearing Holding Company, Inc. ("Holdings"). On March
31, 1992, Holdings acquired all of the outstanding shares of RBC pursuant to an
Agreement and Plan of Reorganization. The acquisition was accounted for under
the purchase method of accounting. The excess of the purchase price ($20,100)
over the fair market value of the tangible net assets acquired by Holdings has
been pushed down and recorded as excess of cost over net assets acquired by the
Company, and includes the acquisitions below and additional acquisitions made in
1992 and 1993.
The Company manufactures roller bearing components and assembled parts and
designs and manufactures high-precision roller and ball bearings. The Company
sells to a wide variety of original equipment manufacturers ("OEMs") and
distributors who are primarily domestic but widely dispersed geographically.
On June 23, 1997, pursuant to a Redemption and Warrant Purchase Agreement
dated May 20, 1997, Holdings effected a recapitalization of its outstanding
capital stock (including the financing and other transactions consummated by
Holdings, the Company and its subsidiaries in connection therewith, the
"Recapitalization"). In connection with the Recapitalization, the Company
issued the Senior Subordinated Notes and incurred the Term Loans described in
Note 5. The proceeds therefrom were utilized to pay a dividend to Holdings to
finance the redemption of a substantial portion of its outstanding common
stock, all of its outstanding preferred stock and certain outstanding
warrants to purchase common stock, and to pay certain Recapitalization fees
and expenses. This transaction was further financed from the proceeds of
certain debt issued directly by Holdings. In addition, a new group of
investors (who were not previously stockholders of Holdings) purchased shares
of common stock and warrants to purchase common stock of Holdings, directly
from certain stockholders of Holdings. The redemption of shares and warrants
were treated by Holdings as a recapitalization transaction.
Stockholders of Holdings owning approximately 7% of the outstanding voting
shares prior to the effective date of the Recapitalization, owned approximately
71% of the outstanding voting shares immediately following the Recapitalization.
The new group of investors referred to above owned the remaining 29% of the
voting shares at such time and thus are not controlling stockholders of either
Holdings or the Company. As a result, the transaction did not result in the
establishment of new bases in Holdings' or the Company's assets and liabilities.
Funds disbursed by Holdings and the Company were charged against their capital
accounts to the extent permitted by law.
2. Acquisition of Wholly Owned Subsidiaries
In October 1996, Linear Precision Products ("LPP"), a wholly owned subsidiary of
the Company, purchased substantially all of the assets and assumed certain
liabilities of a corporation that manufactures precision and ball bearings. The
acquisition was accounted for under the purchase method of accounting. The
purchase price (approximately $5,500) has been allocated to the assets acquired
and liabilities assumed based upon their respective estimated fair values.
In February 1997, RBC Nice Bearings, Inc. ("Nice"), a wholly owned subsidiary of
the Company, purchased substantially all of the assets and assumed certain
liabilities of a corporation that manufacturers ground or semi-ground specialty
and ball bearings. The acquisition was accounted for under the purchase method
of accounting. The purchase price (approximately $7,500) has been allocated to
the assets acquired and liabilities assumed based upon their respective
estimated fair values.
F-8
<PAGE>
In August 1997, Bremen Bearings, Inc. ("Bremen"), a wholly-owned subsidiary of
the Company, completed the acquisition of the Bremen Bearings Division of SKF
USA, Inc., a manufacturer of needle bearings with facilities in Bremen, Indiana.
The purchase was effective as of July 1, 1997. The acquisition was accounted for
under the purchase method of accounting. The total cost through March 28, 1998
of $5,632 was subject to certain adjustments and subsequent conditions. Thus,
the $3,937 investment in subsidiary consists of $3,640 paid at closing and $297
paid to date for post-closing related expenses. A deferred payment of $473,
which was paid in December 1997 for the installation of certain equipment, has
been classified as the purchase of property, plant and equipment. Additionally,
accrued liabilities includes $1,222 for inventory and equipment which will be
paid in August 1998. The purchase price has been allocated to the assets
acquired and liabilities assumed based upon their respective estimated fair
values.
The results of operations of LPP, Nice and Bremen subsequent to the effective
dates of acquisition are included in the results of operations of the Company.
Pro forma consolidated results of operations of the Company, based upon
pre-acquisition unaudited historical information provided by the sellers of LPP,
Nice and Bremen, for the years ended March 28, 1998, March 29, 1997 and March
30, 1996, as if the acquisitions took place on April 1, 1995, are as follows
(unaudited):
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
March 28, March 29, March 30,
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
Net sales $ 139,881 $ 125,612 $ 121,121
(Loss) income before extraordinary charge $ (1,038) $ 6,571 $ 3,939
Net (loss) income $ (1,663) $ 6,571 $ 3,939
</TABLE>
3. Summary of Significant Accounting Policies
General
The consolidated financial statements include the accounts of RBC, and its
wholly owned subsidiaries, Industrial Tectonics Bearings Corporation ("ITB"),
LPP, Nice and Bremen, as well as its Transport Dynamics ("TDC") and Heim
("Heim") divisions. All material intercompany balances and transactions have
been eliminated in consolidation.
The Company has a fiscal year consisting of 52 or 53 weeks, ending on the
Saturday closest to March 31.
Inventories
Inventories are stated at the lower of cost or market, using the first-in,
first-out method, and are summarized as follows:
<TABLE>
<CAPTION>
---------------------------------------------
March 28, 1998 March 29, 1997
---------------------------------------------
<S> <C> <C>
Raw material $ 2,139 $ 1,711
Work in process 16,482 17,170
Finished goods 19,942 17,971
------------------ --------------------
Total inventories $ 38,563 $ 36,852
------------------ --------------------
</TABLE>
F-9
<PAGE>
Property, Plant, and Equipment and Depreciation
Property, plant, and equipment are recorded at cost. Depreciation of plant and
equipment, including equipment under capital leases, is provided for by the
straight-line method over the estimated useful lives (3 to 31 years) of the
respective assets or the lease term, if shorter. Amortization of assets under
capital leases is reported with depreciation. The cost of equipment under
capital leases is equal to the lower of the net present value of the minimum
lease payments or the fair market value of the leased equipment at the inception
of the lease.
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
--------------------------------
March 28, 1998 March 29, 1997
--------------------------------
<S> <C> <C>
Land $7,537 $7,537
Building 8,987 7,287
Machinery & equipment 54,528 43,885
------- -------
Total property, plant &
equipment 71,052 58,709
Less: accumulated depreciation 25,815 18,611
Property, plant and equipment, net $45,237 $40,098
------- -------
</TABLE>
Revenue Recognition and Concentration of Credit Risk
Revenue is recognized upon shipment of products. The Company sells to a large
number of OEMs and distributors who service the aftermarket. The Company's
credit risk associated with accounts receivable is minimized due to its customer
base and wide geographic dispersion. The Company performs ongoing credit
evaluations of its customers financial condition, and bad debt losses have
historically been within the Company's expectations.
Intangible Assets
The excess of purchase price over the fair market value of tangible net assets
acquired is being amortized by the straight-line method over a 40-year period.
Deferred financing costs and related expenses are amortized by the effective
interest method over the lives of the related credit agreements (5 to 23 years).
Income Taxes
The Company is included in the consolidated tax return of Holdings and
calculates its provision for income taxes on a separate entity basis.
Income taxes are recognized during the year in which transactions occur and
enter into the determination of financial statement income, with deferred taxes
being provided for temporary differences between amounts of assets and
liabilities for financial reporting purposes and such amounts for tax purposes.
The differences relate primarily to the timing of deductions for depreciation,
goodwill amortization relating to the acquisition of operating divisions, basis
differences arising from acquisition accounting, pension and retirement
benefits, and various accrued and prepaid expenses. Deferred tax assets and
liabilities are recorded at the rates expected to be in effect when the
temporary differences reverse.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-10
<PAGE>
Impairment
Effective March 31, 1996, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". The Company periodically assesses
the net realizable value of its long-lived assets and evaluates such assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. For assets to be held, impairment is
determined to exist if estimated undiscounted future cash flows are less than
the carrying amount. For assets to be disposed of, impairment is determined to
exist if the estimated net realizable value is less than the carrying amount.
4. Restricted Marketable Securities
Restricted marketable securities which are classified as available for sale
consist of short-term investments of $4,005, and $3,901 at March 28, 1998 and
March 29, 1997, respectively, which were purchased with proceeds from industrial
development revenue bonds issued by the Company during fiscal 1995. The use of
these investments is restricted primarily for capital expenditure requirements
in accordance with the applicable loan agreement and, accordingly, are
classified as long-term. These investments consist of highly liquid investments
with insignificant interest rate risk and original maturities of three months or
less, and are carried at market value, which approximates cost. Fixed maturities
consist of U.S. Treasury Notes and are stated at amortized cost, which
approximates market. Realized gains and losses on restricted marketable
securities were not material, and interest income amounted to $185, $254 and
$176 in fiscal 1998, 1997 and 1996, respectively.
At March 28, 1998, all restricted marketable securities were due in one year or
less.
5. Debt
In connection with the financing of the Recapitalization disclosed in Note 1,
the Company issued $110,000 aggregate principal amount of 9 5/8% Senior
Subordinated Notes Due 2007 (the "Notes"). The Notes pay interest semi-annually
and mature on June 15, 2007, but may be redeemed at the Company's option
beginning on June 15, 2002, as well as, earlier under certain conditions
specified in the indenture (the "Indenture") pursuant to which the Notes were
issued. The Notes are unsecured and subordinate to all existing and future
Senior Indebtedness (as defined in the Indenture) of the Company. The Notes are
fully and unconditionally and irrevocably guaranteed jointly and severally, on a
senior subordinated basis by each of the wholly-owned subsidiaries of the
Company.
The separate financial statements of the subsidiary guarantors have not been
presented because management has determined that they would not be material to
investors. However, the summarized combined financial information of the
subsidiary guarantors are as follows:
<TABLE>
<CAPTION>
March 28, March 29,
1998 1997
--------- ---------
<S> <C> <C>
Balance Sheet Data
Total current assets $22,985 $17,730
Noncurrent assets 21,061 16,417
--------- ---------
Total assets 44,046 34,147
Total current liabilities 36,647 31,716
Noncurrent liabilities 694 1,228
--------- ---------
Total liabilities 37,341 32,944
Stockholder's equity $ 6,705 $ 1,203
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
March 28, March 29, March 30,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating Results
Net sales $ 54,935 $ 23,858 $ 14,641
Gross margin $ 13,142 $ 6,065 $ 2,738
Income before extraordinary charge $ 4,968 $ 1,925 $ (90)
Net income $ 4,968 $ 1,925 $ (446)
</TABLE>
F-11
<PAGE>
Total current liabilities shown above of the subsidiary guarantors includes
intercompany liabilities of $25,936 and $28,312 as of March 28, 1998 and March
29, 1997, respectively. Income before extraordinary charge includes a charge for
corporate overhead allocated from the Company of $1,040 in each fiscal year and
a provision for income taxes of $3,453, $1,338 and $(64) in fiscal years 1998,
1997 and 1996, respectively.
In addition, in connection with the Recapitalization, the Company entered into
bank credit facilities (the "Senior Credit Facilities") with a group of lenders
providing for $16,000 of term loans (the "Term Loans") and up to $54,000 of
revolving credit loans and letters of credit (the "Revolving Credit Facility").
The interest rate on the Term Loan is based on LIBOR plus 2.5%. The applicable
interest rate margin is determined on the first day of each fiscal period based
on the Company's leverage ratio, as defined. The rate in effect at March 28,
1998 was 8.125%.
At March 28, 1998, $10,854 of the Revolving Credit Facility was being utilized
to provide letters of credit to secure the Company's obligations relating to
certain Industrial Development Revenue Bonds, described below. A letter of
credit fee of 2.5% per annum payable quarterly in arrears is required on the
outstanding amount of the letter of credit. As of March 28, 1998 the Company had
the ability to borrow up to an additional $43,146 under the Revolving Credit
Facility. There were no borrowings outstanding under this facility as of March
28, 1998. A commitment fee of 0.5% per annum payable quarterly in arrears is
Grequired on the unused portion of the Revolving Credit Facility.
The Senior Credit Facilities are secured by substantially all of the Company's
assets. Under the terms of the Senior Credit Facility, the Company is required
to comply with various operational and financial covenants, including minimum
EBITDA, minimum fixed charge coverage, total interest coverage and maximum
leverage ratio.
In addition, the Senior Credit Facility places limitations on the Company's
capital expenditures in any fiscal year, restricts its ability to pay dividends,
requires the Company to obtain the lenders consent to certain acquisitions and
contains mandatory prepayment provisions which include prepayments from the sale
of the Company's stock and 50% of excess cash flow, as defined. The Company
incurred approximately $7,605 of fees primarily related to costs associated with
the issuance of the Notes as well as the Senior Credit Facilities. These costs
have been capitalized as deferred financing costs and are being amortized over
the terms of the Notes and Term Loans.
Proceeds from these borrowings were used to repay certain existing indebtedness
as well as to pay a dividend to Holdings in order to consummate the
Recapitalization described in Note 1.
During fiscal 1995, the Company entered into a loan agreement with the South
Carolina Jobs Economic Development Authority which provides for borrowings up to
$10,700 under two industrial development revenue bonds (the "Bonds" or "IRBs").
The proceeds from the Bonds are restricted for working capital requirements and
capital expenditure purposes. As of March 28, 1998, $7,448 of the proceeds have
been expended, and the remaining $4,005 (including accumulated interest of $753)
is invested by the trustee in marketable securities. The Bonds are secured by an
irrevocable direct-pay letter of credit issued by one of the Company's lenders.
The letter of credit is equal to the aggregate principal amounts of the Bonds
plus not less than thirty-five days' interest thereon, calculated at 15% per
annum ($10,854). The Company's obligation to its lender is secured pursuant to
the provisions of the Credit Facility.
F-12
<PAGE>
The balances payable under all borrowing facilities are as follows:
<TABLE>
<CAPTION>
March 28, March 29,
1998 1997
--------- ---------
<S> <C> <C>
Senior Subordinated Notes payable $110,000 $ --
Credit Facility
Term Loan , payable in quarterly installments of $250, commencing September 30,
1997, increasing annually thereafter to $1,375 from September 20, 2001 with
final payment due June 30, 2002; bears interest at variable rates, payable
monthly
and quarterly for prime and LIBOR-based elections, respectively 15,500 --
Term Loan A, payable in quarterly installments of $250, commencing January 1,
1996, increasing annually thereafter to $1,500 from January 1, 2000 with final
payment due October 1, 2000; bears interest at variable rates, payable monthly
and
quarterly for prime and LIBOR-based elections, respectively -- 14,500
Term Loan B, payable in quarterly installments of $62.5 from January 1, 1996 to
October 1, 2000 and $1,506.25 from January 1, 2001 with final payment due
September 20, 2002; bears interest at variable rates, payable monthly and
quarterly for prime and
LIBOR-based elections, respectively -- 12,988
Revolving Credit Facility borrowings outstanding -- 24,627
Industrial Development Revenue Bonds
Series 1994 A due in annual installments of $180 beginning September 1, 2006,
graduating to $815 on September 1, 2014 with final payment due on September 1,
2017; bears interest at a
variable rate, payable monthly 7,700 7,700
Series 1994 B due in annual installments of $240 beginning September 1, 1998
graduating to $420 on September 1, 2002 with final payment of $360 due on
September 1, 2006; bears interest at
a variable rate, payable monthly 3,000 3,000
-------- --------
Total Debt 136,200 62,815
Less: current portion 1,490 2,500
-------- --------
Long term debt $134,710 $ 60,315
--------- ---------
--------- ---------
</TABLE>
Term Loans A and B were retired, and the Revolving Credit Facility was
extinguished, in June 1997 as part of the Recapitalization.
<PAGE>
Maturities of long-term debt during each of the following five fiscal years and
thereafter are as follows:
<TABLE>
<S> <C>
1999 $ 1,490
2000 2,740
2001 4,240
2002 5,420
2003 3,170
Thereafter 119,140
---------
Total $136,200
---------
---------
</TABLE>
6. Obligations Under Capital Leases
Machinery and equipment additions under capital leases amounted to $582, $804
and $2,085 in fiscal 1998, 1997 and 1996, respectively. The average imputed rate
of interest on these leases is 8.4%, 8.7% and 8.7% in fiscal year 1998, 1997 and
1996, respectively. The aggregate present value of future minimum lease payments
under these leases at March 28, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 1,586
2000 784
2001 396
2002 362
2003 476
2004 96
---------
Total $ 3,700
---------
---------
</TABLE>
7. Pension Plans
At March 28, 1998, the Company has noncontributory defined benefit pension plans
covering union employees in its Heim division plant in Fairfield, Connecticut,
its Nice subsidiary plant in Kulpsville, Pennsylvania and its Bremen subsidiary
plant in Bremen, Indiana. Additionally, during 1998, the Company terminated a
noncontributory defined benefit pension plan covering union employees in its RBC
plant in West Trenton, New Jersey, effective May 31, 1997. The anticipated
distribution of plan assets was $5.0 million, of which $3.2 million had been
distributed through March 28, 1998. The remaining $1.8 million is currently
considered sufficient to fund the remaining distributions.
The Company annually contributes to the plans an amount that is actuarially
determined to provide the plans with sufficient assets to meet future benefit
payment requirements. Plan assets are comprised primarily of U.S. government
securities, corporate bonds, and stocks. The plans provide benefits of stated
amounts based on an employee's years of service.
F-13
<PAGE>
The funded status of the continuing union plans is as follows:
<TABLE>
<CAPTION>
March 28, March 29,
1998 1997
------------------------- -----------------------
Underfunded Overfunded Underfunded Overfunded
---------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $ 5,957 $ 3,004 $ 5,127 $ 4,404
---------------------------------------------------
---------------------------------------------------
Accumulated benefit obligation 5,965 3,077 5,128 4,434
---------------------------------------------------
---------------------------------------------------
Projected benefit obligation 5,965 3,077 5,128 4,434
Plan assets at fair value 5,458 4,408 5,000 4,738
---------------------------------------------------
(Underfunded) overfunded status of the Plan (507) 1,331 (128) 304
Unrecognized net gain (269) (141) (530) (360)
Unrecognized prior service cost (benefit) 241 (1,137) 270 76
---------------------------------------------------
(Accrued) prepaid pension liability $ (535) $ 53 $ (388) $ 20
---------------------------------------------------
---------------------------------------------------
</TABLE>
Benefits under the union plans are not a function of employees' salaries, thus,
the accumulated benefit obligation equals the projected benefit obligation.
The plans' pension expense for the fiscal years ended is as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------
March 28, 1998 March 29, 1997 March 30, 1996
------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 277 $ 291 $ 264
Interest cost 507 680 663
Actual return on plan assets (1,104) (757) (612)
Net amortization and deferrals 415 41 11
------------------------------------------------------------------
Total pension expense $ 94 $ 255 $ 326
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
The assumptions used in determining the funded status information were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.0% 7.5% 7.5%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.5%
</TABLE>
The Company recognized a minimum pension liability of $18 and $0 at March 28,
1998 and March 29, 1997 respectively, for the union pension plans, which
represents the excess of the accumulated benefit obligations over plan assets. A
corresponding amount is recognized as an intangible asset to the extent of
previously unrecognized prior service cost ($18 and $0, at March 28, 1998 and
March 29, 1997, respectively).
In addition, the Company has a salary reduction plan under Section 401(k) of the
Internal Revenue Code for all of its employees not covered by a collective
bargaining agreement. The plan is funded by participants through employee
contributions and by Company contributions equal to a percentage of eligible
employee compensation. Employer contributions under this plan amounted to $627,
$386 and $394 in fiscal 1998, 1997 and 1996, respectively.
Effective September 1, 1996 the Company adopted a non-qualified supplemental
retirement plan ("SERP") for a select group of highly compensated management
employees designated by the Board of Directors of the Company. The SERP
allows eligible employees to elect to defer until termination of their
employment the receipt of up to 25% of their current salary. The Company
makes contributions equal to the lesser of 50% of the deferrals or 3.5% of
the employees' annual salary, which vest in full after three years of service
following the effective date of the SERP. Expenses in connection with the
SERP were not material during 1998 or 1997.
F-14
<PAGE>
8. Postretirement Health Care and Life Insurance Benefits
The Company offers certain postretirement health care and life insurance
benefits to employees covered by collective bargaining contracts who retire
after attaining specific age and service requirements. The Company adopted SFAS
No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions in
fiscal 1996 but had previously recorded the contractual liability in purchase
accounting and as part of its decision to restructure certain operations; thus,
the adoption of SFAS No. 106 had an immaterial effect on the Company's financial
statements. SFAS No. 106 requires that the projected future cost of providing
postretirement benefits be recognized as an expense when employees render
service instead of when benefits are paid.
The Company, for the benefit of employees at its Heim, West Trenton, Nice and
Bremen facilities, sponsors contributory defined benefit health care plans that
provide postretirement medical benefits to union employees who have attained
certain age and/or service requirements while employed by the Company. The plans
are unfunded and costs are paid as incurred. Postretirement benefit obligations
are included in "Other noncurrent liabilities" within the Consolidated Balance
Sheets.
<TABLE>
<CAPTION>
As of
---------------------
March 28, March 29,
1998 1997
---------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $1,214 $ 871
Eligible active participants 676 300
Other active participants 733 246
Unrecognized net actuarial gain 451 953
Unrecognized prior service cost 602 710
-------- -------
Accrued postretirement benefit obligation $3,676 $3,080
-------- -------
-------- -------
</TABLE>
The net periodic postretirement benefit cost for the fiscal years ended, as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------
March 28, March 29, March 30,
1998 1997 1996
--------------------------------
<S> <C> <C> <C>
Service cost $ 60 $ 15 $ 28
Interest cost 165 127 229
Prior service cost amortization (155) (108) (18)
--------------------------------
$ 70 $ 34 $ 239
--------------------------------
--------------------------------
</TABLE>
The Company has contractually capped its liability for certain groups of future
retirees. As a result, there is no health care trend associated with these
groups. The effect of a 1% annual increase in the assumed cost trend rate would
increase the accumulated postretirement benefit obligation by approximately 1.2%
for these plans; the annual service and interest cost components in the
aggregate would not be materially affected. The discount rate used in
determining the accumulated postretirement benefit obligation for the plans was
7.0% for fiscal 1998 and 7.5% for fiscal 1997 and 1996.
F-15
<PAGE>
9. Income Taxes
The Company's effective income tax rate is reconciled to the U.S. Federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
March 28, 1998 March 29, 1997 March 30, 1996
-----------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate (34.0%) 34.0% 34.0%
State income taxes - net federal tax benefit 23.7% 5.0% 6.9%
Amortization of goodwill 16.0% 1.5% 6.3%
Other non-deductible expenses 5.6% 0.5% 1.1%
-----------------------------------------------------
Effective tax rate 11.3% 41.0% 48.3%
-----------------------------------------------------
</TABLE>
The income tax provision, excluding the tax benefit on extraordinary charges
consisted of:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
March 28, March 29, March 30,
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 2,429 $ 1,351 $ (404)
State 579 939 --
---------------------------------------
3,008 2,290 (404)
Deferred (2,877) 934 2,104
---------------------------------------
Total $ 131 $ 3,224 $ 1,700
---------------------------------------
---------------------------------------
</TABLE>
The net deferred tax asset consists of the following:
<TABLE>
<CAPTION>
March 28, March 29,
1998 1997
-----------------------------------
<S> <C> <C>
Alternative minimum tax carryforward $ 1,984 $ 3,138
Postretirement benefits 1,131 1,347
Employee compensation accruals 3,223 980
Property, plant and equipment (2,624) (3,030)
Amortizable excess purchase price (362) (362)
Other, net 22 (1,120)
-----------------------------------
Net deferred tax asset $ 3,374 $ 953
-----------------------------------
-----------------------------------
</TABLE>
In both 1998 and 1997, a component of the increase in deferred tax assets was
related to the recording of certain liabilities in connection with purchase
accounting.
10. Stockholder's Equity
The Company has 100 shares of Common Stock par value $.01 per share outstanding,
all of which is owned by Holdings.
All issuances and redemptions of equity by Holdings are shown on the financial
statements of the Company as dividends paid to and capital contributions from
Holdings.
A summary of the status of the Company's warrants and stock options outstanding
as of March 28, 1998, March 29, 1997 and March 30, 1996, (including activity
other than related to compensation) and changes during the years ending on those
dates is presented below:
F-16
<PAGE>
<TABLE>
<CAPTION>
Number
of Class A
Common Share
Warrants/Options
-----------------
<S> <C>
Outstanding, April 1, 1995 19,152
Awarded fiscal 1996 500
-------
Outstanding, March 30, 1996 19,652
Awarded fiscal 1997 150
Redeemed 1997 (350)
-------
Outstanding, March 29, 1997 19,452
Awarded Warrants fiscal 1998 200
Awarded Options fiscal 1998 1,728
Issued in connection with the Recapitalization 7,163
Redeemed fiscal 1998 (2,088)
Repurchased by Holdings in fiscal 1998 (1,713)
Exchanged for Class B Warrants in fiscal 1998 (8,827)
-------
Outstanding, March 28, 1998 15,915
-------
-------
</TABLE>
<TABLE>
<CAPTION>
Number
of Supervoting
Class B
Common
Share Warrants
---------------
<S> <C>
Outstanding, March 29, 1997 0
Awarded in exchange for Class A Warrants 8,827
Awarded in fiscal 1998 1,250
-------
Outstanding, March 28, 1998 10,077
-------
-------
</TABLE>
In connection with the Recapitalization, as described in Note 1, Holdings issued
warrants to purchase 1,250 shares of Class B Common Stock, par value $.01 per
share, of Holdings at an exercise price of $514 per share to Dr. Hartnett. In
addition, a new group of investors (who were not previously stockholders of
Holdings) were issued 6,731 warrants to purchase Class A Common Stock of
Holdings. On February 9, 1998, an additional 432 warrants were issued to this
new group of investors in respect of an anti-dilution protection pursuant to
issuance of options under the stock option plan.
Stock Based Compensation
Management participates in Holdings' stock compensation plan. Holdings has
issued warrants to purchase shares of Class B Supervoting Common Stock to Dr.
Hartnett. All other warrants and options are to purchase Class A common stock.
Warrants and options issued to the Company's management as compensation become
vested and are exercisable in one-third annual increments commencing on the date
of award.
In June 1997, the terms of certain warrants held by the Company's management
were altered. A total of 7,024 options to purchase Class A Common Stock,
which would otherwise have expired in 2002, were extended to expire on June
23, 2007. Additionally, 8,827 warrants to purchase Class A Common Stock held
by Dr. Hartnett were converted into 8,827 warrants to purchase Class B Common
Stock. These Class B Common Stock Warrants were extended to expire on June
23, 2007. In connection with these transactions, compensation cost of $6.6
million arose which has been recorded as operating expense.
On February 9, 1998, the Company issued 1,728 options to acquire Class A Common
Stock to management. The term of the options are 10 years and they are
exercisable at $514 per share.
The following table summarizes information about compensation related stock
option and warrants outstanding at March 28, 1998:
F-17
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- -------------------------------------------
Exercise Price Options Weighted Average Options Exercisable Weighted Average
Outstanding Contractual Life Exercise Price
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
$100 7,024 10 years 6,739 $100
$514 1,728 10 years 50 $514
Class B
$77 - $100 8,827 10 years 8,827 $ 77
</TABLE>
During 1997, the Company adopted the disclosure provision for SFAS No. 123,
"Accounting for Stock Based Compensation." SFAS No. 123 establishes a fair value
method of accounting and reporting standards for stock based compensation plans.
The fair value for the Holdings warrants was estimated at the date of grant
using a Black-Scholes warrant pricing model with the following weighted-average
assumptions: risk free interest rate used is 6.2% in fiscal 1998 and 6.0% for
fiscal 1997 and 1996; dividend yields of 0%, volatility factors of expected
market price of Holdings common stock of .44% and a weighted-average expected
life of the warrants of three years.
The Black-Scholes warrant valuation model was developed for use in estimating
the fair value of traded warrants which have no vesting restrictions and are
fully transferable. In addition, warrant valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Holdings warrants have characteristics significantly different from
those of traded warrants, and because changes in the subjective input
assumptions can materially affect the fair value, estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its warrants.
The pro forma effect on the Company's fiscal 1998, 1997 and 1996 operations is
as follows:
<TABLE>
<CAPTION>
Net Income
-----------------------------
1998 1997 1996
-----------------------------
<S> <C> <C> <C>
As Reported $(1,917) $ 4,640 $ 827
Pro Forma $(2,147) $ 4,554 $ 826
</TABLE>
11. Commitments and Contingencies
The Company leases factory facilities under non-cancelable operating leases,
which expire on various dates through March 2001 with rental expense aggregating
$561, $500 and $916 in fiscal 1998, 1997 and 1996, respectively. The Company
purchased one of these facilities in March 1996 for approximately $2,500. In May
1996, the Company purchased another of the formerly leased factory facilities
for $2,100.
The Company also has non-cancelable operating leases for transportation,
computer and office equipment, which expire at various dates through March 2002.
Rental expense for 1998, 1997 and 1996 aggregated $395, $652 and $711,
respectively.
The aggregate future minimum lease payments under leases are as follows:
<TABLE>
<S> <C>
1999 $ 886
2000 852
2001 489
2002 139
Thereafter 32
--------
Total $ 2,398
--------
--------
</TABLE>
F-18
<PAGE>
The Company enters into government contracts and subcontracts that are subject
to audit by the government. In the opinion of the Company's management, the
results of such audits, if any, are not expected to have a material impact on
the financial statements of the Company.
Certain types of property transactions in Connecticut and New Jersey may
trigger investigation and cleanup obligations under the Connecticut Transfer
Act (the "CTA") or the New Jersey Industrial Site Recovery Act (the
"IRSA"), respectively. In connection with the purchase of its Fairfield,
Connecticut facility in 1996, the Company was required by the CTA to submit
an investigation and remediation plan for known environmental contamination
at that facility. Although this known contamination had been the result of
operations conducted by the facility's prior owner, the Company agreed to
assume responsibility for completing cleanup efforts previously initiated by
that owner. In 1996, the Company submitted and obtained regulatory approval
for its investigation and remediation plan as required by the CTA. In 1997,
the Company's Recapitalization required an additional CTA investigation of
the Fairfield facility. The Company's 1997 CTA investigation found that
residual soil and groundwater contamination attributable to the prior
owner's operations continued to be present at the facility. In February 1998,
the Company submitted these findings to the Connecticut regulatory
authorities. While the Company believes that its total investigation and
cleanup costs will not exceed $50,000 (including attorney's fees), and that
its findings will not result in any further investigation or remediation
obligations, Connecticut regulators may require additional cleanup or
monitoring of the residual contamination at this facility. If such
activities are required, there can be no assurance that the Company's total
investigation and remediation costs will not exceed its $50,000 estimate. To
date, all costs incurred in connection with the Company's 1996 and 1997 CTA
investigations and remediation activities have been satisfied out of current
operations of the Company and are expensed as incurred.
The Company's Recapitalization in 1997 also triggered ISRA obligations at
its West Trenton facility, obligating the Company to investigate all possible
past hazardous substance releases, and to cleanup any resulting
contamination, at that facility. Under ISRA, investigation requirements for
facilities that are currently being remediated pursuant to an earlier
ISRA-triggering transaction may be merged into that ongoing ISRA
investigation. In this case, the West Trenton facility has been the subject
of an ongoing ISRA (and its predecessor statute) groundwater investigation
and remediation by the facility's prior owner since the Company's acquisition
of the facility in 1987. Accordingly, the New Jersey regulatory authorities
have informed the Company that its ISRA obligations triggered by the 1997
Recapitalization are being satisfied by the prior owner's ongoing ISRA
investigation and remediation. That investigation has not found any
additional contamination that would require remediation beyond that which
continues to be performed by the facility's prior owner.
There are various claims and legal proceedings against the Company relating to
its operations in the normal course of business, none of which the Company
believes is material. The Company currently maintains insurance coverage for
product liability claims. The Company is subject to various federal, state and
local environmental laws, ordinances and regulations. The Company believes it is
currently in substantial compliance with all applicable requirements of
environmental laws. State agencies are currently overseeing investigation and/or
remediation activities at various Company facilities. In addition, the previous
owners of certain facilities are undertaking cleanup and limited remediation in
each case in fulfillment of certain indemnification obligations.
12. Other Expense, Net of Other Income
Other expense, net of other income is comprised of the following:
<TABLE>
<CAPTION>
----------------------------------
Fiscal Year Ended
----------------------------------
March 28, March 29, March 30,
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
Additional compensation expense $ 652 $ -- $ --
related to the Recapitalization
Amortization of goodwill and
certain intangible assets 577 578 670
Management consulting fees 108 429 400
Royalty income (85) (83) (192)
Legal settlements 295 -- --
Other expense -- 49 85
Pension termination -- 500 --
Environmental remediation -- -- 425
----------------------------------
$ 1,547 $ 1,473 $ 1,388
----------------------------------
----------------------------------
</TABLE>
F-19
<PAGE>
13. Extraordinary Charge
The extraordinary charge for the year ended March 28, 1998 resulted from the
write off of unamortized deferred financing costs due to the Company's early
extinguishment of debt in connection with the Recapitalization. The
extraordinary charge was $1,059 and is reflected net of the related tax benefit
of $434.
The extraordinary charge in fiscal 1996 resulted from the write-off of
unamortized deferred financing costs in connection with the Company's early
extinguishment of debt. The extraordinary charge was $1,687 and is reflected net
of the related income tax benefit of $692.
14. Subsequent Event
On June 3, 1998, Miller, a wholly-owned subsidiary of the Company, completed
the acquisition of the assets of Miller Bearing Company, Inc. ("MBC"), a
manufacturer of pins, rollers and screw machine products with facilities in
Bremen, Indiana. The aggregate purchase price for the acquisition, which was
effective as of March 1, 1998, was approximately $11.1 million. The acquisition
will be accounted for as a purchase, resulting in approximately $2.1 million
allocable to tangible assets and $9 million of excess of purchase price over net
assets acquired. Operations of MBC for March, 1998 were not material to the
consolidated financial results of the Company.
Summary financial information for MBC for the three years ended March 28, 1998
is as follows (unaudited):
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------
March 28, March 29, March 30,
1998 1997 1996
--------------------------------
<S> <C> <C> <C>
Net Sales $9,001 $8,363 $7,260
Gross Margin $2,379 $2,253 $1,914
Operating Income $1,326 $1,303 $1,063
Net Income $1,214 $1,187 $ 913
</TABLE>
The above information reflects the historical results of Miller, net of
depreciation, and is not a pro forma representation which would adjust for the
assimilation of Miller into the Company's financial reporting procedures.
F-20
<PAGE>
Roller Bearing Company of America, Inc.
Quarterly Results of Operations (Unaudited)
Year Ended March 28, 1998:
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4 FY
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 28,662 $ 32,309 $ 34,282 $ 40,756 $ 136,009
Operating income $ 3,458 $ 4,689 $ 4,437 $ (1,984) $ 10,600
Income before
extraordinary charge $ 1,106 $ 813 $ 584 $ (3,795) $ (1,292)
Net income (loss) $ 481 $ 813 $ 584 $ (3,795) $ (1,917)
</TABLE>
Year Ended March 29, 1997:
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4 FY
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 21,120 $ 20,847 $ 21,960 $ 29,500 $ 93,427
Operating income $ 3,067 $ 2,593 $ 2,709 $ 4,833 $ 13,202
Income before
extraordinary charge $ 1,010 $ 708 $ 762 $ 2,160 $ 4,640
Net income $ 1,010 $ 708 $ 762 $ 2,160 $ 4,640
</TABLE>
F-21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On June 23, 1997, management of the Company determined that the Company's
independent auditors for the fiscal year commencing March 30, 1997 would be
Arthur Andersen, LLP, and accordingly, dismissed Ernst & Young LLP ("E&Y") as of
such date. The reports prepared by E&Y for fiscal years 1996 and 1997 contained
no adverse opinion or disclaimer of opinion, nor were either of such reports
qualified as to uncertainty, audit scope or accounting principles. During fiscal
years 1996 and 1997, and for the period from March 29, 1997 through June 23,
1997, there were no disagreements between the Company and E&Y on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which if not resolved to the satisfaction of E&Y, would have
caused E&Y to make a reference to the subject matter of such disagreement in
connection with its reports.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the directors
and executive officers of Holdings, the Company and the Company's subsidiaries.
Each director is elected for a one year term or until such person's successor is
duly elected and qualified.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Dr. Michael Hartnett 52 Chairman, President and Chief Executive Officer
of Holdings and the Company, Chairman and
President of ITB, President of Nice and LLP,
Director of the Company, ITB, Nice, LLP and
Bremen
Anthony S. Cavalieri 51 Vice President and Chief Financial Officer of
Holdings and the Company, Chief Financial
Officer of ITB, Nice, LLP and Bremen
Michael S. Gostomski 47 Executive Vice President, Mergers and
Acquisitions of Holdings, the Company, ITB,
Nice and LLP, Executive Vice President of
Bremen, Secretary of Nice, LLP and Bremen
Frederick L. Morlok 57 Vice President, Marketing and Sales of
Holdings and the Company
Richard J. Edwards 42 Vice President of Holdings and the Company,
General Manager of the RBC division
Christopher Thomas 43 Vice President, Business Development of
Holdings and the Company
Edward J. Trainer 56 Secretary of Holdings, the Company and ITB
Kurt B. Larsen 34 Director of Holdings and the Company
William E. Myers, Jr. 38 Director of Holdings and the Company
Mitchell I. Quain 46 Director of Holdings and the Company
Stephen A. Kaplan 38 Director of Holdings and the Company
</TABLE>
<PAGE>
Dr. Michael J. Hartnett has been president and Chief Executive Officer of the
Company since April 1992 and Chairman since June 1993. Prior to that, Dr.
Hartnett served as Vice President and General Manager of ITB from 1990,
following eighteen years at Torrington Company, one of the three largest
bearings manufacturers in the United States. While at Torrington, Dr. Hartnett
held the position of Vice President and General Manager of the Aerospace
Business Unit and was, prior to that, Vice President of the Research and
Development Division. Dr. Hartnett holds an undergraduate degree from University
of New Haven, a Masters degree from Worcester Polytechnic Institute, and a Ph.D.
in Applied Mechanics from the University of Connecticut. Dr. Hartnett has also
developed numerous patents, authored more than two dozen technical papers and is
well known for his contributions to the field of Tribology (the study of
friction). Dr. Hartnett currently serves as a director of Aftermarket Technology
Company, a publicly-held company in the business of re-manufacturing aftermarket
components for automobiles.
Anthony S. Cavalieri joined the Company in July 1996. From August 1990 to
November 1995 he was Vice President and Chief Financial Officer of Duro-Test
Corporation, a medium sized lighting products manufacturer. From December 1995
through June 1996, Mr. Cavalieri provided management and financial consulting
services to various entities. Prior to that he was a controller at the Mennen
Company and before that on the audit staff of Price Waterhouse, LLP. Mr.
Cavalieri holds a B.S. in Accounting from St. John's University and an M.B.A.
from Fordham University. He is also a certified public accountant as well as a
certified management accountant, certified internal auditor and certified in
production and inventory management.
Michael S. Gostomski joined the Company in September 1993 as its Senior Vice
President. In July of 1996, he was named Executive Vice President, Mergers and
Acquisitions. From January 1991 through August 1993, he served as President and
Chief Executive Officer for Transnational Industries, a publicly held
manufacturer of components for commercial and military aircraft. Mr. Gostomski
holds a B.S. in Accounting and an M.B.A. in Finance from the University of
Connecticut. He is also a certified public accountant. Mr. Gostomski currently
serves as director of a number of publicly held companies, including
Transnational Industries, Seatak, a publicly held manufacturer of small tools
for the electronics industry, Protopak Corporation, a packaging equipment
manufacturer and New Jersey Steel, a specialty steel manufacturer.
Frederick L. Morlok joined the Company in 1987 as Vice President, Marketing and
Sales. Prior to that he spent twenty-four years at Torrington where he served
<PAGE>
in various sales and marketing positions including District Sales Manager,
Product Manager of Machined Race Products and Business Manager, Strategic
Technology Unit. He holds a B.S. in Management Engineering, Mechanical
Engineering Option and an M.B.A. from Rensselaer Polytechnic Institute.
Richard J. Edwards joined the Company as Manufacturing Manager in the
Hartsville, South Carolina facility in 1990 and was named Vice President and
General Manager of the RBC division in 1996. Prior to joining the Company, he
spent six years with Torrington as Material Manager and Plant Superintendent in
their Tyger River plant.
Christopher Thomas joined the Company in October 1997 as Vice President,
Business Development. From March 1997 through October 1997, he served as
Business Manager of the Needle Bearing Division of Torrington, a manufacturer
of needle bearings. Mr. Thomas served as a Managing Director of NasTech
Europe, Ltd., a joint venture between Torrington and Nippo Seiko, a Japanese
bearing and automotive component manufacturer from April 1995 until March
1997. Prior to that, Mr. Thomas was the Chairman of the Joint Task Force for
the formation of NasTech Europe Ltd from June 1994 until March 1995. From May
1990 through June 1994, Mr. Thomas served as the business Manager of
Precision Components, a division of Torrington. Mr. Thomas received a B.S.
degree in Mechanical Engineering from Worcester Polytechnic Institute and an
M.B.A. from the University of Michigan.
Edward J. Trainer has been employed by the Company since 1967. He served from
1987 to January 1995 as Vice President of Human Resources and has served as
Director of International Sales since January 1995. Mr. Trainer was named
Secretary of the Company in 1993.
Kurt B. Larsen joined the Company in March 1992 and served as Vice President and
Secretary until January 1997. He served as a Director of the Company from March
1992 to January 1997 and from June 1997 to the present. From February 1990 to
January 1997, he served as a principal of Aurora, a leveraged buy-out firm,
where he oversaw and executed investments in several companies. He also serves
as Chairman of Enrich International, Inc., a privately-held company which
manufactures and distributes nutritional supplements, and has been a principal
investor and partner in Hunter Capital, an investment bank, since February 1997.
William E. Myers, Jr. served as a Director of the Company from March 1992 to
May 1997 and from June 1997 to the present. From November 1989 through April
1998 he was the Chairman and Chief Executive Officer of W.E. Myers &
Company, a leading merchant bank which
<PAGE>
specialized in industry consolidation. Since April 1998, Mr. Myers has been
employed as the Chairman and Chief Executive Officer of Consolidation
Partners which is engaged in consolidating various manufacturers of
components.
Mitchell I. Quain joined the Company as a Director in June 1997. Since May 1997
he has served as an Executive Vice President and member of the Board of
Directors of Furman Selz, LLC, an investment banking and brokerage company. From
June 1975 to May 1997 he served as a Managing Director of Schroeder Wertheim &
Company, an investment banking company. He also serves on the Board of Directors
of a number of publicly-held companies, including Allied Products Corporation, a
diversified manufacturing company, DeCrane Aircraft Holdings, Inc., an aircraft
supply company, Mechanical Dynamics, Inc., a software company, and Strategic
Distribution, Inc., a company in the business of industrial distribution.
Stephen A. Kaplan joined the Company as a Director in June 1997. He is also a
Principal of Oaktree Capital Management, LLC ("Oaktree"), the general partner
of the Oaktree Fund, one of the purchasers of the Discount Debentures. Prior
to joining Oaktree in June 1995, he was a managing director of Trust Company
of the West ("TCW"). Prior to joining TCW in 1993, he was a partner in the
law firm of Gibson, Dunn & Crutcher. He serves as a director of a number of
publicly-held companies, including KinderCare Learning Centers, Inc., which
provides child care and pre-school educational services, Acorn Products,
Inc., a manufacturer of lawn and garden tools, Chief Auto Parts, Inc. an auto
parts and accessories retail chain and GeoLogistics Corporation, one of the
largest non asset based global logistics providers headquartered in North
America.
The Boards of Directors of Holdings and the Company currently consist of Dr.
Hartnett and Messrs. Kaplan, Larsen, Myers and Quain. Dr. Hartnett is the sole
director of ITB, Nice and LPP. Pursuant to the Stockholders Agreement (as
defined herein), the Oaktree Fund has the right to designate one member of the
board of directors of Holdings and the Company. Mr. Kaplan is the designee of
the Oaktree Fund. See "Certain Relationships and Related Transactions."
Members of the Boards of Directors of Holdings and the Company currently do
not receive any compensation for their service as directors but are
reimbursed by the Company for any expenses incurred in attending meetings of
the Boards or otherwise performing their duties for the Company and Holdings.
<PAGE>
Item 11. EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid by the
Company in fiscal years 1996, 1997 and 1998 to Dr. Hartnett, its Chairman,
President and Chief Executive Officer, and the next four highly paid executive
officers of the Company (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation
-------------------- ------------------- ------------
Fiscal Other Annual Security
Names & Principal Position Year Salary Bonus Compensation Underlying Options
- --------------------------- ------ ----------------- ------------ -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Michael J. Hartnett,
Chairman, President and
Chief Executive Officer 1998 $461,250 (a)(b) $ 1,545,117(d) 1,250(e) $ 546,787(f)
1997 $305,000 (a)(b)(c) $ 287,167(g) $ 39,466(h)
1996 $305,000 (a)(b) $ 110,000(i) $ 11,962(j)
Michael S. Gostomski,
Executive Vice President,
Mergers & Acquisitions 1998 $159,500 (b) $ 100,000(k) $ 13,256(l) $ 0(z)
1997 $159,500 (b) $ 150,000(m) $ 6,840(n)
1996 $159,500 (b) $ 86,000(i) $ 14,327(o)
Anthony S. Cavalieri
Vice President and Chief
Financial Officer 1998 $141,750 (b)(c) $ 70,000(k) $ 16,371(p) 250(q)
1997 $ 95,268 (b)(c) $ -- $ 4,762(r)
1996 N/A N/A N/A
Frederick Morlok
Vice President, Marketing
and Sales 1998 $165,000 (b)(c) $ 45,000(k) $ 13,820(s) $ 0(z)
1997 $165,000 (b)(c) $ 50,000(m) $ 14,102(t)
1996 $159,167 (b) $ 75,000(i) $ 12,709(u) 250(y)
Richard J. Edwards 1998 $130,378(b)(c) $ 50,000(k) $ 13,291(v) 100(aa)
Vice President 1997 $120,333(b)(c) $ 30,000(m) $ 124,031(w)
and General Manager, 1996 $111,750(b) $ 51,625(i) $ 1,696(x) 250(y)
RBC Division
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(a) Includes $30,000 and $30,000 of compensation deferred by Dr. Hartnett in
fiscal year 1997 and 1996 respectively.
<PAGE>
- ----------
(b) Includes amounts deferred by the executive pursuant to the Company's 401(K)
Plan (as defined herein).
(c) Includes amounts deferred by the executive pursuant to the Company's SERP
(as defined herein).
(d) Consists of the $1 million Hartnett Fee and to $500,000 Hartnett Loan, paid
and advanced in connection with the Recapitalization. Also includes (i)
$4,587 contributed by the Company to Dr. Hartnett's 401(k) Plan account,
(ii) $28,542 contributed by the Company to Dr. Hartnett's SERP account and
(iii) $11,988 paid by the company to lease a car for Dr. Hartnett's use
(e) Consists of warrants to purchase Class B Common Stock issued in connection
with the Recapitalization. Does not include the amendment of warrants owned
by Dr. Hartnett to provide that they become exercisable for shares of Class
B Common Stock or the restating of warrants to, among other things, extend
the exercise period thereof to June, 2007.
(f) Amounts paid to Dr. Hartnett in connection with the redemption by Holdings
of warrants to purchase 1,250 shares of Class A Common Stock at an exercise
price of $76.77 per share. Such warrants were purchased for $437.23 (the
fair market value of the Class A Common Stock as of the date of purchase
($514) less the exercise price thereof) per share underlying such warrants.
Holdings subsequently issued to Dr. Hartnett, warrants to purchase 1,250
shares of Class B Common Stock at an exercise price of $514 per share. Does
not include $172,290.03 paid by Holdings to Dr. Hartnett for redemption of
certain shares of Preferred Stock in connection with the Recapitalization.
(g) Bonus earned in fiscal 1996 and paid in fiscal 1997.
(h) Consists of (i) $5,313 contributed by the Company to Dr. Hartnett's 401(k)
Plan account, (ii) $28,104 contributed by the Company to Dr. Hartnett's
SERP account and (iii) $6,049 paid by the company to lease a car for Dr.
Hartnett's use.
(i) Bonus earned in fiscal 1995 and paid in fiscal 1996. Bonus for fiscal 1996
is reflected in fiscal 1997.
(j) Consists of (i) $4,104 contributed by the company to Dr. Hartnett's 401(k)
Plan account and (ii) $7,858 paid by the company to lease a car for Dr.
Hartnett's use.
(k) Bonus earned in fiscal 1997 and paid in fiscal 1998. Bonus for fiscal 1998
will be paid in fiscal 1999.
(l) Consists of (i) $5,016 contributed by the Company to Mr. Gostomski's 401(k)
Plan account and (ii) $8,240 paid by the Company to lease a car for Mr.
Gostomski's use.
(m) Bonus earned in fiscal 1996 and paid in fiscal 1997. Bonus for fiscal 1997
is reflected in fiscal 1998.
(n) Consists of (i) $3,627 contributed by the Company to Mr. Gostomski's 401(k)
Plan account and (ii) $3,213 paid by the Company to lease a car for Mr.
Gostomski's use.
(o) Consists of (i) $4,278 contributed by the Company to Mr. Gostomski's 401(k)
Plan account and (ii) $10,049 paid by the Company to lease a car for Mr.
Gostomski's use.
(p) Consists of (i) $4,444 contributed by the Company to Mr. Cavalieri's 401(k)
Plan account (iii) $7,391 contributed by the Company to Mr. Cavalieri's
SERP account and (iii) $4,536 paid by the Company to lease a car for Mr.
Cavalieri's use.
(q) Options granted under the Stock Option Plan (as defined herein). Options
with respect to 100 of such shares are exercisable as of the date hereof.
(r) Consists of (i)$350 contributed by the Company to Mr. Cavalieri's 401(k)
Plan account (ii)$817 contributed by the Company to Mr. Cavalieri's SERP
account and (iii) $3,595 paid by the Company to lease a car for Mr.
Cavalieri's use.
(s) Consists of (I) $4,838 contributed by the Company to Mr. Morlok's 401(k)
Plan account (ii) $4,725 contributed by the Company to Mr. Morlok's SERP
account and (iii) $4,257 paid by the Company to lease a car for Mr.
<PAGE>
- ----------
Morlok's use.
(t) Consists of (i) $2,813 contributed by the Company to Mr. Morlok's 401(k)
Plan account, (ii) $2,987 contributed by the Company to Mr. Morlok's SERP
account and (iii) $8,302 paid by the Company to lease a car for Mr.
Morlok's use.
(u) Consists of (i) $4,021 contributed by the Company to Mr. Morlok's 401(k)
Plan account and (ii) $8,688 paid by the Company to lease a car for Mr.
Morlok's use.
(v) Consists of (i) $4,422 contributed by the Company to Mr. Edward's 401(k)
Plan account (ii) $3,225 contributed by the Company to Mr. Edward's SERP
account and (iii) $5,644 paid by the Company to lease a car for Mr.
Edward's use.
(w) Consists of (i) $119,700 realized upon the exercise of 350 warrants to
purchase Class A Common Stock at $100 per share, which shares were
immediately purchased by Holdings for $442 per share, (ii) $2,255
contributed by the Company to Mr. Edwards' 401(k) Plan account and (iii)
$2,076 contributed by the Company to Mr. Edwards' SERP account.
(x) Contributed by the Company to Mr. Edwards' 401(k) Plan account.
(y) Represents warrants to purchase Class A Common Stock at an exercise price
of $100 per share granted on March 30, 1996.
(z) Does not include $423,751 and $48,804 paid by Holdings to Mr. Morlok and
Mr. Gostomski, respectively, for redemption of certain shares of Preferred
Stock in connection with the Recapitalization.
(aa) Options granted under the Stock Option Plan Options with respect to 33.33
of such shares are exercisable as of the date hereof.
<PAGE>
Option Grants in Fiscal 1998
The following information is furnished for the fiscal year ended March 28,
1998 with respect to the Named Executive Officers of the Company for stock
options granted during such fiscal year.
Option Grants in Last Fiscal Year (a)
Individual Grants
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Granted Employees in Fiscal Price Expiration Date
Name Year ($/share) 5%($) 10%($)
- ----------------------- ------------------ --------------------- ------------- -------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Michael J. Hartnett 1,250 (b) 41.98% $514 June 23, 2007 $404,063 $1,023,975
Anthony S. Cavalieri 150 (c) 5.04% $514 February 18, 2008 $48,487 $ 122,827
Richard Edwards 100 (d) 3.36% $514 February 18, 2008 $32,325 $ 81,918
</TABLE>
- ----------
(a) Does not include the amendment of certain warrants held by the Named
Executive Officers to, among other things, extend the period during which
such warrants may be exercised, which may, for financial reporting
purposes, be deemed to be the issuance of new warrants.
(b) Consists of warrants to purchase Class B Common Stock. Does not include the
amendment of certain warrants held by Dr. Hartnett to provide that they be
exercisable for shares of Class B Common Stock instead of Class A Common
Stock.
(c) Consists of options granted under the Stock Option Plan. Options with
respect to 50 of such shares are not exercisable as of the date hereof.
(d) Consists of options granted under the Stock Option Plan. Options with
respect to 66.67 of such shares are not exercisable as of the date hereof.
Aggregate Option and Warrant Exercises in Fiscal 1998 and Year-End Option and
Warrant Values
The following information is furnished for the fiscal ended March 28, 1998
with respect to the Named Executive Officers of the Company for the
unexercised stock options and warrantss at March 28, 1998.
OPTION AND WARRANT EXERCISES DURING FISCAL 1998
AND FISCAL YEAR-END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES WARRANTS AT WARRANTS AT
ACQUIRED MARCH 29, 1997 MARCH 29, 1997
ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE (A)
- ---------------------------------------------- ----------- -------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Dr. Michael J. Hartnett....................... 1,250(b) $546,537.50 10,077/0 $3,857,281.10/0
Michael S. Gostomski.......................... 350(c) $144,900 0/0 $ 0/0
Frederick L. Morlok........................... 2,125(d) $879,750 0/0 $ 0/0
Anthony S. Cavalieri.......................... 0 $ 0 50/100 $ 0/0
Richard J. Edwards............................ 0 $ 0 1,100/0 $ 455,400/0
</TABLE>
- ------------------------
(a) Based upon a per share price of $514.00.
(b) In connection with the Recapitalization, Holdings purchased such warrants
for $437.23 per share of Holdings Common Stock underlying such warrants
($514 per share less the $76.77 exercise price of such warrants) and issued
to Dr. Hartnett warrants to purchase 1,250 shares of Class B Common Stock
with an exercise price of $514 per share.
(c) In connection with the Recapitalization, Mr. Gostomski sold all of such
warrants to an affiliate of CSFB for $414 per share underlying such warrants
($514 per share less the $100 exercise price of such warrants).
(d) In connection with the Recapitalization, Mr. Morlok sold all of such
warrants to the Oaktree Fund and affiliates of CSFB for $414 per share
underlying such warrants ($514 per share less the $100 exercise price of
such warrants).
Employment Agreement
Concurrently with the closing of the Recapitalization, Dr. Hartnett entered into
a five-year employment agreement (The "Employment Agreement") with the Company.
The Employment Agreement provides for Dr. Hartnett to serve as the President,
Chief Executive Officer and Chairman of the Board of Directors of the Company
and requires that Dr. Hartnett devote his full business time and attention to
the affairs of the Company. The Employment Agreement contains covenants
regarding the treatment and disclosure of confidential information and a
covenant prohibiting Dr. Hartnett from competing with the Company during the
term of the Employment Agreement and for two years after its expiration. The
Employment Agreement provides for a salary of $31,250 per month with annual
increases linked to the increase in the All-Items Consumer Price Index for All
Urban Consumers, subject to a minimum increase, plus a bonus linked to the
achievement by the Company of milestones set forth in its Operating Plan
(subject to limited discretion of the Board of Directors of the Company). The
Employment Agreement is terminable (i) upon the death or Total Disability of Dr.
Hartnett, (ii) by the Company for Cause, (iii) by the Company upon 60 days prior
notice and (iv) by Dr. Hartnett for Good Reason (as all such terms are defined
in the Employment Agreement) or upon
<PAGE>
120 days prior notice. If the Employment Agreement is terminated due to death or
disability, by the Company without Cause or by Dr. Hartnett for Good Reason, Dr.
Hartnett shall be entitled to receive his base salary through the end of the
original term of the Employment Agreement plus a pro rata portion of his bonus
in the year in which the termination occurred.
Stock Option Plan
Effective, February 18, 1998, Holdings adopted the Roller Bearing Holding
Company, Inc. Stock Option Plan (the "Stock Option Plan"). The terms of the
Stock Option Plan provide for the grant of options to purchase up to 3365.6
shares of Class A Common Stock to officers and employees of, and consultants
(including members of the board of directors) to, Holdings and its
subsidiaries. Options granted may be either incentive stock options (under
Section 422 of the Internal Revenue Code) or non-qualified stock options. The
Stock Option Plan, which expires on December 31, 2008, is to be governed by
the board of directors of Holdings (the "Holdings Board"), or a committee to
which the Board delegates its responsibilities.
The purpose of the Stock Option Plan is to provide incentives which will
attract and retain highly competent persons as officers, employees and directors
of, and consultants to, Holdings and its subsidiaries, by providing them
opportunities to acquire shares of Class A Common Stock.
The exercise price of options granted under the Stock Option Plan shall be
determined by the Board, but in no event less than 100% of the Fair Market Value
(as defined in the Stock Option Plan) of the Class A Common Stock on the date of
grant.
Options granted under the Stock Option Plan may be exercised during the
period set forth in the agreement pursuant to which the options are granted, but
in no event more than ten (10) years following grant.
Incentive stock options granted under the Stock Option Plan may only be
granted to employees of Holdings and subject to further limitations set forth in
the Stock Option Plan.
The number of shares of Class A Common Stock for which options may be
granted under the Stock Option Plan shall be increased, and the number of
shares for which outstanding options shall be exercisable, and the exercise
price thereof, shall be adjusted upon the happening of stock dividends, stock
splits, recapitalizations, reorganizations and certain other capital events
regarding Holdings or the Class A Common Stock. Upon any merger,
consolidation or combination of Holdings where shares of Class A Common Stock
are converted into cash securities or other property, outstanding options
shall be converted into the right to receive upon exercise the consideration
as would have been payable in exchange for the shares of Class A Common Stock
underlying such options had such options been exercised prior to such event.
Options granted under the Stock Option Plan are not transferrable by the
holders thereof except by the laws of descent and distribution.
<PAGE>
The Holdings Board shall have the right to establish such rules and
regulations concerning the Stock Option Plan, and to make such determinations
and interpretations of the terms thereof as it deems necessary or advisable.
As of June 24, 1998, there were outstanding options to purchase 1,728
shares of Class A Common Stock granted under the Stock Option Plan, of which
options to purchase 392 shares were exercisable as of such date.
401(k) Plan
The Company maintains the Roller Bearing Company of America 401(k)
Retirement Plan (the "401(k) Plan"), a plan established pursuant to Section
401(k) of the Internal Revenue Code, for the benefit of its non-union employees.
All non-union employees who have completed six months of service with the
Company are entitled to participate. Subject to various limits, employees are
entitled to defer up to 15% of their annual salary on a pre-tax basis and up to
an additional 10% of their annual salary on an after tax basis. The Company
matches 50% of an employee's pre-tax contribution up to 10% of annual salary.
The Company may also make discretionary contributions that are allocated among
eligible accounts pro rata based upon salary. Employees vest in the Company's
contributions ratably over three years.
Supplemental Retirement Plan
Effective September 1, 1996, the Company adopted a non-qualified
supplemental retirement plan ("SERP") for a select group of highly
compensated and management employees designated by the Board of Directors of
the Company. The SERP allows eligible employees to elect to defer until
termination of their employment the receipt of up to 25% of their current
salary. The Company makes contributions equal to the lesser of 50% of the
deferrals or 3.5% of the employee's annual salary, which vest in full after
three years of service following the effective date of the SERP. Accounts are
paid, either in a lump sum or installments, upon retirement, death or
termination of employment. Accounts are generally payable from the general
assets of the Company although it is intended that the Company set aside in a
"rabbi trust" invested in annuity contracts amounts necessary to pay
benefits. Employees' rights to receive payments are subject to the rights of
the creditors of the Company.
Compensation Committee Interlocks and Insider Participation
In fiscal 1998, there was no compensation committee of the Board of
Directors of Holdings (the "Board"). No member of the Board was involved in an
interlocking relationship or insider participation with respect to the
compensation committee of any other entity.
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of March 28, 1998, there were 100 shares of common stock, par value $.01
per share, of the Company outstanding, all of which were owned by Holdings and
pledged by Holdings to the holders of the Discount Debentures. The following
table lists, as of March 28, 1998, all shares of Class A Common Stock and Class
B Common Stock of Holdings beneficially owned by (i) each director of the
Company, (ii) the Named Executive Officers (iii) each person known by the
Company to beneficially own more than 5% of the outstanding shares of any class
of common stock of Holdings at such date and (iv) all directors and executive
officers of Holdings and the Company as a group (22 persons). As of March 28,
1998 there were 5,875 shares of Class A Common Stock and 3,948 shares of Class B
Common Stock outstanding. Additionally, as of such date, there were outstanding
warrants and options to purchase up to an additional 15,915 shares of Class A
Common Stock and 10,077 shares of Class B Common Stock and options granted under
the Stock Option Plan to purchase an additional 1,728 shares of Class A Common
Stock.
<TABLE>
<CAPTION>
Stockholder (a) Number of Shares (a) Percentage of Class
--------------- -------------------- -------------------
<S> <C> <C>
Dr. Michael J. Hartnett 14,025.8(b) 70.48%(c)
Michael S. Gostomski 1 *
Frederick L. Morlok 525 8.94%
Anthony S. Cavalieri 100(d) 1.67%
Christopher J. Sommers 918.623(e) 15.64%
Richard J. Edwards 1,133.33(f) 16.17%
William E. Myers
Two North Lake Avenue
Pasadena, California 91101 2,275(g) 27.91%
Kurt Larsen
P.O. Box 692547
Park City, Utah 84068 30.83(h) *
Stephen Kaplan
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
550 South Hope Street
Los Angeles, California 90071 8,572.83(i) 65.70%
Mitchell Quain
230 Park Avenue
New York, New York 10020 430.83(j) 6.90%
Oaktree Capital Management, LLC
550 South Hope Street
Los Angeles, California 90071 8,542(k) 65.62%
OCM Principal Opportunities Fund, L.P.
550 South Hope Street
Los Angeles, California 90071 8,542(l) 65.62%
Bruce Karsh
550 South Hope Street
Los Angeles, California 90071 8,542(m) 65.62%
Howard Marks
550 South Hope Street
Los Angeles, California 90071 8,542(m) 65.62%
Northstar High Total Return Fund
300 First Stamford Place
Stamford, Connecticut 06902 1,343(n) 18.61%
Northstar Investment Management Corp.
300 First Stamford Place
Stamford, Connecticut 06902 1,343(n) 18.61%
Merban Equity (o),(p)
c/o Credit Suisse First Boston
Bleichistrasse 8
P.O. Box 4263
CH-6304 Zug, Switzerland 1,399.8 (q),(r) 23.83%
Credit Suisse First Boston Corporation (s)
11 Madison Avenue
New York, New York 10010 2,840.8 (t) 48.35%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Credit Suisse Group (p),(u)
Uetlibergstrasse 231
Ch-8045
Zurich, Switzerland 2,840.8 (o)(p)(t) 48.35%
Mark Kennelley (q)(v)
c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010 490 8.34%
Richard Gallant (q)(v)
c/o Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010 431 7.34%
Brian Sanderson 362 (g) 5.80%
Ronald E. Lemansky 416.33(w) 6.62%
Phil Beausoleil 316.33(x) 5.11%
All members of management as a
group (16 persons) 29,674.64(y) 91.26%
</TABLE>
---------------
Less than 1%
(a) Except where otherwise indicated, (i) shares of common stock are of Class A
Common Stock (ii) warrants are to purchase shares of Class A Common Stock
and (iii) the address for each stockholder is c/o the Company at 60 Round
Hill Road, P.O. Box 430, Fairfield, Connecticut 06430.
(b) Consists of 3,948.4 shares of Class B Common Stock and warrants to purchase
up to 10,077.4 shares of Class B Common Stock.
(c) Represents 100% of the outstanding shares of Class B Common Stock and
70.48% of all outstanding shares of common stock of any class. Shares of
Class B Common Stock are convertible into shares of Class A Common Stock
one a one-for-one basis. Through the ownership of Class B Common Stock, Dr.
Hartnett has the power to control a majority of the voting power of all
voting securities of Holdings even if he were to own less than 50% of the
outstanding common stock. See "Item 13. Certain Relationships and Related
Transactions".
<PAGE>
(d) Consists of options granted under the Stock Option Plan. Does not include
additional options to purchase 50 shares of Class A Common Stock issued
under the Stock Option Plan not convertible as of the date hereof.
(e) Such shares are held of record by The Sommers Family Trust. Mr. Sommers
beneficially owns such shares.
(f) Consists of warrants to purchase 1,100 shares of Class A Common Stock and
options to purchase 33.33 shares of Class A Common Stock granted under the
Stock Option Plan. Does not include options to purchase 66.67 share of
Class A Common Stock granted under the Stock Option Plan not exercisable as
of the date hereof.
(g) Consists of warrants to purchase Class A Common Stock.
(h) Consists of options to purchase Class A Common Stock granted under the
Stock Option Plan. Does not include options to purchase 61.67 shares of
Class A Common Stock granted under the Stock Option Plan not exercisable as
to the date hereof.
(i) Consists of warrants to purchase 6,791 shares of Class A Common Stock and
1,400 shares of Class A Common Stock owned by the Oaktree Fund, and
warrants to purchase 351 shares of Class A Common Stock issued to the
Oaktree Fund following the issuance of options under the Stock Option Plan
pursuant to certain anti-dilution provisions of the Discount Warrants, as
well as options to purchase 30.83 shares of Class A Common Stock granted
under the Stock Option Plan. Does not include options to purchase 61.67
shares of Class A Common Stock granted under the Stock Option Plan not
exercisable as of the date hereof. To the extent that the stockholder, as a
principal of Oaktree, participates in the process to vote or to dispose of
any shares or warrants held by the Oaktree Fund, he may be deemed under
such circumstances for the purposes of Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to be the beneficial
owner of such securities. The stockholder disclaims beneficial ownership of
securities held by the Oaktree Fund.
(j) Includes warrants to purchase 340 shares of Class A Stock and options to
purchase 30.83 shares of Class A Common Stock granted under the Stock
Option Plan. Does not include options to purchase 61.67 shares of Class A
Common Stock granted under the Stock Option Plan not exercisable as of the
date hereof.
(k) Consists of warrants to purchase 6,791 shares of Class A Common Stock and
1,400 shares of Class A Common Stock owned by the Oaktree Fund, and
warrants to purchase 351 shares of Class A Common Stock issued to the
Oaktree Fund following the issuance of options under the Stock Option Plan
pursuant to certain antidilution provisions of the Discount Warrants. The
stockholder is the general Partner of the Oaktree Fund. Does not include
options to purchase Class A Common owned by Mr. Kaplan.
(l) Consists of warrants to purchase 6,791 shares of Class A Common Stock and
1,400 shares of Class A Common Stock owned by the Oaktree Fund, and
warrants to purchase 351 shares of Class A Common Stock issued to the
Oaktree Fund following the issuance of options under the Stock Option Plan
pursuant to certain antidilution
<PAGE>
provisions of the Discount Warrants. Does not include options to purchase
Class A Common Stock owned by Mr. Kaplan.
(m) Consists of warrants to purchase 6,791 shares of Class A Common Stock and
1,400 shares of Class A Common Stock owned by the Oaktree Fund, and
warrants to purchase 351 shares of Class A Common Stock issued to the
Oaktree Fund following the issuance of options under the Stock Option Plan
pursuant to certain antidilution provisions of the Discount Warrants. Does
not include options to purchase Class A Common Stock owned by Mr. Kaplan.
To the extent that the stockholder, as a principal of Oaktreee,
participates in the process to vote or to dispose of any shares or warrants
held by Oaktree Fund, he may be deemed under such circumstances for the
purposes of Section 13 of the Exchange Act, to be the beneficial owner of
such securities. The stockholder disclaims beneficial ownership of such
securities.
(n) Consists of Discount Warrants to purchase 1,262 shares of Class A Common
Stock owned by Northstar High Total Return Fund ( the "Northstar Fund"),
and warrants to purchase 81 shares of Class A Common Stock issued to the
Northstar Fund following the issuance of options under the Stock Option
Plan pursuant to certain antidilution provisions of the Discount Warrants.
Northstar Investment Management Corp. (`Northstar") is the investment
advisor of the Northstar Fund and may be deemed to beneficially own such
warrants.
(o) Affiliate of CSFB.
(p) A wholly-owned subsidiary of Credit Suisse Group, an entity incorporated
under the laws of Switzerland.
(q) Such shares and warrants may be deemed to be beneficially owned by CSFB.
(r) Does not include shares of Class A Common Stock held by certain employees
of CSFB.
(s) An indirect wholly-owned subsidiary of Credit Suisse Group, an entity
incorporated under the laws of Switzerland. CSFB is a subsidiary of Credit
Suisse First Boston, Inc., which is a subsidiary of CFSB, a Swiss Bank,
which is a subsidiary of Credit Suisse Group. Each of such entities may be
deemed to beneficially own the shares of Class A Common Stock and warrants
owned by affiliates of CSFB.
(t) Consists of shares of Class A Common Stock owned by affiliates and
employees of CSFB.
(u) The stockholder, an entity incorporated under the laws of Switzerland, is
the ultimate parent entity of CSFB and Merban Equity.
(v) Employee of CSFB.
(w) Consists of warrants to purchase 383 shares of Class A Common Stock and
options to purchase 33.33 shares of Common Stock granted under the Stock
Option Plan. Does not include warrants to purchase 67 shares of Class A
Common Stock or options to purchase 66.67 shares of Class A Common Stock
granted under the Stock Option Plan not exercisable as of the date hereof.
(x) Consists of warrants to purchase 283 shares of Class A Common Stock and
options to purchase 33.33 shares of Class A Common Stock granted under the
Stock Option
<PAGE>
Plan. Does not include warrants to purchase 67 shares of Class
A Common Stock or options to purchase 66.67 shares of Class A Common Stock
granted under the Stock Option Plan not exercisable as of the date hereof.
(y) Includes (i) (1) 1,633.36 shares of Class A Common Stock, (2) 3,948.4
shares of Class B Common Stock, (3) warrants to purchase 5,081 shares of
Class A Common Stock, (4) warrants to purchase 10,077.4 shares of Class B
Common Stock, and (5) options to purchase 392.48 shares of Class A Common
Stock granted under the Stock Option Plan, held by members of management
and (ii) 1,400 shares of Class A Common Stock and warrants to purchase
7,142 shares of Class A Common Stock held by the Oaktree Fund. Does not
include warrants to purchase 134 shares of Class A Common Stock or options
to purchase 1,335.02 shares of Class A Common Stock granted under the
Stock Option Plan not exercisable as to the date hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a summary of certain agreements and arrangements, as well as
other transactions between the Company and related parties which have taken
place during the Company's most recent fiscal year.
The Recapitalization
As discussed above, in connection with the Recapitalization, (i) the Company
paid the Dividend to Holdings in the amount of approximately $56.9 million to
finance the Recapitalization, (ii) Holdings sold the Discount Debentures and
the Discount Warrants to the Oaktree Fund and Northstar Investment Management
Corp. ("Northstar"), (iii) Holdings used the proceeds of the Dividend and the
proceeds from the sale of the Discount Debentures and the Discount Warrants
to redeem Holdings Common Stock and Preferred Stock and purchase Holdings
Warrants for aggregate consideration of approximately $92.2 million
(including shares of Holdings Common Stock and Preferred Stock and Holdings
Warrants owned by members of management and affiliates of Holdings), (iv)
Holdings assigned its rights to purchase certain shares of Holdings Common
Stock and Holdings Warrants under the Recapitalization Agreement to Dr.
Hartnett, certain affiliates of CSFB, the Oaktree Fund, Mr. Morrison, The
Somers Family Trust and Mr. Quain, (v) Holdings effected the Hartnett
Repurchase of 1,250 Holdings Warrants from Dr. Hartnett for an amount per
share of Holdings Common Stock underlying such Holdings Warrants equal to
$514 less the approximately $77 exercise price of such warrants (an aggregate
of approximately $550,000), (vi) Holdings issued warrants exercisable for
1,250 shares of Class B Common Stock at an exercise price of $514 per share
of Common Stock to Dr. Hartnett, (vii) Holdings made the Hartnett Loan in the
amount of $500,000, (viii) Holdings paid the Hartnett Fee in the amount of $1
million, (ix) Holdings converted all of Dr. Hartnett's shares of Holdings
Common Stock into shares of Class B Common Stock, and amended all Holdings
Warrants held by Dr. Hartnett to provide that they be exercisable for shares
of Class B Common Stock, (x) the Company
<PAGE>
repaid outstanding indebtedness (approximately $52.1 million) on the Existing
Revolving Credit Facility and the Existing Term Loan, (xi) Holdings paid a fee
of $1.6 million to CSFB, in connection with the sale of the Discount Debentures,
(xii) the Company paid a fee to CSFB of $3.85 million in connection with the
sale of the Notes, (xiii) the Company entered into the Senior Credit Facilities
with, among others, an affiliate of CSFB and paid (1) certain fees to such
lenders and (2) a fee of $1.5 million to CSFB in connection therewith, and (xiv)
the Company agreed to indemnify CSFB and certain affiliates of CSFB in
connection with certain matters relating to the Recapitalization.
The Hartnett Loan bears no interest and is recourse only to the securities
purchased with the proceeds thereof. As of March 28, 1998, the entire principal
balance of the Hartnett Loan remained outstanding.
The assignment of rights under the Recapitalization Agreement referred to in
clause (iv) above, was undertaken in order to achieve certain desired
post-Recapitalization equity positions and to satisfy certain contractual
obligations of the Company and Holdings. In exchange for such assignments, the
assignees assumed the obligations of the Company and Holdings under the
Recapitalization Agreement with respect to such shares of Common Stock or
Holdings Warrants.
The Hartnett Repurchase and the grant of certain warrants to Dr. Hartnett
referred to in clause (vi) above were undertaken to enable Dr. Hartnett to
fulfill his obligations with respect to certain shares of Common Stock assigned
to him and referred to in clause (iv) above without Dr. Hartnett suffering a
diminution of his fully-diluted equity position in Holdings. Upon the Hartnett
Repurchase, all obligations of Holdings under the Holdings Warrants repurchased
were extinguished.
The Hartnett Fee was paid to Dr. Hartnett in consideration of services rendered
in connection with the preparation, negotiation and consummation of the
Recapitalization.
In connection with the Recapitalization, the Oaktree Fund purchased
approximately $59.8 million principal amount at maturity of Discount Debentures
and Discount Warrants to purchase 5,469 shares of Common Stock from Holdings in
exchange for approximately $32 million. Mr. Kaplan, a director of Holdings and
the Company, is a principal of Oaktree, the general partner of the Oaktree Fund.
In addition, in connection with the Recapitalization and the other transactions
consummated in connection therewith, the Company paid Ernst & Young, LLP a
consulting fee in the amount of approximately $1 million.
In connection with the Recapitalization and the redemption of certain shares of
Preferred Stock by Holdings pursuant thereto, Holdings released certain holders
thereof who were prior stockholders of the Company, from certain indemnification
obligations owing to Holdings. Such obligations arose under the agreement
pursuant to which Holdings purchased the Company from such stockholders. The
shares of Preferred Stock were held in escrow in connection with such
stockholders' obligations
<PAGE>
under such indemnification provisions. The provisions of the escrow provided
that the escrowed shares were to be released upon any transaction involving a
change in control of Holdings, except as to the extent of claims previously
made. As there were no pending claims, upon consummation of the
Recapitalization, such shares were released from escrow and redeemed by
Holdings. Any claims for environmental remediation at the facilities covered by
the released indemnification are being covered by other indemnifying parties,
and the Company believes that such other indemnification obligations should be
sufficient to cover all costs associated with the known or likely environmental
conditions at such facilities.
Hartnett Control Provision
Through ownership of Class B Common Stock and the provisions of the
Certificate of Incorporation of Holdings granting such Class B Common Stock
10 votes per share, whether or not Dr. Hartnett owns a majority of the
outstanding capital stock of Holdings, he will have, subject to certain
limitations, the power to control a majority of the voting rights of all
capital stock of Holdings. Such right will be suspended for such periods
during which Dr. Hartnett ceases to serve in the management of the Company,
or any successor thereto, or owns less than 50% of the outstanding Holdings
Common Stock on a fully diluted basis that he owned immediately following the
Recapitalization.
Employment Agreement
Effective upon the closing of the Recapitalization, Dr. Hartnett entered into
a five-year Employment Agreement with the Company containing a covenant
restricting competition with the Company. See "Executive Compensation".
Hartnett Bonus
In connection with the acquisition of Nice by the Company, the Company paid a
bonus to Dr. Hartnett in the amount of $136,000. Such bonus was paid in the
first quarter of fiscal 1998.
Myers' Fee
W.E. Myers & Company, an entity which was owned and controlled by Mr. Myers,
a director of Holdings, received a $100,000 fee in 1997 for the provision of
investment bank services in connection with the acquisition of LPP by the
Company.
Stockholder Agreements
Concurrently with the closing of the Recapitalization, Holdings entered into a
stockholders' agreement (the "Stockholders Agreement") with Dr. Hartnett, the
Oaktree Fund, Northstar and certain affiliates of CSFB. The Stockholders
Agreement provides for (i) restrictions on transfer of all
<PAGE>
securities of Holdings held by the parties to the Stockholders Agreement, (ii)
rights of first refusal in favor of the parties to the Stockholders Agreement
prior to any transfer by a party (other than transfers to certain affiliates of
the parties) of securities of Holdings, (iii) tag-along rights in favor of the
other parties to the Stockholders Agreement upon certain transfers of securities
of Holdings by Dr. Hartnett, (iv) certain rights in favor of Dr. Hartnett to
compel the other parties to the Stockholders Agreement to sell securities of
Holdings held by such parties upon certain sales of securities of Holdings by
Dr. Hartnett, (v) certain preemptive rights in favor of the Oaktree Fund,
Northstar and Dr. Hartnett with respect to securities of Holdings, (vi)
piggyback registration rights in favor of all of the parties to the Stockholders
Agreement with respect to securities of Holdings, (vii) detailed registration
rights in favor of the Oaktree Fund and Northstar with respect to securities of
Holdings, with customary covenants regarding such registration and (vii) a grant
to the Oaktree Fund of the right to designate one member of the board of
directors of each of Holdings and the Company. Many of the rights and privileges
contained in the Stockholders Agreement terminate or become limited following an
initial public offering of securities of Holdings.
The Board of Holdings has approved the entry into additional stockholders'
agreements with certain of Holdings other stockholders and warrantholders
providing for (i) the right to repurchase the stock or warrants held by such
parties upon the death or termination of employment of any stockholder or
warrantholder who is employed by Holdings or its subsidiaries, (ii) the right
to tag-along on certain sales of securities by other stockholders of Holdings
and (iii) certain rights in favor of Dr. Hartnett to compel such stockholders
and warrantholders to sell their securities of Holdings upon certain sales of
securities by Dr. Hartnett. Holdings anticipates executing such agreements
during fiscal 1999.
Prior to the Recapitalization, Holdings was a party to various arrangements with
its stockholders and warrantholders, all of which have been terminated.
Consulting Agreement
Prior to the Recapitalization, the Company and Tribos Management Company, Inc.,
an affiliate of Aurora, were parties to a consulting agreement (the "Consulting
Agreement"). whereby Tribos provided certain consulting services to the Company
in exchange for monthly payments of approximately $36,000. The Consulting
Agreement also provided for annual adjustments to the fee, reimbursement of
Tribos' expenses by the Company and the payment of additional fees in connection
with the acquisition of Nice. The total fees paid in fiscal 1998, 1997 and 1996
pursuant to the consulting agreement were $108,000, $429,000 and $400,000,
respectively. The Consulting Agreement was terminated in connection with the
Recapitalization.
Stock Option Plan
Effective February 18, 1998, Holdings adopted the Stock Option Plan and
issued options thereunder to certain of its directors, officers and
employees. See, "Item 11. Executive Compensation".
<PAGE>
Warrant Reissuances
The Board has approved a proposal to amend and restate the terms of certain
of its outstanding warrants to, among other things, extend the terms thereof.
Such action will be effective as of February 18, 1998.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
Consolidated Statement of Operations for Each of the Years in the
Three-Year Period Ended March 28, 1998.......................................Part II Item 8
Consolidated Balance Sheet at March 28, 1998, March 29, 1997 and
March 30, 1996.............................................................. Part II Item 8
Consolidated Statement of Cash Flows for Each of the Years in
the three-Year Period Ended March 28, 1998...................................Part II Item 8
Consolidated Statement of Stockholder's (Deficit) Equity for Each
of the Years in the Three-Year Period Ended March 28, 1998...................Part II Item 8
Notes to Consolidated Financial Statements.....................................Part II Item 8
Independent Auditors' Report...................................................Part II Item 8
</TABLE>
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES
(a) Exhibits.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation,
dated June 23, 1997, of Roller Bearing Company of
America, Inc. ("RBCA").
3.2** Bylaws of RBCA.
3.2(a)*** Amendment to the Bylaws of RBCA.
4.1** Indenture, dated as of June 15, 1997 between RBCA
and the United States Trust Company of New York
("Trustee") with forms of Outstanding Note and
Exchange Note.
4.1(a)** Supplemental Indenture, dated as of August 8, 1997
by and between Bremen and the Trustee.
4.2** Global Note Issued to Depository Trust Co., duly
authenticated by RBCA and the Trustee.
4.3** Registration Rights Agreement dated June 17, 1997
between RBCA, the Subsidiary Guarantors named
therein and CSFB.
4.4*** Stock Option Plan of Holdings, dated as of
February 18, 1998 with form of agreement.
4.5*** Form of Stock Transfer Restriction Agreement
between Holdings and certain of its stockholders.
4.6*** Form of Amended and Restated Warrant of Holdings.
10.1** Purchase Agreement, dated June 17, 1997 among RBCA,
the Subsidiary Guarantors named therein and the
CSFB
10.2** Redemption and Warrant Purchase Agreement by and
among Holdings, Certain Stockholders of Holdings,
and Michael J. Hartnett, as purchaser
representative, dated as of May 20, 1997, as
amended by that certain Amendment No. 1, dated as
of June 23, 1997.
10.3** Credit Agreement dated as of June 23, 1997, among
RBCA, the Lenders named therein and CSFB, as
Administrative Agent.
10.4** Pledge Agreement dated as of June 23, 1997, among
RBCA, each Subsidiary of RBCA named therein and
CSFB.
10.5** Security Agreement dated as of June 23, 1997, among
RBCA, each Subsidiary of RBCA named therein and
CSFB.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
10.6** Guarantee Agreement dated as of June 23, 1997,
among each of the subsidiaries named therein of
RBCA and CSFB.
10.7** Asset Purchase Agreement by and among BFM Aerospace
Corporation, Ground Support, Inc., RBC Transport
Dynamics Corporation and Holdings, dated as of
October 26, 1992.
10.8** Asset Purchase Agreement by and among BFM Aerospace
Corporation, BFM Transport Dynamics Corporation,
RBC Transport Dynamics Corporation and Holdings,
dated as of October 26, 1992.
10.9** Agreement and Plan of Reorganization among RBCA,
Roller Bearing Acquisition Company, Inc., Holdings
and the Stockholders of RBCA, dated March 31, 1992.
10.10** Agreement of Merger between Roller Bearing
Acquisition Company, Inc. and RBCA, dated March 31,
1992.
10.11** Asset Sale Agreement by and between IMO Industries
Inc. and RBCA, dated as of May 10, 1993.
10.12** Asset Purchase Agreement by and among BPP
Acquisition Corporation, Beaver Precision Products,
Inc., RBCA, and Lloyd J. Baretz, dated as of
October 18, 1996.
10.13** Asset Purchase Agreement By and Among SKF USA Inc.,
Nice and RBCA, dated as of February 28, 1997.
10.14** Lease between General Sullivan Group, Inc. and RBC
Bearings, dated July 11, 1995, for West Trenton,
New Jersey premises.
10.15** Lease between Industrial Development Group and
RBCA, dated March 12, 1996 for Waterbury,
Connecticut premises.
10.16** Letter of Credit Agreement, dated as of September
1, 1994, between RBCA and Heller Financial, Inc.
("Heller").
10.17** Termination, Release and Enhancement Letter of
Credit Documents Continuation Agreement dated June
23, 1997, by and between Heller, RBCA and ITB.
10.18** Executed counterpart of the Pledge and Security
Agreement, dated as of September 1, 1994, between
RBCA, Heller and the Trustee.
10.19** Loan Agreement, dated as of September 1, 1994,
between the South Carolina Job - Economic
Development Authority, ("the Authority") and RBCA
with respect to the Series 1994A Bonds.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
10.20*** Collective Bargaining Agreement between Bremen,
Indiana Plant of SKF USA, Inc and International
Union, United Automobile, Aerospace and Agricultural
Workers of America, U.A.W. Local 1368, effective
July 20, 1996.
10.21** Trust Indenture, dated as of September 1, 1994,
between the Authority and Mark Twain Bank, ("Bond
Trustee"), with respect to the Series 1994A Bonds.
10.22** Loan Agreement, dated as of September 1, 1994,
between the Authority and RBCA, with respect to the
Series 1994B Bonds.
10.23** Trust Indenture, dated as of September 1, 1994,
between the Authority and Bond Trustee, with
respect to the Series 1994B Bonds.
10.24** Collective Bargaining Agreement between Heim, the
International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America,
U.A.W., and Amalgamated Local 376, U.A.W.,
effective February 1, 1996.
10.25** Collective Bargaining Agreement between Nice
Specialty Bearings Division, SKF Bearing Industries
and United Steelworkers of America (AFL - CIO) and
its Local 6326, effective October 26, 1996.
10.26** Collective Bargaining Agreement between RBCA and
the International Union U.A.W. and its Local 502,
effective December 1, 1996.
10.27** Employment Agreement effective as of June 23, 1997
between RBCA and Michael J. Hartnett, Ph.D.
10.28** Stockholders' Agreement dated as of June 23, 1997
by and among Holdings, OCM Principal Opportunities
Fund, Northstar Investment Management Corporation,
Merban Equity, the CSFB Individuals named therein
and Dr. Michael J. Hartnett.
10.29** Promissory Note dated as of June 23, 1997 for
$500,000 made by Michael J. Hartnett, Ph.D. and
payable to RBCA.
10.30** Tax Sharing Agreement effective as of June 23,
1997, by and among Holdings and RBCA, ITB, LPP and
Nice.
10.31** Asset Purchase Agreement by and among SKF USA Inc.,
Bremen and RBCA dated as of August 8, 1997.
10.32*** Real Estate Purchase Agreement for the Walterboro ,
South Carolina facility, dated March 27, 1998 by
and between Linear Precision Products, Inc., RBCA
and Dana Corporation.
10.33*** Amendment to the Letter of Credit Agreement, dated
as of June 23, 1998 between RBCA and Heller
Financial Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
10.34*** Supplement No. 1 to Guarantee Agreement, dated as
of August 8, 1997, by and between Bremen and
CSFB.
10.35*** Supplement No. 1 to Indemnity, Subrogation and
Contribution Agreement, dated as of August 8, 1997,
by and between Bremen and CSFB.
10.36*** Supplement No. 1 to Security Agreement, dated as of
August 8, 1997, by and between Bremen and CSFB.
10.37*** Supplement No. 1 to Pledge Agreement, dated as of
August 8, 1997, by and between Bremen and CSFB.
10.38*** Agreement of Lease, dated as of November 1,
1964, between Bremen, Inc. and SKF Industries,
Inc. with Assignment and Agreement Lease, dated
August 8, 1997, between SKF USA, Inc. and Bremen
Bearings.
10.39*** Asset Purchase Agreement, dated as of June 3, 1998,
by and among Miller Acquisition Corporation, Miller
Bearing Company and the Shareholders of Miller
Bearing Corporation.
10.40*** Supplement No. 2 to Guarantee Agreement dated as of
June 3, 1998, by and between Miller Acquisition
Corporation and CSFB, as Collateral Agent.
10.41*** Supplement No. 2 to Indemnity, Subrogation and
Contribution Agreement, dated as of June 3, 1998,
by and between Miller Acquisition Corporation and
CSFB.
10.42*** Supplement No. 2 to Security Agreement, dated as of
June 3, 1998, by and between Miller Acquisition
Corporation and CSFB.
10.43*** Supplement No. 2 to Pledge Agreement, dated as of
June 3, 1998, by and between Miller Acquisition
Corporation and CSFB.
16.1** Statement of the Company regarding Change in
Certifying Accountant.
16.2** Letter of Ernst & Young LLP regarding Change in
Certifying Accountant.
21.*** Subsidiaries of RBCA.
27.*** Financial Data Schedule.
</TABLE>
- ----------
* Incorporated by reference to the Registration Statement on Form S-4, filed
with the Securities and Exchange Commission by RBCA and its subsidiaries on
August 8, 1997.
** Incorporated by reference to Amendment No. 1 to the Registration Statement
<PAGE>
on Form S-4, filed with the Securities and Exchange Commission by RBCA and
its subsidiaries on October 31, 1997.
*** Filed herewith.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ROLLER BEARING COMPANY OF AMERICA, INC.
By: /s/ Michael J. Hartnett
--------------------------------------
Michael J. Hartnett
President and Chief Executive Officer
Chairman of the Board of Directors
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacitites and on the dates indicated.
June 24, 1998 By: /s/ Michael J. Hartnett
--------------------------------------
Michael J. Hartnett
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
June 23, 1998 By: /s/ Anthony S. Cavalieri
--------------------------------------
Anthony S. Cavalieri
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
June 24, 1998 By: /s/ Stephen A. Kaplan
--------------------------------------
Stephen A. Kaplan
Director
June 22, 1998 By: /s/ Kurt B. Larsen
--------------------------------------
Kurt B. Larsen
Director
June 23, 1998 By: /s/ William E. Myers, Jr.
--------------------------------------
William E. Myers, Jr.
Director
June 21, 1998 By: /s/ Mitchell T. Quain
--------------------------------------
Mitchell T. Quain
Director
<PAGE>
Exhibit 3.2(a)
UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
ROLLER BEARING COMPANY OF AMERICA, INC.
The undersigned, being all of the members of the Board of Directors of
Roller Bearing Company of America, Inc., a Delaware corporation (the
"Corporation"), hereby adopt the following resolutions by Unanimous Written
Consent in accordance with the provisions of Section 141 of the General
Corporation Law of the State of Delaware, and direct that the Secretary of the
Corporation place a copy of this Unanimous Written Consent in the minute books
of the Corporation:
WHEREAS, the Board of Directors of the Corporation deems it to be in
the best interest of the Corporation to amend the Bylaws of the
Corporation with respect to the indemnification of the directors,
employees and agents of the Corporation; and
WHEREAS, the Board of Directors of the Corporation deems it to be in
the best interest of the Corporation to expand the number of directors
of the Corporation to six (6) and to add Robert Anderson as a director
of the Corporation.
NOW, THEREFORE, BE IT:
RESOLVED, that Section 7.01 of the Bylaws of the Corporation is hereby
amended and restated in full as follows:
SECTION 7.01 Liability and Indemnification. In addition to the
limitation of liability and other rights set forth in the Corporation's
Certificate of Incorporation:
(a) The Corporation shall indemnify, in the manner and to the
full extent permitted by law, any person (or the estate of any person)
who was or is a party to, or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether or
not by or in the right of the Corporation, and whether civil, criminal,
administrative, investigative or otherwise, by reason of the fact that
such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the
<PAGE>
Corporation as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other
enterprise. The Corporation may, to the full extent permitted by law,
purchase and maintain insurance on behalf of any such person against
any liability which may be asserted against him. To the full extent
permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement, and, in the manner provided by law, any such expenses
shall be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the person seeking indemnification to pay such amounts if it
is ultimately determined that he is not entitled to be indemnified. The
indemnification provided herein shall not be deemed to limit the right
of the Corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive
of any other rights to which any person seeking indemnification from
the Corporation may be entitled under any agreement, 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.
(b) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Law as the same exits or may hereafter be amended.
(c) Any repeal or modification of paragraph (b) of this
Section 7.01 shall not adversely affect any right or protection of a
director of the Corporation existing hereunder with respect to any act
or omission occurring prior to such repeal or modification.
; and be it further
RESOLVED, that the number of directors of the Board of Directors is
hereby increased from five (5) to six (6) and Robert Anderson is hereby
nominated and elected to serve as a member of the Board of Directors,
to serve in such capacity until his successor shall have been duly
elected and shall have been qualified.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Unanimous
Written Consent as of this _____ day of June, 1998.
/s/ Michael J. Hartnett
----------------------------------
Michael J. Hartnett
/s/ Mitchell Quain
----------------------------------
Mitchell Quain
/s/ William E. Myers, Jr.
----------------------------------
William E. Myers, Jr.
/s/ Kurt B. Larsen
----------------------------------
Kurt B. Larsen
/s/ Stephen A. Kaplan
----------------------------------
Stephen A. Kaplan
3
<PAGE>
Exhibit 4.4
ROLLER BEARING HOLDING COMPANY, INC.
STOCK OPTION PLAN
1. Purpose. The Roller Bearing Holding Company, Inc. Stock Option Plan
(the "Plan") is intended to provide incentives which will attract and retain
highly competent persons as officers and employees of Roller Bearing Holding
Company, Inc. and its designated subsidiaries (the "Company"), as well as
independent contractors providing consulting or advisory services to the
Company, by providing them opportunities to acquire shares of Class A voting
stock of the Company ("Common Shares") pursuant to Options, as described herein.
2. Administration.
(a) The Plan will be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates, or is required to
delegate, administration to a Committee, as provided in Sections 2(b) or 2(c)
below. The Board is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it deems necessary or appropriate for
the proper administration of the Plan and to make such determinations and
interpretations and to take such action in connection with the Plan and any
Options granted hereunder as it deems necessary or advisable. All determinations
and interpretations made by the Board shall be binding and conclusive on all
participants and their legal representatives. No member of the Board, and no
employee of the Company shall be liable for any act or failure to act hereunder,
by any other member or employee or by any agent to whom duties in connection
with the administration of this Plan have been delegated or, except in
circumstances involving his bad faith, gross negligence or fraud, for any act or
failure to act by the member or employee.
(b) The Board may delegate all or any portion of administration of
the Plan to a committee composed of not fewer than two (2) members of the Board
(the "Committee"). If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board (and references in this Plan to the Board
shall thereafter be to the Committee, as applicable), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may terminate all or any portion of
the Committee's authority under the Plan at any time and revest in the Board all
or any portion of the administration of the Plan.
<PAGE>
(c) The Board shall be required to delegate administration of the
Plan to a Committee, all of whose members shall be "nonemployee directors,"
effective on and after the date of the first registration of an equity security
of the Company under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"). Any "nonemployee director" shall otherwise comply with the
requirements of Rule 16b-3 of the Exchange Act as in effect at the relevant time
and, to the extent necessary, Internal Revenue Code Section 162(m).
3. Participants. Participants will consist of such officers and employees
of the Company, and independent contractors providing consulting or advisory
services to the Company (including members of the Board), as the Board, in its
sole discretion, determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Board may designate
from time to time to receive Options under the Plan. Designation as a
participant in any year shall not require the Board to designate such person to
receive an Option in any other year or, once designated, to receive the same
type or amount of Options as granted to the participant, or any other
participant, in any year. The Board shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
their respective Options.
4. Shares Reserved under the Plan. Subject to adjustments as provided in
Section 6, there is hereby reserved for issuance under the Plan an aggregate of
3,365,596 Common Shares, which may be authorized but unissued shares or shares
held by the Company in its treasury. Any shares subject to any form of Option
hereunder may thereafter be subject to new Options under this Plan if there is a
lapse, expiration or termination of any such Options granted prior to issuance
of the shares, or if shares are issued under Options and thereafter are
reacquired by the Company pursuant to rights reserved by the Company upon
issuance thereof.
5. Options. Options will consist of awards from the Company that will
enable the holder to purchase a specific number of Common Shares, at set terms
and at a fixed purchase price. Options may be "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code ("Incentive Stock
Options") or Options that do not constitute Incentive Stock Options
("Nonqualified Stock Options," and together with Incentive Stock Options,
"Options"). The Board will have the authority to grant to any participant one or
more Incentive Stock Options, Nonqualified Stock Options, or both types of
Options. Each Option shall be evidenced by a written option agreement in such
form and shall be subject to such terms and conditions as the Board may approve
from time to time, including without limitation the following:
(a) Exercise Price. Each Option granted hereunder shall have such
per-share exercise price as the Board may determine at the date of grant;
provided, however, that the per-share exercise price for Options shall not be
less than 100% of the Fair Market Value of the Common Shares on the date the
option is granted, as reasonably determined by the Board.
2
<PAGE>
(b) Payment of Exercise Price. The option exercise price may be paid
by check or, in the discretion of the Board, by the delivery (or certification
of ownership) of Common Shares of the Company then owned by the participant;
provided, however, that payment of the exercise price by delivery of Common
Shares of the Company then owned by the participant may be made only if such
payment does not result in a charge to earnings for financial accounting
purposes as determined by the Board. In the discretion of the Board, if Common
Shares are readily tradeable on a national securities exchange or other market
system at the time of option exercise, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
(c) Exercise Period. Options granted under the Plan shall be
exercisable at such times and subject to such terms and conditions as shall be
determined by the Board; provided, however, that Options shall not be
exercisable more than 10 years after the date they are granted. All Options
shall terminate at such earlier times and upon such conditions or circumstances
as the Board shall in its sole discretion set forth in such option at the date
of grant, including but not limited to limitations on exercisability following
termination of the participant's employment or consulting relationship.
(d) Limitations on Incentive Stock Options. Incentive Stock Options
may be granted only to participants who are employees of the Company or one of
its subsidiaries (within the meaning of Section 424(f) of the Internal Revenue
Code) at the date of grant. The aggregate Fair Market Value (determined as of
the time the option is granted) of the Common Shares with respect to which
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year (under all option plans of the Company) shall not
exceed $100,000. Incentive Stock Options may not be granted to any participant
who, at the time of grant, owns stock possessing (after the application of the
attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company, unless the option
price is fixed at not less than 110% of the Fair Market Value of the Common
Shares on the date of grant and the exercise of such option is prohibited by its
terms after the expiration of five years from the date of grant of such option.
(e) Redesignation as Nonqualified Stock Options. Options designated
as Incentive Stock Options that fail to meet the requirements of Section 422 of
the Internal Revenue Code shall be redesignated as nonqualified options for
Federal income tax purposes automatically without further action by the Board on
the date of such failure to continue to meet the requirements of Section 422 of
the Code.
(f) Limitation of Rights in Shares. The recipient of an Option shall
not be deemed for any purpose to be a shareholder of the Company with respect to
any of the
3
<PAGE>
shares subject thereto except to the extent that the Option shall have been
exercised and, in addition, a certificate shall have been issued and delivered
to the participant.
6. Adjustment Provisions.
(a) If the Company shall at any time change the number of issued
Common Shares without new consideration to the Company by stock dividend, stock
split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Common Shares,
the total number of shares available for Options under this Plan shall be
appropriately adjusted and the number of shares covered by each outstanding
Option and the exercise price thereunder shall be adjusted so that the net value
of such Option shall not be changed, all of the foregoing, including the
appropriations of any such adjustment to be as determined by the Board, in its
discretion. It is specifically understood that the provisions of this subsection
(a) are intended to apply solely to capital events that are independent of, and
unrelated to, any transaction involving the direct or indirect sale or issuance
of securities of the Company for value (and irrespective of the adequacy of the
consideration so paid).
(b) In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the Company
with or into another corporation which results in the outstanding Common Shares
being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of this Plan and any limitation applicable to the Option, any
participant to whom an Option has been granted shall have the right thereafter
and during the term of the Option, to receive upon exercise thereof the
Acquisition Consideration (as defined below) receivable upon the Acquisition by
a holder of the number of Common Shares that might have been obtained upon
exercise of the Option or portion thereof, as the case may be, immediately prior
to the Acquisition. The term "Acquisition Consideration" shall mean the kind and
amount of securities, cash or other property or any combination thereof
receivable in respect of one Common Share upon consummation of an Acquisition.
(c) Notwithstanding any other provision of this Plan, the
Board may authorize the issuance, continuation or assumption of Options or
provide for other equitable adjustments after changes in the Common Shares
resulting from any other merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar occurrence upon
such terms and conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business entity
is being acquired by the Company, and the Company assumes outstanding employee
stock options and/or the obligation to make future grants of options to
employees of the acquired entity, the aggregate
4
<PAGE>
number of Common Shares available for Options under this Plan shall be increased
accordingly.
7. Nontransferability.
(a) Each Option granted under the Plan to a participant shall
not be transferable by him otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the participant's lifetime, only
by him. In the event of the death of a participant while the participant is
rendering employment, consulting or advisory services to the Company, each
Option theretofore granted to him shall be exercisable during such period after
his death as the Board shall in its discretion set forth in such option at the
date of grant (but not beyond the stated duration of the option) and then only:
(i) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's
rights under the Option shall pass by will or the laws of descent and
distribution; and
(ii) To the extent that the deceased participant was entitled to do so
at the date of his death.
(b) Notwithstanding Section 7(a), in the discretion of the
Board, Options granted hereunder may be transferred to members of the
participant's immediate family (which for purposes of this Plan shall be limited
to the participant's children, grandchildren and spouse), or to one or more
trusts for the benefit of such family members, or to partnerships or limited
liability companies in which such family members and/or trusts are the only
partners or members, but only if the Option expressly so provides.
8. Other Provisions. Options granted under the Plan may also be subject
to such other provisions (whether or not applicable to any other Options awarded
under the Plan to the participant or to any other participant) as the Board
determines appropriate, including without limitation, provisions for the
installment purchase of Common Shares, provisions to assist the participant in
financing the acquisition of Common Shares, provisions for the forfeiture of, or
restrictions on resale or other disposition of, Common Shares acquired under any
form of Option, provisions for the deferral of option gains, provisions for the
acceleration of exercisability or vesting of Options in the event of a change of
control of the Company, provisions for the payment of the value of Options to
participants in the event of a change of control of the Company, provisions for
the forfeiture of the Options, or provisions to comply with Federal and state
securities laws, or understandings or conditions as to the participant's
employment in addition to those specifically provided for under the Plan.
5
<PAGE>
9. Fair Market Value. For purposes of this Plan and any Options awarded
hereunder, the Fair Market Value of Common Shares shall be the mean between the
highest and lowest sale prices for the Company's Common Shares as reported on
the Nasdaq National Market (or such other consolidated transaction reporting
system on which such Common Shares are primarily traded) on the date of
calculation (or on the next preceding trading date if Common Shares were not
traded on the date of calculation); provided, however, that if the Company's
Common Shares are not at any time readily tradeable on a national securities
exchange or other market system, Fair Market Value shall mean the amount
determined in good faith by the Board as the fair market value of the Common
Shares of the Company.
10. Withholding. All payments or distributions made pursuant to the Plan
shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local income and/or employment tax withholding requirements.
If the Company proposes or is required to distribute Common Shares pursuant to
the exercise of Options, it may require the recipient to remit to it an amount
sufficient to satisfy such tax withholding requirements prior to the delivery of
any certificates for such Common Shares. The Board may, in its discretion and
subject to such rules as it may adopt, permit an optionee to pay all or a
portion of the federal, state and local withholding taxes arising in connection
with the exercise of an Option, by electing to have the Company withhold Common
Shares having a Fair Market Value equal to the amount of taxes required to be
withheld.
11. Tenure. A participant's right, if any, to continue to serve the
Company as an officer, employee, consultant, advisor, or otherwise, shall not be
enlarged or otherwise affected by his designation as a participant under the
Plan, nor shall this Plan in any way interfere with the right of the Company,
subject to the terms of any separate agreement to the contrary, at any time to
terminate such employment, consulting or advisory relationship, or to increase
or decrease the compensation of the participant from the rate in existence at
the time of the grant of an Option.
12. Duration, Amendment and Termination. No Option shall be granted after
December 31, 2008; provided, however, that the terms and conditions applicable
to any Option granted prior to such date may thereafter be amended or modified
by mutual agreement between the Company and the participant or such other
persons as may then have an interest therein. Also, by mutual agreement between
the Company and a participant hereunder, under this Plan or under any other
present or future plan of the Company, Options may be granted to such
participant in substitution and exchange for, and in cancellation of, any
Options previously granted such participant under this Plan, or any other
present or future plan of the Company. The Board may amend the Plan from time to
time or terminate the Plan at any time, subject to any requirement of
stockholder approval required by applicable law, rule or regulation. However, no
action authorized by this Section 12 shall reduce the amount of any outstanding
Option or change the terms or conditions thereof without the participant's
consent.
6
<PAGE>
13. Governing Law. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware (regardless of the law that might otherwise govern under applicable
Delaware principles of conflict of laws).
14. Approval. The Plan was adopted by the Board on February 18, 1998 and
the shareholders of the Company on February 18, 1998.
7
<PAGE>
ROLLER BEARING HOLDING COMPANY, INC.
NON-QUALIFIED STOCK OPTION
THIS OPTION is granted this day of , 199 , by Roller Bearing Holding
Company, Inc. a corporation ("RBC") to (the "Employee");
WHEREAS, the Board of Directors of RBC is of the opinion that the interests
of RBC and its subsidiaries (collectively, the "Company") will be advanced by
encouraging and enabling those officers and key employees of the Company, as
well as independent contractors providing consulting or advisory services to the
Company, upon whose judgment, initiative and efforts the Company is largely
dependent for the successful conduct of the business of the Company to acquire
or increase their proprietary interest in the Company, thus providing them with
a more direct stake in its welfare and assuring a closer identification of their
interests with those of the Company; and
WHEREAS, the Board believes that the acquisition of such an interest in the
Company will stimulate the efforts of such officers, key employees and
independent contractors;
NOW, THEREFORE, in consideration of the premises and of the services
required under Section 2 in order to receive benefits hereunder, the Company
hereby grants this option to the Employee on the terms hereinafter expressed:
1. Option Grant. The Company hereby grants to the Employee a non-
qualified stock option to purchase a total of shares (the "Option Shares")
of
<PAGE>
class A voting stock of RBC ("Common Shares") at the option price of $514 per
Common Share. This option is not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
2. Time of Exercise. This option may be exercised (in the manner provided
in Section 3 hereof) in whole or in part, from time to time after the date
hereof, subject to the following limitations:
(a) This option may be exercised (to the extent not previously
exercised) to the maximum cumulative extent set forth below, i.e. depending upon
the date of such exercise:
<TABLE>
<CAPTION>
Permitted Exercise (Stated
Date of Exercise as a Percentage of the Total
Option Shares)
- -------------------------------------------------------------------------------
<S> <C>
[From and after the date hereof] ____%
[From and after] ____%
[From and after hereof] ____%
[From and after hereof] ____%
</TABLE>
Notwithstanding the foregoing, this option may not be exercised for fractional
Common Shares and this option may not be exercised for less than Common
Shares at a time unless it is for the balance of the Option Shares available
hereunder.
(b) Notwithstanding Section 2(a) hereof, in the event of the
Employee's termination of employment with the Company due to "Permanent
Disability" (as defined below) or death, this option shall immediately become
exercisable (to the extent not previously exercised) to the extent of 100% of
the total Option Shares.
2
<PAGE>
(c) This option shall terminate as to any then unexercised options
(and shall then forever lapse) on the tenth anniversary of the date hereof, or,
if earlier, upon the first to occur of any of the following:
(i) the effective date of the termination of the Employee's
employment by the Company for "cause," which for purposes of this
option shall have the same meaning as set forth in any separate
employment agreement between the Employer and the Company or, in the
absence of any such separate employment agreement, "cause" means
termination because of
(1) any act of fraud, embezzlement, theft or commission of
a crime involving moral turpitude by the Employee;
(2) any breach by the Employee of any material covenant,
condition, or agreement in any employment agreement entered into
with the Company;
(3) any good faith finding by the Company that the Employee
repeatedly failed to perform the Employee's required duties;
provided that the Company shall have provided the Employee with
notice of such failure to perform and shall have afforded the
Employee a reasonable opportunity to cure (it being understood
that compliance with the notice or cure provisions set forth in
any written employment agreement with the Employee shall
constitute reasonable actions on behalf of the Company); or
3
<PAGE>
(4) any chemical dependency by the Employee (other than in
connection with medicines prescribed for the Employee).
(ii) 90 days following the termination of the Employee's
employment by the Company for any reason other than death, Permanent
Disability or "cause" (and, in any such case, then only to the extent
the Employee could have exercised this option on the date of such
termination); or
(iii) one year following the termination of the Employee's
employment due to death or Permanent Disability.
(d) For purposes of this option, the Employee's employment will be
deemed to have been terminated due to Permanent Disability if such termination
is due to Employee's inability to perform his or her stated duties with the
Company, as confirmed by a physician acceptable to the Company specializing in
the area of medicine that is the subject of such disability, by reason of
illness, accident or other incapacity, for a period of more than 90 consecutive
days or 180 days during any consecutive 360 day period.
(e) This option shall not be affected by leaves of absence approved
in writing by the CEO of the Company or by any change of employment status so
long as the Employee continues to be an employee of the Company. Nothing in this
option shall confer on the Employee any right to continue in the employ of the
Company or to interfere with the right of the Company, subject to the terms of
any separate employment contract, if any, to the contrary, to terminate
Employee's employment at any time.
4
<PAGE>
3. Exercise of Option.
(a) This option may be exercised only by appropriate notice in
writing delivered to the Secretary of RBC at its corporate headquarters in
Fairfield, Connecticut, and accompanied by:
(i) The full purchase price of the Option Shares purchased
payable by a certified or cashier's check made payable to the order of
the Company;
(ii) An executed Stock Transfer Restriction Agreement (the "Stock
Restriction Agreement") between the Company and the Employee or his
successor in interest, whether determined by will or the laws of
descent and distribution or otherwise, in the form attached hereto as
Exhibit A, as the same may be modified from time to time, in RBC's
discretion; and
(iii) Such other documents or representations (including without
limitation representations as to the intention of the Employee or his
successor, or other purchaser under Section 6, to acquire the Option
Shares for investment) as the Company may reasonably request in order
to comply with securities, tax or other laws then applicable to the
exercise of the option.
(b) Payment of the option exercise price hereunder may, in the sole
discretion of the Company, be made by delivering (or certifying as to ownership)
certificates for Common Shares which have been held by Employee for at least six
5
<PAGE>
months (or such longer period as RBC may deem necessary in order to avoid a
charge to earnings for financial reporting purposes) which are equal in value
(based on their Fair Market Value on the date of surrender) to such purchase
price or the portion thereof so paid). In addition, in the event Option Shares
are registered under the Securities Exchange Act of 1934, payment of the option
exercise price hereunder may, in the sole discretion of RBC, also be made by
delivering a properly executed exercise notice to RBC together with a copy of
irrevocable instructions to a broker to promptly deliver to RBC the necessary
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, RBC may enter into agreements for coordinated procedures with one or
more brokerage firms.
(c) The exercise of this option is conditioned upon the Employee
making arrangements satisfactory to the Company relating to any required
withholding taxes attributable to such exercise. The Company may, in its sole
discretion and subject to such rules and procedures as it may adopt, permit the
Employee to satisfy any tax withholding obligation, in whole or in part, by
electing to have the Company withhold Option Shares received in connection with
the exercise of this option having a Fair Market Value equal to the amount
required to be withheld.
4. Change of Control.
(a) In the event of a Change of Control, the Board may, in its sole
discretion by providing at least 30-days prior written notice to the Employee
(i) elect to cancel this option, unless theretofore (or concurrently with such
Change of Control) exercised, on the effective date of the Change of Control,
and/or (ii) accelerate the
6
<PAGE>
exercisability of this option with respect to all or any portion of the Option
Shares that were not theretofore exercisable by operation of Section 2 above,
and/or (iii) require, in lieu of the exercise of this option, that the Employee
be provided with a cash payment as set forth in Section 4(c) hereof.
(b) For purposes of this option, a "Change of Control" shall occur:
(i) upon the consummation of a sale, lease, exchange or other
transfer or disposition by the Company of all or substantially all of
the assets of the Company on a consolidated basis; provided, however,
that the mortgage, pledge or hypothecation of all or substantially all
of the assets of the Company on a consolidated basis, in connection
with a bona fide financing shall not constitute a Change of Control;
or
(ii) when any "person," other than any shareholder having Voting
Control as of June 23, 1997, (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 but excluding any
Company sponsored employee benefit plan) becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Securities Exchange Act of
1934 as in effect on date hereof), directly or indirectly, of Voting
Control. For the purposes hereof "Voting Control" means owning more
than 50% of the "voting power" of those of RBC's (or, for purposes of
(iii) below of a corporation with which RBC shall have merged or
consolidated) securities that have the right to elect the Board of
Directors of RBC or such other corporation and otherwise direct the
governance of RBC or such other corporation; or
7
<PAGE>
(iii) upon the consummation of a merger or consolidation in which
any person (other than any shareholder having voting control as of
June 23, 1997) will beneficially own immediately after the effective
time of the merger or consolidation Voting Control of the surviving or
new corporation; or
(c) Pursuant to Section 4(a)(iii) hereof, in the event of a Change of
Control, the Company may, at its option, elect to pay in cash an amount equal to
the excess, if any, of (i) the Fair Market Value of each Option Share on the
date of exercise over (ii) the exercise price as provided herein, multiplied by
the number of Option Shares for which the option is exercised, less any required
withholding taxes. In the event of such election, the Company will make a
payment to the Employee, his estate, the person to whom the option passes by
will or by the laws of descent or distribution or the Employee's legal
representative or guardian, upon the effective date of the Change of Control and
the Company shall have no further liability of any kind to Employee.
5. Transferability of Option.
(a) Except as provided in Sections 5(b), this option is not
transferable by the Employee otherwise than by will or the laws of descent and
distribution, and is exercisable, during the Employee's lifetime, only by him or
her.
(b) Subject to the prior written consent of the Company, this option
may transferred, in whole or in part, only under the circumstances, and subject
to the terms and conditions, set forth in Section 2.5 of the Stock Restriction
Agreement.
6. Death of Employee. If the Employee dies while in the employ of the
8
<PAGE>
Company, this option may be exercised in whole or in part and from time to time,
in the manner described in Section 3 hereof, by his estate or the person to whom
the option passes by will or the laws of descent and distribution, but only to
the extent that the Employee could have exercised it on the date of his death,
and only within a period of (a) twelve months next succeeding the Employee's
termination of employment due to death, or (b) ten years from the date hereof,
whichever period is shorter.
7. Delivery of Certificates. If at any time during the term of this
option the Company shall be advised by its counsel that Option Shares
deliverable upon exercise of this option are required to be registered under the
Federal Securities Act of 1933, as amended, or under applicable state securities
laws, or that delivery of the Option Shares must be accompanied or preceded by a
prospectus meeting the requirements of the Act or of any applicable state
securities laws, delivery of Option Shares by the Company may be deferred until
registration is effected or a prospectus is available or until an appropriate
exemption from registration is secured. The Employee shall have no interest in
the Option Shares covered by this option unless and until certificates for the
Option Shares are issued following the exercise of this option.
8. Adjustment Provisions.
(a) If RBC shall at any time change the number of issued Common
Shares without new consideration to RBC by stock dividend, stock split,
recapitalization, reorganization, exchange of shares, liquidation, combination
or other change in corporate structure affecting the Common Shares, the total
number of shares available for options under this option shall be appropriately
adjusted and the exercise price hereunder shall
9
<PAGE>
be adjusted so that the net value of such option shall not be changed, all of
the foregoing, including the appropriations of any such adjustment to be as
determined by the Board, in its sole discretion. It is specifically understood
that the provisions of this subsection (a) are intended to apply solely to
capital events that are independent of, and unrelated to, any transaction
involving the direct or indirect sale or issuance of securities of RBC for value
(and irrespective of the adequacy of the consideration so paid).
(b) In the case of any sale of assets, merger, consolidation, combination
or other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Common Shares being
converted into or exchanged for different securities, cash or other property, or
any combination thereof (an "Acquisition"), subject to the provisions of this
option, the Employee shall have the right thereafter and during the term of the
option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon the Acquisition by a holder of the number of
Common Shares that might have been obtained upon exercise of the option or
portion thereof, as the case may be, immediately prior to the Acquisition. The
term "Acquisition Consideration" shall mean the kind and amount of securities,
cash or other property or any combination thereof receivable in respect of one
Option Share upon consummation of an Acquisition.
9. Applicable Plan. This option is granted under and is subject to the
terms and conditions of the Roller Bearing Holding Company, Inc. Stock Option
Plan (the "Plan") attached hereto as Exhibit B. Any capitalized terms not
defined herein shall be subject to the definitions set forth in the Plan.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this option to be executed on
the date first above written.
ROLLER BEARING HOLDING COMPANY, INC.
By:
---------------------
Its: President
ACCEPTED:
- ------------------------
Employee
, 199
- ---------------- --
11
<PAGE>
Exhibit 4.5
STOCK TRANSFER RESTRICTION AGREEMENT
Stock Transfer Restriction Agreement, dated this ___ day of _______,
1998 by and among Roller Bearing Holding Company, Inc., a Delaware corporation
("Holdings"), William E. Myers, Jr. (the "Initial Party"), Dr. Michael J.
Hartnett ("Hartnett") and the Persons who by operation of Section 2.5 hereof
become a party hereto (collectively with the Initial Party, the "Stockholders"
and individually a "Stockholder").
WHEREAS, the Initial Party is the owner of [_____________ shares (the
"Shares") of Class A Voting Common Stock of Holdings, par value $.01 per share
("Class A Common Stock" and collectively with any other common stock of any
class or series issued by Holdings, the "Common Stock") and warrants to purchase
________ shares of Class A Common Stock at $100.00 per share (the "Warrants")];
WHEREAS, Holdings, Hartnett and the Stockholders desire to set forth
their agreement regarding certain matters relating to the Stockholders'
ownership of the [Shares and the Warrants], as well as (i) any shares of capital
stock or Derivative Securities that may be issued by Holdings and owned by any
of the Stockholders and (ii) any shares of Common Stock that may be issued by
Holdings to any of the Stockholders upon conversion, exchange or exercise of any
[Warrants or other] Derivative Securities, in each case whether currently owned
or hereinafter acquired, being collectively the "Securities").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the meanings indicated:
1.1 "Affiliate" shall mean a Person controlled by, in control of, or under
common control with, another Person. For purposes of this definition, "control"
(including the correlative terms "controlled by", "in control of" and "under
common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
1.2 "Derivative Securities" shall mean options, warrants (including the
Warrants) and other rights to subscribe for, and securities convertible into or
exchangeable or exercisable for, shares of Common Stock.
1.3 "Fair Market Value" shall mean as to any property on any date, the
fair market value of such property on such date (without regard to any
liabilities to which such property may be subject) as determined in good faith
by the Board of Directors of Holdings, which determination shall, absent
manifest error and except as otherwise set forth in Section 2.3, be binding on
the Stockholders.
1.4 "Initial Public Offering" shall mean the first underwritten public
offering of equity securities of Holdings pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), for which
Holdings received not less than $25
2
<PAGE>
million in gross proceeds and following which there is a public market for the
securities so offered.
1.5 "Outstanding Shares" shall mean, at any given time, the sum of (i) all
outstanding shares of Common Stock and (ii) the aggregate number of shares of
Common Stock issuable upon the exercise, conversion or exchange, as applicable,
of outstanding Derivative Securities. Whenever in this Agreement reference is
made to ownership of Outstanding Shares, such phrase shall mean ownership of the
applicable underlying Common Stock and Derivative Securities in respect thereof.
1.6 "Permitted Transferee" shall mean, with respect to any Person, (a) if
such Person is an individual, (i) a member of the Immediate Family of such
Person, or (ii) a trust or other similar legal entity for the primary benefit of
such Person and/or one or more members of his Immediate Family, or (iii) a
partnership, limited partnership, limited liability company, corporation or
other entity in which such Person and members of his Immediate Family possess
100% of the outstanding voting securities, (b) if such Person is a partnership
or limited liability company, the general partners, limited partners or members
thereof to whom securities of Holdings are Transferred on a pro rata basis in
accordance with the terms of the underlying partnership agreement or limited
liability company agreement and (c) if such Person is a corporation, any wholly
owned subsidiary of such corporation or parent of such corporation that wholly
owns such corporation. For purposes of this definition, "Immediate Family", with
respect to any individual, shall mean his brothers, sisters, spouse, children
(including adopted children), parents, parents-in-law, grandchildren, great
grandchildren and other lineal descendants and spouses of any of the foregoing.
3
<PAGE>
1.7 "Person" shall mean any natural person, corporation, organization,
partnership, association, joint-stock company, limited liability company, joint
venture, trust or government, or any agency or political subdivision of any
government.
1.8 "Transfer" shall mean any direct or indirect, voluntary or
involuntary, sale assignment, gift, encumbrance or other direct or indirect
transfer (whether outright or conditional) of any Securities or any interest
therein.
1.9 Defined Terms
The following terms are defined elsewhere in this Agreement in the
Sections and on the pages indicated:
<TABLE>
<CAPTION>
Defined Term Section Page
- ------------ ------- ----
<S> <C> <C>
Act 1.4 3
Affiliate 1.1 2
Board 2.3(c)(i) 9
Cause 2.3(b)(ii) 8
Class A Common Stock Recitations 1
Common Stock Recitations 1
Compelled Sale 2.4(a) 12
Compelled Sale Notice 2.4(b) 12
Compelled Sale Purchaser 2.4(a) 11
controlled by 1.1 2
Credit Restriction 2.3(c)(ii) 10
Derivative Securities 1.2 2
Fair Market Value 1.3 2
Hartnett Introduction 1
Holdings Introduction 1
Immediate Family 1.6(c) 4
in control of 1.1 2
Initial Party Introduction 1
Initial Public Offering 1.4 3
Joinder Agreement 2.5(b) 14
Objecting Party 2.3(a) 6
Outstanding Shares 1.5 3
Permitted Transferee 1.6 3
Person 1.7 4
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Defined Term Section Page
- ------------ ------- ----
<S> <C> <C>
Proposed Transferors 2.4(a) 11
Repurchase Offer Notice 2.3(a) 6
Securities Recitations 1
Shares Recitations 1
Stockholder Introduction 1
Stockholders Introduction 1
Transfer 1.8 4
under common control with 1.1 2
Warrants Recitations 1
</TABLE>
2. TRANSFER RESTRICTIONS
2.1 Legends. None of the Securities, including shares of Common Stock
underlying the Warrants, has been (or will have been at the time of issuance)
registered under the Act. Certificates representing the Shares, the Warrants,
and upon exercise of the Warrants, the shares of Common Stock issuable at such
time, shall bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act"), and may not be
offered or sold except pursuant to (i) an effective registration statement
under the Act or (ii) an exemption from registration under such Act (which,
if requested by the issuer, shall be accompanied by an opinion of counsel
to such effect reasonably satisfactory to the issuer).
2.2 Restrictions on Transfer of Securities. Except as otherwise provided
for in this Article 2, no Stockholder shall Transfer any Securities without
the prior written consent of Holdings.
2.3 Purchase on Death or Termination of Employment. Upon the death of the
Initial Party or the termination of the employment of the Initial Party by
Holdings or any subsidiary of Holdings (provided that the Initial Party is not,
following such employment termination, an employee of Holdings or any subsidiary
of Holdings) for any reason whatsoever, Holdings shall have the right (but not
the obligation), exercisable upon notice given not more than one hundred and
twenty (120) days following the date of such death or
5
<PAGE>
termination of employment, to repurchase all, but not less than all, of the
Securities (whether owned by the Initial Party or any Permitted Transferee of
the Initial Party) at the Fair Market Value therefor as of the last day of the
fiscal quarter immediately preceding such date of termination or death.
(a) If Holdings elects to exercise its rights to repurchase
Securities under this Section 2.3, it shall deliver to each Stockholder (or the
administrator of the estate of any deceased Stockholder) a notice of its
election to so exercise (the "Repurchase Offer Notice"), which notice shall set
forth Holdings' determination of the Fair Market Value of the Securities. If,
within five (5) business days following delivery of the Repurchase Offer Notice,
the Initial Party (or the administrator of the Initial Party's estate, the
"Objecting Party") delivers a notice to Holdings disputing Holdings'
determination of Fair Market Value, Holdings and the Objecting Party shall
endeavor in good faith to agree upon a mutually acceptable determination of Fair
Market Value of the Securities. Failure by the Objecting Party to object within
such five (5) business day period shall be deemed to be acceptance of Holdings'
determination of Fair Market Value and a waiver of any right to object thereto.
If, within ten (10) days following delivery of a notice disputing Holdings'
determination of Fair Market Value, Holdings and the Objecting Party are not
able to agree upon the Fair Market Value of the Securities, Holdings shall
retain a nationally recognized accounting, investment banking or other firm,
reasonably acceptable to the Objecting Party, experienced in the valuation of
assets similar to the Securities, to value the Securities. The determination of
such expert shall be binding upon Holdings and the Stockholders and the expenses
of retaining such expert shall be borne equally by Holdings and the Objecting
Party, provided,
6
<PAGE>
however, that, within ten (10) days following delivery of the determination of
such expert to Holdings, Holdings shall have the right to withdraw its offer to
repurchase the Securities and elect not to exercise its rights under this
Section 2.3. If Holdings' offer to repurchase the Securities is not withdrawn as
provided above, the closing of the repurchase by Holdings of the Securities
shall take place on the date specified in the Repurchase Offer Notice, which
date shall not be earlier than ten (10), or later than ninety (90), days
following delivery of the Repurchase Offer Notice, provided, however, that, if
the Objecting Party shall have objected to Holdings' determination of Fair
Market Value of the Securities, the closing of the repurchase of the Securities
shall take place on a date specified by Holdings that shall be not less than ten
(10), nor more than sixty (60), days following the final determination of such
Fair Market Value, and provided further, however, that, if the closing of the
repurchase of Securities shall be deferred by operation of Section 2.3(c)
hereof, the closing of the repurchase of Securities shall take place on a date
specified by Holdings that shall be not less than ten (10), nor more than sixty
(60), days following the date such deferral terminates.
(b) (i) Payment for the Securities repurchased by Holdings pursuant
to this Section 2.3 shall be as follows:
(A) If the event giving rise to Holdings' right to
repurchase under this Section 2.3 shall be a termination of the
Initial Party's employment for Cause, payments shall be made in
five equal annual payments on the first through the fifth
anniversaries of the date of the closing of such repurchase (or
such shorter period as Holdings may choose and set forth in the
Repurchase Offer Notice) with interest thereon as set forth in
Section 2.3(d) hereof; or
7
<PAGE>
(B) If the event giving rise to Holdings' right to
repurchase under this Section 2.3 shall be anything other than a
termination of the Initial Party's employment for Cause, payments
shall be made in three equal annual payments on the first, second
and third anniversaries of the date of the closing of such
repurchase (or such shorter period as Holdings may choose and set
forth in the Repurchase Offer Notice) with interest thereon as
set forth in Section 2.3(d) hereof;
provided, however, that Holdings shall have the right to prepay any such
amounts, in whole or in part, at any time without penalty or premium.
(ii) As used herein "Cause" shall mean:
(A) any act of fraud, embezzlement, theft or commission of a
crime involving moral turpitude by the Initial Party;
(B) any breach by the Initial Party of any material
covenant, condition, or agreement in any employment agreement
entered into with Holdings or any subsidiary of Holdings;
(C) any good faith finding by Holdings (or the subsidiary of
Holdings that employed the Initial Party) that the Initial Party
repeatedly failed to perform the Initial Party's required duties;
provided that Holdings (or such employing subsidiary) shall have
provided the Initial Party with notice of such failure to perform
and have afforded the Initial Party a reasonable opportunity to
cure (it being understood that compliance with the notice or cure
provisions set forth in any written employment agreement with the
Initial Party shall
8
<PAGE>
constitute reasonable actions on behalf of Holdings (or such
employing subsidiary)); or
(D) any chemical dependency by the Initial Party (other than
in connection with medicines prescribed for the Initial Party).
(c) (i) Holdings' obligation to close the repurchase of, or make any
payments (including any payments of interest) for, the Securities repurchased
pursuant to this Section 2.3 shall be qualified, as hereinafter provided, in the
event of the existence of a Credit Restriction. In the event of a Credit
Restriction, Holdings may, at its option, defer (without penalty or premium) the
closing of the repurchase of the Securities or all or any portion of any
payments otherwise due, until such time as such closing or payment, in the
opinion of the Board of Directors of Holdings (the "Board") is no longer subject
to such Credit Restriction. The obligation to close the repurchase of, or make
payments for, the Securities repurchased pursuant to this Section 2.3 shall be
tolled during any period of deferral provided for above, and such repurchase
shall be closed or such payments shall (re)commence following such deferral on
the same schedule as provided in Section 2.3(b) hereof (but with all time frames
for payments extended for the period of deferral, i.e. with no acceleration of
payments in respect of payments that were due during such period of deferral);
provided that interest on the purchase price for the Securities repurchased (or
to be repurchased if the closing of the repurchase is deferred by reason of the
Credit Restriction) pursuant to this Section 2.3 shall accrue during such period
of deferral at the rate set forth in Section 2.3(d) hereof and shall be paid as
set forth in said Section 2.3(d). If the closing of the repurchase was deferred
by
9
<PAGE>
reason of the Credit Restriction, interest shall accrue, as aforesaid, beginning
on the 91st day following delivery of the Repurchase Offer Notice.
(ii) As used herein, a "Credit Restriction" shall be deemed to
exist if any provision of any agreement with lenders to Holdings or holders of
debt securities of Holdings (or lenders to, or holders of debt securities of,
any subsidiary of Holdings), (A) restricts or limits Holdings' right to effect
such repurchase or make any such payment, (B) restricts or limits the right of
Holdings' subsidiaries to transfer (by way of dividend or otherwise) to Holdings
the funds necessary to make such repurchase or payment, or (C) provides that the
closing of such repurchase or making of any such payment would (x) restrict the
right of Holdings or any of its subsidiaries to borrow any funds under such
agreements, (y) result in a default thereunder or (z) otherwise result in an
adverse affect on Holdings or any of its subsidiaries under such agreements, in
each case as reasonably determined by the Board, whose determination shall be
binding on the parties hereto.
(d) Interest on the unpaid portion of the purchase price for the
Securities repurchased pursuant to this Section 2.3 shall accrue at a variable
rate constituting the prime rate published by Holding's primary bank lender
(from time to time) from the date of the closing of such repurchase until
payment therefor is made. Each payment by Holdings pursuant to this Section 2.3
shall include all accrued and unpaid interest to the date of such payment on the
then unpaid portion of the purchase price for the Securities repurchased
pursuant to this Section 2.3. Interest accrued during any period of deferral
(pursuant to (c) above) shall be paid as follows:
10
<PAGE>
(i) If the closing of the repurchase is deferred, such accrued
interest shall be added to the purchase price for the Securities
otherwise established hereunder, and shall be paid, together with
accrued interest thereon, as set forth in Section 2.3(b) hereof;
(ii) If the closing of the repurchase had previously taken place,
but payments under Section 2.3(b) hereof are deferred, such accrued
interest shall effectively be capitalized over the remaining term of
repayment set forth in Section 2.3(b) hereof, to be repaid, together
with interest thereon, in the same fashion as the then balance of the
original principal amount. (e) Notwithstanding anything else in this
Agreement to the contrary,
Holdings shall have the right to assign, in whole or in part, to any other party
its right to repurchase Securities under this Section 2.3.
2.4 Right to Compel Sale.
(a) If Hartnett and his Permitted Transferees (the "Proposed
Transferors"), wish to sell all, and not less than all, of the Common Stock or
Derivative Securities then owned by the Proposed Transferors on such date, to
any bona fide independent third party other than an Affiliate or a Permitted
Transferee of such Proposed Transferors (the "Compelled Sale Purchaser"), and if
such Compelled Sale Purchaser requires, as a condition to acquiring such Common
Stock or Derivative Securities upon terms acceptable to the Proposed
Transferors, that the Stockholders sell to such Compelled Sale Purchaser all,
and not less than all, of the Securities, then each Stockholder shall be
obligated to join and fully cooperate in the sale together with the concurrent
sale by the Proposed Transferors (a
11
<PAGE>
"Compelled Sale") of all of its respective Securities to the Compelled Sale
Purchaser, subject to the following:
(i) The terms and conditions applicable to the sale of the
Securities shall be identical to those applicable to the sale of the
securities by the Proposed Transferors, including, without limitation,
the amount and nature of consideration and the same representations,
indemnities and the like required of the Proposed Transferors.
(ii) Notwithstanding the foregoing, any liability of any
Stockholder in connection with such sale shall be (A) several and not
joint and several, (B) shall be limited to the proceeds actually
received by such Stockholder, and, (C) in any event except for any
liability occasioned by the specific wrongdoing of any Person, the
liability of the Proposed Transferors and the Stockholders shall be
further limited to damages occasioned by the breach of the
representations and warranties made by them (which, in the case of the
Stockholders, shall only include representations and warranties as to
their ownership of the Securities being sold and other matters
specifically applicable to them and their Securities) and damages
arising under any indemnity or escrow provisions that are limited to
their proportion of the aggregate proceeds received by all of them.
(b) The Proposed Transferors shall notify each Stockholder in
writing of a Compelled Sale (a "Compelled Sale Notice"), which Compelled Sale
Notice shall set forth all of the material terms and conditions of the Compelled
Sale, including, without limitation, the proposed amount and nature of
consideration and all other material terms and conditions, including the date of
the proposed Transfer and all applicable representations, indemnities and other
contract provisions. Each Stockholder shall execute and deliver to the Proposed
12
<PAGE>
Transferors within five (5) business days after delivery to such Stockholder
for such execution, all documents required to be executed by such Stockholder
in order to consummate such Compelled Sale, subject to the limitations on
liability contained in Section 2.4(a)(ii) hereof. Further, and in any event,
each Stockholder hereby appoints the Secretary of Holdings as its
attorney-in-fact to execute any and all documents and instruments and take
all actions reasonably necessary to Transfer the Securities owned by such
Stockholder in order to effect the terms of this Section 2.4, which power of
attorney may only be exercised if the Compelled Sale complies with all of the
terms of this Section 2.4. It is understood and agreed that the appointment
of the Secretary of Holdings as the attorney-in-fact of each Stockholder for
the purposes set forth above is coupled with an interest and is irrevocable.
(c) Upon consummation of the sale of the Securities to the
Compelled Sale Purchaser pursuant to the Compelled Sale, the Compelled Sale
Purchaser shall (i) notify each Stockholder of such completion and shall furnish
such evidence of said sale (including time of completion) and of the terms
thereof as any of the Stockholders may reasonably request, and (ii) remit to
each Proposed Transferor and each Stockholder the consideration for the total
sales price of Common Stock and Derivative Securities of such party sold
pursuant thereto, against delivery by such party of such evidences of ownership
of such party's Common Stock and Derivative Securities as may be requested by
the Compelled Sale Purchaser, and the compliance by such party with any other
conditions to closing generally applicable to all Proposed Transferors and
Stockholders.
(d) If any Compelled Sale Offer is withdrawn, or terminated
for any reason, prior to consummation, the Proposed Transferors shall, without
prejudice to their (or any
13
<PAGE>
other Proposed Transferor's) rights hereunder to deliver a subsequent Compelled
Sale Notice, return to each Stockholder all documentation which such Stockholder
had previously delivered to the Proposed Transferor in connection with such
Compelled Sale Offer.
2.5 Transfers to Permitted Transferees. (a) Notwithstanding anything
contained in this Article 2 to the contrary, each Stockholder may Transfer any
or all Common Stock or Derivative Securities owned by such Person to Permitted
Transferees of the Initial Party.
(b) Any Transfer to a Permitted Transferee pursuant to Section
2.6(a) hereof, shall be conditioned in each such case upon any such Transferee
first entering into a joinder agreement (a "Joinder Agreement"), in the form
attached hereto as Exhibit A, pursuant to which such Transferee, and the Common
Stock or Derivative Securities acquired, shall become subject to the terms and
conditions of this Agreement, including those contained in Section 2.5(c)
hereof.
(c) Upon any Transfer by a Stockholder and the execution of a
Joinder Agreement, each Transferee, and the Securities acquired by it, shall be
subject to all of the limitations and obligations set forth in this Article 2,
and, except as set forth in clause (ii) below, shall obtain the benefits and
rights of a Stockholder hereunder, with respect to the Securities so acquired,
pursuant to this Article 2.
(d) In the event that a Stockholder Transfers any of its
Securities hereunder, until notice thereof shall have been delivered by such
Stockholder to Holdings and Hartnett (i) any notices to be given to such
Transferees shall be deemed given if delivered to the Transferor Stockholder,
(ii) a notice from any such Transferee shall be deemed delivered only if
delivered by such Transferor Stockholder, (iii) Holdings and Hartnett shall be
permitted to
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<PAGE>
rely upon any notice given by such Transferor Stockholder as containing the
intentions of its Transferees, and (iv) where applicable, such Transferees shall
share any rights contained in this Agreement as they shall deem appropriate, and
as reflected by any notices provided by such Transferor Stockholder. If the
Initial Party Transfers all of its Securities it may designate, by written
notice to Holdings and all other stockholders, a successor Person to give and
accept notices, on behalf of all Transferees of the Initial Party, as set forth
herein.
2.6 Termination on Initial Public Offering. The restrictions on Transfer
of Common Stock and Derivative Securities and the other rights, restrictions and
obligations contained in this Article 2 shall terminate and be of no further
force and effect following an Initial Public Offering.
2.7 Transfers Not in Compliance Void. Any purported Transfer of Securities
owned by a Stockholder that is not in compliance with this Agreement shall be
null and void and of no force and effect whatsoever. Accordingly, such Transfer
shall not be reflected on the books of Holdings and Holdings will not recognize
any such proposed transferee as the holder of any such Securities. 3.
TERMINATION; AMENDMENT
3.1 Termination; Amendment.
(a) This Agreement may be terminated and the terms hereof
amended at any time only by the execution of a written instrument signed on
behalf of Holdings, Hartnett and either (i) the Initial Party or (ii) the
Holders of not less than 67% of the aggregate Outstanding Shares held by the
Stockholders.
15
<PAGE>
(b) In the event of the termination of this Agreement, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or any of their directors, officers, partners or
stockholders.
4. MISCELLANEOUS
4.1 Notices.
Any notice, request, instruction, or other communication to be given
hereunder by any party to another shall be in writing and shall be deemed to
have given if delivered by hand or sent by telecopier (transmission confirmed),
certified or registered mail (return receipt requested), postage prepaid, or by
overnight express service, addressed to the respective party or parties: (i) if
to a Stockholder or successor thereto, at the address for such party in the
books and records of Holdings, (ii) if to Holdings at the following address:
Roller Bearing Holding Company, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
Attention: Chief Executive Officer
with a copy (which shall
not constitute notice) to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212-547-5444
Attention: C. David Goldman, Esq.
16
<PAGE>
and (iii) if to Hartnett:
Dr. Michael J. Hartnett
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
P.O. Box 430
Fairfield, Connecticut 06430-0430
Telecopier: 203-256-0775
with a copy (which shall
not constitute notice) to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Telecopier: 212-547-5444
Attention: C. David Goldman, Esq.
or to such other address or addresses as any party may designate to the others
by like notice as set forth above. Any notice given hereunder shall be deemed
given and received on the date of hand delivery or transmission by telecopier,
three days after mailing by certified or registered mail or one day after
delivery to an overnight express service for next day delivery, as the case may
be.
4.2 Entire Agreement. This Agreement contains the entire agreement between
the parties hereto with respect to the subject matter contemplated hereby.
4.3 Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
4.4 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, and successors, any rights or remedies
under or by reason of this Agreement.
17
<PAGE>
4.5 Remedies Cumulative. No remedy made available by any of the provisions
of this Agreement is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity.
4.6 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL
PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT
GIVING EFFECT TO THE RULES OF SAID STATE GOVERNING THE CONFLICTS OF LAWS.
(b) The parties hereto hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement may
be brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction for such purpose. The parties hereto hereby irrevocably
waive any objection to such jurisdiction or inconvenient forum. Any such process
or summons to be served upon any of the parties hereto (at the option of the
party bringing such action, proceeding or claim) may be served by transmitting a
copy thereof, by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 4.1 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
party so served in any action, proceeding or claim. Nothing herein shall affect
the right of any party hereto to serve process
18
<PAGE>
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction.
4.7 Assignment. Except as otherwise set forth in this Agreement, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
4.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when a counterpart has been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement as of the date set forth above.
ROLLER BEARING HOLDING COMPANY, INC.
By:
-----------------------------------------
Name:
Title:
---------------------------------------------
Dr. Michael J. Hartnett
---------------------------------------------
William E. Myers, Jr.
20
<PAGE>
Exhibit 4.6
ROLLER BEARING HOLDING COMPANY, INC.
AMENDED AND RESTATED
WARRANTS TO PURCHASE COMMON STOCK
THIS AMENDED AND RESTATED WARRANT ("Warrant Agreement") is entered into
effective as of this ___ day of___, 1998, by and between ROLLER BEARING HOLDING
COMPANY, INC., a Delaware corporation (the "Company"), and WILLIAM E. MYERS, JR.
(the "Holder").
W I T N E S S E T H
WHEREAS, the Company previously granted to Holder the Warrants to purchase
that number of shares of Common Stock of the Company, as reflected by the
Warrant Certificates referred to on Annex A hereto (the "Original Warrants");
and
WHEREAS, the parties desire to amend, restate and consolidate the Original
Warrants in their entirety by entering into this Warrant Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
Section 1. Warrants. Subject to the terms and conditions set forth herein,
this Warrant Agreement entitles the Holder to purchase up to two thousand two
hundred and seventy-five (2,275) shares (each such share being referred to
herein as a "Warrant Share" and all such shares being referred to herein,
collectively, as the "Warrant Shares") of Class A Common Stock, $0.01 par value
per share, of the Company ("Common Stock"), and at the exercise price of one
hundred dollars ($100) per Warrant Share (the "Exercise Price"). This Warrant
Agreement is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code, as amended.
Section 2. Duration and Exercise of Warrants.
(a) Subject to all the terms and conditions hereinafter set forth
(including, without limitation, the terms and conditions in Section 16), the
Warrants may be exercised by the Holder, in whole or in part, at any time or
from time to time, prior to 5:00 p.m., eastern standard time, on June 23, 2007
(the "Expiration Time"). At the Expiration Time, each Warrant not exercised
prior thereto shall be and become void and of no value.
(b) 100% of the Warrants may be exercised immediately upon
<PAGE>
execution hereof. In addition, this Warrant Agreement may not be exercised for
less than ____ Warrant Shares at a time unless it is for the balance of the
Warrant Shares available hereunder.
(c) Notwithstanding Section 2(a) hereof, following the termination of the
Holder's service on the Board of Directors of the Company (the "Board"), this
Warrant Agreement shall remain exercisable for the period ending on the earlier
of (i) the Expiration Time or (ii) the date determined below, after which time
the Warrants shall then forever lapse:
(1) upon the ninetieth (90th) day after the termination of the
Holder's service of the Board for any reason other than death; or
(2) upon the first annual anniversary of the termination of the
Holder's service of the Board due to the Holder's death.
(d) Nothing in this Warrant Agreement shall confer on the Holder any right
to continue to serve on the Board.
Section 3. Method of Exercise.
(a) Subject to Sections 4, 9 and 10 hereof, upon (i) delivery of a Form of
Election to Purchase attached as Annex A hereto (the "Form of Election to
Purchase") duly completed and signed, to the Company at the address provided in
Section 11, and (ii) payment by delivery of a cashier's or certified check made
payable to the Company, in an amount equal to the Exercise Price multiplied by
the number of Warrant Shares being so exercised, the Company shall promptly
issue and cause to be delivered to or upon the written order of the Holder, a
certificate for the Warrant Shares subject to such exercise. The "Date of
Election to Purchase" any Warrant means the date on which the Company shall have
received both (1) a Form of Election to Purchase duly completed and signed, and
(2) payment of the Exercise Price for such Warrants being acquired.
(b) In the event shares of Common Stock of the Company are registered under
the Securities Exchange Act of 1934, payment of the Exercise Price hereunder
may, in the sole discretion of the Company, be made by delivering (or certifying
as to ownership of) certificates of shares of Common Stock of the Company which
have been held by the Holder for at least six months (or such longer period as
may be required to avoid a charge to earnings for financial reporting purposes)
which are equal in value (based on their Fair Market Value (as defined in
Section 1.3 of the Stockholders Agreement, dated as of _______________, by and
among the Company, Dr. Michael J. Hartnett and the Holder (the "Stockholders
Agreement")) on the date of surrender or certification) to such Exercise Price
or the portion thereof so paid. In addition, in the event shares of Common Stock
of the Company are registered under the Securities Exchange Act of 1934, payment
of the Exercise Price hereunder may, in the sole discretion of
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<PAGE>
the Company, also be made by delivering a properly executed Form of Election to
Purchase to the Company together with a copy of irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds to
pay the Exercise Price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
Section 4. Payment of Taxes. The Company shall have the right to require,
prior to the issuance or delivery of a certificate for any Warrant Shares
acquired hereunder, payment by the Holder (by cashier's or certified check made
payable to the Company) of any income or employment taxes, if any, required by
law to be withheld by the Company in connection with the exercise of all or part
of this Warrant Agreement.
Section 5. Non-Transferability; Death. Except as provided in the
Stockholders Agreement, this Warrant Agreement is not transferable by the Holder
otherwise than by will or the laws of descent and distribution and is
exercisable during the Holder's lifetime only by him. If the Holder dies while
serving on the Board, this Warrant Agreement may be exercised only during the
period described in Section 2(c) (ii) (but not later than the Expiration Time)
by his estate or the person to whom this Warrant Agreement passes by will or the
laws of descent and distribution, but only to the extent that the Holder could
have exercised this Warrant Agreement on the date of his death.
Section 6. Reservation and Issuance of Warrant Shares.
(a) The Company shall at all times have authorized, and reserve and keep
available, exclusively for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon the exercise of the Warrants, the number of Warrant
Shares deliverable upon exercise of the Warrants. The Company shall take all
corporate action necessary to enable the Company to validly and legally issue,
at the Exercise Price, Warrant Shares that are fully-paid and nonassessable.
(b) The Company covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant Agreement, be (i) duly authorized,
validly issued, fully paid and nonassessable and (ii) free from all taxes or
other governmental charges with respect to the issuance thereof (exclusive of
income or employment taxes) and from all liens, charges and security interests
created by the Company.
Section 7. Adjustments; Notice of Certain Events.
(a) If the Company shall effect a stock dividend, stock split,
recapitalization, reorganization, exchange of shares, liquidation, combination
or other change in corporate structure affecting the shares of Common Stock),
the total number of Warrant Shares then remaining subject to purchase hereunder
and the Exercise Price per share shall be adjusted so that the total
consideration
3
<PAGE>
payable to the Company upon the purchase of all shares not theretofore purchased
and the interest (as a percentage of all similar interests in the Company) to be
received on exercise hereof) shall not be changed.
(b) Should the Company elect to undertake any sale of all or substantially
all of its assets, or any merger, consolidation, combination or other corporate
reorganization or restructuring of the Company with or into another corporation
which results in the outstanding shares of Common Stock being converted into or
exchanged for different securities, cash or other property, or any combination
thereof (an "Acquisition"), the Company shall give written notice of such event
to the Holder at least fifteen (15) days prior to the date on which such
transaction is expected to become effective or consummated. Such notice shall
specify such expected date of effectiveness or consummation. Failure to give
such notice or any defect therein shall not effect the validity of any action
taken in connection with such transaction.
Section 8. No Stock Rights. The Holder shall not be entitled to vote nor be
deemed the holder of shares of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise the Warrants, nor
shall anything contained herein be construed to confer upon the Holder the
rights of a stockholder of the Company or the right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise, unless and until certificates for the Warrant
Shares are issued following the Date of Election to Purchase.
Section 9. Fractional Warrants and Fractional Warrant Shares. The Company
may, but shall not be required to, issue fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 9,
be issuable to the Holder upon exercise of any Warrants, the Company may, at its
election, pay to such Holder an amount in cash equal to the difference between
(a) the Fair Market Value of one share of Common Stock and (b) the Exercise
Price, multiplied by such fraction. The Holder expressly waives the right to
receive any fractional Warrant Shares upon exercise of a Warrant. The Holder
shall be entitled to receive fractional Warrant Shares at the election of the
Company.
Section 10. Registration of Warrant Shares. The Company shall not be
required to issue or deliver any certificate for its shares of Common Stock
purchased upon the exercise of this Warrant Agreement prior to the admission of
such shares to listing on any stock exchange on which shares of the Company's
Common Stock may at that time be listed. In the event of the exercise of this
Warrant Agreement with respect to any shares subject hereto, if other shares of
Common Stock of the Company are then listed, the Company shall make prompt
application for such listing with respect to the shares acquired upon the
exercise
4
<PAGE>
hereof. If at any time during the Warrant Agreement period the Company shall be
advised by its counsel that shares deliverable upon exercise of Warrants are
required to be registered under the Federal Securities Act of 1933, as amended,
or that delivery of the shares must be accompanied or preceded by a prospectus
meeting the requirements of the Act, the Company will use reasonable efforts to
effect such registration or provide such prospectus not later than a reasonable
time following each exercise of this Warrant Agreement, but delivery of shares
by the Company may be deferred until registration is effected or a prospectus
available. The Company shall be under no obligation to register the shares
deliverable upon exercise of this Warrant Agreement unless it shall be advised
by its counsel that such shares are required to be so registered. The Holder
shall have no interest in the shares covered by this Warrant Agreement unless
and until certificates for the shares are issued following the exercise of this
Warrant Agreement. Notwithstanding anything to the contrary in this Warrant
Agreement, in lieu of affecting the registration statement described in the
preceding sentence, the Company may, in the alternative, provide the Holder with
a cash payment in consideration of the Warrant Shares subject to such exercise
in an amount equal to the excess of the Fair Market Value of one share of Common
Stock over the Exercise Price, multiplied by the number of Warrant Shares
subject to such exercise, and the Company shall have no further liability of any
kind to the Holder with respect to such Warrant Shares.
Section 11. Notices. All notices, requests, demands and other
communications relating to this Warrant Agreement shall be in writing, including
by telecopier, addressed, if to the registered Holder hereof, to it at the
address furnished by the registered Holder to the Company, and if to the
Company, at its office at 60 Round Hill Road, P.O. Box 430, Fairfield,
Connecticut 06430-043060, Attention: Chief Executive Officer, or to such other
address as any party shall notify the other party in writing, and shall be
effective, in the case of written notice by mail, three days after placement
into the mails (first class, postage prepaid), and in the case of notice by
telecopier on the same day as sent.
Section 12. Binding Effect. This Warrant Agreement shall be binding upon
and inure to the sole and exclusive benefit of the Company, its permitted
successors and permitted assigns, and the Holder.
Section 13. Survival of Rights and Duties. Unless earlier terminated or
cancelled in whole or in part pursuant to Sections 2 or 15 hereof, this Warrant
Agreement and any unexercised Warrants represented hereby shall terminate and be
of no further force and effect on the earlier of the Expiration Time or the date
on which all the Warrants shall have been exercised, except that the provisions
of Sections 4, 6(b) and 10 of this Warrant Agreement shall continue in full
force and effect after any such termination or cancellation.
5
<PAGE>
Section 14. Governing Law. This Warrant Agreement shall be construed in
accordance with and governed by the internal laws of the State of Delaware
applicable to contracts executed and to be performed wholly within such state,
without regard to the principles of conflicts or choice of law.
Section 15. Entire Agreement; Modification and Waiver. Subject to Section
16 hereof, this Warrant Agreement represents the entire agreement between the
Company and the Holder relating to the subject matter hereof, and supersedes any
and all prior agreements, including but not limited to the Original Warrants.
This Warrant Agreement and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Section 16. Stockholders Agreement. The Holder acknowledges that it is a
party to the Stockholders Agreement, a copy of which is attached as Annex B
hereto, and that the Holder is bound by all the terms and conditions of such
Stockholders Agreement. Any and all Warrant Shares issued from time to time
hereunder shall, immediately upon issuance thereof, and without any further
action by or on behalf of the Holder or the Company, be subject to the
Stockholders Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed under its corporate seal by its officers thereunto duly authorized as
of the date hereof, and the Holder has caused this warrant to be executed and
delivered by its duly authorized representative.
ROLLER BEARING HOLDING COMPANY, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
HOLDER
- -----------------------------
(Signature)
7
<PAGE>
ANNEX A
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder if the Holder desires to exercise Warrants
evidenced by the foregoing Warrant Agreement)
To Roller Bearing Holding Company, Inc.:
The undersigned hereby irrevocably elects to exercise ____ Warrants (as defined
in and evidenced by the foregoing Warrant) for, and to purchase thereunder,
__________ full shares of common stock, $0.01 par value per share, of Roller
Bearing Holding Company, Inc., issuable upon exercise of such Warrants and
delivery of $______ in cash and any applicable taxes payable by the undersigned
pursuant to such Warrant Agreement.
The undersigned requests that certificates for such shares be issued in the name
of the following:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
(Please print name and address)
- -------------------------------------------------------------------------------
(Please print name and address)
- ----------------------------------
- ----------------------------------
Dated: HOLDER
------------------
---------------------------------------
(Signature)
8
<PAGE>
Exhibit 10.20
AGREEMENT
Between
BREMEN, INDIANA PLANT
of SKF USA, INC.
and
INTERNATIONAL UNION, UNITED
AUTOMOBILE, AEROSPACE AND
AGRICULTURAL WORKERS OF AMERICA,
U.A.W.
Local 1368
Effective July 20, 1996
<PAGE>
INDEX
Article Page
I Agreement ..................................................... 1
II Union Recognition ............................................. 1
III Agency Shop and Check-off ..................................... 2
IV Cooperative Union Management .................................. 3
V Rights and Functions of Management ............................ 4
VI Strikes and Lockouts .......................................... 4
VII Production Standards and Incentive Pay ........................ 5
VIII Job Evaluation Plan ........................................... 6
IX Hours of Work and Overtime Pay ................................ 7
X Vacations and Vacation Pay ................................... 10
XI Holidays ..................................................... 12
XII Seniority .................................................... 13
XIII Settlement of Differences .................................... 19
XIV Wages and Rates of Pay ....................................... 21
XV Insurance Benefits and Pensions .............................. 22
XVI Jury Duty, Bereavement and Military Reserve Pay .............. 23
XVII Safety and health ............................................ 23
XVIII Plant Rules .................................................. 24
XIX Leave of Absence ............................................. 24
XX Amendments and Modifications ................................. 25
XXI Termination and Notice ....................................... 26
Rates of Pay by Labor Grade .................................. 28
Memo of Understanding ..................................... 34-41
<PAGE>
AGREEMENT
ARTICLE I
Section 1.
This agreement, dated the 20th July 1996, is entered into between the
Bremen, Indiana plant of SKF USA. INC., (hereinafter called the "Company")
and the INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL
IMPLEMENT WORKERS OF AMERICA (UAW) and its Local 1368 (hereinafter called
the "Union").
Section 2.
In consideration of this Agreement, the parties agree that it is the
intent and purpose of the parties hereto that this Agreement is the
complete Agreement covering rates of pay, hours of work and working
conditions to be observed between the parties, and to provide orderly
relationships between the Company and the Union, and to secure prompt
disposition of differences between the parties pertaining to the
compliance with or application of this Agreement.
Section 3.
In recognition of its responsibility as the exclusive agent of the
employees, the Union agrees that it will actively cooperate in
discouraging absenteeism and tardiness, and that it will actively support
proper Company efforts to eliminate waste, improve quality, prevent
accidents, and strengthen good will between the Company, the employees,
the customers, the Union and the public. The Union also confirms that it
subscribes to the concept of a fair day's work for a fair day's pay.
ARTICLE II
Union Recognition
Section 1.
The Company recognizes the Union as the sole collective bargaining agency
with respect to rates of pay,
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hours of work, and conditions of employment for employees engaged on jobs
in the Company's Bremen, Indiana plant.
Section 2.
The term "employee" as used in this Agreement shall apply to all
production and maintenance workers engaged on jobs in the Company's
Bremen, Indiana plant who are on an hourly or incentive basis, but
excludes watchmen, salaried employees and supervisory employees with
authority to hire, promote, discharge, discipline or otherwise effect
changes in the status of employees or effectively to recommend such
action. Nor does the term "employee" apply with respect to those part-time
employees who are hired by the Company to perform certain functions in
accordance with an Agreement between the Company and civic officials
involving the utilization of part-time high school students.
ARTICLE Ill
Agency Shop and Check-off
Section 1.
Each employee who on the effective date of this Agreement is a member of
the Union in good standing and each employee who becomes a member after
that date shall, as a condition of employment, maintain his membership in
the Union.
Each employee hired on or after August 12, 1972, shall as a condition of
employment, beginning on the 30th day following the beginning of such
employment acquire and maintain membership in the Union.
Section 2.
The Company, for those employees who have heretofore, or hereafter by
written authorization so directed, shall deduct from the first pay of each
month the proper Union dues for the previous month, an initiation fee for
new members, the assessments and promptly remit same to the International
Secretary-Treasurer of the Union. Changes in dues and assess-
2
<PAGE>
ments will be made only as authorized in writing by the International
Secretary-Treasurer of the Union to the Company.
ARTICLE IV
Cooperative Union Management
Section 1.
The Company and the Union agree that they will not discriminate in the
hiring or employees, or in their training, upgrading, downgrading,
promotion, transfer, layoff, discipline, discharge or otherwise because of
race, creed, color or national origin, age, union affiliation, sex or
marital status.
Section 2.
The Company and the Union recognize the advisability of making every
effort to constantly improve relationships between the Company, the Union
and all employees. To this end, a committee composed of two members of the
Union and two members of management shall meet for one hour at least once
a month on Company time to discuss problems and/or grievances which may
cause a disruption in relationships or to suggest means of improving
relationships. The General Manager and the International Representative
may attend these meetings. The purpose of these meetings is to prevent,
where possible, the use of the Arbitration Clause of this Agreement, as
such is both costly to the parties and further, bilateral good faith
collective bargaining is ineffective when a third party is called for the
purposes of determining the intent of the Agreement.
Section 8.
a) It is the duty of every employee to apply himself diligently to his
work during all of his working hours and to this end the Union will
support the Company's efforts to curb absenteeism and the practices
which curtail production; to eliminate waste and inefficiency; to
improve the quality of workmanship; to prevent accidents, and to
promote good will between the Company and the employees.
3
<PAGE>
b) The Union will cooperate wholeheartedly with the Company in a
concerted drive for better quality and quantity of production. It
should be the responsibility of each employee to see that the work
performed is up to required standards and that no defective work is
concealed.
ARTICLE V
Rights and Functions of Management
Section 1.
The control of all matters relative to the management and operation of the
plant and the operation of the Company's business which was vested in the
Company prior to the execution of this Agreement shall continue as a
management right, except as these matters may be expressly limited by the
terms of this Agreement. The Company and the Union in the exercise of
their rights shall observe the provisions of this Agreement.
Section 2.
The violation by either party of any provision of this Agreement shall not
render the Agreement inoperative, and the sole and exclusive method of
remedying any dispute which may arise hereunder shall be Article XIII,
Settlement of Differences.
ARTICLE VI
Strikes and Lockouts
Section 1.
During the existence of this Agreement, the Union agrees that neither it
nor any employee shall engage in any strikes, work stoppages, or slowing
down of work, or any other interference with the normal production of the
plant, or shipments from the plant of products produced herein, or
shipments of necessary materials to the plant. Any violation of this
Section by any employee shall be cause for dismissal or suspension.
In the event there is an interruption of production because of a concerted
action, the Union, through the
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<PAGE>
International Representative and Local President, shall immediately direct
cessation of such interruption.
Section 2.
The Company, for itself, its supervisors and authorized representatives,
agrees that during the term of this Agreement there shall be no lockouts
in the Company's plant.
ARTICLE VII
Production Standards and Incentive Pay
Section 1.
It is understood that the Company may make, at any time, motion, time or
methods studies required for the efficient operation of its business, and
may establish standards and levels of performance, and may audit its
standards when it deems this to be necessary in the interest of its
business. New equipment or machinery will be rated within ninety (90)
days. If no rates are applied during this period, the affected employee
will be paid four (4) labor grades above his base rate for 90 days. If
rates are not then instituted, the employee will be paid an additional
labor grade until rates are established.
Section 2.
Once a production standard has been established, the equity of such a
standard may be challenged under the procedure set forth in Article XIII,
Settlement of Differences. Should the Union dispute the equity or fairness
of a production standard, the Company will review with a proper Union
steward, upon his request, the data relating to the production standard.
Section 3.
A production standard may be changed whenever a substantial and continuing
change in material, method, specifications, or equipment, or an
accumulation of such changes, or an obvious clerical error or mechanical
error has occurred, that has a substantial effect on the productivity of
the job.
Section 4.
It is recognized that the Company has the right to institute incentive
standards, with the understanding that such incentive standards shall be
set in such a manner so that qualified operators working at a nor-
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mal pace can produce work at 100% of standard. Wherever an incentive
standard is established, the bonus payment shall not be less than 1% of
base rate for each 1% increase above standard, and all incentive pay shall
be calculated on a weekly bases. The equity of any standard shall be
subject to the grievance procedure and the data shall be made available
for review by a designated local union official or any International time
study representative. The Company guarantees that all incentive standards
shall be paid off of the base rates as outlined in Appendix "A".
Section 5.
When an employee performs any work which does not meet the required
specifications, he shall not receive any pay or credit for the work except
for his guaranteed base rate on a weekly basis. However, when the cause
for rework is beyond the operator's control, this provision will not
apply.
ARTICLE VIII
Job Evaluation Plan
Section 1.
Jobs shall be classified in their appropriate work grades by the Company,
using the National Metal Trades Associate's Job Evaluation Plan. Job
descriptions, labor grades, and rates of pay have been prepared and are in
effect for all present jobs. When conditions warrant such action, the
Company will establish new job classifications, change, or add to and
remove jobs or job descriptions. When new jobs are established, or changes
or additions made to existing jobs, new job descriptions will be drawn and
evaluated by the Company in accordance with the NMTA Job Evaluation Plan.
Union must be furnished a current copy of the NMTA Job Evaluation Plan
being use by the Company.
Section 2.
All job rates of pay in effect at the time of this Agreement are effective
and properly evaluated and shall not be subject to process under the
grievance procedure section of this contract. Any new or changed job or
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job rate may be subject to processing under Article XIII, Settlement of
Differences. Such processing shall be confined to the result of the
application of the NMTA Job Evaluation Plan. The Plan itself shall not be
subject to processing under Article XIII, Settlement of Differences, nor
shall it be, in any manner or detail, subject to arbitration under this
Agreement.
Section 3
(a) Rates of pay and effective date thereof are listed for each of the
labor grades as outlined in Appendix "A" of this Agreement
Section 4.
The following method will be used in determining the work grade to be
assigned to a job:
The job will be analyzed and reviewed by the Company's Job Analyst
who will write up a description of the general details considered
necessary to describe the principal functions of the job identified,
which description shall not be construed as a detailed description
of all of the work requirements that may be inherent in any given
job. A copy of all job descriptions shall be made available to the
Union for their inspection and review.
ARTICLE IX
Hours of Work and Overtime Pay
Section 1.
This Article is intended only to provide a basis for calculating
overtime. It shall not be construed by the Union or any of its
members as limiting or guaranteeing the number of hours to be worked
by an individual employee or group of employees per day or per week.
Section 2. Work Week.
A normal work week shall consist of five consecutive eight hour days
from Monday through Friday except where off standard work weeks are
established, in which event the work week shall consist of five
consecutive days followed by two days of rest.
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Section 3.
A day shall he defined as a consecutive 24-hour period beginning with the
starting time of an employee's shift. Eight continuous hours of work,
interrupted by regularly scheduled lunch periods shall constitute a day's work.
Section 4. Standard Schedules.
Except where an off-standard work week is established, the standard one,
two, three, and four shift schedules listed below shall be the hours of work,
unless by agreement between the Union and the Company they are altered.
One shift operation: 7:00 a.m. to 3:30 p.m.
Two shift operation: 7:00 a.m. to 3:30 p.m.
3:30 p.m. to 12:00 midnight
Three shift operation: 7:00 a.m. to 3:30 p.m.
3:00 p.m to 11:00 p.m. and 11:00 p.m to 7:00 a.m.
Four shift operation:
A B C D
Sunday Off Off Sat. 11:00 p.m. 3-11
Sun. 7:00 a.m.
Monday 7-3 Off Sun. 11:00 p.m. 3-11
Mon. 7:00 a.m
Tuesday 7-3 3-11 Mon. 11:00 p.m. Off
Tues. 7:00 a.m
Wednesday 7-3 3-11 Tues. 11:00 p.m. Off
Wed. 7:00 a.m
Thursday 7-3 3-11 Off Wed. 11:00 p.m.
Thurs. 7:00 a.m.
Friday 7-3 3-11 Off. Thurs. 11:00 p.m.
Fri. 7:00 a.m.
Saturday Off 3-11 Fri. 11:00 p.m. 7-3
Sat. 7:00 a.m.
Employees working on the B shift shall be paid at time and 1/8 for hours
worked on Saturday.
Employees working on the C and D shifts shall be paid at time and 1/8 for
hours worked on Saturday and time and 1/4 for hours worked on Sunday.
Employees on the B shift will be paid the second shift premium and
employees on the C and D shifts will be paid the third shift premium.
No employee hired prior to 7/21/90 will be obligated to work on the D
shift.
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Section 5. Division of Overtime and Overtime Pay.
All overtime shall be distributed as equally as practicable within the
department, classification and shift in accordance with the respective
departmental agreements. Overtime scheduling shall be compulsory for 48 hours
where scheduled absences and vacations must be covered. In the case of scheduled
vacations and scheduled absences, employers will be polled by seniority to fill
in. If there are no volunteers, the least senior employees in the classification
will be assigned. An excused absence is the exception to these rules. On a daily
basis, notification for scheduled overtime will be at least four (4) hours prior
to the end of a shift. Whenever possible, notification for sixth and seventh day
overtime will be posted prior to the end of the shift on the third working day
of the scheduled week.
A. Except as provided in B, below, time and one-half shall he paid for all
hours or parts of hours worked:
(1) In excess of eight (8) hours in any one work day.
(2) In excess of forty (40) hours in any one work week.
(3) On Saturday, except for off-standard work weeks.
(4) On the sixth day of their scheduled work week for employees on
off-standard work weeks.
B. Double time shall be paid for all hours or parts of hours worked:
(1) On Sundays, except for off-standard work weeks.
(2) On the seventh day of their scheduled work week for employees
on off-standard work weeks.
C. Overtime rates and premium rates shall not be paid to employees on more
than one overtime or premium basis whether hourly, daily, or weekly.
D. Company liability with respect to mis-scheduling of overtime shall be
limited to a make-up turn. In the event that an employee is bypassed for a
make-up turn the Company will be liable for payment. An employee who is not
notified for an overtime turn within contractural limits shall not be charged
with a turn. An employee scheduled to work on his 6th or 7th day shall have a 24
hour notice of cancellation of such work except in
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emergencies. If notice is not given, the employee scheduled will
receive 4 hours pay at the appropriate rate.
E. If a holiday falls on Friday or Monday and overtime is scheduled on
the succeeding or preceding Saturday, it will be on a voluntary
basis.
Section 6. Call In Pay.
Employees called into work within a twenty-four (24) hours period from the
starting time of their shift shall be guaranteed a minimum of four (4)
hours pay at time and one-half.
Section 7.
Employees who report for work as scheduled or who report for work upon
notification to report shall, regardless of whether or not work is
available for them be guaranteed a report in pay of no less than four (4)
hours at their regularly assigned personal rate.
A. Employees will not be paid under this Section if:
(1) They are unfit for work;
(2) Work is unavailable as a result of causes beyond the control
of management;
(3) They are notified not to report for work with 24 hours notice;
(4) They refuse to perform work available within their department
unless such work is not available and they refuse to perform
other work for which they are qualified.
ARTICLE X
Vacations and Vacation Pay
Section 1.
The vacation year shall begin on January 1 and end on December 31. The
period for taking vacation time off shall begin with the first full week
in January and end with the last full week in December, with the
understanding that this period shall not detract from the Company's right
to establish a vacation shutdown period. However, if there is a vacation
shutdown the period for such shutdown shall be limited to the months of
June, July and August. Plant shutdown shall be posted by the end of the
first full week of the year.
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Section 1a.
Tool room and maintenance employees will be given 120 days notice prior to
the plant shutdown if they are not scheduled to work. If the Company fails
to provide such notice, time off during the shutdown for the affected
employees will not be charged to vacation.
Section 2.
Each employee who is actively on the payroll on December 31, or the Sunday
closest to December 31, shall be entitled to his full vacation benefits
notwithstanding the fact that his services may have been terminated for
any reason in the ensuing year prior to the receipt of vacation pay.
Section 3.
Employees who were not on the active payroll on December 31 or the Sunday
closest to December 31, but who become active thereafter as a result of
recall or return from a leave of absence will receive vacation pay on a
prorated basis computed at one-twelfth (1/12th) of his benefit for each
full month of service in the current vacation year. Employees recalled on
or before the 15th of any month shall be given credit for the full month.
Employees whose benefits are computed under this Section 3 shall forfeit
such benefits if:
(a) They are discharged; or
(b) They resign without giving five (5) days' written notice to the
Company.
Section 4.
Effective January 1, 1982, vacation benefits for eligible full time
employees shall be as follows:
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Accredited Service
Prior to December 31 Vacation
of Vacation Year Vacation Time Pay Hours
1 year to 2 years 1 week and 1 day 68
2 years to 10 years 2 weeks and 1 day 108
10 years to 15 years 3 weeks and 1 day 148
15 years to 20 years 3 weeks and 4 days 172
20 years and over 4 weeks and 1 day 188
An employee will receive vacation pay at his straight time average hourly
rate based upon its highest 8 weeks earnings during the first six months
of the calendar year. For an employee who takes his vacation prior to
July, his straight time average hourly rate will be based on his highest 8
weeks earnings during the last 6 months of the previous calendar year.
ARTICLE XI
HOLIDAYS
Section 1.
The following days are those to which the provisions of this Article
apply:
Day Before New Year's Day New Year's Day
Good Friday Memorial Day
Independence Day Labor Day
Thanksgiving Day Day After Thanksgiving Day
Day Before Christmas Christmas Day
* Four (4) Personal Holidays
* (Except when July 4th falls on a Tuesday or Thursday in a given year, in
which case one of the holidays will be either on the Monday preceding
July 4 or on the Friday following July 4.
All employees with ninety (90) days continuous full time employment shall
be eligible to receive holiday pay provided they are on a working status
at the time of the holiday, and work the scheduled hours on the working
days before and after the holiday or the day in which the holiday is
celebrated, unless the employee is excused for legitimate reasons. No more
than 8 hours will be scheduled on those days and the Company will be
liable for hours scheduled if it does not provide the work.
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Section 2. Holiday Pay
(a) Any work performed on a holiday shall be on a voluntary basis and
the employee shall be paid double time for all hours worked in
addition to the regular holiday pay.
(b) If a holiday falls during a paid vacation, the employee will receive
an extra day off with pay or may be paid in lieu of the holiday.
(c) Pay for the above-mentioned holidays shall be on a one pay basis
only. There shall be no pyramiding of overtime pay for holidays.
Regular holiday pay shall be on the basis of eight (8) hours at the
employee's personal base rate.
ARTICLE XII
Seniority
Section 1.
The Company hereby recognizes the principle of seniority and all seniority
provisions shall operate on a departmental basis in accordance with the
procedures hereinafter listed in this Article.
A. Seniority shall accumulate from the original date of employment for
every employee covered by this Agreement and said seniority rights
shall cease upon the occurrence of any of the following acts or
conditions:
(1) A voluntary resignation or quit.
(2) A discharge for cause.
(3) A layoff of more than 42 months or a leave of absence of more
than one (1) year's duration, however, in the case of a
medical leave such leave may be extended by mutual agreement.
(4) Failure to report for work within five (5) working days from
the date of recall from lay-off or leave of absence.
(5) Failure to request excused absence after three (3) days.
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(6) When an employee with less than one (1) year's service is laid
off, such employee shall have recall rights not to exceed one
(1) year.
(7) The Company will inform the Union President three days prior
to the advent of a layoff and/or a recall to and from the
street. An employee who is initially bumped will be notified
three (3) days in advance.
All employees with less than ninety (90) days of continuous service shall
be considered probationary employees. After completion of the ninety (90)
days' probationary period, the employee's record of continuous service
will date back to the original date of his employment.
Section 2.
Seniority shall at all times be recognized for the purposes of upgrading
and layoff and recall provided the employee possesses the necessary skill
and ability to perform the job in question.
Section 3. Job Opening and Upgrading Procedure.
(a) When a job is declared open by the Company there shall be a shift
preference right which will operate within the department and
classification involved before the open job is posted.
1. If no employee in the plant has recall rights to the open
job, it will be posted plantwide so that any employee
previously qualified on the job may bid before an employee
laid off from the Company who has rights to that job is
recalled. If no person on layoff fills the open job, it will
be posted plantwide so that any employee will have the chance
to bid before hiring from outside. This in not applicable to
grades 10, 11, and 12.
(b) When a job is posted for bid, it shall remain on the bulletin board
for a period of 4 days including Saturdays, Sundays and holidays.
Employees will also have the right to designate in advance with the
Company personnel office, their desire to upgrade to specific jobs.
(c) Any successful applicant for a job who moves into a new department
shall take all his seniority into that department after the period
of ninety (90) continuous days of work within the new department.
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In the event of work force reduction probationary employees will be
considered as without seniority rights and will be laid off prior to
any other employees in the department.
With respect to those employees who have less than ninety (90) days
in a department and are not probationary employees. Company
seniority will determine which employee will be affected in case of
layoff.
(d) Any employee who fails to meet job requirements on any job where he
is a successful bidder shall be returned to his former job,
department and shift.
(e) After any upgrading or bidding, an employee will be restricted from
bidding again for another job for a period of nine (9) months. This
restriction will be waived in the event that an opening occurs in
maintenance or in the tool room for L.G. six and above. If after
bidding on a posted job an employee is disqualified by the Company,
he may bid on another posted job at any time, provided all means for
filling that job have been exhausted in conformance with Article XII
of the Agreement. After an employee has bid on a job he may
disqualify himself on that job at any time prior to the passage of
forty-five (45) days or the Company may disqualify him in a ninety
(90) day period.
After an employee has been disqualified from a job by the Company,
he may bid on that job again after a one year period; however, if he
is again disqualified from the job he will not be permitted to bid
it in the future
(f) Downward moves will only be permitted in the case of advanced age,
health or other special conditions subject to management's approval.
The one exception will be for a downward or lateral bid to an
opening in maintenance or tool room (labor grade 6 and above).
In the case of an application for a downward move due to age or
health, the Joint Union-Management Seniority Committee will endeavor
to seek placement of the employee in a job he is able to per-
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form at base rate earnings as close as possible to his present base
rate provided he has the ability and seniority to hold such job.
(g) Any incapacitated employee who is unable to perform the work in his
classification shall be given consideration by the Company for
another job that he is able to perform during his period of
incapacitation. If he is assigned a job, he shall be paid at the
rate of that job. "Employees with medical limitations working in the
plant must provide the Company with monthly updates from a physician
selected by the Company and at the Company's expense. However, if
there is a dispute between the Company doctor and the employee's
personal physician, a third doctor will be consulted to settle the
issue." The third doctor will be at the Company's expense.
(h) Consistent with the terms of this contract, an employee will have
the right to move laterally on an open job.
Section 4. Lay-Offs
When an employee is laid off from his department and job classification he
shall have the option of retrograding in compliance with (b) below or he
may displace the least senior employee in his labor grade in his unit. If
his seniority precludes the displacement of any employee in his labor
grade, he may bump the least senior employee on a lower base rate job
within the unit.
(a) When a move has been effectuated under the seniority provisions of
the contract, the affected employee will be allowed to exercise a
shift preference so long as it is consistent with his seniority.
(b) In the event of a lay-off, the affected employee will be given the
opportunity, seniority permitting, to retrograde into any job
previously qualified on while in the employ of the Company.
Retrograde may mean upward, downward or lateral movement.
(c) After an employee has exhausted all seniority moves under the
provisions of the contract, he will be given the opportunity to bump
a less senior employee, providing he can perform that job
proficiently within a three (3) week period.
(d) After an employee has exhausted all seniority
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moves under the provisions of the contract, he will be recalled to
any job by seniority in Labor Grade 9 or below provided he hasn't
waived his rights to that job and he will be given up to three weeks
to demonstrate proficiency on the job. This section is not
applicable to maintenance and tool room jobs.
(e) When an employee is laid off, he will be asked whether he will
accept recall to any job or just his own. If the employee waives
recall to other jobs, he will be recalled only to his own job. If
the employee accepts recall to jobs other than his own, he may not
refuse those jobs when offered. An employee, on layoff, may revise
his status concerning the job or jobs to which he'll return by
notifying the Company in writing. Such notification may be made no
more than twice a year during any given layoff. Recall rights are
for 42 months.
(f) If an employee is recalled by the Company and subsequently
disqualifies himself or is disqualified by the Company, his
subsequent placement will be in accordance with Section 4 (a), (b),
(c) and (d).
Section 5.
This Article does not limit or guarantee the number of hours to be worked
by any department or any employee. In the event of a curtailed work week
the days worked shall be consecutive beginning on Monday except for
off-standard work schedules. If curtailment is necessary beyond four (4)
weeks, the Union may discuss alternatives with the Company.
Section 6.
Bulletin Boards shall be provided for all seniority lists and other Union
purposes as well. It is understood that the Union officers shall submit
any document to be posted on the bulletin boards to the appropriate
representative of management for his approval prior to posting.
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Section 7.
It is understood that the following Union officers shall have top
seniority during their respective terms of office:
1. President
2. Vice President
3. Financial Secretary
4. Recording Secretary
5. Bargaining Committee Members
This seniority shall be for the purpose of layoff and recall only.
The four top Union officers shall be assigned to the first shift.
Section 8.
The committeeman on each shift shall hold top seniority on his
respective shift for the purpose of layoff and recall only. This seniority
shall not take precedence over the officers as listed in Section 7.
Section 9.
It is understood that any employee promoted from the bargaining unit
will have 60 days to return with his accumulated seniority except for 30
days. If the employee does not return to the bargaining unit in that time,
he will lose all his seniority and may return thereafter only as a new
employee. Any return to the bargaining unit must be to a posted job. If
there is no posted job, the affected employee may bump the least senior
employee whose job he can perform. The job in question must be labor grade
7 and below. This section does not apply to any employee who left the
bargaining unit prior to July 21, 1978.
Section 10.
Employees applying for jobs in Labor Grade 8 and above shall be
required to pass a job test in connection with job openings in such labor
grades. The following procedure will apply:
The Company will pay 100% of tuition for any required courses.
Testing will be administered and evaluated by an independent
agency.
Openings will he filled from within on a seniority
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basis providing applicants pass the test. If no one qualifies, the Company
may seek outside applicants. A joint Union-Company trades committee will
be established to oversee the program.
To attain L.G. 12, an employee must become progressively adept at
performing the duties of each higher grade. The applicant will require a
minimum of two years of successful work in on-the-job training or
successfully complete 350 hours of training at an accredited technical
school outside of Company hours.
If an opening occurs in the Toolroom and it cannot be filled with a
qualified employee either in or out of the plant, the Company will
establish a training program to fill the job.
ARTICLE XIII
Settlement of Differences
Section 1.
A grievance shall be defined as any dispute which arises between the
Company and the Union over the compliance with or application of this
Agreement as it pertains to any bargaining unit employee other than a
probationary employee, and all such differences shall be settled in the
following manner.
Step I. Between the employee and his foreman; or at the request of either
the committeeman or the employee, between the employee, committeeman and
fore man. If the dispute is not settled in accordance with an oral
discussion between the foreman, the employee and/or the committeeman, then
the dispute may be reduced to writing and submitted to Step 2 within two
(2) days from the date of the initial discussion.
Step II. Within five (5) days from the date of receipt of a written
grievance, it shall be heard by the Step II committee which shall consist
of two representatives of management and two representatives of the local
Union, or as a minimal requirement a date will be set for the hearing
without exception. If the dispute still remains unsettled, it may be
placed by the Union on the Third Step Agenda within seven (7) days
following the hearing in Step II.
Step III. The Step III committee shall hear all cases which have been
unresolved in Step II and said committee shall consist of two
representatives of management and two representatives of the local Union.
In addition, the General Manager and a representative of the International
Union may sit in on any third step hearing. In the event that the dispute
is not resolved in the third step, the Union may file the said
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difference for arbitration within ten (10) working days after the date of
the third step meeting, but the said ten (10) days may be waived by mutual
agreement between the Union and the Company so as to further discuss the
subject of the dispute under the cooperative management clause of this
Agreement.
If a grievance in Step 2 is not heard within the 5 day limit it will be
placed immediately on the third step agenda.
Section 2.
If a grievance hereunder is referred to arbitration, the parties will use
the arbitration procedures of the Federal Mediation Service. If a
grievance is submitted to arbitration, the decision of the arbitrator
shall be final and binding on both parties and any cost with respect to
said arbitration shall be borne equally between the parties.
Section 3.
In connection with the settlement of grievances, the Company hereby agrees
to be liable to pay up to two (2) hours per month for no more than three
(3) Union representatives engaged in the hearing of disputes under this
Section of the Labor Agreement. No issue in dispute under this Labor
Agreement shall be arbitrable unless the said issue involves the meaning,
application of, or compliance with a specific provision of this Agreement
or the intent thereof. The arbitrator shall not add to, subtract from, or
modify any of the provisions of this Agreement, and shall not reverse
management's decision except when, in the judgment of the arbitrator,
management has acted without just cause. The arbitrator's award shall in
no case be retroactive beyond thirty (30) days prior to the filing of the
written grievance which constituted the issue in question.
Section 4.
Except for grievances involving seniority, all grievances must be filed
within thirty (30) working days from the date of its occurrence. In no
case, however, shall the Company's liability for retroactive pay exceed a
period of thirty (30) days prior to the date on which the grievance is
filed. Grievances not so filed shall be deemed to have been waived and
shall not be raised thereafter. Grievances resolved in either Step
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I, Step II, or Step III above shall be considered satisfactorily settled,
closed on the record, and shall not be reopened.
Section 5.
Grievances which shall arise between the Union and the Company
concerning employee discipline shall have priority over all other cases
under this Article XIII of the Labor Agreement.
ARTICLE XIV
Wages and Rates of Pay
Section 1.
Top wage rates for all labor grades are listed below:
Labor July 20 Labor July 20 Labor July 20
Grade 1996 Grade 1996 Grade 1996
1 $11.09 5 $11.64 9 $12.02
2 11.22 6 11.79 10 12.11
3 11.43 7 11.87 11 12.19
4 11.54 8 11.95 12 12.27
Each grade will be increased by another $0.30 effective July 19, 1997. Each
grade will be increased by another $0.30 effective July 18, 1998. Employees
hired between July 21, 1984 and July 17, 1996 will have their rates increased by
an additional .l0 cents on July 20, 1996 by an additional .10 cents on July
19, 1997 and by an additional .05 cents on July 18, 1998. This amount of .25
per hour is in addition to the general increases granted under this Labor
Agreement.
Section 2.
New employees without previous experience will be hired at the
appropriate rate as shown on the progression rate scales outlined in
Appendix "A" of this Agreement.
Section 3.
Employees who have some experience will be placed at a rate on the
progression rate scale commensurate with their experience and ability to
perform the job between the minimum hiring rate for the labor grade up to
and including the full job rate if the employee is fully qualified. In no
case shall any employee receive less than his present rate when he is
accepted for training on another job provided the move is lateral or up.
Section 4.
Any employee on a progression rate shall be reviewed periodically
and appropriate adjustments shall be made
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on the basis of the review period until the employee reaches the full rate
of the job. Employees in Labor Grade 9 and below shall be reviewed every
thirty (30) days and adjustments will be automatic unless the employee is
removed from the job. Employees in Labor Grades 10, 11, and 12 shall be
reviewed every 30 days and adjustments will be made on the same basis as
Labor Grades 9 and below.
Section 5.
Employees working on a scheduled second shift shall be paid a night shift
premium of 20(cent) per hour. Employees working on a scheduled third
shift shall be paid a night shift premium of 22(cent) per hour. Employees
assigned to one shift shall not receive a premium applicable to another
shift for any reason.
Section 6.
Any employee on transfer to another job shall be paid the rate of his job
or the rate of the job to which he is transferred, whichever is higher.
An incentive employee will be paid five (5) labor grades higher than his
base rate in those cases where the job to which he is transferred causes a
loss of earnings. Temporary transfers will not exceed ninety (90) days in
a year unless otherwise agreed to. If a transfer exceeds ninety (90) days,
the job will be posted. The Company will not use the temporary transfer
provision in cases involving the use of employees working out of their job
descriptions for periods of less than four (4) hours duration.
ARTICLE XV
Insurance Benefits and Pensions
Section 1.
A Pension Agreement and Insurance Program have been provided in Agreements
which are separate and apart from this contract booklet.
Section 2.
With respect to pension service credits, all active employment time
accrued prior to the acquisition of the Bremen Bearing Company by S K F
Industries, Inc., shall be counted as years of service for pension
eligibility purposes.
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Section 3.
Each employee will be provided with a booklet outlining the pension and
insurance benefits.
ARTICLE XVI
Jury Duty, Bereavement and Military Reserve Pay
Section 1. Jury Duty Pay.
Any employee who is called for Jury Duty service shall be excused from
work for the days on which he serves and he shall receive for each such
day of jury service on which he otherwise would have worked, the
difference between eight (8) times his assigned base rate and the payment
he receives for jury service. The employee will present proof of service
and the amount of pay received therefor.
Section 2. Bereavement Pay.
Employees will be paid by the Company for time lost due to death in the
immediate family. Such pay to be no more than their assigned rate for a
period not in excess of three (3) work days. Immediate family includes
mother, father of employee, husband or wife, children, brother or sister,
mother-in-law, father-in-law, grandchildren, stepchildren, stepparents,
grandparents, son-in-law and daughter-in-law.
Section 3. Military Reserve Training Pay.
An active employee who is required to attend Military Reserve Training
Encampment will receive the difference in pay between his assigned base
rate and payment received for his military service. Payment hereunder
shall be based on proof of service and shall not exceed a period of eighty
(80) hours.
ARTICLE XVII
Safety and Health
Section 1.
Heating, lighting, toilet, locker and sanitary facilities and all
protective devices necessary to protect the health of employees shall be
provided by the Company as prescribed under the Laws of the State of
Indiana and the United States. The Union will at all times cooperate with
and assist the Company in maintaining and improving safety and health
conditions in the plant.
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ARTICLE XVIII
Plant Rules
Section 1.
The Union recognizes that it is necessary for the Company to issue rules
from time to time governing the conduct of employees and that it is the
duty of each employee to familiarize himself with such rules and
regulations. This does not constitute acceptance by the Union of any
specific rules not in compliance with the provisions of this Agreement.
ARTICLE XIX
Leave of Absence
Section 1.
A. Employees who are to be absent for more than one week for personal
illness or physical disability and who have acquired one (1) year of
service with the Company, will be granted a leave of absence up to
one (1) year. (Employees with sixty (60) days seniority but less
than one (1) year of service will be granted a leave of absence for
the period equal to their length of service.) Leaves of absence will
only be granted upon written request and when accompanied by a
physician's statement. Such leaves will be granted without pay
except seniority will accumulate for the duration of the leave.
Requests for personal leaves of absence for unusual reasons may be
made through the Plant Manager. Such leaves, if granted, shall not
be in excess of two weeks.
B. Employees applying for a leave of absence or returning from a leave
of absence may be subject to a medical examination and approval by a
Company appointed physician.
C. An employee with a physician's statement must renew medical
certification every three (3) months.
Section 2.
Any employee who is elected or appointed to a position with the
International Union (UAW) will be granted a leave of absence for the
duration of his assignment upon written request by the Inter-
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national Union. Seniority will accumulate during such leave but without
pay or other benefits except for pension purposes.
Section 3.
A. Failure to report to work within five days after the expiration of a
leave of absence or extension thereof shall constitute a voluntary
resignation.
B. Employees returning to work after a leave of absence will be placed
on the same job held at the beginning of the leave based on their
seniority and provided they are able to perform the full job
requirements.
Section 4.
A. Any employee who has been granted a leave of absence and who while
on leave of absence, seeks or accepts other employment or who
engages in any business or occupation shall be considered as having
voluntarily quit. Exceptions to this Section may be made by mutual
agreement.
ARTICLE XX
Amendments and Modifications
Section 1.
This agreement together with the insurance plan, wages and rules referred
to herein constitutes the entire Agreement between the Parties and
concludes collective bargaining for its term. In the event any of the
provisions of this Agreement shall become invalid or unenforceable by
reason of any federal or state law or executive order now existing or
hereafter enacted, such invalidity or unenforceability shall not have any
effect on the remaining provisions of this Agreement.
Section 2.
No amendments or modifications of this Agreement shall be valid except
when committed to writing and signed by the authorized representative of
both parties. The authorized representatives of the Union shall include
the duly authorized representatives of the International Union and the
duly authorized representatives of the Local Union No. 1368.
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ARTICLE XXI
Termination and Notice
Section 1.
This agreement between the parties shall remain in force for the period
commencing on July 20, 1996 and ending 12:00 midnight July 16, 1999 and
shall automatically renew itself from year to year thereafter unless
written notices of the desire to terminate or amend any portion of any of
the terms hereof is given by either party to the other, at least sixty
(60) days prior to July 16, 1999 or in the event this Agreement is renewed
such notice shall then be given at least sixty (60) days prior to any
subsequent annual expiration date.
If notice of the desire to terminate or amend shall be given, as provided
in the preceding paragraph, negotiations for the new or amended Agreement
shall begin not later than ten (10) days subsequent to such notice, and
shall continue until agreement has been reached; and during such
negotiations this Agreement shall remain in full force and effective
provided, however, that if negotiations continue beyond the terminal date
of this Agreement, either party may then terminate this Agreement upon ten
(10) days written notice to the other party.
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MEMO OF UNDERSTANDING
It is agreed that the foregoing language substantially represents the
terms and conditions of a new labor agreement between the Bremen Plant of SKF
U.S.A. Inc. and Local 1368 of the U.A.W.
For the Union For the Company
/s/ [Illegible] /s/ [Illegible]
- ----------------------------- -----------------------------
/s/ [Illegible] /s/ [Illegible]
- ----------------------------- -----------------------------
/s/ [Illegible] /s/ [Illegible]
- ----------------------------- -----------------------------
/s/ [Illegible]
- ----------------------------- -----------------------------
/s/ [Illegible] /s/ [Illegible]
- ----------------------------- -----------------------------
- ----------------------------- -----------------------------
Agreed this 18th day of July, 1996.
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APPENDIX "A"
RATES OF PAY LABOR GRADE
JULY 20, 1996
EMPLOYEES HIRED PRIOR TO JULY 21, 1984
PROGRESSION SCALE
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 10.94 11.09
2 1 10.97 11.07 11.22
3 1 11.08 11.18 11.28 11.43
4 1 11.09 11.19 11.29 11.39 11.54
5 1 11.19 11.29 11.39 11.49 11.64
6 1 11.34 11.44 11.54 11.64 11.79
7 1 11.42 11.52 11.62 11.72 11.87
8 1 11.50 11.60 11.70 11.80 11.95
9 1 11.57 11.67 11.77 11.87 12.02
10 1 11.66 11.76 11.86 11.96 12.11
11 1 11.74 11.84 11.94 12.04 12.19
12 1 11.82 11.92 12.02 12.12 12.27
EMPLOYEES HIRED AFTER JULY 21, 1984
PRIOR TO JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 10.79 10.94
2 1 10.82 10.92 11.07
3 1 10.93 11.03 11.13 11.28
4 1 10.94 11.04 11.14 11.24 11.39
5 1 11.04 11.14 11.24 11.34 11.49
6 1 11.19 11.29 11.39 11.49 11.64
7 1 11.27 11.37 11.47 11.57 11.72
8 1 11.35 11.45 11.55 11.65 11.80
9 1 11.42 11.52 11.62 11.72 11.87
10 1 11.51 11.61 11.71 11.81 11.96
11 1 11.59 11.69 11.79 11.89 12.04
12 1 11.67 11.77 11.87 11.97 12.12
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EMPLOYEES HIRED AFTER JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 7.94 8.09
2 1 7.97 8.07 8.22
3 1 8.08 8.18 8.28 8.43
4 1 8.09 8.19 8.29 8.39 8.54
5 1 8.19 8.29 8.39 8.49 8.64
6 1 8.34 8.44 8.54 8.64 8.79
7 1 8.42 8.52 8.62 8.72 8.87
8 1 8.50 8.60 8.70 8.80 8.95
9 1 8.57 8.67 8.77 8.87 9.02
10 1 8.66 8.76 8.86 8.96 9.11
11 1 8.74 8.84 8.94 9.04 9.19
12 1 8.82 8.92 9.02 9.12 9.27
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APPENDIX A
RATES OF PAY LABOR GRADE
JULY 19, 1997
EMPLOYEES HIRED PRIOR TO JULY 21, 1984
PROGRESSION SCALE
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 11.24 11.39
2 1 11.27 11.37 11.52
3 1 11.38 11.48 11.58 11.73
4 1 11.39 11.49 11.59 11.69 11.84
5 1 11.49 11.59 11.69 11.79 11.94
6 1 11.64 11.74 11.84 11.94 12.09
7 1 11.72 11.82 11.92 12.02 12.17
8 1 11.80 11.90 12.00 12.10 12.25
9 1 11.87 11.97 12.07 12.17 12.32
10 1 11.96 12.06 12.16 12.26 12.41
11 1 12.04 12.14 12.24 12.34 12.49
12 1 12.12 12.22 12.32 12.42 12.57
EMPLOYEES HIRED AFTER JULY 23, 1984
PRIOR TO JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 11.19 11.34
2 1 11.22 11.32 11.47
3 1 11.33 11.43 11.53 11.68
4 1 11.34 11.44 11.54 11.64 11.79
5 1 11.44 11.54 11.64 11.74 11.89
6 1 11.59 11.69 11.79 11.89 12.04
7 1 11.67 11.77 11.87 11.97 12.12
8 1 11.75 11.85 11.95 12.05 12.20
9 1 13.82 11.92 12.02 12.12 12.27
10 1 11.91 12.01 12.11 12.21 12.36
11 1 11.99 12.09 12.19 12.29 12.44
12 1 12.07 12.17 12.27 12.37 12.52
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EMPLOYEES HIRED AFTER JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 8.24 8.39
2 1 8.27 8.37 8.52
3 1 8.38 8.48 8.58 8.73
4 1 8.39 8.49 8.59 8.69 8.84
5 1 8.49 8.59 8.69 8.79 8.94
6 1 8.64 8.74 8.84 8.94 9.09
7 1 8.72 8.82 8.92 9.02 9.17
8 1 8.80 8.90 9.00 9.10 9.25
9 1 8.87 8.97 9.07 9.17 9.32
10 1 8.96 9.06 9.16 9.26 9.41
11 1 9.04 9.14 9.24 9.34 9.49
12 1 9.12 9.22 9.32 9.42 9.57
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APPENDIX "A"
RATES OF PAY LABOR GRADE
JULY 18, 1998
EMPLOYEES HIRED PRIOR TO JULY 21, 1984
PROGRESSION SCALE
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 11.54 11.69
2 1 11.57 11.67 11.82
3 1 11.68 11.78 11.88 12.03
4 1 11.69 11.79 11.89 11.99 12.14
5 1 11.79 11.89 11.99 12.09 12.24
6 1 11.94 12.04 12.14 12.24 12.39
7 1 12.02 12.12 12.22 12.32 12.47
8 1 12.10 12.20 12.30 12.40 12.55
9 1 12.17 12.27 12.37 12.47 12.62
10 1 12.26 12.36 12.46 12.56 12.71
11 1 12.34 12.44 12.54 12.64 12.79
12 1 12.42 12.52 12.62 12.72 12.87
EMPLOYEES HIRED AFTER JULY 21, 1984
PRIOR TO JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 11.54 11.69
2 1 11.57 11.67 11.82
3 1 11.68 11.78 11.88 12.03
4 1 11.69 11.79 11.89 11.99 12.14
5 1 11.79 11.89 11.99 12.09 12.24
6 1 11.94 12.04 12.14 12.24 12.39
7 1 12.02 12.12 12.22 12.32 12.47
8 1 12.10 12.20 12.30 12.40 12.55
9 1 12.17 12.27 12.37 12.47 12.62
10 1 12.26 12.36 12.46 12.56 12.71
11 1 12.34 12.44 12.54 12.64 12.79
12 1 12.42 12.52 12.62 12.72 12.87
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EMPLOYEES HIRED AFTER JULY 19, 1996
REVIEW FULL
LABOR INTERVALS JOB
GRADE (MONTHS) RATE
1 1 8.54 8.69
2 1 8.57 8.67 8.82
3 1 8.68 8.78 8.88 9.03
4 1 8.69 8.79 8.89 8.99 9.14
5 1 8.79 8.89 8.99 9.09 9.24
6 1 8.94 9.04 9.14 9.24 9.39
7 1 9.02 9.12 9.22 9.32 9.47
8 1 9.10 9.20 9.30 9.40 9.55
9 1 9.17 9.27 9.37 9.47 9.62
10 1 9.26 9.36 9.46 9.56 9.71
11 1 9.34 9.44 9.54 9.64 9.79
12 1 9.42 9.52 9.62 9.72 9.87
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MEMO OF UNDERSTANDING #1
ARTICLE XVI
Bereavement Pay
The three days allowed must be taken. In other words, no pay can be taken in
lieu of the time allowed off. Of course, if a person decides they only want one
or two days off and wishes to work, this is their option. The days off must be
consecutive and only at the time of the funeral. In other words, you cannot take
one day at the time of the funeral and two days two months later for the same
bereavement. In case the three days include Saturday and Sunday, the employee
will not lose two paid days, but will take two additional days for Saturday and
Sunday. For example, the employee would take off Friday, Monday and Tuesday with
pay. If the bereavement occurs during the employee's vacation, the three days
allowed should be taken immediately after the termination of the vacation time.
The vacation time does not count against the three days allowed. If a holiday
falls on one of the three days allowed, an extra day can be taken with pay.
MEMO OF UNDERSTANDING #2
The six (6) month and lateral move clause in the contract as waived for an
employee who returns to the Job from which he was removed, if this move is made
within one year. If his former job is posted within one year, and the employee
declines to return to this Job at this time, he loses the rights of waiver.
MEMO OF UNDERSTANDING #3
While it is understood that the Company may experiment with equipment, it is not
the intent of the Company to replace any bargaining unit employee with a
salaried employee through the exercise of this right. In the case of foremen,
they may perform such work under their jurisdiction as instructing,
experimenting, or relieving bottlenecks in production, but no bargaining unit
employee shall lose a work opportunity as a result.
MEMO OF UNDERSTANDING #4
Where a work opportunity is lost, the Company shall be liable for a minimum of 4
hours at time and one half for work performed by non-bargaining unit employees
normally performed by bargaining unit employees.
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MEMO OF UNDERSTANDING #5
After twelve (12) months service in labor grade 6 in the Maintenance
Department, the employee will automatically transfer to Grade 8 (General
Maintenance Mechanic) providing he can successfully pass a working test
pertaining to the Grade 8 classification.
MEMO OF UNDERSTANDING #6
ABSENTEEISM AND LATENESS
Absenteeism and lateness records will be reviewed on a monthly basis.
Employees with an excused absence will not be affected.
The warning system in regard to absenteeism and lateness will operate as
follows:
1. First - Written
2. Second - Written
3. Third - Written - 3 day suspension
4. Fourth - Written - Discharge
Warning slips will be retracted from the employees records by the
following method:
All outstanding warnings are eliminated with the advent of the new labor
agreement. A probationary period of one-hundred twenty (120) days will exist for
each warning given. If after the issuance of a warning the one-hundred twenty
(120) day period elapses and no further warnings are given, the warning will be
removed from the employee's records. The one-hundred twenty (120) day period
will prevail for each warning in the employee's file.
MEMO OF UNDERSTANDING #7
BREAK-IN PERIOD
Effective immediately employees operating on machine controlled incentive
standards (Cut-off and Grinder) who are training new men will be paid three (3)
labor grades higher than their present classifications. Since all operators in
these two departments are Grade 6, during the time of actual training the
operators base pay will be the top step in Labor Grade 9. Training time will be
considered as time spent with a new operator. When a
35
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new operator moves to one machine the training time will cease and the base pay
will revert back to Grade 6.
When assembly operators train other employees they will be paid the top step of
labor grade 4.
MEMO OF UNDERSTANDING #8
Saturday time and one-half and Sunday double time will be defined as follows:
For a one shift or two shift operation time and one-half will start at 24:00
hours Friday and cease at 24:00 hours Saturdays. Double time will start at 24:00
hours Saturdays and cease at 24:00 hours Sundays.
For a three shift operation time and one-half will start at 23:00 hours Fridays
and cease at 23:00 hours Saturdays. Double time will start at 23:00 hours
Saturdays and cease 23:00 hours Sundays.
MEMO OF UNDERSTANDING #9
In the event a junior worker in a department is transferred to another shift and
the transfer exceeds forty-five (45) days, a bid for a shift preference must be
posted when the vacancy is filled.
If the transfer does not exceed forty-five (45) days, the Employee that was
transferred will have to return to the shift.
MEMO OF UNDERSTANDING #10
Employees on temporary transfer to another department will work the hours as
scheduled in that department during the transfer. If they receive less than 16
hours notice of a temporary transfer, they shall have the option of working
either the hours scheduled in their own department or those scheduled in the
department to which the temporary move was made.
MEMO OF UNDERSTANDING #11
CONCERNING ARTICLE XII, SECTION 7
This provision protects Union officers from the vagaries of bumping/layoff
during the terms of office. Therefore they are to remain on the shift to which
they are assigned until the abolition of that shift or upon voluntary removal to
another shift.
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<PAGE>
On the other hand, this provision in no way permits a Union officer to use his
privileges for purposes of vacation or promotion preference, etc.
To allow the bumping of Union committeemen or officers without respect to shift
retention, it is technically possible to have them all confined to one shift
while the other shifts have no representation. Of course this was never the
intention, since such an eventuality would leave Company-Union contracts in an
unworkable state.
MEMO OF UNDERSTANDING #12
Shift preference may be exercised twice per year, but an employee must stay on
the shift for six months after exercising this right. It is the obligation of
the employee to notify the Company if he wishes a shift preference.
In exercising the shift preference, the employee will bump the least senior
employee in the same job on the shift he desires to transfer to provided his
seniority is greater. The displaced employee will then bump the least senior
employee in the same job on the next shift of priority, provided his seniority
is greater. Priority of shifts will be in day, middle and evening turn order.
MEMO OF UNDERSTANDING #14
If a Knobbing Department employee is not present, abrasive can be run by a
temporarily transferred employee. When the Knobbing Department is not staffed,
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Knob Removal and Green Tumble parts will be gaged, run to size, and shut off, if
necessary, by either Quality Control or the Watchman. Knob removal parts when
done are to be rinsed clean and put to lime to prevent pitting.
MEMO OF UNDERSTANDING #15
The following will prevail for employees who are successful bidders on open jobs
but circumstances prevent them from moving:
1. If after two (2) weeks from date of bidding the employee is still held
within department, he will receive make up pay equal to his present step in
the Labor Grade in which he was the successful bidder. Seniority will
commence in the new Department at this time,
Note:
Incentive earnings will not be calculated on the make up pay. Overtime will
not be paid on make up pay but will be paid on hours worked at straight
time.
2. Successful bidders shall not be detained for any time in excess of five (5)
weeks from their bidding date unless approved by the employee.
3. At the time of the actual transfer the employee will automatically be
placed at a rate on the progression rate scale per company policy.
MEMO OF UNDERSTANDING #16
It is the policy of the Company to encourage its employees to prepare
themselves voluntarily for increased responsibility by studying accredited
semi-technical, technical, and professional subjects related to the
Company's business. To aid the employee, the Company has instituted a
Tuition Refund Plan by which 75% of the tuition paid by each employee will
be refunded on approved and satisfactorily completed subjects.
MEMO OF UNDERSTANDING #17
When work which the bargaining unit normally performs is to be
subcontracted, it will be done on the basis of time or money or special
equipment or expertise.
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When work is to be contracted out, the Company will inform the Union and explain
the necessity prior to the subcontracting.
MEMO OF UNDERSTANDING #18
Press operators will use the lathe only for purposes of polishing tooling.
MEMO OF UNDERSTANDING #19
The first step of the four steps on the Progression Scale will not apply to
employees bidding to another labor grade.
The four step Progression Scale will only apply to new employees hired after
July 22, 1978.
MEMO OF UNDERSTANDING #20
Until such time as rates can be established in labor grades 10 through 12.
employees within those classifications will be paid at 130% of their base rates
on a weekly basis.
MEMO OF UNDERSTANDING #21
When an employee is laid off from a job he will have recall rights to that job
for 42 months.
LABOR UNITS & GRADES
UNIT #1 UNIT #3
Cut Off - 6 Assembly - 1
Heat Treat - 7 Inspection - 2
Grinding - 6 Inspection Leader - 4
Ass'y Leader - 6 Floor Person - 4
Process Inspection - 6 Roller MIC Operator - 4
Quality Assurance - 6 Material Handler/Sorter - 5
Press Operators - 7
Flexible Worker - 7
UN1T #4
UNIT #2
Maintenance - 10
Knobbing - 4
Liming Lead - 5 UNIT #5
Liming Helper - 3
Shipping & Receiving - 4 Tool Room - 8
Shipping Lead Person - 6 Tool Room - 10
Store Room Attendant - 4 Tool Room - 11
Waste Treatment Operator - 5 Rool Room - 12
Shift Helper/Sorter - 3 Store Room Lead - 9
LABOR UNIT
All Labor Grade #2 Jobs
MEMO OF UNDERSTANDING #22
It is the obligation of the employee to notify the Company of any absence on the
first day of the occurrence. Failure to do so could result in disciplinary
action.
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MEMO OF UNDERSTANDING #24
It is understood that the Company will not resort to a four shift basis because
of lack of available equipment due to disrepair.
MEMO OF UNDERSTANDING #25
The Company will supply each maintenance employee with lightweight coveralls;
however, the employee will be responsible for the garment's upkeep. In order to
receive a replacement uniform, an employee will be required to turn in the one
that has been furnished.
MEMO OF UNDERSTANDING #26
The Company agrees to make weekly payroll deductions for credit union. Company
assumes no obligation other than one gross deduction per employee, per payroll
period to be forwarded to one of two credit unions mutually agreed to by the
Company and the Union.
MEMO OF UNDERSTANDING #27
It is agreed that during the term of this contract the waste treatment
operator's shift will run from 1:00 p.m. to 9:30 p.m. with a one-half hour
unpaid lunch period.
MEMO OF UNDERSTANDING #28
Each week the total paid wages, excluding overtime premium, is divided by the
total hours worked. This yields the average hourly rate for the week. The eight
highest week's average hourly rate within the six-month period is used to
calculate the vacation hourly rate. This is determined by adding the average
hourly rate for the eight highest weeks and dividing the total by eight (8).
MEMO OF UNDERSTANDING #29
When a department is placed on a 4 shift operation, all employees in the
affected department will be assigned to that schedule only. The holiday schedule
for the 4 shift operation shall be determined by the Company and union and
posted by the beginning (January) of each year.
MEMO OF UNDERSTANDING #30
Employees will be allowed one day off with no pay due to the death of a spouse's
grandparents.
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MEMO OF UNDERSTANDING #31
In the event of a workforce reduction, the employee with flexible worker
classification may be bumped the same as any other employee on the basis of his
seniority. Further, the flexible worker will be assigned to a given shift. Any
changes in the schedule is subject to union approval.
MEMO OF UNDERSTANDING ON EYE EXAM #32
The Company will provide one eye exam per employee during the life of the
current contract for those employees who are not presently covered by an eye
examination program.
MEMO OF UNDERSTANDING #33
The Company will make every effort to avoid scheduling only one employee per
shift.
MEMO OF UNDERSTANDING #34
Any employee hired after 7/16/93 will pay $7.00 per week toward medical
insurance for an individual and $12.00 per week for a family. Any employee hired
after 7/19/96 will pay $9.00 per week toward medical insurance for an individual
and $15.00 per week for a family.
MEMO OF UNDERSTANDING #35
It is not the intent of the Company to compel an employee on a Family Medical
Leave to use vacation during that period.
MEMO OF UNDERSTANDING #36
Employees hired after July 19, 1996, will start at $3.00 per hour lower than the
prevailing wage scale in effect for this labor agreement.
MEMO OF UNDERSTANDING #37
Heat Treat Operators will be paid Labor Grade 9 when they operate three (3)
furnaces.
MEMO OF UNDERSTANDING #38
It is understood that the Company and the Union will discuss the possibility of
replacing the present incentive system with a gainsharing program that will be
acceptable to both parties.
MEMO OF UNDERSTANDING #39
If an employee is on vacation the week that Union dues are withheld, the
Company agrees to provide the Union with the names along with the hourly rate
that they were paid.
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AMENDMENT TO THE PENSION PLAN
FOR HOURLY EMPLOYEES
BREMEN, INDIANA PLANT OF SKF USA INC.
The present minimum pension formula shall be improved by increasing the pension
per month per year of service from $24.00 to $27.00 for retirements on or after
August 31 1996.
RETIREE HEALTH INSURANCE
Any employee retiring during the life of this agreement will have his benefits
capped at whatever the cost of those benefits on August 1, 1996. These benefits
have been capped at $234.14.
IMPROVEMENTS IN GROUP LIFE, ACCIDENTAL DEATH
AND DISMEMBERMENT, AND ACCIDENT AND HEALTH INSURANCE BENEFITS
BREMEN, INDIANA PLANT OF SKF USA INC.
1. The weekly accident and health benefit will be $175.00 for disabilities
commencing on or after August 1, 1996.
2. Effective August 1, 1985, the amount of group life and accidental death
and dismemberment insurance active employees will be increased from $9,000
to $10,000. Life and accidental death and dismemberment insurance for
active employee age 66 or over will be $6,500.
Life insurance is continued upon retirement under Pension Plan but is
reduced to $1,800 upon your attainment of age 66, $1,600 upon your
attainment of age 67, $1,500 upon your attainment of age 68 and
thereafter.
IMPROVEMENTS IN THE MAJOR DENTAL PLAN BREMEN PLANT OF SKF USA INC.
1. Effective September 1, 1981, the maximum benefit payable for all covered
dental services received during any calendar year will be increased from
$750 to $1,000.
2. Effective September 1, 1981, payment will be provided for 100% of the Usual
and Customary charges for the following dental care services:
(a) Oral examinations.
(b) Periapical and bitewing x-rays.
(c) Topical fluoride application.
(d) Prophylaxis, including cleaning, scaling, and polishing
(e) Denture repair.
(f) Palliative emergency treatment.
(g) Fillings, consisting of silver amalgam, silicate and plastic
restoration.
(h) Simple extractions involving less than six teeth.
42
<PAGE>
MAJOR MEDICAL BENEFITS
EFFECTIVE 9-1-96
Bremen, IN Plant
Major Medical benefits are determined as follows: From the Covered Medical
Expenses which are incurred in any calendar year by any enrolled member for any
and all conditions or illnesses regardless of whether related, there is
subtracted the sum of: $200.00 (the deductible amount) plus the amount under the
terms of the basic plan.
The Major Medical Expense Plan will pay 80% of the remaining Covered Medical
Expenses subject to a maximum of $1,000,000.00 for any all conditions or
illnesses regardless of whether related, for you and for each eligible
dependent, except for special provisions for treatment of mental ailments.
Deductibles
The following provisions pertain to the deductible amount:
1. A separate deductible amount is payable with respect to each calendar year
in which Covered Medical Expenses are incurred: except that if you had
expenses in the last three (3) months of any calendar year which could have
been counted toward your $200.00 deductible for that year but the full
deductible was not met, they can then be counted toward the $200.00 annual
deductible for the next year.
2. Each enrolled member (employee or eligible dependent) must satisfy his own
deductible, except that:
a. In the case of an accident involving an employee and/or one or more
dependents, only one deductible is applied in any calendar year with
respect to expenses for injuries to the family members which resulted from
that accident.
b. The deductible will not be applied more than three (3) times with
respect to Covered Expenses incurred by an employee and all enrolled
dependents in any calendar year.
3. Basis plan deductibles or co-payments will not be eligible towards this
Major Medical deductible.
43
<PAGE>
BLUE CROSS HOSPITALIZATION INSURANCE
EFFECTIVE 9-1-96
Bremen, IN Plant
An individual deductible of $250.00 will apply for all in-patient
hospitalization admissions during the course of one calendar year.
The deductible will not be applied more than two times with respect to
in-patient admissions incurred by an employee and all enrolled dependents in a
calendar year.
44
<PAGE>
EX-10.32
REAL ESTATE PURCHASE AGREEMENT
This Real Estate Purchase Agreement ("Agreement") is entered into by
and among LINEAR PRECISION PRODUCTS, INC., a Delaware corporation, formerly
known as BPP Acquisition Corporation, with offices at 60 Round Hill Road,
Fairfield, Connecticut 06430 ("Buyer"), ROLLER BEARING COMPANY OF AMERICA, INC.,
a Delaware corporation with offices at 60 Round Hill Road, Fairfield,
Connecticut 06430 ("RBC") and DANA CORPORATION, a Virginia corporation with
offices at 4500 Doff Street, Toledo, Ohio 43697- 1000 ("Seller"), as of the date
of the last signature to this Agreement ("Acceptance Date").
RECITALS:
A. Buyer desires to purchase and acquire from Seller the real
property located at 530 Recold Road, Walterboro, Colleton County, South Carolina
29488 and legally described on Exhibit A attached hereto, together with all
buildings and improvements located thereon, and all rights, licenses, privileges
and appurtenances thereunto belonging ("Real Property"), upon and subject to the
terms and conditions hereinafter set forth.
B. Seller desires to sell, transfer and convey the Real Property to
Buyer, upon and subject to the terms and conditions hereinafter set forth.
C. Buyer has been in possession of the Real Property since October
30, 1996, as tenant under a Business Property Lease between Seller and Buyer
(formerly known as BPP Acquisition Corporation), dated October 30, 1996
("Lease".).
D. Buyer and RBC are affiliated corporations; and Seller, RBC and
Buyer (formerly known as BPP Acquisition Corporation) entered into a certain
environmental indemnification agreement, dated October 30, 1996, relating to the
Real Property ("October 30, 1996 Agreement").
NOW, THEREFORE, for good and valuable considerations, the receipt of
which are hereby acknowledged, the parties agree as follows:
1. Property. Seller agrees to sell the Real Property to Buyer, and
Buyer agrees to purchase the Real Property from Seller.
2. Purchase Price and Payment. The purchase price of the Real
Property ("Purchase Price") shall be $495,000. The Purchase Price shall be paid
by Buyer to Seller at the Closing (as hereinafter defined) in cash or
immediately available funds (subject to the credits, prorations and adjustments
under this Agreement).
3. Evidence of Title. As evidence of title, Seller shall deliver to
Buyer, not later than 10 days after the Acceptance Date, a commitment
("Commitment") for the issuance to Buyer of an ALTA owner's title insurance
policy issued by a title insurance company ("Title Company") acceptable to
Seller and Buyer, in the amount of the Purchase Price.
<PAGE>
4. Taxes and Assessments. There shall not be any proration of real
estate taxes and installments of assessments in connection with the Closing,
since Buyer (formerly known as BPP Acquisition Corporation) is and has been
obligated to pay taxes and assessments pursuant to the Lease.
5. Environmental Indemnification Agreement. At the Closing, Seller,
Buyer and RBC shall execute and deliver an environmental indemnification
agreement ("Environmental Indemnification Agreement") in the form of Exhibit B
attached hereto. The Environmental Indemnification Agreement shall cancel and
supersede the October 30, 1996 Agreement.
6. Termination of Lease. At the Closing, Seller and Buyer shall
enter into a termination of the Lease ("Lease Termination"), in the form of
Exhibit C attached hereto.
7. Buyer's Conditions of Closing. Buyer's obligations under this
Agreement are subject to the satisfaction of the following conditions
("Conditions Precedent"):
(a) Buyer shall have received and approved the Commitment.
(b) Buyer shall have received and approved a currently dated ALTA
survey ("Survey") of the Property, which Survey shall have
been secured by Seller and certified to Buyer, Seller and the
Title Company.
In the event that the Conditions Precedent are not satisfied on or
before that date ("Contingency Date") occurring one (1) day prior to the Closing
date, Buyer shall have the option of either (a) cancelling and terminating this
Agreement by giving written notice to Seller not later than the Contingency
Date, in which event neither party shall have any further liability to the other
party hereunder, or (b) waiving said unsatisfied Conditions Precedent and
proceeding toward the Closing in accordance with the other provisions of this
Agreement.
8. Closing. The closing of the transaction described in this
Agreement ("Closing") shall occur on or before that date occurring 60 days after
the Acceptance Date. At Closing, (a) Seller shall convey to Buyer marketable
title to the Real Property by a transferable and recordable special warranty
deed ("Deed"), subject only to zoning resolutions and ordinances, real estate
taxes and installments of assessments, and easements, agreements, restrictions
and other matters of record; (b) Seller shall deliver to Buyer the non-foreign
affidavit described under Section 1445 of the Internal Revenue Code; (c) Seller
shall deliver an ALTA seller's closing affidavit to Buyer and the Title Company
in such form as reasonably required by the Title Company; (d) Seller and Buyer
(formerly known as BPP Acquisition Corporation) shall execute and deliver the
Lease Termination; (e) Seller, Buyer and RBC shall execute and deliver the
Environmental Indemnification Agreement; and (f) the parties shall deliver
evidence of signing authority and/or such other documents as may be reasonably
required to effectuate the transaction contemplated by this Agreement.
-2-
<PAGE>
9. Costs. At the Closing, Seller shall pay the cost of the Survey,
and all conveyance fees and/or transfer taxes associated with this transaction.
At the Closing, Buyer shall pay the cost of the Commitment, the title policy and
all other title insurance costs, and all recording fees associated with this
transaction. In the event that the Closing does not occur, for reasons other
than the breach or default of Buyer hereunder, Seller shall pay any fee owing to
the Title Company for the cancellation of the Commitment.
10. Condition of Real Property. Buyer (formerly known as BPP
Acquisition Corporation) acknowledges and agrees that it has been occupying the
Real Property since October 30, 1996. Subject to the Environmental
Indemnification Agreement and the provisions of Section 11 hereof, Buyer accepts
the Property in an "as is, where is" condition as of the Acceptance Date and as
of the date of Closing, regardless of any defects therein, whether patent or
latent, concealed or otherwise.
11. Damage to Real Property. The casualty insurance on the Real
Property is being carried by Buyer (formerly known as BPP Acquisition
Corporation), pursuant to the Lease. In the event that any structure or
improvement on the Real Property is materially damaged or destroyed by fire or
other casualty prior to the delivery of the Deed to Buyer at the Closing, the
parties shall perform this Agreement and Seller (and Seller's mortgagee, if any)
shall relinquish any rights of Seller in and to any insurance proceeds covering
such casualty.
12. Notices. All notices, waivers, consents, demands or other
communications (collectively, "notices") given hereunder by any party to another
party shall be in writing and shall be delivered either (a) by personal delivery
or (b) by certified United States Mail, postage prepaid, or (c) by nationally
recognized overnight courier, at or to the addresses of the parties first set
forth above, or to such other address as any party may from time to time specify
by notice to another party. All notices shall be deemed to have been delivered
upon the earlier of actual receipt, three (3) days after mailing by certified
mail, or one (1) day after sending by overnight courier.
13. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties' successors and assigns; provided, however, that this
Agreement shall not be assigned by any party without the prior written consent
of the other parties. No representations, warranties or covenants pertaining to
this Agreement or the Property have been made by, or shall be binding upon,
either Seller or Buyer, except as stated herein or in the Environmental
Indemnification Agreement. The headings contained herein are for convenience of
reference only, and are not to be used in interpreting this Agreement. This
Agreement shall be construed and enforced pursuant to the laws of the State of
South Carolina. No amendments or variations of the terms and conditions of this
Agreement shall be valid unless the same is in writing and signed by all parties
hereto. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute but one document. Time is of the essence of this Agreement. The term
"day" as used in this Agreement means a calendar day, and if the date of any
required action or notice under this Agreement falls on a Saturday, Sunday or
legal holiday, the date for such required action or notice shall be extended to
the next business day.
-3-
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and RBC have executed this
Agreement, through their duly authorized representatives, as of the dates
indicated below.
LINEAR PRECISION PRODUCTS, INC.
By /s/ Michael S. Gostomski
-----------------------------------
Its Vice President
--------------------------------
Dated: March 27, 1998
DANA CORPORATION
By Melvin H. Rothlisberger
-----------------------------------
Melvin H. Rothlisberger
Assistant Treasurer
Dated: March 24, 1998
ROLLER BEARING COMPANY OF
AMERICA, INC.
By /s/ Michael S. Gostomski
-----------------------------------
Its Executive Vice President
--------------------------------
Dated: March 27, 1998
-4-
<PAGE>
EXHIBIT A
All that certain piece, parcel or Lot of land, lying and being in Colleton
County, South Carolina, being located on the Eastern Side of Thunderbolt Drive,
Formerly Recold Road, (S-15-61) and being more fully shown and designated on an
ALTA\ACSM Land Title Survey for Roller Bearing Corporation, by Fowler Land
Surveying, Dated January 7, 1998, and having the following Metes and Bounds, to
wit:
Beginning at the Centerline Intersection of S-15-459 and S-15-461 and running in
a direction of S 29 45'27" W for a distance of 790.53' to an iron pin found on
the Eastern Right-of-Way of S-15-461 and noted as the point of beginning, thence
turning and running along the property of Low Country Regional Development Corp.
S 56 20'00" E for a distance of 583.83' to an iron pin found, thence turning and
running along the property of Walterboro-Colleton County Airport Commission S 25
57'05" W for a distance of 547.61' to an iron pin found, thence turning and
continuing along the property of Walterboro-Colleton County Airport Commissions
47 26'55" W for a distance of 511.64' to an iron pin found at the center of a
100' South Carolina Electric and Gas Right-of-Way thence turning and running
along the center of said right-of-Way N 18 56'23" W for a distance of 676.55' to
an iron pin found on the Eastern Right-of-Way of S-15-461, Thence turning and
running Northerly along said Right-of-Way around a curve to the left with an Arc
of 289.17', Having a radius of 6109.98' and a chord of N 34 35'06" E for 289.15'
to an iron pin set, thence turning and continuing along the Right-of-Way of
S-15-461 N 33 13'45" E for a distance of 339.61' to the point of beginning and
containing 12.00 Acres.
TMS# 132-00-00-079
<PAGE>
EX-10.33
THIRD AMENDMENT TO
LETTER OF CREDIT AGREEMENT
THIS THIRD AMENDMENT TO LETTER OF CREDIT (this "Amendment") is entered
into as of this 23rd day of June, 1998 by and between ROLLER BEARING COMPANY OF
AMERICA, INC., a Delaware corporation (the "Company") and HELLER FINANCIAL,
INC., a Delaware corporation ("Heller").
RECITALS:
A. Company and Heller have entered into that certain Letter of Credit
Agreement dated as of September 1, 1994, and amended by the First Amendment to
the Letter of Credit Agreement dated November 16, 1997 and the Second Amendment
to Letter of Credit Agreement dated June 23, 1997 (as amended, the "Letter of
Credit Agreement"), pursuant to which Heller has issued the "Letter of Credit"
(this and all other capitalized terms used but not defined herein shall have the
meanings set forth in the Letter of Credit Agreement).
B. Company is also a party to a Credit Agreement dated June 23, 1997 (as
amended to date, the "Credit Agreement") with Credit Suisse First Boston as
agent (in such capacity, the "Agent") for the financial institutions party
thereto as Lenders (the "Lenders"), and the Lenders, to which Heller is a party
as a Lender and as an "Issuing Bank" with respect to the Letter of Credit.
C. Subject to the terms and conditions contained herein, Company and
Heller desire to amend certain provisions of the Letter of Credit Agreement as
set forth below.
NOW THEREFORE, in consideration of the premises and mutual agreements,
provisions and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Amendment. Article Four of the Letter of Credit Agreement is hereby
amended by deleting Section 4.6 thereof in its entirety.
2. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without giving
effect to conflict of law principles.
3. Counterparts; No Further Amendments. This Amendment may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which when taken together, shall constitute but one and the same
instrument. Except as amended hereby, the Letter of Credit Agreement remains
unmodified and in full
<PAGE>
force and effect. All references to the Letter of Credit in the Credit Documents
shall be deemed to refer to the Letter of Credit Agreement as amended hereby.
IN WITNESS WHEREOF, the Company and Heller have executed this Amendment as
of the date first set forth above.
ROLLER BEARING COMPANY
OF AMERICA, INC.
By: /s/ Anthony S. Cavilieri
-------------------------------
Its: Vice President and CEO
HELLER FINANCIAL, INC.
By: /s/ Andrew D. Marek
-------------------------------
Its: Senior Vice President
2
<PAGE>
Exhibit 10.34
SUPPLEMENT NO. 1 dated as of August 8, 1997 to the Guarantee
Agreement dated as of June 23, 1997, among each of the
subsidiaries listed on Schedule I thereto (each such subsidiary
individually, a "Guarantor" and collectively, the "Guarantors") of
ROLLER BEARING COMPANY OF AMERICA, INC., a Delaware corporation
(the "Borrower"), and CREDIT SUISSE FIRST BOSTON, a bank organized
under the laws of Switzerland, acting through its New York branch,
as collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties (as defined in the Credit Agreement referred to
below).
A. Reference is made to the Credit Agreement dated as of June 23, 1997
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders"), Credit Suisse First Boston, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent"), Collateral
Agent and issuing bank (in such capacity, the "Issuing Bank").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit, in each case to or for the account of the Borrower. Pursuant to
Section 5.11 of the Credit Agreement, each Subsidiary of the Borrower that
was not in existence or not a Subsidiary on the date of the Credit Agreement
is required to enter into the Guarantee Agreement as a Guarantor upon
becoming a Subsidiary. Section 20 of the Guarantee Agreement provides that
additional Subsidiaries of the Borrower may become Guarantors under the
Guarantee Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "New
Guarantor") is executing this Supplement in accordance with the requirements
of the Credit Agreement to become a Guarantor under the Guarantee Agreement
in order to induce the Lenders to make additional Loans and the Issuing Bank
to issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the
New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) agrees to all the terms and
provisions of the Guarantee Agreement applicable to it as a Guarantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Guarantor thereunder are true and correct on and
as of the date hereof. Each reference to a "Guarantor" in the Guarantee
Agreement shall be deemed to include the New Guarantor. The Guarantee
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Supplement shall become effective
when the Collateral Agent shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Guarantor and the
Collateral Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart of this Supplement.
<PAGE>
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein and in the Guarantee Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision hereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to it
at the address set forth under its signature below, with a copy to the
Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Guarantee Agreement as of the day and year
first above written.
BREMEN BEARINGS, INC.,
by /s/ Michael S. Gostomski
----------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
Address: c/o 60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by /s/ Ira Lubinsky
----------------------------------
Name: IRA LUBINSKY
Title: VICE PRESIDENT
by /s/ Julia P. Kingsbury
----------------------------------
Name: JULIA P. KINGSBURY
Title: ASSISTANT VICE PRESIDENT
2
<PAGE>
Exhibit 10.35
SUPPLEMENT NO.1 dated as of August 8, 1997 to the Indemnity,
Subrogation and Contribution Agreement dated as of June 23, 1997
(as the same may be amended, supplemented or otherwise modified
from time to time, the "Indemnity, Subrogation and Contribution
Agreement"), among ROLLER BEARING COMPANY OF AMERICA, INC., a
Delaware corporation (the "Borrower"), each Subsidiary of the
Borrower listed on Schedule I thereto (the "Guarantors"), and
CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders") and Credit Suisse First Boston, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"),
Collateral Agent and issuing bank (in such capacity, the "Issuing Bank"), and
(b) the Guarantee Agreement dated as of June 23, 1997, among the Guarantors
and the Collateral Agent (the "Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit, in each case for the
account of the Borrower. Pursuant to Section 5.11 of the Credit Agreement,
each Domestic Subsidiary of the Borrower that was not in existence or not
such a Subsidiary on the date of the Credit Agreement is required to enter
into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary.
Section 12 of the Indemnity, Subrogation and Contribution Agreement provides
that additional Subsidiaries of the Borrower may become Guarantors under the
Indemnity, Subrogation and Contribution Agreement by execution and delivery
of an instrument in the form of this Supplement. The undersigned Subsidiary
of the Borrower (the "New Guarantor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Guarantor under the Indemnity, Subrogation and Contribution Agreement in
order to induce the Lenders to make additional Loans and the Issuing Bank to
issue additional Letters of Credit and as consideration for Loans previously
made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation
and Contribution Agreement, the New Guarantor by its signature below becomes
a Guarantor under the Indemnity, Subrogation and Contribution Agreement with
the same force and effect as if originally named therein as a Guarantor and
the New Guarantor hereby agrees to all the terms and provisions of the
Indemnity, Subrogation and Contribution Agreement applicable to it as a
Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity,
Subrogation and Contribution Agreement shall be deemed to include the New
Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute
a single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this
<PAGE>
Supplement that, when taken together, bear the signatures of the New
Guarantor and the Collateral Agent. Delivery of an executed signature page to
this Supplement by facsimile transmission shall be as effective as delivery
of a manually signed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but
the validity, legality and enforceability of the remaining provisions
contained herein and in the Indemnity, Subrogation and Contribution Agreement
shall not in any way be affected or impaired. The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have
duly executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
BREMEN BEARINGS, INC.
by /s/ Michael S. Gostomski
------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
Address: c/o 60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ Ira Lubinsky
------------------------
Name: Ira Lubinsky
Title: Vice President
by /s/ Julia P. Kingsbury
-------------------------
Name: Julia P. Kingsbury
Title: Assistant Vice President
2
<PAGE>
Exhibit 10.36
SUPPLEMENT NO. 1 dated as of August 8, 1997 to the Security
Agreement dated as of June 23, 1997, among ROLLER BEARING COMPANY
OF AMERICA, INC., a Delaware corporation (the "Borrower"), each
subsidiary of the Borrower listed on Schedule I thereto (each such
subsidiary individually a "Guarantor" and collectively, the
"Guarantors"; the Guarantors and the Borrower are referred to
collectively herein as the "Grantors") and CREDIT SUISSE FIRST
BOSTON, a bank organized under the law of Switzerland, acting
through its New York branch, as collateral agent (in such
capacity, the "Collateral Agent") for the Secured Parties (as
defined herein).
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders"), Credit Suisse First Boston, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent"), Collateral
Agent and as issuing bank (in such capacity, the "Issuing Bank") and (b) the
Guarantee Agreement dated as of June 23, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement'), among the
Guarantors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of Security Agreement provides that additional
Subsidiaries of the Borrower may become Grantors under the Security Agreement
by execution and delivery of an instrument in the form of this Supplement.
The undersigned Subsidiary (the "New Grantor") is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a
Grantor under the Security Agreement in order to induce the Lenders to make
additional Loans and Issuing Bank to issue additional Letters of Credit and
as consideration for Loans previously made and Letters of Credit previously
issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions
of the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as
a Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment
and performance in full of the Obligations (as defined in the Security
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Grantor's right, title and interest in and to the Collateral (as defined in
the Security Agreement) of The New Grantor. Each reference to a "Grantor" in
the Security Agreement shall be deemed to include the New Grantor. The
Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against to in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute
a single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.
<PAGE>
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein and in the Security Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal
or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it
at the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year
first above written.
BREMEN BEARINGS, INC.,
by /s/ Michael S. Gostomski
------------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
Address: c/o 60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ Ira Lubinsky
------------------------------------
Name: Ira Lubinsky
Title: Vice President
by /s/ Julia P. Kingsbury
-----------------------------------
Name: Julia P. Kingsbury
Title: Assistant Vice President
<PAGE>
LOCATION OF COLLATERAL SCHEDULE I
to Supplement No. 1 to the
Security Agreement
<TABLE>
<CAPTION>
Description Location
- ----------- --------
<S> <C>
All types 1343 West Plymouth Street
Route 6 West
Bremen, IN 46506
Accounts, Documents 60 Round Hill Road
Instruments & General Intangibles Fairfield, CT 06430
</TABLE>
<PAGE>
Exhibit 10.37
SUPPLEMENT NO. 1 dated as of August 8, 1997, to the PLEDGE
AGREEMENT dated as of June 23, 1997, among ROLLER BEARING COMPANY
OF AMERICA, INC., a Delaware corporation (the "Borrower"), each
subsidiary of the Borrower listed on Schedule I thereto (each such
subsidiary individually a "Subsidiary Pledgor" and collectively,
the "Subsidiary Pledgors"; the Borrower and Subsidiary Pledgors
are referred to collectively herein as the "Pledgors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below)
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the lenders from time to time party
thereto (the "Lenders"), Credit Suisse First Boston, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent"), Collateral
Agent, and issuing bank (in such capacity, the "Issuing Bank"), and (b) the
Guarantee Agreement dated as of June 23, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Guarantee Agreement") among the
Pledgors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of
the Borrower that was not in existence or not a Subsidiary on the date of the
Credit Agreement is required to enter into the Pledge Agreement as a
Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or
possesses property of a type that would be considered Collateral under the
Pledge Agreement. Section 24 of the Pledge Agreement provides that such
Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Pledgor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders
to make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the
New Pledgor by its signature below becomes a Pledgor under the Pledge
Agreement with the same force and effect as if originally named therein as a
Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions
of the Pledge Agreement applicable to it as a Pledgor thereunder and (b)
represents and warrants that the representations and warranties made by it as
a Pledgor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Pledgor, as security for the payment
and performance in full of the Obligations (as defined in the Pledge
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Pledgor's right, title and interest in and to the Collateral (as defined in
the Pledge Agreement) of the Pledgor. Each reference to a "Subsidiary
Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include
the New Pledgor. The Pledge Agreement is hereby incorporated herein by
reference.
<PAGE>
SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Pledgor and the
Collateral Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effective as delivery of a manually
signed counterpart of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set forth
on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case of any one or more of the provisions contained in
this Supplement should be held invalid, illegal or unenforceable in any
respect, neither party hereto shall be required to comply with such provision
for so long as such provision is held to be invalid, illegal or
unenforceable, but the validity, legality and enforceability of the remaining
provisions contained herein and in the Pledge Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 15 of the Pledge Agreement. All
communications and notices hereunder to the New Pledgor shall be given to it
in care of the Borrower.
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
BREMEN BEARINGS, INC.
by /s/ Michael S. Gostomski
-------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
Address: c/o 60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ Ira Lubinsky
-------------------------------
Name: Ira Lubinsky
Title: Vice President
by /s/ Julia P. Kingsbury
-------------------------------
Name: Julia P. Kingsbury
Title: Assistant Vice President
<PAGE>
Schedule I to
Supplement No. 1
to the Pledge Agreement
Pledged Securities of the New Pledgor
CAPITAL STOCK
<TABLE>
<CAPTION>
Number of Registered Number and Percentage of
Issuer Certificate Owner Class of Shares Shares
------ ----------- ---------- --------------- -------------
<C> <C> <C> <C> <C>
None
</TABLE>
DEBT SECURITIES
<TABLE>
<CAPTION>
Principal
Issuer Amount Date of Note Maturity Date
------ --------- ------------ -------------
<C> <C> <C> <C>
None
</TABLE>
<PAGE>
EX-10.38
ASSIGNMENT AND AGREEMENT OF LEASE
This Assignment and Agreement of Lease is entered into this 8th day of
August, 1997 by and between SKF USA Inc., a corporation of the State of Delaware
duly qualified to do business in the State of Indiana (hereinafter called "SKF")
and Bremen Bearings, Inc., a corporation of the State of Delaware duly qualified
to do business in the State of Indiana (hereinafter called "Bremen").
WHEREAS, as of the 1st day of November, 1964, Brem, Inc., an Indiana
corporation, as Landlord, entered into an Agreement of Lease with SKF, as
Tenant, for the lease and rental of the premises and on the terms and conditions
therein recited, a copy of which Lease is attached hereto as Exhibit A; and
NOW THEREFORE
1. Pursuant to Section 404 of said Lease, SKF hereby assigns and transfers
unto Bremen its interest in and to all that certain Agreement of Lease dated
July 16, 1962, between Brem, Inc. and SKF, all as is more particularly set forth
in Exhibit A.
2. Bremen assumes from the date hereof each and every one of the rights,
privileges, duties and obligations of SKF as recited in said Lease as amended
during the remaining term and any renewal term and any renewal term thereof, and
to do every and all things and make all payments therein stated for SKF to do
and perform.
3. Upon approval of this Assignment and Agreement of Lease, SKF shall be
relieved from all further obligations under said Lease.
4. SKF warrants and represents it is not in default under said Lease, as
amended, and that the Lease as amended is in all respects valid, subsisting and
in good standing.
IN WITNESS WHEREOF, SKF and Bremen each has caused this Assignment and
Agreement of Lease to be executed respectively by its duly authorized officer.
SKF USA Inc.
By: /s/ Allen Belenson
------------------------------
Vice President
Bremen Bearings, Inc.
By: /s/ Michael S. Gostomski
------------------------------
Ex. Vice President
<PAGE>
ASSENT:
Brem, Inc. by the signature of its duly authorized officer acknowledges
receipt of a copy of the above Assignment and Agreement of Lease and assents
thereto according to the terms thereof.
Brem, Inc.
By: /s/ [ILLEGIBLE]
------------------------------
Dated: August 8, 1997 (Title) VP
<PAGE>
EXHIBIT A
AGREEMENT OF LEASE
This Agreement of Lease made as of the 1st day of November, 1964,
between BREM, INC., an Indiana corporation, having a place of business in
Philadelphia, Pennsylvania, c/o Fidelity-Philadelphia Trust Company, 135 South
Broad Street, 19109, (hereinafter called "Landlord") and SKF INDUSTRIES, INC., a
Delaware corporation, having its principal place of business at Front Street and
Erie Avenue, Philadelphia, Pennsylvania, with a postal address of P.0. Box
6731, Philadelphia, Pennsylvania, 19132, (hereinafter called "Tenant").
WITNESSETH
That for and in consideration of the promises and agreements
hereinafter set forth, the parties hereto do hereby promise, covenant and agree
to and with each other as follows:
ARTICLE 1 - THE LEASED PREMISES
Sec. 101 Landlord does hereby lease unto Tenant and Tenant rents
from Landlord the land described in Exhibit "A", attached hereto and forming a
part hereof, consisting of approximately ten and one quarter (10-1/4) acres
together with the one story building thereon.
Landlord warrants that the building is free from defects of work and
material supplied by and for Landlord, said warranty to run for a period of one
year from November 1, 1964, or the date of completion whichever is later,
<PAGE>
and to the extent that any such defects appear in the work and material for
which Landlord is responsible, same shall be cured by Landlord at its own
expense or Tenant may cure the same and charge Landlord therefor, including the
right on the part of the Tenant to deduct the cost thereof from any rental
payments due to Landlord.
Sec. 102 All fixtures, machinery and equipment which are necessary to the
general operation and maintenance of the leased premises shall be the property
of Landlord whether owned by Landlord at the commencement of the term,
subsequently purchased by Landlord, or purchased by Tenant in accordance with
the provisions of this lease. All lighting fixtures, heating equipment and
air-conditioning equipment integral to the leased premises shall be considered
necessary to the general operation and maintenance of the premises.
Trade fixtures, machinery and other equipment which are supplied and
used by Tenant in the conduct of its business and which are not necessary for
the general operation and maintenance of the leased premises, but which may be
affixed to the leased premises in such manner as might, under applicable local
laws, cause the same to be regarded as part of the real property, shall be the
property of Tenant and may be removed by Tenant at any time prior to the
termination of the lease or any extension thereof. Tenant shall, at its expense,
remove such trade fixtures at the expiration of the term or any extension
thereof, and repair at its own expense any damage caused by such removal.
Sec. 103 As used in this agreement, "Premises!!" means the promises described in
Section 101 above, and includes all improvements now or hereafter located or
constructed on the premises,
-2-
<PAGE>
including the fixtures and equipment therein which are the property of Landlord
as above described. "Improvements" means all buildings and other improvements
now or hereafter located or constructed on the premises.
-3-
<PAGE>
ARTICLE 2 - TERM OF LEASE, POSSESSION, RENT
Sec. 201 The term of This Agreement of Lease shall commence on November 1, 1964
and shall end at noon July 16, 1987, subject to the right of Tenant to renew
this Agreement of Lease for a term of fifteen (15) years from such expiration
date.
Sec. 202 Tenant agrees to pay Landlord as rent the monthly sum of Three Hundred
Thirty-Five Dollars ($335.00) for the initial term set forth in Section 201,
said rental to be paid in advance for each and every month within ten (10) days
of the first day of the month.
Sec. 203 Tenant shall have the option to renew this Agreement of Lease for a
fifteen (15) year term following the expiration of the term set forth in Section
201, such option to be exercised at least six (6) months before the termination
of the term set forth in Section 201, by giving written notice to Landlord by
mail postpaid or delivered to Landlord of the intent of Tenant to renew this
Agreement of Lease.
The renewal shall be on the same terms and conditions as those
herein contained except that the monthly rent to be paid by Tenant to Landlord
during said renewal term shall be Two Hundred Dollars ($200.00) payable in
advance within ten (10) days of the first day of the month.
Sec. 204
If tenant remains in possession of the premises without written
consent of Landlord, after the term of this lease or after the extension period
if Tenant has elected to extend as set forth in Section 203, such holding-over
shall, if rent is accepted by
-4-
<PAGE>
Landlord for any period after the expiration of the term and Tenant has not
exercised its option to extend, as well as for any period after the expiration
of the extension period, create a tenancy from year to year at the monthly
rental payable as set forth in Section 203 and otherwise upon the terms and
conditions of this lease. Either Landlord or Tenant may terminate such a tenancy
at the end of any such year upon not less than ninety (90) days' notice of
termination; provided that, upon notice to Tenant within sixty (60) days after
any such holding over, Landlord may elect that the hold-over tenancy shall be
from month to month and terminable by Landlord or Tenant at the end of any month
upon thirty (30) days' notice.
Sec. 205 The receipt of any rent by Landlord, whether the same be that
originally reserved or that which may be payable under any of the covenants or
agreements herein contained, or any portion thereof, shall not be deemed to
operate as a waiver of the rights of Landlord to enforce the payment of rent
previously due or which may thereafter become due or to forfeit this lease by
the remedies reserved by Landlord hereunder, and the failure of Landlord to
enforce any covenant or condition concerning which Tenant shall be guilty of a
breach or be in default shall not be deemed to avoid the right of Landlord to
enforce the same or any other covenants and conditions on the occasion of any
subsequent breach or default.
Sec. 206 Subsequent to Tenant's occupancy and during the remainder of the term
of this lease or any extension thereof, Tenant shall at all times keep in good
order and condition, and at its cost and expense make all repairs, inside and
out, ordinary as well as extraordinary, structural or otherwise, to all
buildings and structures now or hereafter constructed on or appurtenant to said
premises, and all equipment thereof, including,
-5-
<PAGE>
but not being limited to, all engines, dynamos, boilers, elevators, machinery,
pipes, ducts, conduits, plumbing, heating and air conditioning installations,
wiring, gas and steam and electrical fittings, and all other equipment of every
nature whatsoever.
Landlord shall have the right at reasonable times to inspect the
premises.
Landlord may make or cause to be made any repairs which Landlord
determines are necessary for the protection and maintenance of the premises, if
Tenant fails to commence such repairs within thirty (30) days after written
notice from Landlord, unless emergency conditions require immediate
commencement, and Tenant shall pay Landlord promptly, as additional rent, any
expenditures by Landlord for such work. Any receipt showing the payment of any
such repairs shall be presumptive evidence against Tenant that the amount of
such payment was due and payable.
Tenant shall not permit any mechanics' or similar liens to remain
upon the premises for labor or material claimed to have been furnished to Tenant
in connection with work of any character performed or claimed to have been
performed on the premises or at the direction or with the consent of Tenant.
Tenant may contest the validity of any such lien or claim, provided Tenant, if
required by Landlord, shall give to Landlord reasonable security, not to exceed
double the amount of the claim, to insure payment and to prevent any sale,
foreclosure or forfeiture of the premises by reason of such nonpayment. Upon a
final determination of the validity of such lien or claim, Tenant shall pay
promptly any judgment or decree rendered against Tenant or Landlord, with all
proper costs, charges and reasonable attorneys' fees, and shall
-6-
<PAGE>
cause such lien or liens to be released of record without cost to Landlord.
Sec. 207 Tenant shall pay as additional rent when due and payable and before
they become delinquent all taxes (other than income taxes, or corporate
franchise or capital stock taxes of Landlord, and all other taxes of Landlord
similar in nature thereto), all assessments, water rates, meter charges and
other charges, extraordinary as well as ordinary, and other public charges which
during the term hereof or any extension shall be charged, levied, assessed,
imposed, become a lien or grow due or payable upon or on account of said
premises or any appurtenances thereof, by virtue of or under any present or
future law or requirement of any governmental or quasi-governmental body or
authority; and all charges for water, gas and electricity, light or power, or
other service furnished to said premises thereof during said term and any
extension period; and all fees and charges of any public, governmental or
quasi-governmental body or authority, for construction, maintenance, occupation
or use during said term or any renewal period. Tenant shall, on the payment
thereof and without demand, produce and exhibit to Landlord receipts, by proper
officials, showing such payments; except, however, that the taxes for the tax
year in which the tenancy hereunder ends, shall be apportioned, and Tenant shall
pay to Landlord or in accordance with Landlord's direction as and when such
taxes for said last year become due, such proportion thereof respectively as the
part of such year included in the tenancy hereunder bears to the full year.
Tenant may, however, defer the payment of any such tax, assessment or other
charge so long as the validity or the amount thereof shall be contested by
Tenant in good faith and by appropriate legal proceedings, provided that neither
the premises nor the lien of such tax, assessment or other charge be meanwhile
advertised for sale because of such non-payment, and provided further that
Tenant, if requested
-7-
<PAGE>
by Landlord, shall have furnished to Landlord security satisfactory to Landlord
and in an amount satisfactory to Landlord not exceeding double the amount of the
tax, assessment or other charge so contested and securing Landlord against the
payment of such tax, assessment or other charge so contested and against any and
all loss, damage or penalty whatsoever in anywise arising from the failure of
Tenant to pay the same. If Tenant, in violation of any provision of this lease,
shall fail to pay or discharge any such tax, assessment or other charge,
Landlord may (but shall not be obliged to) pay or discharge the same, and the
amount paid by Landlord, with all expenses, interest and penalties connected
therewith, shall be repaid by Tenant on demand. For all purposes under this
lease and in any suit of any kind between the parties hereto, any receipt
showing the payment of any such tax, assessment or other charge signed by any
public or other official authorized to give similar receipts shall be
presumptive evidence against Tenant that the amount of such payment was due and
payable and that such tax, assessment or other charge was a valid and existing
lien on the leased premises at the time of such payment.
Sec. 208 It is intended that the rent provided for in this lease shall be an
absolutely net return to Landlord for the term of this lease and any extension
term, free of any expenses or charges with respect to the premises, including
taxes and assessments now imposed upon or related to the premises commonly known
as real estate taxes, and any taxes and assessments whether by way of an income
tax or otherwise which may be levied, assessed or imposed by the state in which
the premises are located or by any political or taxing subdivision thereof upon
the income arising from the rents provided herein in lieu of or as a substitute
for taxes and assessments imposed upon or related to the premises and commonly
known as real estate taxes, and that Tenant, and not Landlord, shall be required
to, and shall pay such taxes and assessments.
-8-
<PAGE>
Sec. 209 In the event that Landlord mortgages, or otherwise encumbers its land,
buildings, structures and improvements as included in the premises described in
Exhibit "A" hereof, Landlord shall procure an agreement from such mortgagee, or
the holder of such an encumbrance, by the terms of which such mortgagee or
holder will agree to give written notice to Tenant of default under such
mortgage or encumbrance in sufficient time to permit Tenant to cure said default
in order to avoid any foreclosure or other sale under and by virtue of such
mortgage or encumbrance and an opportunity to Tenant to bid for said property at
such sale, provided, however, that so long as the mortgagor or encumbrancor is
not in default under any such mortgage or encumbrance, the rights of Tenant
under this lease shall in nowise be abridged, limited or voided in any respect,
and so long as Tenant is not in default under any of the terms and conditions
of this lease and has not prepaid any rent, Tenant's possession shall not be
disturbed.
Tenant shall have the right to use the rent provided for under this
lease to cure any defaults under such mortgage or encumbrance, payment to be
made by Tenant in such an event to the holder or holders of record of such
mortgage or encumbrance, such right, however, to be limited only to a first
mortgage or an encumbrance which is a first lien on Landlord's land, buildings,
structures and improvements.
-9-
<PAGE>
ARTICLE 3 - INSURANCE
Sec. 301 Tenant, at its own cost and expense, will procure and maintain fire
insurance with extended coverage in companies satisfactory to Landlord and in
amounts which shall be not less than the replacement value of Landlord's
building(s) and the fixtures, machinery and equipment belonging to Landlord as
set forth in Section 102 to cover Landlord's interests. The replacement value of
the items to be covered by insurance shall be determined at each anniversary
date of this lease or any extension period thereof.
Tenant, at its own cost and expense, will procure and maintain war
damage insurance as may be available through the United States Government or any
agency thereof to cover Landlord's interests if Landlord so elects. If Tenant
shall fail to procure such insurance, Landlord may do so and charge the same to
Tenant as additional rent and the same may be demanded and collected as such
from Tenant.
Such policies shall name Landlord as its interest may appear, and
shall provide for at least five (5) days' notice to Landlord before
cancellation.
Such policies or certificates thereof shall be delivered to Landlord
by Tenant.
Sec. 302 Tenant, at its own cost and expense, will provide and keep in force
insurance on boilers and pressure vessels covering Landlord's building(s),
structures, improvements and fixtures on the premises in an amount not less than
Two Hundred Thousand Dollars ($200,000.-) and in companies satisfactory to
Landlord. Such policies shall name the Landlord as the insured or as additional
insured, and shall provide for at least five (5) days' notice to Landlord before
cancellation. Such policies or certificates thereof shall be delivered to
Landlord.
-10-
<PAGE>
Sec. 303 Tenant, at its expense, shall provide and keep in force for the benefit
of Landlord comprehensive general liability insurance in which Landlord shall be
named as an additional assured with minimum limits of liability in respect of
bodily injury of $250,000 for each person and $1,000,000 for each occurrence and
in respect of property damage of $100,000 for each occurrence. Such policies
shall cover contractual agreement, the entire premises, including any elevators
thereon, railway sidings, and any sidewalks, streets and ways adjoining the
premises; shall be issued by insurance companies and in form satisfactory to
Landlord; shall provide for at least five (5) days' notice to Landlord before
cancellation. Such policies or certificates thereof shall be delivered to
Landlord.
Sec. 304 If Tenant carries a blanket liability policy or policies protecting
against liability occasioned by accident or disaster at various locations,
delivery by Tenant to Landlord of a certificate or certificates issued by the
insurance company or companies writing such policy or policies, stating that
Landlord is protected thereunder to the extent specified in Section 303, and
that (to the extent of the coverage of Landlord thereunder) such policy or
policies shall not be amended, modified or cancelled without Landlord's consent,
shall be deemed a compliance by Tenant with the foregoing requirement with
respect to carrying of liability insurance.
All premiums and charges for all of the aforesaid insurance recited
in this lease shall be paid by Tenant, and if Tenant shall fail to make any such
payment when due, Landlord may make such payment and the amount thereof shall be
demandable and collected as additional rent hereunder.
Sec. 305 In case of loss or damage in whole or in part to any building or
structure at any time on the leased premises by fire
-11-
<PAGE>
or other casualty, Tenant will restore, rebuild or replace any such building or
structures in such manner as shall make the same, or the substitute therefor, as
nearly as practicable of the same character and condition as before such loss or
damage, with any alterations or changes approved in writing by the Landlord, and
according to plans and specifications which Tenant shall submit to Landlord for
approval and which may be approved by Landlord (such approval not to be withheld
unreasonably), and in conformity with law and all ordinances, regulations and
requirements of all federal, state and municipal departments or authorities
having jurisdiction thereof.
In such case this lease shall not terminate and Tenant's liability
for the rent and all other payments and covenants herein provided for shall
continue without abatement. Also, a sum equal to the insurance money received by
Landlord and/or Tenant shall be deposited by it or them as such insurance moneys
are paid in such bank or trust company as Landlord and Tenant may select, to be
held by them in an escrow account and, subject to the limitations herein
contained, shall be applied to the cost of such rebuilding, restoration or
replacement as such work shall proceed. All such funds shall be withdrawn on
joint signature of Landlord and Tenant. Such application shall be made only
pursuant to certificates of Tenant reasonably satisfactory to Landlord. Each
such certificate shall certify the cost of the work done at the date thereof and
not included in any previous certificate. If the total amount of insurance
moneys so received is insufficient to pay the entire cost of restoration,
rebuilding or replacement, Tenant shall pay the deficit. If Landlord
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fails to make the aforesaid deposit, Tenant shall have the right to make any
payment which would otherwise be payable out of the funds so to be deposited and
to deduct all amounts so paid, with interest at the rate of six percentum (6%)
per annum, from the rental next becoming due under the provisions hereof, until
the full amount so paid shall have been deducted. This remedy, however, shall
not prevent Tenant from recovering from Landlord, by action or otherwise, the
full amount of such payments to the extent that deductions have not actually
been made.
In case the insurance moneys so received exceed the amount spent in
such restoration, rebuilding, or replacement, such excess shall be paid over to
Tenant.
In case of termination of this lease after a default by Tenant, all
such funds shall be applied by Landlord, but without the necessity of Tenant's
consent, in the following order:
(1) such amount as is necessary to
repair the property;
(2) such amount as is necessary to
cure Tenant's default; and
(3) toward Tenant's future liability
to Landlord.
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ARTICLE 4 - TITLE, CONDITION AND USE OF
PREMISES, INDEMNITY, ASSIGNMENT
Sec. 401 During the term of this lease Tenant shall promptly observe and, at
Tenant's own expense, comply with and execute all present and future laws,
rules, requirements, orders, directions, ordinances and regulations of the
State, Township or Municipality in which the leased premises are situated, and
of the United States of America, and of any other governmental or
quasi-governmental body, authority or agency, and of all municipal departments,
bureaus, boards or officials of said Town of Bremen and of the local or regional
Board of Fire Underwriters, and the local or regional Fire Insurance Exchange
and Casualty Insurance Exchange, or any other boards or organizations exercising
similar functions, concerning said premises, or the sidewalks or streets in
front thereof, or the vaults, passageways, franchises or privileges appurtenant
thereto or connected with the enjoyment thereof, and shall, at Tenant's own
expense, make any and all improvements thereon or alterations thereto,
structural or otherwise, that may be required after occupancy by Tenant or at
any time thereafter by any such future law, rule, requirement, order, direction,
ordinance or regulation, except as stated in Section 101 with respect to defects
which shall be the responsibility of the Landlord. Tenant may, however, defer
complying with and executing any such rule, requirement, order, direction,
ordinance or regulation, so long as the validity thereof shall be contested by
Tenant in good faith and by appropriate legal proceedings, provided that no
proceedings for the enforcement of any penalty be commenced against Landlord,
and further provided that Tenant, if requested by Landlord, shall have furnished
to Landlord security reasonably satisfactory to Landlord, in an amount
reasonably satisfactory to Landlord, securing Landlord against all expense for
complying with or executing such rule, requirement,
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order, direction, ordinance or regulation so contested, and against any and all
loss, damage or penalty whatsoever in anywise arising from failure to comply
with and execute the same. If Tenant, in violation of the foregoing provisions,
shall fail to comply with and execute any such law, rule, requirement, order,
direction, ordinance, or regulation, Landlord may (but shall not be obliged to)
comply with and execute the same, and the amount paid by Landlord in order to do
so, with all expenses, interest and penalties connected therewith, shall be
repaid by Tenant on demand. For all purposes under this lease and in any suit of
any kind between the parties hereto, any receipt showing any payment for any
work so done or material so furnished, shall be presumptive evidence against
Tenant that the amount of such payment was necessary and reasonable.
Except as herein otherwise provided, Landlord shall not be
responsible for any defect, latent or otherwise, or for any change of conditions
in the premises or the buildings or improvements thereon, or for any damage
thereto, or to any person or persons or to goods or other things contained
therein, by reason of any manner of thing whatsoever subsequent to Tenant's
occupancy thereof, Tenant hereby assuming all the risk, responsibility and
liability with reference to the condition, tenantability, management, operation
and control of the leased premises subsequent to Tenant's occupancy.
Tenant shall indemnify and save Landlord harmless against and from
any and all claims by or in behalf of any person, persons, corporation,
corporations or governmental authority arising from the conduct or management of
or front any work or thing whatsoever done in or about the leased premises or
any building or structure thereon or the equipment thereof from the
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date of such occupancy and during the remainder of the term of this lease or any
extension thereof or arising after such occupancy and during the remainder of
such term or any extension thereof from any condition of any street or sidewalk
adjoining said premises or any vaults, passageways or spaces therein or
appurtenant thereto, or arising from any act or negligence of Tenant or any of
the agents, contractors or employees of Tenant or arising from any accident,
injury or damage whatsoever, however caused, to any person or persons or to the
property of person, persons, corporation or corporations, occurring subsequent
to Tenant's occupancy and during the remainder of such term or any extension
thereof, in or about the leased premises, or upon or under the sidewalks or
streets in front thereof, and from and against all costs, reasonable counsel
fees, expenses and liabilities in or about any such claim or any action or
proceeding brought thereon, except such claims, expenses and liabilities arising
out of defects for which Landlord is responsible under the provisions of Section
101. In case of any action or proceeding brought against Landlord by reason of
any such claim, Landlord shall give written notice thereof to Tenant, and for
those things for which Tenant shall or may be liable, Tenant shall resist or
defend such action or proceeding by counsel reasonably satisfactory to Landlord
or to any insurance company which shall have written insurance against any such
liability in policies held and protecting Landlord. Nothing in this Section 401
contained, however, shall be deemed to be an indemnification against, nor to
relieve Landlord for responsibility for any accident, injury or damage caused by
the negligence of Landlord, its employees or agents.
Sec. 402 Tenant shall have the peaceful and quiet use of the premises for any
lawful purpose without hindrance on the part of Landlord, and Landlord shall
warrant and defend Tenant in such
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useful and quiet use against the lawful claims of all persons claiming by,
through or under Landlord.
Sec. 403 If the use of the premises for any purpose should be prohibited or
prevented by any public authority for any reason other than condemnation, this
lease shall not be thereby terminated, nor shall Tenant be entitled by reason
thereof to surrender the premises, or to abatement or reduction in rent, nor
shall the respective obligations of Landlord and Tenant be affected.
Sec. 404 Neither this lease nor the term hereby demised nor any part thereof nor
any right hereby vested in Tenant shall at any time be assigned or transferred
in any manner whatsoever unless Tenant shall deliver or cause to be delivered to
Landlord an agreement in writing in and by which the assignee or transferee
shall be obligated fully to perform all the terms, covenants, conditions and
provisions of this lease. No assignment or transfer shall be valid for any
purpose whatsoever until such an agreement has been delivered to Landlord.
Except in the case of an assignment of Tenant's rights hereunder to, and an
assumption of Tenant's obligations hereunder by an assignee acceptable to and
approved in writing by Landlord, no assignment or transfer shall in any manner
whatsoever operate to relieve or release Tenant or any other person, firm or
corporation from any obligation hereunder; but during any extension period after
the expiration of the original term of this lease, Landlord will not
unreasonably withhold its approval of any such assignee assuming Tenant's
obligations, and upon such approval and assumption Tenant named herein shall be
relieved from all further obligations under this lease for such extension
period.
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ARTICLE 5 - BANKRUPTCY, DEFAULT, ABANDONMENT
Sec. 501 If at any time during the tern of this lease or any extension
period, Tenant, finally and without further possibility of appeal or review,
(1) is adjudicated a bankrupt or insolvent, or
(2) has a receiver appointed for all or substantially all of its
business or assets on the ground of Tenant's insolvency, and
such receiver is not discharged within one hundred eighty
(180) days, or
(3) has a trustee appointed for it after a petition has been filed
for Tenant's reorganization under the Bankruptcy Act of the
United States, known as the Chandler Act, or any future law of
the United States having the same general purpose, and such
trustee is not discharged within one hundred eighty (180)
days, or
(4) shall make a voluntary assignment for the benefit of
creditors,
then, and in any such event, Landlord shall have the right, at its election,
then or at any time thereafter (provided that the condition shall continue), to
give Tenant notice of Landlord's intention to terminate the lease and all of
Tenant's rights hereunder, on a date specified in such notice, which date shall
be not less than ten (10) days after the date of the mailing or giving of such
notice, and on the date specified in such notice the term of this lease, and all
rights granted to Tenant hereunder, shall come to an end as fully as if such
date were the last day of the whole term hereinabove specified. In any such
event, the rights and obligations of the parties shall be governed by Section
503 of the Agreement of Lease.
Tenant shall not commence or make or procure to be commenced or made
any action, proceeding or application for the
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purpose of having Tenant declared a bankrupt or insolvent, or of procuring the
appointment of a receiver or trustee of the property of Tenant, which shall
include the term hereby granted, or the extension period should Tenant have
elected to extend its tenancy, or any of the rights hereby vested in Tenant. In
case any receiver shall at any time be appointed of any of the property of
Tenant, including the term hereby granted or such extension period, or any of
the rights hereby vested in Tenant, Tenant shall use reasonable diligence to
procure the discharge of such receivership so far as it affects such term,
extension period or rights.
Sec. 502 Whenever under the terms of this lease Tenant shall be obliged to make
any payment whatsoever, and if the same shall not be paid within thirty (30)
days after .it is due and payable, Landlord may (but shall not be obliged to)
make such payment, and all amounts so expended by Landlord or expended by
Landlord pursuant to Section 206, and all other amounts in addition to the
rental which Tenant shall be required to pay to Landlord, either by reason of
default of Tenant or otherwise, shall become and be considered as additional
rental reserved hereunder, and shall be payable, except insofar as herein
specifically provided to be paid earlier, with the next accruing installment of
the rent herein reserved, and shall be collectible as rental; and in the event
of the non-payment thereof, Landlord shall have any and all remedies that would
be available to Landlord in the event of the non-payment of the rent.
Sec. 503 In the event of the desertion or abandonment of the premises, or in the
event that default be made by Tenant for thirty (30) days after notice and
demand in any payment due to Landlord, or in the event that breach or default be
made by Tenant for thirty (30) days after notice and demand in any of the
covenants, agreement or conditions herein contained, Landlord shall
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have the right forthwith to re-enter the leased premises, either by force or
otherwise, and dispossess and remove therefrom Tenant and other occupants
thereof and all their effects not previously removed by them and to hold said
premises as if this lease had not been made; and Tenant hereby expressly waives
the service of notice of intention to re-enter or of instituting legal
proceedings to that end.
In case of any breach or default of Tenant followed by re-entry by
Landlord, or in case Tenant shall be dispossessed for any cause by or at the
instance of Landlord, or in the event that Landlord shall obtain possession of
the premises in any manner after any breach or default by Tenant, the rental
shall be paid pro-rata up to the time of such re-entry, dispossession or
cessation of the term; and thereafter Landlord shall have the right to sue for
and recover all rents and other sums accrued up to the time of such re-entry,
dispossession or cessation of the term, including damages arising out of any
breach on the part of Tenant, and Landlord may relet the premises or any part or
parts thereof either in the name of Landlord or otherwise for a term or terms
which may, at Landlord's option, exceed the period which would otherwise have
constituted the balance of the term of this lease and of the extension period.
Landlord will make reasonable and diligent efforts to rent the premises. In such
event, Tenant or the successors of Tenant shall also pay to Landlord any and all
deficiency there may be between the rent and all other sums or payments hereby
reserved or covenanted to be paid by Tenant and the net amount of rents and
other sum or sums collected on account of leases of the premises (after
deducting from the gross receipts the expenses of every kind of Landlord in
connection with letting said premises, together with all counsel fees and also
all other expenses, costs and payments which, in accordance with the terms of
this lease, would have been borne by Tenant), for each month of
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<PAGE>
the period which would have constituted the balance of the term of this lease,
or the balance of the term of any extension period. Such amounts to be paid by
Tenant, in whichever case they may become payable, shall be paid in monthly
installments by Tenant as determined by statements rendered by Landlord to
Tenant, and any suit brought to collect the amount of the deficiency so
determined for any period shall not prejudice in any way the rights of Landlord
to collect the deficiency for any subsequent period by a similar proceeding.
Notwithstanding the termination of this lease, the dispossession of Tenant or
the re-entry by Landlord, the liability of Tenant under the provisions of this
lease shall continue. Landlord shall also have the right without resuming
possession of the premises or terminating this lease, to sue for and recover all
rents and other sums, including damages, at any time and from time to time
accruing hereunder.
No right of redemption shall be exercised under any present or
future law in case Tenant shall be dispossessed for any cause, or if Landlord
shall in any other manner obtain possession of the premises in consequence of
any breach or default of Tenant, any and all right of redemption being hereby
expressly waived by Tenant.
Any installment of rent or other amounts due to be paid as
additional rental overdue for a period more than thirty (30) days after notice
and demand shall bear interest at the rate of six per centum (6%) per annum
until paid.
Sec. 504 In addition to any and all other remedies the Landlord may restrain any
threatened breach of any covenant, condition or agreement herein contained, but
the mention herein of any particular remedy or right shall not preclude Landlord
from any other remedy or right it may have either in law or equity, or by virtue
of some other provision of this lease; nor shall consent to one act, which would
otherwise be a violation, or waiver of, or redress for one
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violation, either of covenant or condition, prevent a subsequent act which would
originally have constituted a violation from having all the force and effect of
an original violation. Receipt by Landlord of rent or other payment from Tenant
or from anyone other than Tenant shall not be deemed to operate as a waiver of
any rights of Landlord to enforce the payment by Tenant of any rent or other
payment previously due or which may thereafter become due or of any rights of
Landlord to terminate this lease or to exercise any remedy or right which might
otherwise be available to Landlord.
Sec. 505 Subject to the provisions of Section 602 hereof, all alterations,
renewals, replacements or improvements of and additions to any buildings,
structure or equipment on or appurtenant to the premises made or provided by
Tenant and all buildings erected by Tenant shall immediately be and become the
property of Landlord, free from any right of Tenant therein, except as lessee
hereunder, and Tenant shall have no right to compensation for any thereof.
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ARTICLE 6 - ADDITIONAL CONSTRUCTION
Sec. 601 In the event Tenant desires the construction of a permanent addition to
the building now located on the site, or desires an additional permanent
building erected upon the site, it is the present intention of the parties
hereto that Landlord and Tenant will endeavor to reach an agreement as to the
construction of same and the terms of a lease therefor including the rental to
be paid by Tenant for such increased facilities.
If Landlord and Tenant cannot agree as to the construction by
Landlord of a permanent addition to the building or of an additional permanent
building on the site, and the lease terms with respect thereto, and if said
disagreement continues for a period of one hundred and twenty (120) days after
the making of any such request by Tenant to Landlord, Tenant may at any Lime
thereafter, upon written notice to Landlord, elect in writing to purchase from
Landlord within sixty (60) days after such notice sufficient of Landlord's land
free and clear of the lien of any mortgage or encumbrance but with appropriate
easements in favor of Tenant to accommodate Tenant's proposed construction and
at the then fair market price for such land. If Landlord and Tenant cannot agree
on a fair market price for such land, then the determination of the amount which
is a fair market price shall be determined by arbitration, the arbitrators and
the proceedings of arbitration to be selected and conducted as set forth in
Section 701. From and after any such land purchase by Tenant from Landlord, the
rent payable by Tenant to Landlord shall be modified to exclude rental payments
for the land on the basis that for each acre purchased the rent payable by
Tenant to Landlord shall be reduced in the monthly amount of Fifteen and no/l00
Dollars ($15.00) during the remainder of the initial term of the lease, and
during any extension term.
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Upon the termination of this lease, either at the end of the
original term or at the end of the extension period, as the case may be, Tenant
shall, at its own cost and expense, cause any necessary party wall or walls to
be constructed to separate Landlord's buildings from any of Tenant's buildings,
and any other buildings belonging to any other person as may be required, and
Tenant will also perform at its own cost and expense each and every act
including such removal of Tenant's buildings as may be required by any
governmental body whether by way of zoning requirements, building requirements,
health and sanitary requirements, and/or any other requirements so that
thereafter Landlord nay have the full and complete use of its premises and
buildings undisturbed by any act of Tenant.
Nothing herein shall preclude Tenant from exercising the privileges
granted Tenant in Section 602.
Sec. 602. In the event Tenant desires to construct any additional facility on
any unimproved portion of the demised premises or any permanent addition to any
building constructed thereon, or to make any structural alteration to any such
buildings or additions, Tenant may do so at Tenant's cost and expense, provided
(1) the prior written consent of Landlord (which shall not be
unreasonably withheld) is obtained if such additions and new
construction will cost more than Twenty-Five Thousand Dollars
($25,000.00)
(2) such additions or new construction will be of a type which
would not detract from the improvements then erected and would
not diminish the value of the leased premises;
(3) notice of any proposed construction work costing more than Ten
Thousand Dollars ($10,000.) is given to Landlord; and
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(4) a copy of the plans and specifications therefor shall be
furnished to Landlord upon its request.
Tenant shall make such structural alterations or additions as may be
required by governmental authority having jurisdiction to require the same.
In the event Tenant constructs any additional facilities or
permanent additions to any building on the demised premises, Tenant may make use
of the foundations and structural parts of the building(s) owned by Landlord, in
order to serve the adjoining facilities or improvements, provided, however, such
use is made without structural damage to any building erected on the premises.
In the event Tenant, at its own cost and expense, constructs any
such facilities or additions to any building on the demised premises, Landlord
shall not have any title or property interest in the same prior to the
termination of the lease, and shall receive no additional rent therefor. Upon
the termination of the lease and without further act of any kind by Tenant or
Landlord, the complete title and ownership in such additional facilities or
permanent additions, consistently with Section 102, shall vest in Landlord and
become its property.
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ARTICLE 7 - CONDEMNATION
Sec. 701 In the event that the whole of the leased premises (all of the land and
the buildings and structures on the land) is taken in condemnation proceedings
or by any right of eminent domain, this lease and the terms as well as any
extension period hereby granted shall cease, terminate and expire upon the date
of the vesting of title pursuant to such proceedings or the taking of possession
of the premises in connection with the exercise of any right of eminent domain,
whichever shall be earlier. The award for such taking shall be paid to Landlord.
Any unearned rent paid in advance by Tenant shall be refunded to
Tenant, provided that all of the obligations of Tenant hereunder shall have been
performed to such date.
In the event that a part but less than whole of leased premises is
so taken during the term hereof or any extension period thereof, this lease
shall not cease or expire, but it and all of the terms, provisions and
obligations of Tenant hereunder shall continue in full force and effect without
diminution or abatement of rent except as hereinafter expressly set forth. Any
and all awards which shall or may be made for such taking, shall be paid and
applied, after payment of reasonable and necessary costs to secure any such
award or awards, for the following purposes and in the following order:
(1) To return the buildings and structures to a condition usable
for Tenant's purposes.
(2) Any excess to provide additional building space, which may be
larger or smaller than the building taken, if Tenant so
elects.
(3) To the extent that the award funds are not applied and
expended for items set forth in Subsections (1) and (2) above,
the excess shall be paid to Landlord and applied by Landlord
toward the reduc-
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tion of the total remaining rent called for to be paid by
Tenant to Landlord under Section 202 throughout the remaining
initial term if such taking should then occur, or under
Section 203 through the remaining years of the fifteen (15)
year extension period if such taking shall then occur. In such
cases the future rents payable by Tenant to Landlord shall be
reduced:
(a) with respect to the remaining years of the initial term
by a monthly amount which when discounted at six per
centum (6%) will equal such excess, in which event the
rents for the renewal term shall not be affected;
(b) with respect to the remaining years of the fifteen (15)
year extension period by a monthly amount which when
discounted at six per centum (6%) will equal such
excess.
(4) Any additional excess after the application of award funds
under Subsections (1), (2) and (3) shall be retained by
Landlord.
If all or any portion of the premises shall be taken in condemnation
proceedings or by right of eminent domain for governmental occupancy for a
limited period, this lease shall not terminate, cease or expire, and Tenant
shall continue to perform and observe all of its obligations hereunder as though
such taking had not occurred, except only to the extent that Tenant may be
prevented from so doing pursuant to the terms of the order of the authority
which exercised such rights.
In the event of such taking as referred to in the preceding
paragraph, Tenant shall be entitled to receive the entire
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amount of any award for such taking (whether paid by way of damages, rent or
otherwise) if the period of government taking is not to extend beyond the
original term hereof. If the period of government taking shall extend beyond the
original term hereof, and if and to the extent that Tenant elects to renew this
lease, then for the period of the extension, Tenant shall be entitled to receive
the entire amount of any award for such taking as shall cover the extension
period elected by Tenant. Any portion of any award for such taking to which
Tenant is not entitled, net of necessary and proper expenses to secure the same,
shall be paid, used, applied and apportioned in an equitable manner, applying
the principles set forth herein with respect to total or partial taking of the
leased premises. If the parties shall fail to agree upon such application and
apportionment, the matters in dispute shall be submitted to a panel of three (3)
arbitrators, one to be chosen promptly by each party hereto, and the two so
chosen to choose a third arbitrator. If within ten (10) days after the two are
so chosen they are unable to agree upon a third arbitrator, he shall be chosen
by the American Arbitration Association. The arbitration proceedings shall be
conducted under the rules and procedures of said Association.
The award and decision on any matter in dispute shall be made by at
least a majority of the arbitrators; any such award and decision shall be final
and binding on Landlord and Tenant. The arbitrators shall not have the power to
alter, amend, modify, change or add to this lease, but shall be limited to the
application and interpretation thereof.
Each party shall pay the cost of the arbitrator selected by such
party and all of its own costs including those of its witnesses. All remaining
costs shall be borne equally by the parties.
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Tenant shall not be entitled to compensation or damage in any form
from Landlord by reason of being deprived of the premises or any part thereof as
a result of condemnation or the exercise of the right of eminent domain.
Any award for any other item shall belong to Tenant.
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ARTICLE 8 - MISCELLANEOUS
Sec. 801 Landlord shall have the right at any reasonable time during the last
six (6) months of the original term to enter upon the premises to exhibit the
same for purposes of sale and to place signs on conspicuous portions of the
building advertising the same for rental or for sale unless extension notice has
been given by Tenant, to Landlord. In the latter case, Landlord shall have,
during the last six (6) months of the extension period, the same rights and
privileges of entering the premises and exhibiting them as recited immediately
above.
Sec. 802 Landlord shall have the right to sell or transfer the premises subject
to this Agreement of Lease. In the case of such sale or transfer if a
purchaser's interest in the premises shall be less than Landlord's entire
interest, Landlord will designate or cause to be designated a single person or
corporation, bank, trust company or fiduciary organization to whom or to which
Tenant shall pay rent and be otherwise responsible for the performance of its
obligations under this Agreement of Lease without obligation on the part of the
Tenant to see to the application of such rent payments and without obligation on
the part of the Tenant to be otherwise responsible than to such designee for the
performance of its obligations hereunder.
Sec. 803 Except as may be herein otherwise provided, at the expiration of the
original term hereof, or any extension period, Tenant shall and will peaceably
quit and surrender possession of the premises with all the improvements and
additions thereto broom clean and in good condition, reasonable wear and tear
excepted, and without notice of any description, and all notice to quit and
vacate being hereby expressly waived, any law, custom or usage to the contrary
notwithstanding.
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Sec. 804 Tenant shall have no right, power or authority and nothing herein
contained shall be construed to give Tenant any right, power, or authority to do
any act or make any contract which may create or be the foundation for any lien
upon the estate reversions or interest of Landlord in the leased premises.
Sec. 805 Notice, demands, and communications hereunder to the Tenant or to the
Landlord shall be validly and sufficiently served, given or made if mailed by
registered mail, with postage prepaid, and if intended for Tenant addressed to
Tenant at P.O. Box 6731, Philadelphia, Pennsylvania, 19132, or if intended for
Landlord, c/o Fidelity-Philadelphia Trust Company, 135 South Brood Street,
Philadelphia, Pennsylvania, 19109.
Either party may designate, by notice in writing, a new address, to
which any such notice, demand or communication shall thereafter be so addressed
and mailed.
Sec. 806 Neither this lease nor any of the terms, covenants, provisions or
conditions herein contained shall be altered, modified, cancelled or discharged,
except by a written agreement signed by the parties hereto.
Sec. 807 If, after default in payment of rent, or violation or breach, or
default in the performance of any other covenant or provision of this lease, or
upon the expiration of the term hereof or any extension period, Tenant removes
or is dispossessed from, or abandons the leased premises and fails to remove any
trade fixtures, machinery or other property belonging to it prior to the
issuance of the final order or execution of the warrant of dispossess, then the
said trade fixtures, machinery, or other property shall be deemed abandoned by
Tenant and shall become the property of Landlord.
Sec. 808 Upon request of either of the parties hereto, they
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will enter into a short form lease for recording purposes.
Sec. 809 The descriptive headings in this lease are inserted for convenience
only and do not constitute a part hereof.
Sec. 810 If requested by Landlord, Tenant shall upon termination of this lease
execute and deliver to Landlord an appropriate release in proper form for
recording of all of Tenant's interests in the premises.
Sec. 811 This Agreement of Lease is entered into by Landlord with Tenant without
any restrictions on the part of the Landlord to do so and, except as herein
stated, without any responsibility or liability on the part of the Landlord to
third parties concerning the granting of this lease and the terms hereof.
Sec. 812 Subject as herein recited, the provisions hereof shall apply to, be
binding upon and enure to the benefit of the parties hereto, their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
of Lease in two counterparts, each of which may be considered an original part,
Landlord and Tenant by their respective duly authorized officers, their
respective corporate seals impressed hereon, duly attested, all as of the day
and year first above written.
BREM, INC.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------ ------------------------
Secretary President
SKF INDUSTRIES, INC.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------ ------------------------
Secretary President
- 32 -
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
: ss.
COUNTY OF PHILADELPHIA :
On this the 16th day of February 1965, before me, JOHN C. LINN, JR.,
the undersigned officer, personally appeared John G. Parsons, Jr., who
acknowledged himself to be the President of BREM, INC., a corporation, and that
he, as such President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ JOHN C. LINN JR.,
-------------------------------------
My commission expires: Notary Public
JOHN C. LINN JR., Notary Public
PHILA PHILA. COUNTY [ILLEGIBLE]
My Commission Expires [ILLEGIBLE]
COMMONWEALTH OF PENNSYLVANIA :
: ss.
COUNTY OF PHILADELPHIA :
On this the 4th day of February 1965, before me, Margaret E. Roth,
the undersigned officer, personally appeared Wm. J. Wiley, who acknowledged
himself to be the Vice President of SKF Industries, Inc., a corporation, and
that he, as such Vice President, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as Vice President,
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Margaret E. Roth
-------------------------------------
My commission expires: Notary Public
November [ILLEGIBLE], 1965
<PAGE>
EXHIBIT "A" TO LEASE DATED NOVEMBER 1, 1964
Between
BREM, INC.
and
SKF INDUSTRIES, INC.
ALL THAT CERTAIN lot or piece of ground with the building and improvements
thereon erected situate in the Town of Bremen, Indiana, consisting of
approximately ten and one quarter (10-1/4) acres of ground and described in
accordance with a survey thereof dated September 25, 1964 by Frank E. Kleinke,
Licensed Land Surveyor of the State of Indiana, as follows:
Beginning on the center line of U.S. Highway #6 (Sixty (60') feet wide)
Four Hundred Ten (410') Feet East of the West line of the Northeast Quarter (NE
1/4) of Section 34, Township 35 North, Range 3 East; thence due East on said
center line Three Hundred Ten (310) Feet to a point Six Hundred Thirty (630')
Feet West of the Intersection of the center line of Liberty St. and the center
line of said Highway #6; thence South O(degree)11'20" East (parallel with said
West Quarter section line One Thousand Two Hundred Seventy-three and One Tenth
(1,273.1') Feet to the North line of Grant St. extended; thence North 89(degree)
46'40" West Three Hundred Sixty (360') Feet; thence North 0(degree) ll'20" West
Eight Hundred Four and Five Tenths (804.5') Feet; thence due West Four and Nine
Tenths (4.9') Feet; thence North 0(degree) ll'20" West Two Hundred One and One
Tenths (201.1') Feet, and along the East line of a building extended; thence due
East Fifty-four and Nine Tenths (54.9') Feet; thence North 0(degree) ll'20" West
Two Hundred Sixty-eight and Nine Tenths (268.9') Feet to place of beginning;
containing Ten and Twenty-four Hundredths (10.24) Acres, more or less, all in
the Northeast Quarter (NE 1/4 of Section 34, Township 35 North, Range 3 East, in
the Town of Bremen, Indiana. Subject to the existing Highway right-of-way of
U.S. No. 6.
TOGETHER with all easements, improvements, tenaments, appurtenances,
hereditaments, ways of ingress and egress and water courses to, on under or over
such land and all rights and privileges belonging or in any way appertaining to
such premises, subject to any restrictions, easements now existing, and to any
zoning and governmental regulations now or hereafter in effect affecting said
land and the building or structure thereon and as well as any additional
buildings or structures which may be erected at any time during the term of the
lease of which this Exhibit "A" forms a part or any extension of said lease.
<PAGE>
LEASE MISC. RECORD 00 PAGE 17
70304
This Lease made, in duplicate, as of the 1st day of November, 1964,
between BREM, INC., an Indiana corporation (hereinafter called "Landlord") and
SKF INDUSTRIES, INC., a Delaware corporation, qualified to do business in
Indiana, (hereinafter called "Tenant"),
- WITNESSETH -
For and in consideration of the sum of One Dollar and other valuable
consideration paid and to be paid and performed by Tenant to Landlord, Landlord
leases unto Tenant, and Tenant rents from Landlord, upon the terms and
conditions and subject to the limitations more particularly set forth in a
certain Agreement of Lease between Landlord and Tenant, bearing even date
herewith, (hereinafter called the "Agreement") the premises described in Exhibit
"A" attached hereto and made a part hereof:
Together with all the easements, improvements, tenements, appurtenances,
hereditaments, fixtures, rights and privileges thereto belonging or in any way
appertaining and subject to any restrictions, easements, and to any zoning and
governmental regulations now or hereafter in effect, relating to or affecting
the leased premises.
TO HAVE AND TO HOLD the above described premises for a term commencing
November 1, 1964 and ending at noon July 16, 1987, with the privilege of a
further term of fifteen (15) years at the option of the Tenant, unless sooner
terminated as in the Agreement provided.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease through
their respective authorized officers, and their respective corporate seals
impressed.
BREM, INC.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------ ------------------------
Secretary President
SKF INDUSTRIES, INC.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------ ------------------------
Secretary Vice President
[SEAL of BREM, INC.]
[SEAL of SKF INDUSTRIES, INC.]
<PAGE>
Exhibit 10.39
ASSET PURCHASE AGREEMENT
By and Among
MILLER ACQUISITION CORP.,
MILLER BEARING COMPANY, INC.,
and
THE SHAREHOLDERS OF
MILLER BEARING COMPANY, INC.
Dated as of June 3, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") dated as of June 3,
1998 is by and among MILLER ACQUISITION CORP., a Delaware corporation ("Buyer"),
MILLER BEARING COMPANY, INC., a Delaware corporation ("Seller") and THE
SHAREHOLDERS OF MILLER BEARING COMPANY, INC. (collectively, the "Shareholders").
R E C I T A L S
WHEREAS, Seller is engaged in the design, development, manufacture,
packaging and warehousing of pins, rollers and screw machine products and the
sale of such items to customers throughout the United States and Europe (the
"Business"); and
WHEREAS, the Shareholders are the holders of all of the outstanding
capital stock of Seller; and
WHEREAS, Seller desires to sell and transfer to Buyer substantially all
of its assets in consideration for the delivery by Buyer to Seller of the
Purchase Price (as defined herein) and on the terms and conditions set forth
herein; and
WHEREAS, Buyer desires to purchase from Seller substantially all of its
assets and assume certain of its liabilities on the terms and conditions set
forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I.
DEFINITIONS
1.1. Index of Defined Terms. The following is an index of defined terms
utilized in this Agreement:
<TABLE>
<CAPTION>
Defined Term Section Page
- ------------ ------- ----
<S> <C> <C>
1997 Balance Sheet 3.5.(a) 17
Adjusted February 28 Balance Sheet 3.5.(c) ^ 18
==
Affiliate 1.2 3
Agreement Preface 1
Allocation Statement 2.10 16
Annual Financials 3.5.(a) 17
Applicable Law 1.2 3
Assumed Contracts 2.3 9
Assumed Liabilities 2.3 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Business Preface 1
Business Day 1.2 4
Business Secrets 10.2 40
Buyer Preface 1
Closing 2.6.(a) 13
Closing Date 2.6.(a) 13
Code 1.2 4
Effective Date 2.6.(b) 13
Employee 1.2 4
Environmental Claim 1.2 4
Environmental Condition 1.2 4
Environmental Laws 1.2 4
Equipment 2.1.(b) 7
ERISA 1.2 4
ERISA Affiliate 1.2 4
Excluded Assets 2.2 9
Excluded Liabilities 2.4 11
Excluded Product Warranty Claims 6.6 32
February 28 Balance Sheet 3.5.(a) 17
Financials 3.5.(a) 17
Fraud 1.2 4
GAAP 1.2 4
Governmental Authority 1.2 5
Indemnification Trigger Amount 8.1.(b)(i) ^ 34
==
Indemnified Party 8.3.(a) 35
Indemnifying Party 8.3.(a) 35
Indemnity Claim 8.3.(a) 35
Indemnity Limitation Exclusions 8.1.(b)(ii) 34
Indemnity Outside Date 8.5.(a) 38
Insurance Policies 3.23 25
Intellectual Property Rights 2.1.(i) 8
Interim Financials 3.5.(a) 17
Interim Period Excluded Liabilities 2.6.(b)(iii) 13
Interim Period 2.6.(b) 13
Interim Period Taxes 2.6.(b)(iv) ^ 14
==
Inventory 2.1.(c) 7
IRS 1.2 5
Knowledge 1.2 5
Liability 1.2 5
Lien 1.2 5
Losses 8.1.(a) 33
Material 1.2 5
Materiality Threshold 1.2 5
Party or Parties 1.2 5
Pension Plans 3.18.(a) 23
Permits 3.14.(a) 21
Permitted Liens 1.2 5
Person 1.2 6
Personal Property Leases 3.7 18
Plans 3.18.(a) 23
Proceedings 3.11 20
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Product 1.2 6
Purchase Price 2.7 14
Real Property 3.6.(a) 18
Receivables 2.1.(e) 8
Required Contractual Consent 3.14.(b) ^ 22
==
Required Consents 3.14.(b) ^ 22
==
Required Governmental Approval 3.14.(b) 21
Restricted Period 10.1 ^ 40
==
Restrictive Covenants 2.7 14
Scheduled Contracts 3.12 20
Scheduled Contract Date 3.12 20
Seller Preface 1
Seller Indemnity Cap 8.1.(c) 34
Seller Payments 2.4.(o) 12
Settlement Notice 8.3.(c)(ii) 37
Shareholders Preface 1
Surveys 5.2.(b) ^ 29
==
Tax 1.2 6
Tax Return 1.2 6
Third Party Claim 8.3.(b) ^ 36
==
Title Commitments 5.2.(a) 28
Title Company 5.2.(a) 28
Title Policies 5.2.(a) 28
Transaction Expenses 2.4.(c) 11
Transferred Assets 2.1 7
Transferred Employees 6.5.(a) 31
Transferred Receivables 3.24 25
Trigger Losses 8.1.(b)(i) 33
WARN 6.5.(c) ^ 32
==
Welfare Plans 3.18.(a) 23
</TABLE>
1.2. General Defined Terms. As used herein, the following terms shall
have the meaning indicated:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable for any reason whatsoever to such Person or any of its
Affiliates or Plan Affiliates or any of their respective properties, assets,
business operations, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's, consultant's or agent's
3
<PAGE>
activities on behalf of such Person or any of its Affiliates or ERISA
Affiliates).
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employee" means any Person employed by Seller in connection with the
Business.
"Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including, without limitation, potential liability for investigatory tests,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of (i) any Environmental
Condition, or (ii) any other circumstance forming the basis of any violation of
any Environmental Law.
"Environmental Condition" means a condition of the soil, surface
waters, groundwaters, stream sediments, air and similar environmental media both
on and off a property resulting from any activity, inactivity or operations
occurring on such property, that, by virtue of Environmental Laws, (i) requires
investigatory, corrective or remedial measures, and/or (ii) comprises a basis
for claims against, demands of and/or Liabilities of Seller or Buyer.
"Environmental Laws" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
guidelines, policies or requirements of any governmental authority regulating or
imposing standards of liability or of conduct respecting environmental concerns
as are now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any Person means any other Person that, together
with such Person as of the relevant measuring date under ERISA, was or is
required to be treated as a single employer under Section 414 of the Code.
"Fraud" means any false representation of a material fact made with
knowledge of its falsity and with intent that it be acted on with injury to the
other.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis by Seller.
4
<PAGE>
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"IRS" means the Internal Revenue Service.
"Knowledge", in the case of Seller, means the conscious awareness of
any one or more of the Shareholders. Knowledge, in the case of Buyer, means the
conscious awareness of any one or more of Michael Gostomski, Michael Hartnett,
Gregory Ceuch, Ronald Lemansky or Christopher Thomas.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable, convertible into money
or calculable or otherwise and whether or not the same is required to be accrued
on the financial statements of such Person and whether or not the same appears
on any Schedule to this Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
"Material", whether capitalized or not, when used to qualify a
representation, warranty, or covenant contained in this Agreement shall mean,
unless otherwise defined, as the case may be and to the extent that the context
so requires, either (i) that there is a reasonable probability under all the
circumstances and in view of the total mix of information available that a
reasonable Person, in the position relying thereon, would attach importance in
deciding whether to enter into and consummate this Agreement in accordance with
the specific terms contained herein; or (ii) that the magnitude of any
inaccuracy in, or noncompliance with, the representation, warranty or covenant
at issue is substantial enough to result in monetary liability or cost in excess
of $50,000 (the "Materiality Threshold") to the party to this Agreement for
whose benefit the representation, warranty or covenant is made.
"Party" or "Parties" refers to Buyer or Seller only.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested
5
<PAGE>
in good faith by appropriate proceedings; (ii) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other similar
Persons and other Liens imposed by Applicable Law incurred in the ordinary
course of business for sums not yet delinquent or being contested in good faith,
(iii) Liens relating to deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security or to secure the performance of leases, trade contracts or other
similar agreements; and (iv) other Liens set forth on Schedule 1.2 hereto.
Notwithstanding the foregoing, the following shall not be Permitted Liens: (a)
any Lien arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Plan sponsored by, maintained by or
contributed to by Seller or any of its ERISA Affiliates or arising in connection
with any excise tax or penalty tax with respect to such Benefit Plan and (b) any
Lien arising under clause (i) or (ii) above that is the subject of a contest if
the underlying indebtedness constitutes an Assumed Liability hereunder except
and to the extent that the Taxes or sums in question are reflected as a
Liability on the Adjusted February 28 Balance Sheet.
"Person" means an individual, corporation, partnership, association,
trust, estate, joint-stock company, limited liability company, joint venture,
trust or other entity or organization, including a Governmental Authority.
"Product" means any product manufactured, processed, distributed,
shipped or sold by or for the account of the Seller in connection with the
Business.
"Tax" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipts tax, employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
6
<PAGE>
ARTICLE II.
TRANSFER OF ASSETS
2.1. Transfer of Assets by Seller. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell or cause to be sold to Buyer at the Closing all the
assets, properties, rights, licenses, permits, contracts, causes of action and
claims, of every kind and description as the same shall exist on the Effective
Date (other than the Excluded Assets), wherever located, whether tangible or
intangible, real, personal or mixed, that are used, owned by, leased by or in
the possession of Seller in connection with the Business, whether or not
reflected on the books and records of Seller, including all assets shown on the
Adjusted February 28 Balance Sheet (the collective assets, properties, rights,
licenses, permits, contracts, causes of action and claims to be transferred to
Buyer by Seller pursuant hereto are referred to collectively herein as the
"Transferred Assets") and including without limitation all right, title and
interest of Seller in, to, and under the following, in any and all such cases to
the extent used, owned by, leased by or in the possession of Seller in
connection with the Business on the Effective Date:
(a) all real property and leases, capitalized or operating, of, and
other interests in, real property, in each case together with all buildings,
structures, fixtures, building equipment, easements and improvements erected
thereon and appurtenances and rights and interests thereto including, without
limitation, the Real Property;
(b) all machinery, equipment, furniture, office equipment, computer
equipment (including all hardware and software), communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other tangible
property (and interests in any of the foregoing) of Seller ("Equipment")
including, without limitation, the Equipment set forth on Schedule 2.1.(b)
hereto;
(c) all items of inventory, notwithstanding how classified in the
financial records of Seller, including all raw materials, purchased parts,
work-in-process, finished goods, supplies, spare parts and samples
(collectively, the "Inventory" );
(d) all contracts, agreements, options, leases, licenses, sales and
purchase orders, commitments and other instruments of any kind, whether written
or oral, to which Seller is a party on the Effective Date, including the
Scheduled Contracts;
7
<PAGE>
(e) all accounts receivable and notes receivable, together with any
unpaid interest or fees accrued thereon or other amounts due with respect
thereto, of Seller, and any security or collateral therefor, including
recoverable advances and deposits (collectively, the "Receivables");
(f) all prepaid charges and expenses of Seller, including any such
charges and expenses with respect to ad valorem taxes, leases and rentals and
utilities, but only to the extent Buyer shall obtain the benefit therefrom after
the Closing;
(g) all rights of Seller under any insurance policy (excluding life
insurance policies on the lives of any of the Shareholders);
(h) all of Seller's rights, claims, credits, causes of action or rights
of setoff against third parties relating to the Business or the Transferred
Assets, whether liquidated or unliquidated, fixed or contingent, including
claims pursuant to all warranties, representations and guarantees made by
suppliers, manufacturers, contractors and other third parties in connection with
products or services purchased by or furnished to Seller affecting any of the
Transferred Assets;
(i) all patents, trademarks, trade names (including the name "Miller
Bearing" and all variations and derivatives thereof), trade styles, logos and
service marks and all applications and registrations therefor and licenses
thereof and all technical, processing, manufacturing or marketing information,
including new developments, inventions, know-how, processes, ideas and trade
secrets and documentation thereof (including related papers, blueprints,
drawings, chemical compositions, formulae, diaries, notebooks, specifications,
designs, methods of manufacture and data processing software) and all claims and
rights related thereto (collectively, the "Intellectual Property Rights");
(j) all tools, dies, jigs, molds, patterns, machinery and equipment,
whether owned or leased, whether in the possession of the Seller or vendors;
(k) all vehicles and rights under vehicle leases (excluding the lease
of the 1997 Mercedes);
(l) all rights under agreements with employees and others concerning
confidentiality and assignment of inventions;
(m) all information systems, programs, software and documentation
thereof (including all electronic data processing systems, program
specifications, source codes, logs, input data and report layouts and formats,
record file layouts, diagrams,
8
<PAGE>
functional specifications and narrative descriptions, flow charts and other
related material);
(n) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller, whether or not actually utilized by
Seller;
(o) all books, records, files and papers of Seller, whether in hard
copy or computer format, including books of account, invoices, engineering
information, sales and promotional literature, manuals and data, sales and
purchase correspondence, lists of present and former suppliers, personnel and
employment records of present and former employees, and documentation developed
or used for accounting, marketing, engineering, manufacturing or any other
purpose any time prior to the Effective Date, in any and all such cases to the
extent related to the Business (provided that Buyer is not purchasing any books
and records that Seller is prohibited by contract from disclosing (which such
books and records, and the Persons to whom the Seller is so restricted, are
summarized on Schedule 3.21 hereto));
(p) all lists of present customers and lists of former customers;
(q) all goodwill;
(r) all construction contracts and other contracts for the maintenance,
repair or improvement of the Real Property;
(s) all product designations used with respect to the Products; and
(t) except as specifically provided in Section 2.2, all other assets
and properties of Seller that exist on the Effective Date, whether tangible or
intangible, real or personal.
2.2. Excluded Assets. Buyer expressly understands and agrees that the
assets and properties set forth on Schedule 2.2 (the "Excluded Assets") shall be
excluded from the Transferred Assets and shall be retained by Seller. The
Excluded Assets shall include the "Federal Tax Deposit" and "prepaid insurance",
if any, each as reflected on the February 28 Balance Sheet.
2.3. Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees, effective at the time
of Closing, to assume and in due course perform, pay and discharge the following
Liabilities (the "Assumed Liabilities"):
9
<PAGE>
(i) All of the Liabilities reflected on the Adjusted February
28 Balance Sheet; and
(ii) All Liabilities of Seller that arise following the
Effective Date (including in respect of the Interim Period) under or in
connection with contractual obligations created prior to the Effective
Date (the "Assumed Contracts"); provided that (A) the Assumed Contracts
shall include only (1) the Scheduled Contracts, (2) those contracts
that were entered into in the ordinary course of the Business but are
of such a de minimis nature that they are not Scheduled Contracts, and
(3) those contracts that were entered into in the ordinary course of
the Business following the Scheduled Contract Date; and (B) the
Liabilities assumed under this subsection (ii) shall not include (1)
monetary Liabilities relating to the period prior to the Effective Date
that were not included on the Adjusted February 28 Balance Sheet or (2)
Liabilities that arose from actions or omissions of the Seller prior to
the Effective Date (e.g. the following shall not constitute Assumed
Liabilities unless they were included as Liabilities on the Adjusted
February 28 Balance Sheet: (x) Liabilities arising by reason of a
default by Seller on or before the Effective Date under an Assumed
Contract, (y) Liabilities arising from a failure by Seller prior to the
Effective Date to take steps reasonably required in order to satisfy
obligations under the Assumed Contracts, and (z) Liabilities on account
of products or services produced or provided by Seller prior to the
Effective Date);
(iii) Notwithstanding anything contained herein to the
contrary, those Liabilities described on Schedule 2.3(iii) hereto (even
though such Liabilities were not included as such on the Adjusted
February 28 Balance Sheet) and any and all Liabilities incurred during
the Interim Period which arose in the normal course of Business (except
for any Liability incurred or arising during the Interim Period that is
of the nature set forth in subsections (a) through (o) of Section 2.4);
and
(iv) Those Liabilities related to indebtedness of ^ Seller for
borrowed money set forth on the Adjusted February 28 Balance Sheet.
2.4. Excluded Liabilities. Buyer does not hereby assume, and shall not
at any time hereafter (including on or after the Effective Date) become liable
for, any of the Liabilities of Seller or any of its Affiliates or any ERISA
Affiliate of any of
10
<PAGE>
the foregoing other than the Assumed Liabilities (the "Excluded Liabilities").
Without limiting the generality of the foregoing, the Excluded Liabilities shall
include any Liabilities of the Seller, howsoever arising and whether or not
known as the date hereof, that relate to the period prior to the Effective Date
that were not included as such on the Adjusted February 28 Balance Sheet or that
are not included as Assumed Liabilities within Section 2.3(ii) above. Further,
the Excluded Liabilities shall include, without limitation, the following
Liabilities:
(a) any Liability of any of Seller or any of its Affiliates or any
ERISA Affiliate of any of the foregoing whether currently in existence or
arising hereafter that is not attributable to, or that does not arise out of the
conduct of, the Business;
(b) any Liability whether presently in existence or arising hereafter
directly or indirectly relating to an Excluded Asset;
(c) any Liability whether currently in existence or arising hereafter
relating to fees, commissions or expenses owed to any broker, finder, investment
banker, accountant, attorney or other intermediary or advisor employed by Seller
or any of its Affiliates or their respective ERISA Affiliates in connection with
the transactions contemplated hereby or arising in connection herewith; or any
liability of Seller to employees of the Business in respect to any bonus or
other payment made in respect of, by reason of, or contingent on, the
transactions contemplated hereby; or any other fees and costs arising in
connection with the transaction (including, for example, transfer taxes) (all of
the Liabilities set forth in this subsection (c) are referred to as the
"Transaction Expenses");
(d) any Liability the existence of which constitutes, gives rise to, or
arises by reason of, a breach of any representation, warranty or covenant
hereunder;
(e) any contingent Liabilities of Seller related to any transactions by
Seller prior to the Effective Date except Liabilities that Buyer has expressly
agreed to assume pursuant to the terms of this Agreement and those Liabilities
listed on Schedule 2.4.(e);
(f) any Liability related to indebtedness of Seller for borrowed money
or capitalized leases, or the guarantee by Seller of the indebtedness of any
other Person, except as set forth on the Adjusted February 28 Balance Sheet or
on Schedule 2.4.(f) (including amounts owed to Valley American Bank);
11
<PAGE>
(g) any Liability of Seller arising under this Agreement;
(h) subject to Section 6.6 below, with respect to Products manufactured
on or prior to the Effective Date (and whether or not sold prior to the
Effective Date), any Liability arising out of, resulting from, or relating to
claims seeking return, replacement, and/or repair of such Products pursuant
either to (i) express product warranties extended by Seller prior to the Closing
Date or by Buyer after the Closing Date (provided that Buyer's warranties are no
more expansive than the warranties extended by Seller prior to the Closing Date)
or (ii) product warranties or obligations implied or provided by Applicable Law;
(i) with respect to Products manufactured on or prior to the Effective
Date (and whether or not sold prior to the Effective Date), any Liability
arising out of, resulting from, or relating to product liability claims;
(j) any Liability of Seller which serves as basis of any claim for
indemnification under Article VIII hereof;
(k) any Liability under contracts set forth on Schedule 2.4.(k);
(l) any Liabilities under contracts with, or indebtedness to,
Affiliates of Seller, except as set forth on Schedule 2.4.(l);
(m) any Liability under the Personal Property Leases and the Scheduled
Contracts which is not an Assumed Liability under Section 2.3(ii);
(n) any Liability of Seller relating to worker's compensation benefits,
whether arising or maturing prior to or after the Effective Date, but only for
incidents occurring prior to the Effective Date; and
(o) any Liability in respect of Seller Payments. For the purposes
hereof, the "Seller Payments" mean any direct or indirect payments made to or
for, or on behalf of, or Liabilities accrued on account of, any Shareholder,
regardless of how characterized, and regardless of the nature thereof, i.e.
whether as dividend, distribution, compensation, reimbursement or otherwise, to
the extent in excess of $96,000 in the aggregate: (i) in respect of the period
prior to the Effective Date to the extent not reflected as a Liability on the
Adjusted February 28 Balance Sheet, (ii) in respect of the Interim Period other
than pursuant to the Employment Agreement between Seller and Joe E. Miller, or
(iii) interest attributable to indebtedness of the Seller to the Shareholders.
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2.5. Intentionally Omitted.
2.6. Closing.
(a) The closing (the "Closing") of the transactions contemplated by
this Agreement shall take place at the offices of McDermott, Will & Emery, 227
West Monroe Street, Chicago, Illinois on the date hereof (the "Closing Date").
(b) The Seller and the Buyer agree that the Closing shall be effective
for all purposes as of the close of business on February 28, 1998 (the
"Effective Date"). Pursuant thereto, except as otherwise set forth herein, the
operations of the Business during the period between the Effective Date and the
Closing Date (the "Interim Period") shall be for the account of the Buyer.
Without limiting the generality of the foregoing:
(i) all assets acquired during the Interim Period of a nature
similar to the Transferred Assets shall be deemed owned by Buyer from
the outset,
(ii) all net cash created during the Interim Period (i.e.
after satisfying Liabilities described in (iii) below (but excluding
any cash paid in respect of the Purchase Price)) shall be for the
account of Buyer and shall be transferred to Buyer at the Closing,
(iii) Buyer shall be responsible for all Liabilities incurred
or arising consistent with past practices respecting the Business
during the Interim Period (including interest on account of all
indebtedness of Seller for borrowed money (including to the
Shareholders) set forth on the Adjusted February 28 Balance Sheet)
except for any Liability incurred or arising during the Interim Period
that is of the nature set forth in subsections (a) through (o) of
Section 2.4; pursuant thereto, Buyer shall have no responsibility for,
and Seller shall remain obligated to satisfy, or, as the case may be,
reimburse Buyer for all payments made during the Interim Period in
respect of, Liabilities incurred ^, arising or paid during the Interim
Period of the nature described in subsections (a) through (o) of
Section 2.4 (the "Interim Period Excluded Liabilities"), and
(iv) Buyer shall be responsible for the payment of any state
or federal income taxes paid or payable on account of the income of the
Business in respect of the Interim Period to the extent such income is
effectively for the account of Buyer pursuant to this Section 2.6
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(the "Interim Period Taxes") and Buyer shall hold Seller and the
Shareholders harmless from any such Interim Period Taxes and any
associated costs or expenses; provided that (A) Seller and the
Shareholders shall not file any tax returns respecting the income of
the Business, or otherwise calling for the payment of Interim Period
Taxes, without Buyer's prior written approval and (B) Buyer shall have
the right to control the defense of any claims for Interim Period Taxes
asserted by any taxing authorities against Seller or the Shareholders.
2.7. Purchase Price. The aggregate purchase price for the Transferred
Assets and the consideration for the agreements contained in Article X below
(the "Restrictive Covenants") shall be the sum of the following (the "Purchase
Price"), it being understood, however, that the Purchase Price is based, inter
alia, upon the accuracy of the representations and warranties set forth in
Article III:
(a) ^ $9,445,315 reduced by the amount, if any, of Excluded Liabilities
that were paid during the Interim Period (regardless of when incurred), and
(b) The assumption by the Buyer of the Assumed Liabilities.
2.8. Payment of Purchase Price. The entire Purchase Price shall be paid
in cash by wire transfer of immediately available funds; provided that $500,000
thereof shall be deposited in escrow pursuant to Section 8.1.(d) below.
2.9. Closing Deliveries.
(a) At the Closing, the Seller and the Shareholders shall deliver to
Buyer:
(i) consents to assignment to Buyer of the Employment
Agreements between Seller and Joe E. Miller, Paul J. Larsen and Gary W.
Miller;
(ii) an opinion of counsel from Arthur E. Stamas, Esq.,
counsel to Seller;
(iii) UCC-11 searches with respect to the Transferred Assets;
(iv) a payoff letter and releases from Valley American Bank
and Trust Company;
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(v) UCC-3 termination statements, mortgage terminations and
other Lien releases with respect to Liens filed against the Business or
the Transferred Assets (other than the Permitted Liens), including,
without limitation, UCC-3 termination statements from Norwest Bank
Indiana, N.A.;
(vi) patent, trademark and copyright assignments, in form and
substance satisfactory to Buyer, effecting the transfer of the patents,
trademarks and copyrights included in the Transferred Assets;
(vii) assignments (with lessor's consents thereto) of
leasehold interests in an leased real or personal property included in
the Transferred Assets;
(viii) vehicle titles and valid assignments thereof for each
vehicle included in the Transferred Assets;
(ix) general warranty deeds granting to Buyer good and
marketable title to the Real Property (subject only to covenants and
conditions contained in the Title Policies) together with, to the
extent the same are held by Seller, all rights, privileges, easements
and appurtenances thereto, and all affidavits, governmental forms and
other documents required in connection therewith to convey such title
to Buyer subject only to Permitted Liens;
(x) a bill of sale and such other documents of assignment,
transfer and conveyance as Buyer shall reasonably request to transfer
all right, title and interest of Seller in and to the Transferred
Assets, free and clear of all Liens (other than Permitted Liens) to
Buyer;
(xi) a consent to assignment to Buyer of the Consignment
Agreement by and between Seller and Paragon Electric, Inc.; and
(xii) the disclosure document required to be delivered to
Buyer in accordance with the Indiana Responsible Party Transfer Law.
(b) At the Closing, Buyer shall deliver to Seller and the Shareholders:
(i) the Purchase Price, in accordance with Section 2.8;
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(ii) an Indiana ^ General Sales Tax Exemption Certificate
(Form ST-105) with respect to the purchase of the Inventory; and
(iii) an opinion of counsel from McDermott, Will & Emery,
counsel to Buyer.
(c) At the Closing, Buyer shall satisfy the indebtedness described on
Schedule 2.9.(c) hereto.
2.10. Purchase Price Allocation. The consideration for the Business and
the Transferred Assets shall be allocated by Buyer and Seller pursuant to
Schedule 2.10 hereto. Such allocation shall be used for all purposes, including
preparation and filing of IRS Form 8594 with respect to the transactions
contemplated hereby (the "Allocation Statement"). Buyer and Seller shall report
the tax consequences of the transactions contemplated by this Agreement in a
manner consistent with the Allocation Statement and shall not take any position
inconsistent therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES AS TO SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to Buyer as follows. It is agreed by Buyer and Seller that throughout this
Agreement Seller's statements in any form are based only on the Knowledge of the
Shareholders except for Sections 3.1, 3.2, 3.4, 3.5, 3.8 and 3.11.
3.1. Existence and Power; Capital Stock.
(a) Seller is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware and has all corporate
power and all governmental licenses, authorizations, consents and approvals
required to carry on the Business as now conducted and to own and operate the
Business as now owned and operated. Seller is qualified to conduct business and
in good standing in each jurisdiction where the nature of its activities in
connection with the conduct of the Business requires it to be so qualified.
(b) The Shareholders are the legal and beneficial owners of all of the
issued and outstanding capital stock of Seller.
3.2. Authorization. The execution, delivery and performance by Seller
of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary
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corporate action on the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the legal, valid and binding
agreement of Seller, enforceable against Seller in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and subject to
general principles of equity.
3.3. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than any actions,
consents, approvals or filings which have been obtained.
3.4. Non-Contravention. The execution, delivery and performance by
Seller of this Agreement do not and will not (a) contravene or conflict with the
Certificate of Incorporation or Bylaws of Seller, true and correct copies of
which have been delivered to Buyer by Seller, (b) contravene or conflict with or
constitute a violation of any provision of any Applicable Law binding upon or
applicable to Seller, the Business or any of the Transferred Assets, (c)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which Seller is
entitled under, any material contract or any Permit or similar authorization
relating to the Business or included in any of the Transferred Assets or by
which any of the Transferred Assets may be bound, or (d) result in the creation
or imposition of any Lien on any Transferred Asset, other than Permitted Liens.
3.5. Financial Statements; Undisclosed Liabilities .
(a) Attached hereto as Schedule 3.5.(a) are true and complete copies of
(i) the audited balance sheet of Seller as at November 30, 1997 (the "1997
Balance Sheet") and as at November 30, 1995 and 1996 and the related audited
statements of income and statements of cash flows for the years ended November
30, 1995, 1996 and 1997 (collectively, the "Annual Financials") and (ii) the
unaudited balance sheet of Seller as at February 28, 1998 (the "February 28
Balance Sheet") and the related unaudited statement of income and of cash flows
for the three months ended February 28, 1998 (collectively, the "Interim
Financials" and, together with the Annual Financials, the "Financials").
(b) The Financials have been prepared based on the books and records of
Seller. Except for variations in treatment for tax reporting purposes, the books
and records upon which the Financials were based (i) constitute the sole such
books and records maintained by the Seller and account for all of the financial
transactions of the Seller (in all such cases irrespective of
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whether such books and records are maintained in accordance with GAAP) and (ii)
are the books and records to which the Buyer was provided access during its
diligence process.
(c) The balance sheet set forth on Schedule 3.5.(c) (the "Adjusted
February 28 Balance Sheet") reflects those adjustments to the February 28
Balance Sheet agreed upon by Seller and Buyer. There are no Excluded Assets
reflected on the Adjusted February 28 Balance Sheet.
(d) Attached hereto as Schedule 3.5.(d) are true and correct copies of
internally prepared monthly balance sheets and statements of income for the
period January 1, 1995 through February 28, 1998.
3.6. Real Property.
(a) Schedule 3.6.(a) sets forth a true and complete list of all real
property owned by Seller in connection with the Business (the "Real Property")
such list setting forth the location of each parcel of Real Property, the record
owner thereof, the acreage and a brief description of the nature of the
activities of Seller on such Real Property.
(b) Except as set forth in Schedule 3.6.(b), (i) there are no current
leases, subleases, options or other agreements, granting to any third person the
right to purchase or lease the Real Property and (ii) there are no written or
oral agreements to permit third persons to use or occupy the Real Property.
3.7. Leased Personal Property. Schedule 3.7 sets forth a true and
complete list of all personal property leases or licenses (i) to which Seller is
a party or by which Seller is bound, (ii) that are related to the Business and
(iii) that provide for annual payments by Seller in excess of Five Thousand
Dollars ($5,000) or that contain other affirmative material obligations that
cannot be terminated by Seller within 30 days (the "Personal Property Leases")
entered into in connection with the Business. With respect to the Personal
Property Leases, except as set forth on Schedule 3.7, there exist no defaults by
Seller, or, to the Knowledge of Seller, any default or threatened default by any
lessor or third party thereunder, that has affected or could reasonably be
expected to materially affect the rights and privileges thereunder of Seller.
Except as set forth on Schedule 3.7, all Personal Property Leases to which
Seller is a party or by which it is bound may be assigned, transferred and
conveyed to Buyer without default, penalty or modification thereof.
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3.8. Sufficiency of and Title to the Transferred Assets.
(a) Seller has the right to sell, assign, transfer and convey, and upon
consummation of the transactions contemplated by this Agreement, will have sold,
assigned, transferred and conveyed, to Buyer all of the Transferred Assets free
and clear of all Liens, except for Permitted Liens.
(b) Except as set forth on Schedule 3.8.(b), the Transferred Assets,
taken as a whole, are in such operating condition and repair so Seller is able
to meet all requirements of the Business as presently conducted.
(c) The Business is a going concern, and, with the transfer of the
Transferred Assets to Buyer pursuant to this Agreement, Buyer will have all
assets necessary to operate the Business as presently conducted.
(d) Except as set forth in Schedule 3.8.(d), Seller either owns the
entire right, title and interest in, to and under, or has the legally
enforceable right to use all Transferred Assets.
3.9. Affiliates. Except as set forth in Schedule 3.9, neither Seller
nor any principal stockholder of Seller or any officers or directors of Seller
(or any immediate family member of any such officer or director):
(a) now has or at any time subsequent to November 30, 1995, had, either
directly or indirectly, an equity or debt interest in any Person which furnishes
or sells or during such period furnished or sold services or products to Seller
(other than legal, accounting and consulting services) or purchases or during
such period purchased from Seller any goods or services, or otherwise does or
during such period did business with Seller of a material nature or amount;
provided, however, that neither Seller, nor any stockholder of Seller nor any of
Seller's officers and directors or other Affiliates shall be deemed to have such
an interest solely by virtue of the ownership of less than one percent (1%) of
the outstanding voting stock or debt securities of any publicly held company,
the stock or debt securities of which are traded on a national stock exchange or
quoted on the National Association of Securities Dealers Automated Quotation
System; or
(b) now is or at any time subsequent to November 30, 1995, was, a party
to any contract, commitment or agreement relating to the Business to which
Seller is or during such period was a party or under which Seller is or was
obligated or bound or to which any of their respective properties may be or may
have been subject, other than through Seller.
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3.10. Inventory. As of the Effective Date, (a) that portion of the
Inventory comprised of finished goods: (i) has been acquired or manufactured in
the ordinary course of business, in accordance with Seller's normal inventory
practices; (ii) is free of any material defect or deficiency in design, material
or workmanship; (iii) is in merchantable and undamaged condition and, where
applicable, meets customer specifications, and (b) that portion of the Inventory
comprised of raw materials and work in process, when manufactured into finished
goods, will satisfy all of the representations set forth in subsection (a)
above.
3.11. Litigation. Except as disclosed on Schedule 3.11, (i) there are
no actions, suits, hearings, arbitrations, proceedings (public or private) or
governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
and for which Seller has received service of process, or, to Seller's Knowledge,
threatened, against or affecting the Business or any of the Transferred Assets
or which seek to enjoin or rescind the transactions contemplated by this
Agreement or otherwise prevent Seller from complying with the terms and
provisions of this Agreement; and (ii) there are no existing orders, judgments
or decrees of any Governmental Authority affecting any of the Transferred Assets
or the Business.
3.12. Contracts.
Schedule 3.12 sets forth a complete list of all written contracts,
commitments and obligations of Seller as of May 20, 1998 (the "Scheduled
Contract Date") that are in connection with the Business and are of the nature
described in (a) through (f) below (collectively with the Leases and the
Employment Agreements, the "Scheduled Contracts"):
(a) each contract between Seller and (A) each present or former Seller
Employee, (B) any supplier of services or products to Seller whose dollar volume
of sales to Seller exceeded Ten Thousand Dollars ($10,000) in 1997, and (C) any
Person in which the aggregate payments made or to be made to Seller under such
contract exceeded Ten Thousand Dollars ($10,000) in 1997;
(b) each other agreement or arrangement of Seller that (A) requires the
payment or incurrence of Liabilities or the rendering of services by Seller,
subsequent to the date of this Agreement of more than Ten Thousand Dollars
($10,000) and (B) cannot be terminated by Seller within 30 days;
(c) all contracts relating to, and evidences of or guarantees of, or
providing security for, indebtedness for borrowed money or the deferred purchase
price of property (whether incurred, assumed, guaranteed or secured by any
asset);
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(d) all partnership, joint venture or other similar contracts,
arrangements or agreements;
(e) to the extent that any of the following provide for annual payments
by Seller in excess of Ten Thousand Dollars ($10,000) and cannot be terminated
by Seller within 30 days, all license, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements relating to or
providing for the marketing and/or sale of the products or services to which
Seller is a party or by which Seller is otherwise bound; and
(f) all other contracts, commitments and obligations that are not in
the ordinary course of the Business.
3.13. Customers.
No customer of Seller has communicated to Seller that it will cease
doing business with Buyer after, or as a result of, the consummation of any
transactions contemplated hereby except as listed on Schedule 3.13. Buyer
acknowledges that, subject to the foregoing, Seller is making no guarantees
respecting the quantity or quality of sales that Buyer will be able to make
after the Closing.
3.14. Permits; Required Consent.
(a) Schedule 3.14.(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities and all other Persons
necessary for the operation of the Transferred Assets or the Business in
substantially the same manner as currently operated or affecting or relating in
any way to the Business, but other than normal course approvals, permits and the
like that are general in nature and not specific to the Business, the
Transferred Assets or the Real Property (the "Permits").
(b) Schedule 3.14.(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any material Permit or otherwise, and (ii) each
contract with respect to which the consent of the other party or parties thereto
must be obtained by Seller by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to avoid
the invalidity of the transfer of such contract, the termination thereof, a
breach or default thereunder or any other change or modification to the terms
thereof (each, a "Required Contractual Consent" and collectively with the
Required Governmental Approvals, the "Required Consents").
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(c) Except as set forth in Schedule 3.14.(a) or Schedule 3.14.(b) each
Permit is valid and in full force and effect in all material respects and,
assuming the related Required Consents have been obtained prior to the Closing
Date, are or will be transferable by Seller (to the extent transferable under
Applicable Law), and assuming the related Required Consents have been obtained
prior to the Closing Date, none of the Permits will be terminated or become
terminable or impaired in any material respect as a result of the transactions
contemplated hereby.
3.15. Compliance with Applicable Laws.
(a) Except as set forth in Schedule 3.15, to the Knowledge of Seller,
the operation of the Business by Seller and the condition of the Transferred
Assets have not violated or infringed, and do not violate or infringe, any
Applicable Law, or any order, writ, injunction or decree of any Governmental
Authority. Seller has corrected all violations of Applicable Law that have been
identified as such by any Governmental Authority or by any Person employed by or
retained by Seller.
(b) Seller has not received notice of any violations or alleged
violations of any Applicable Law (i) that remains unresolved as of the date
hereof or (ii) that was received within the past twelve (12) months except to
the extent that any such violation has been corrected with no adverse
consequences to the Business that would be binding on the Buyer after the
Closing.
(c) Seller has complied in all respects with the provisions of the
Indiana Responsible Property Transfer Law, including the delivery to Buyer of
the disclosure document required thereby.
3.16. Employee Information.
(a) Schedule 3.16.(a) contains the names and addresses of all employees
of Seller, the job designations of each such employee, and the compensation paid
to each such employee and the basis thereof, presently and for calendar year
1997. If Buyer obtains the written consent of an employee, Seller will also
tender to the Buyer information concerning any disciplinary proceeding or action
taken with respect to any such employees, including without limitation any
information concerning positive drug tests; provided that Buyer shall be
responsible for satisfying any claims made against Seller based upon Buyer's
misuse of any such information.
(b) Schedule 3.16.(b) sets forth (i) all outstanding written employment
agreements or commitments to which Seller is a party or by which Seller is
bound, and (ii) all outstanding written consulting, retainer or service
agreements or arrangements for
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rendition of services to Seller or to which Seller is a party and by which
Seller is bound.
3.17. Labor Matters.
There are no labor or collective bargaining units applicable to Seller,
or with respect to which Seller is otherwise bound. Attached hereto as Schedule
3.17 is a description of any formal or informal organization efforts, whether or
not successful, related to Seller since January 1, 1996, together with a
description of Seller's response thereto.
3.18. Employee Benefit Plans.
(a) Schedule 3.18 is a copy (or description, as the case may be) of all
employee benefit plans, programs, practices, or arrangements, written or
unwritten, (including but not limited to programs including pensions, profit
sharing, stock options, incentives, bonuses, vacations, severance, disability,
hospitalization, medical insurance, life insurance, and the like) currently in
existence under which Seller or any subsidiary or any other organization of
Seller which is a member of a controlled group of organization (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code), has any obligations in
respect of, or that otherwise cover, any of the current or former employees of
Seller or their beneficiaries, other than salary or wages (the "Plans"), which
list includes, but is not limited to each employee welfare plan ("Welfare
Plans") within the meaning of Section 3(1) of ERISA and each employee pension
benefit plan within the meaning of Section 3(2) of ERISA ("Pension Plans"). For
purposes of this Section (v), the term "Pension Plans" shall include any
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) The Welfare Plans and Pension Plans have been administered in
compliance with applicable laws, including ERISA, in all material respects, and
all necessary governmental approvals for the Plans have been obtained.
(c) As of the Closing Date, Seller will have performed all obligations
in form and in operation required to be performed by it as of such date under
the Plans and will not be in default under or in violation of any of the Plans,
and Seller has no Knowledge of any material violation or default by any other
party with respect to the Plans.
3.19. Intellectual Property.
(a) Schedule 3.19.(a) sets forth a complete and correct list of each
patent, patent application and docketed invention, trademark, trade name,
trademark or trade name registration or application, copyright or copyright
registration or application for
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copyright registration, and each license or licensing agreement for any of the
foregoing relating to any Transferred Asset or held by Seller with respect to
the Business.
(b) Except as disclosed in Schedule 3.19.(b), Seller has not during the
three years preceding the date of this Agreement been a party to any Proceeding,
nor to the Knowledge of Seller is any Proceeding threatened as to which there is
a reasonable possibility of a determination adverse to Seller that involved or
may involve a claim of infringement by any Person (including any Governmental
Authority) of any Intellectual Property Right. Except as disclosed in Schedule
3.19.(b) no Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by
Seller, or restricting the licensing thereof by Seller to any Person. The use of
the Intellectual Property Rights does not conflict with, infringe upon or
violate any patent, patent license, patent application, trademark, trade name,
trademark or trade name registration, copyright, copyright registration, service
mark, brand mark or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes, or any similar rights, of any
Person.
3.20. Advisory Fees. There is no investment banker, broker, finder or
other intermediary or advisor that has been retained by or is authorized to act
on behalf of Seller or its Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.21. Disclosure of Business Secrets to Others; Non-Competition
Agreements.
(a) Schedule 3.21.(a) attached hereto sets forth a true and complete
list of all persons or entities (other than current employees, directors and
shareholders of Seller and Buyer or Governmental Authorities with regulatory
authority) to which, to Seller's Knowledge, Seller has disclosed any
confidential, proprietary or other similar non-public information respecting the
Business or the Transferred Assets during the last five (5) years, including the
name and address of each such person, a description of the information disclosed
to each such person and a copy of any non-disclosure or other agreement executed
by such person with respect to the disclosed information unless subject to a
confidentiality agreement prohibiting such disclosure by Seller.
(b) Except as set forth on Schedule 3.21.(b), no contracts, agreements
or arrangements of any kind, whether written or oral, currently exist to which
Seller is a party and which (i) restrict any person or entity from engaging in
the Business or from
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competing with Seller, or (ii) which restrict Seller from engaging in the
Business or from competing with any other person or entity.
3.22. Environmental Matters.
(a) To Seller's Knowledge, there exists no Environmental Condition at
the Real Property.
(b) Seller has not received any Environmental Claim based on an
Environmental Condition.
3.23. Insurance. Schedule 3.23 sets forth a complete and correct list
of all material insurance policies of any kind currently in force with respect
to the Business (the "Insurance Policies"), including "occurrence based"
liability policies regardless of the periods to which they relate. Schedule 3.23
sets forth for each Insurance Policy the type of coverage, the name of the
insureds, the insurer, the premium, the expiration date, the period to which it
relates, the deductibles and loss retention amounts and the amounts of coverage.
3.24. Receivables. Schedule 3.24 sets forth an accurate, correct and
complete aging of all Receivables of the Business as of February 28, 1998. All
outstanding Receivables, to the extent constituting Transferred Assets (the
"Transferred Receivables") are due and valid claims against account debtors for
goods or services delivered or rendered, and shall, to Seller's Knowledge, be
collectible in the ordinary course of business and are subject to no defenses,
offsets or counter-claims. All Transferred Receivables arose in the ordinary
course of business. To Seller's Knowledge, no Transferred Receivables are
subject to prior assignment, claim, lien or security interest. To Seller's
Knowledge, no Transferred Receivable is owed by an account debtor which is
insolvent or the subject of any bankruptcy or insolvency proceedings of any kind
or of any other pending proceeding or action which may have a material adverse
effect on the business of such account debtor. Seller has not incurred any
liabilities to customers in respect of the Transferred Receivables for discounts
(other than for prompt payment), returns, promotional allowances or otherwise.
Subject to the foregoing, Buyer acknowledges that nothing contained herein
constitutes a guarantee by Seller of the collectibility of the Transferred
Receivables.
3.25. Products.
(a) All products manufactured, processed, distributed, shipped or sold
by Seller in connection with the Business and any services rendered by it have
been in conformity with all applicable contractual commitments and all express
or implied warranties.^
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(b) Schedule 3.25.(b), sets forth an accurate, correct and complete
statement of all written warranties, warranty policies, service and maintenance
agreements of the Business. The product warranty and return experience for the
three (3) years ended November 30, 1997 and interim period through the date
hereof is set forth on Schedule 3.25.(b).
(c) Schedule 3.25.(c) sets forth an accurate, correct and complete list
and summary description of all existing claims, duties, responsibilities,
liabilities or obligations arising from or alleged to arise from any injury to
person or property as a result of the ownership, possession or use of any
product manufactured or sold by Seller in connection with the Business prior to
the Closing Date. Except as set forth in Schedule 3.25.(c), the Business will
not be subject to any claim, expense, liability or obligation arising from any
injury to person or property as a result of ownership, possession or use of any
product manufactured, processed, distributed, shipped or sold prior to the
Closing Date.
3.26. Seller's Insurance. Included within Schedule 3.23 is a list of
all comprehensive general liability and worker's compensation insurance
coverages as in effect since January 1, 1995. All such policies provide coverage
for occurrences during the period of coverage, irrespective of when claims are
made thereunder.
3.27. Material Disclosures. To Seller's Knowledge, no statement,
representation or warranty made by Seller in this Agreement or in any
certificate, statement, list, schedule or other document furnished or to be
furnished to Buyer hereunder contains, or when so furnished will contain, any
untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
3.28. Buyer Acknowledgement. Buyer hereby acknowledges and agrees that
it is not relying upon any representations or warranties other than those
specifically set forth in this Article III, whether written or oral, and
howsoever otherwise communicated. Pursuant thereto, the Buyer acknowledges and
agrees that it is acquiring the Transferred Assets pursuant hereto free of any
representations and warranties other than those specifically set forth herein.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer hereby represents and
warrants to Seller that:
4.1. Organization and Existence. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. Buyer is duly
qualified to do business and in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary to carry on its business as now conducted.
4.2. Corporate Authorization. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a legal, valid and binding agreement of Buyer, enforceable
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
4.3. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement require no action by, consent or approval
of, or filing with, any Governmental Authority other than as set forth in this
Agreement.
4.4. Non-Contravention. The execution, delivery and performance by
Buyer of this Agreement does not (a) contravene or conflict with the Certificate
of Incorporation or Bylaws of Buyer, or (b) assuming compliance with the matters
referred to in Section 4.2, contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or applicable to
Buyer.
4.5. Advisory Fees. There is no investment banker, broker, finder or
other intermediary or advisor that has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee, commission or reimbursement
of expenses from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.6. Litigation. There is no Proceeding pending against, or to the
Knowledge of Buyer, threatened against or
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affecting, Buyer before any court or arbitrators or any governmental body,
agency or official that in any matter challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.
4.7. Material Disclosure. To Buyer's Knowledge, no statement,
representation or warranty made by Buyer in this Agreement or in any
certificate, statement, list, schedule, or other document furnished or to be
furnished to Seller hereunder contains, or when so furnished will contain, any
untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE V.
COVENANTS OF SELLER
5.1. Access to Information; Additional Information
.
After the Closing, Seller shall provide Buyer with such of Seller's
historic books and financial records as Buyer may require in order for Buyer to
comply with its disclosure obligations under applicable securities laws.
5.2. Title Commitment and Survey.
(a) Seller has delivered to Buyer a commitment for an Owner's Title
Insurance Policy (the "Title Commitments") issued by Chicago Title Insurance
Company (the "Title Company"), in the form set forth on Schedule 5.2.(a). At the
Closing, Seller will deliver to Buyer the title insurance policies covered by
the Title Commitments (the "Title Policies"). In lieu of a policy the Title
Company may issue a "mark up commitment" indicating that the Title Company's
requirements have been satisfied and that a policy consistent with the Title
Commitments will be issued promptly following the Closing. Such title insurance
policies shall (i) be in the amounts set forth on Schedule 5.2.(a) (which
amounts, however, shall not be binding for the purpose of allocating the
Purchase Price), (ii) be issued by the Title Company, (iii) show in Schedule A
thereof the approved survey description of such Real Property and each easement
appurtenant thereto, with the standard printed exceptions deleted, and otherwise
show in Schedule B thereof only the Permitted Liens, and (iv) shall be
accompanied by the endorsements listed on Schedule 5.2.(a) and contain such
endorsements as may reasonably be requested by Buyer with Buyer to bear the
costs associated with any such endorsements.
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(b) Seller has delivered a current ALTA boundary survey of each Parcel
of Real Property (the "Surveys") certified to Buyer and the Title Company (and
such other persons as Buyer may require) by a registered land surveyor or
engineer in the form attached hereto as Schedule 5.2.(b) (which Surveys are
acceptable to Buyer).
5.3. Taxes.
(a) All sales, value added, use and other Taxes imposed in connection
with or measured by the sale of the Transferred Assets shall be borne by Seller.
Real property transfer Taxes imposed in connection with the sale of the
Transferred Assets shall be borne by the party named in the law providing for
such transfer Tax and, if no such party is named, by Seller.
(b) Seller agrees that no new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Transferred
Assets shall be made after the date of this Agreement without the prior written
consent of Buyer.
(c) Buyer, on the one hand, and Seller and the Shareholders, on the
other hand, shall (i) provide to each other such assistance as may reasonably be
requested in connection with the preparation of any Tax Return relating to the
Business and the conduct of any audit or other examination by any taxing
authority or in connection with judicial or administrative proceedings relating
to any liability for Taxes relating to the Business, (ii) retain all records or
other information that may be relevant to the preparation of any Tax Returns
relating to the Business, or the conduct of any audit or examination, or other
tax proceeding relating to the Business, and (iii) retain all relevant
documents, including prior year's Tax Returns relating to the Business,
supporting work schedules and other records or information that may be relevant
to such returns and shall not destroy or otherwise dispose of any such records
without the prior written consent of the other party.
(d) Seller shall provide Buyer with a FIRPTA certificate or similar
document in order to relieve Buyer of any obligations to withhold any portion of
the Purchase Price.
(e) Pursuant to Section 1445(b)(2) of the Code, Seller shall furnish
Buyer an affidavit stating under penalty of perjury Seller's United States
taxpayer identification number and that Seller is not a foreign person.
5.4. Right to Corporate Name.
(a) Seller hereby acknowledges and agrees that it is transferring its
entire interest in the tradename "Miller Bearing Company" or any variation or
derivation thereof containing the name
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"Miller Bearing". Seller shall not at any time claim any right, title or
interest to such name.
(b) Effective on the Closing Date, Seller shall take all necessary
action to change the corporate name of Seller in its state of incorporation and
all states in which it is authorized to transact business on the Closing Date,
to a name that does not contain any words similar or reasonably likely be
confused with any words in the "Miller Bearing Company, Inc." name or any use by
Buyer thereof.
ARTICLE VI.
COVENANTS OF ALL PARTIES
6.1. Further Assurances. Subject to the terms and conditions of this
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law to consummate the transactions contemplated by
this Agreement. Buyer and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Following the Closing, Buyer shall make the employees and records of the
Business reasonably available to Seller during normal business hours (at no
charge to Seller other than for out of pocket expenses incurred by Buyer for
items such as photocopying or travel) for the purposes of providing accounting
information reasonably required by Seller, providing testimony or information in
connection with any legal proceeding or for any other appropriate purpose
arising out of Seller's ownership and operation of the Business.
6.2. Certain Filings. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
6.3. Intentionally Omitted.
6.4. Bulk Sales Laws. Buyer waives compliance by Seller with the
provisions of (i) Indiana's Department of Revenue
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Bulk Sales Law and (ii) all applicable provisions of Article 6 of the Uniform
Commercial Code as adopted in any state relating to bulk sales. Seller shall
indemnify Buyer for any taxes owed to the State of Indiana arising out of
Seller's failure to comply with the notification requirement referred to in the
preceding sentence.
6.5. Employees and Employee Benefit Matters.
(a) Effective as of the Closing Date, Buyer may, but shall not be
obligated to, offer employment to some of Seller's employees who are actively at
work immediately prior to the Closing Date, subject to Buyer's right to
terminate the employment of any such employees at any time and for any reason in
its sole discretion. It is specifically understood that (i) Buyer shall have no
obligation to hire any of the Seller's employees and (ii) no rights or
entitlements shall vest in favor of any third party (including any of Seller's
employees) by virtue of this Agreement. Any employees so hired are hereinafter
referred to as "Transferred Employees". Buyer shall identify all such
Transferred Employees to Seller within ten (10) days following the Closing.
(b) Buyer agrees to assume responsibility to the Transferred Employees
for the payment of any accrued wages, salaries, commissions, vacation pay, sick
pay, severance obligations and any other employee benefit or entitlement of any
kind or nature whatsoever accrued or accruing to such employees pursuant to any
employee benefit plan, fund, program, contract (oral or written), policy or
arrangement arising by reason of any Applicable Law or any agreement that Seller
may have with any such Transferred Employees, all to the extent arising in
respect of or relating to the period prior to the Effective Date, but only if,
and to the extent, (i) accrued on the Adjusted February 28 Balance Sheet, or
(ii) disclosed in one or more of the Schedules hereto. Nothing contained herein
shall create any rights in favor of any Transferee Employee beyond rights to
which they were otherwise entitled pursuant to any such Applicable Law or
agreement.
Seller shall be responsible to satisfy, and/or to reimburse Buyer on
account of, any claims made by any Transferred Employees against Buyer for
severance pay, unfair or unlawful termination, continued entitlement to benefits
beyond termination and the like in the event of, and regardless of the
circumstances of, Buyer's termination of the employment of any Transferred
Employees following the Closing, to the extent that any such claims relate to,
or otherwise arise on account of, or are calculated in whole or in part by
reference to, the period prior to the Effective Date. Seller shall retain the
right to challenge any such claims made by Transferred Employees, and Buyer
shall continue to be liable for claims arising from the period after the
Effective Date.
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(c) Seller shall terminate all of its employees (other than those
identified on Schedule 6.5.(c)) and, subject to subsection (b) above, shall be
responsible for all of the consequences thereof. Seller shall be responsible for
compliance with, and prior to the Closing shall complete, all Applicable Laws
respecting the effect of the transactions contemplated by this Agreement and by
any agreement or document contemplated hereby on any of its employees including,
without limitation, the Worker Adjustment and Retraining Notification Act, 29
U.S.C. ss. 2101, et seq. ("WARN"). Seller agrees that it will not take any
action which causes the notice provisions of WARN to be applicable to the
transactions contemplated by this Agreement.
6.6. Product Warranty Claims. In the event of any Liability arising out
of, resulting from, or relating to claims seeking return, replacement, and/or
repair of any Products manufactured on or prior to the Effective Date (and
constitute finished goods as of the Effective Date) pursuant either to (i)
express Product warranties extended by Seller prior to the Closing or Buyer
after the Closing Date (provided that Buyer's warranties are no more expansive
than the warranties extended by Seller prior to the Closing Date), or (ii)
Product warranties or obligations implied or provided by applicable law
(together, the "Excluded Product Warranty Claims") with respect to any such
Products, the following shall apply and, pursuant thereto, the following shall
represent Buyer's sole recourse on account of a breach by Seller of the
representations set forth in Section 3.25.(a) unless occasioned by Fraud by
Seller:
(a) Buyer shall satisfy any such Excluded Product Warranty Claims in
the ordinary course of business in a manner consistent with Seller's past
practices; provided that Buyer shall keep Seller apprised of any such Excluded
Product Warranty Claims and its responses thereto and shall in any event permit
Seller at least fifteen (15) days following notice of any such Claim to respond
and settle such Claim without adverse effect on Buyer's relationship with such
customer (such that no such settlement shall be made by Seller without Buyer's
consent, which consent will not be unreasonably withheld), and
(b) Seller shall, within fifteen (15) days of presentment of a written
summary thereof, reimburse Buyer one hundred percent (100%) of the costs
incurred by Buyer in connection therewith to the extent in excess of Fifty
Thousand Dollars ($50,000); provided that Seller shall have no responsibility
hereunder on account of any such Excluded Product Warranty Claims caused solely
by any work performed by Buyer on
the underlying Products; and provided further that the Seller shall have no
responsibility to Buyer for any claims made hereunder beyond the Indemnity
Outside Date; and provided, further, that Seller shall have no liability under
this subparagraph (b) on account of any
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Excluded Product Warranty Claims made by Roller Bearing Company of America or
any of its Affiliates.
ARTICLE VII.
INTENTIONALLY OMITTED
ARTICLE VIII.
INDEMNIFICATION
8.1. Indemnity by Seller.
(a) Seller hereby agrees to indemnify and to hold Buyer harmless from
and against any and all actual financial injuries, losses, expenses, fees,
penalties, demands, claims, actions, causes of action, judgments, assessments,
damages, obligations, liabilities and reasonable costs of every nature and
description (collectively, "Losses"), and shall pay Buyer on demand the full
amount of any such Losses relating to, arising out of, or resulting from (i) any
inaccuracy in any representation, or the breach of any warranty, covenant or
other agreement, made by Seller in connection with this Agreement or any other
written agreement, document or certificate delivered in connection with the
Closing; (ii) any failure by Seller duly to perform or observe any term,
provision or covenant in this Agreement or any other written agreement, document
or certificate delivered in connection herewith; (iii) any of Seller's
obligations to its creditors for which Buyer may become responsible as a matter
of law by reason of the parties' failure to comply with the provisions of any
applicable bulk sales laws; (iv) any Excluded Liability; and (v) any Interim
Period Excluded Liability.
By way of further clarification of the foregoing subsections (iii),
(iv) and (v), this indemnification shall apply to all of Seller's liabilities or
obligations arising or relating to the period prior to the Effective Date that
are not expressly assumed by Buyer hereunder, whether or not known as of the
Effective Date, whether or not asserted prior to the Effective Date, whether or
not the circumstances giving rise to such indemnification continue following the
Effective Date, and whether or not Buyer would become liable for any such
matters by operation of law or otherwise.
(b) (i) Seller shall have no responsibility to Buyer with respect to
any single claim for indemnification pursuant to this Section 8.1 unless and
until the Losses in respect of such claim exceed Fifty Thousand Dollars
($50,000) (the "Indemnification Trigger Amount"); provided that, (A) for the
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purposes of calculating the Indemnification Trigger Amount, claims associated
with related items shall be accumulated and treated as a single claim, (B) once
the Losses in respect of such claim exceed the Indemnification Trigger Amount,
Seller's indemnification obligations in respect of such claim shall apply to the
entire amount of such Losses (all Losses incurred in respect of claims for which
the Indemnification Trigger Amount is exceeded, including the first $50,000 of
Losses as to each such claim, being the "Trigger Losses") and (C) in determining
the amount of Losses in respect of any claim, the Materiality Threshold, if
applicable to the underlying claim, shall not be applied, i.e., the Seller shall
not under any circumstances be entitled to the benefits of both the Materiality
Threshold and the Indemnification Trigger Amount; and
(ii) Seller shall not be required to indemnify Buyer with respect to
any Losses claimed for indemnification pursuant to this Section 8.1 unless and
until the aggregate amount of all Trigger Losses exceeds One Hundred Thousand
Dollars ($100,000) and then to the extent it exceeds $100,000 and then only to
the extent of the Trigger Losses, at which time Seller's indemnification
obligations shall apply to all claims for which Buyer is entitled to
indemnification hereunder ^(but only if the Losses as to each claim exceed the
Indemnification Trigger Amount); provided, however, that notwithstanding (i) or
(ii) Seller shall be liable for all claims by Buyer, regardless of amount,
arising out of any of the following (the "Indemnity Limitation Exclusions") (A)
Fraud by Seller, or (B) a claim hereunder on account of (x) Transaction
Expenses, (y) Seller Payments or (z) Interim Period Excluded Liabilities in the
nature of Transaction Expenses or Seller Payments.
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, the liability of the Seller pursuant to this Section 8.1 shall be
limited to Five Hundred Thousand Dollars ($500,000) (the "Seller Indemnity
Cap"); provided, however, that the Seller Indemnity Cap shall not apply to any
Loss arising in respect of any Indemnity Limitation Exclusions.
(d) In order to fund the satisfaction by Seller of any indemnification
claims for which it may become responsible hereunder, the ^ Buyer shall deposit
(out of the Purchase Price) the sum of Five Hundred Thousand Dollars ($500,000)
in escrow at the Closing with Valley American Bank pursuant to an escrow
agreement in the form attached hereto as Exhibit A. Such escrow amount shall be
deposited in an interest bearing account with interest payable to Seller.
(e) By their signatures to this Agreement, the Shareholders hereby
agree, severally (and not jointly), to be responsible for, and to indemnify
Buyer in respect of, any and all Losses incurred by the Buyer in respect of any
Indemnity Limitation Exclusions. Pursuant thereto, the liability of the
Shareholders
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hereunder shall be shared among them pro rata to the percentages set forth on
Schedule 8.1.(e).
(f) Irrespective of any other clause in this Agreement, the Buyer's
sole recourse for a violation by Seller or Shareholders of any provision of this
Agreement (except for any violation of Article X which shall not be so limited)
shall be pursuant to this Paragraph 8.1.
8.2. Indemnity By Buyer. (a) Buyer hereby agrees to indemnify and to
hold Seller harmless from and against any and all Losses of any kind or nature
whatsoever, and shall pay Seller on demand the full amount of any such Losses
(as defined in Paragraph 8.1 above) relating to, arising out of or resulting
from (i) any inaccuracy in any representation, or the breach of any warranty,
covenant or other agreement made by Buyer in this Agreement; (ii) any failure by
Buyer duly to perform or observe any term, provision, covenant or agreement
hereof or contained herein to be performed or observed by Buyer, including,
without limitation, any failure by Buyer to satisfy the Assumed Liabilities
after the Effective Date; (iii) any matter or thing relating to the conduct of
Buyer's business after the Effective Date, except for any event, transaction,
condition, occurrence or situation arising out of, relating to, or resulting or
continuing from the period prior to the Effective Date, or for which Seller and
Shareholders are obligated to indemnify Buyer hereunder; and (iv) any of the
Assumed Liabilities.
(b) Buyer shall not be required to indemnify Seller with respect to any
Losses claimed for indemnification pursuant to this Section 8.2 unless and until
the aggregate amount of all Losses claimed against Buyer exceeds One Hundred
Thousand Dollars ($100,000); provided, however, that Buyer shall be liable for
all claims by Seller, regardless of amount, arising out of the Fraud of Buyer or
Buyer's failure to satisfy the Assumed Liabilities or the Interim Period Taxes.
8.3. Procedure for Satisfaction of Indemnity Claims. The obligations
and liabilities of each indemnifying party hereunder shall be subject to the
following terms and conditions:
(a) A party hereto who is responsible for indemnifying the other party
against any matter pursuant to this Agreement is referred to as the
"Indemnifying Party", and the other party claiming indemnity is referred to as
the "Indemnified Party." Any claim for indemnification made pursuant to this
Article VIII is sometimes referred to as an "Indemnity Claim."
(b) The Indemnified Party shall give prompt written notice to the
Indemnifying Party of any Indemnity Claim after learning of the existence
thereof; provided, however, that the
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failure to provide such prompt notice shall in no event impair the rights of the
Indemnified Party or limit the obligations of the Indemnifying Party hereunder
except to the extent that such failure has a material adverse effect on the
ability of the Indemnifying Party adequately to defend such claim. In the event
of a claim brought by a third party (a "Third Party Claim") which might give
rise to an Indemnity Claim by the Indemnified Party, such notice of the
Indemnity Claim shall state the nature and basis of said Indemnity Claim and the
amount thereof, to the extent known. In the event of any other Indemnity Claim,
including one for an alleged breach or misrepresentation hereunder, such notice
shall state the nature and basis thereof, the amount of the asserted damages,
and the method by which such alleged damages were calculated; provided, however,
that the Indemnified Party shall in all events have the right subsequently to
revise the basis for such Indemnity Claim and the amount of damages asserted as
well as the method by which such damages are calculated.
(c) In the event of a Third Party Claim:
(i) Provided that the Indemnifying Party (1) first irrevocably
admits in writing to the Indemnified Party that such claim is one in
respect of which the Indemnifying Party is obligated to indemnify the
Indemnified Party hereunder, and (2) has adequately evidenced to the
Indemnified Party its ability to satisfy such claim, the Indemnifying
Party shall be entitled to contest and to assume the defense of the
claim at the Indemnifying Party's expense, and further provided that it
utilizes reputable counsel reasonably satisfactory to the Indemnified
Party. Should the Indemnifying Party give notice to the Indemnified
Party of the Indemnifying Party's election to assume the contest or
defense as aforesaid, then the Indemnifying Party shall be obligated
promptly to defend such claim. The Indemnified Party shall, at the
Indemnifying Party's expense, make available to the Indemnifying Party
and its attorneys, accountants or other duly designated agents all
books and records of the Indemnified Party relating to any such action,
suit or proceeding, and the parties hereto agree to render to each
other such assistance (at the expense of the Indemnifying Party) as
they may reasonably require of each other in order to ensure the proper
and adequate contest or defense of any such action, suit or proceeding.
The Indemnified Party shall be entitled, with counsel selected by the
Indemnified Party, to participate in (but not to control), at its own
expense, the defense of any claim or litigation which the Indemnifying
Party has, in accordance with the provisions of this subsection (i),
elected to defend, and to be kept fully informed of the
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status thereof at all stages, including the right to receive, at the
Indemnifying Party's expense, copies of all pleadings and other
material papers in connection with such claim or litigation.
The Indemnifying Party shall not settle any Third Party Claim
without the consent of the Indemnified Party unless (1) the
Indemnifying Party fully indemnifies the Indemnified Party for all
Losses in connection with such settlement of such claim, (2) there
is no finding or admission of any violation of Law by the
Indemnified Party not agreeing to the settlement, and (3) the relief
granted in connection therewith requires no action on the part of,
and has no economic or other effect on, the Indemnified Party.
(ii) If the defense of a Third Party Claim is not assumed by
the Indemnifying Party as provided in subsection (i) above, then the
Indemnified Party may (to the extent that the Indemnified Party
determines to do so in its sole discretion) conduct any such proceeding
as it deems appropriate, and may take whatever action it deems
necessary or appropriate to resolve or settle such claim or dispute,
but shall in no event have any obligation to defend any such claim or
proceeding or to appeal any adverse finding or determination or to
defend the appeal by any other party to a favorable determination, it
being understood and agreed that any actions taken or omitted with
respect to the foregoing shall not avoid, reduce or mitigate the
Indemnifying Party's liability hereunder. The Indemnifying Party shall
nevertheless, at its own expense, make available to the Indemnified
Party and its attorneys and accountants all books and records of the
Indemnifying Party relating to such proceedings or litigation, and
shall render to the Indemnified Party such assistance as may be
reasonably requested by the Indemnified Party.
The Indemnifying Party shall be entitled, with counsel selected by it,
to participate in (but not to control), at its own expense, the defense of any
claim or litigation which the Indemnifying Party has not elected to defend in
accordance with the provisions of subsection (i) above.
The Indemnified Party shall not settle any Third Party Claim without
first giving notice of the proposed settlement to the Indemnifying Party (the
"Settlement Notice"). The Indemnifying Party shall have the right, exercisable
within three (3) Business Days following receipt of the Settlement Notice, to
instruct the Indemnified Party not so to settle such Third Party Claim, provided
that, in such event, the Indemnifying Party shall be required to
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assume the defense of any such Third Party Claim subject to and in accordance
with the provisions and prerequisites of subsection (i) above (including those
set forth in the first sentence thereof); provided that the Indemnified Party
shall be entitled to settle such Third Party Claim regardless of the
instructions of the Indemnifying Party to the contrary if the Indemnifying Party
is unable or fails to satisfy the requirements set forth in clauses (1) and (2)
contained in the first sentence of subsection (i) above.
8.4. Satisfaction of Indemnity Claims. In the event Buyer shall assert
an Indemnity Claim pursuant to Section 8.1 hereof against Seller, Buyer may not
obtain satisfaction of any such claim by way of set-off against any amounts
owing by Buyer to Seller.
8.5. Survival of Representations and Warranties and Covenants.
The representations, warranties and covenants contained in this
Agreement shall survive as follows:
(a) Except as otherwise provided in Section 8.5.(b), (c) or
(d), all representations, warranties and covenants shall expire on the
first anniversary of the Closing Date (the "Indemnity Outside Date").
(b) Notwithstanding Section 8.5.(a), the representations,
warranties and covenants of Seller and Buyer as an Indemnifying Party
shall survive the Closing Date until the second anniversary of the
Closing with respect to any Fraud by Seller or Buyer, as the case may
be.
(c) Notwithstanding Section 8.5.(a), the representations,
warranties and covenants of Seller and the Shareholders set forth in
Sections 3.1, 3.2, 3.3 and 3.4 shall survive without expiration; and
the representations and warranties of Buyer set forth in Sections 4.1,
4.2, 4.3 and 4.4 shall survive without expiration.
(d) Notwithstanding Section 8.5.(a), the covenants of Seller
and Shareholders as set forth in Sections 5.1, 5.3, 5.4, 6.1, 6.2, 6.4
and 6.5 and Article X shall survive without limitations as to time.
Any cause of action for breach of a representation or warranty contained herein
shall expire and terminate unless the party claiming that such breach occurred
delivers to the other party written notice and a reasonably detailed explanation
of the alleged breach on or before 5:00 P.M., New York City time, on the date on
38
<PAGE>
which such representation or warranty expires pursuant to this Section 8.5.
8.6. Interest. The Indemnifying Party, shall pay the Indemnified Party
interest at the per annum rate publicly announced from time to time by Citibank,
N.A. as its prime rate (or reference rate) in effect from time to time plus two
percent (2%), compounded quarterly, for any indemnifiable Loss from the date
such indemnifiable Loss was actually paid and notice given to Seller by the
Indemnified Party until paid in full by the Indemnifying Party (or otherwise
satisfied).
8.7. Payments. All sums payable by any party pursuant to this Article
VIII shall be paid free and clear of all deductions or withholdings, unless
otherwise required by law.
8.8. No Limitation. The representations, warranties and covenants of
Seller and the Shareholders contained in this Agreement shall not be limited in
any respect by or on account of (a) any facts and circumstances known or which
should have been known by Buyer or its agents, attorneys or other advisors as a
result of any due diligence investigations undertaken by Buyer on or before the
Closing or otherwise or (b) by any disclosure made by Seller to Buyer, except as
set forth on the Schedules hereto; provided that (i) the Buyer hereby represents
and warrants that to its Knowledge, there exist no violations by Seller of any
of the representations and warranties set forth in Article III above, and Buyer
shall have no recourse against Seller or the Shareholders for any violation of
any such representations and warranties of which it has Knowledge on the date
hereof; and (ii) Buyer hereby acknowledges and agrees that it has had a complete
opportunity to perform such due diligence respecting the Transferred Assets and
the Business as it deemed necessary and appropriate; and that, to Buyer's
Knowledge, the Seller has provided Buyer with full and unlimited access to all
information, facilities and personnel as may be necessary in order for Buyer to
perform such diligence.
ARTICLE IX.
INTENTIONALLY OMITTED
39
<PAGE>
ARTICLE X.
NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION
10.1. Non-Competition. For a period of five (5) years from the date
hereof (the "Restricted Period"), neither Seller nor any Shareholder shall
engage, directly or indirectly, in the Business. By way of further definition
and explanation of the foregoing, and without limiting the generality of the
foregoing restriction, during such Restricted Period, neither Seller nor any
Shareholder shall devote any time or attention to acquiring, managing,
operating, joining, controlling, participating or becoming financially
interested in, or being connected with (in any capacity, whether as a partner,
stockholder, investor, consultant, independent contractor, agent, representative
or otherwise), or providing any direct or indirect financial assistance to, any
person, corporation, firm, business, partnership, or other entity which is
engaged, directly or indirectly, in the Business. Nothing contained herein,
however, shall prohibit Seller or any Shareholder from acquiring and owning, for
investment purposes only, up to one percent (1%) of the outstanding equity
securities of an entity engaged in the Business if such equity securities of any
such entity are available to the general public on a national securities
exchange.
10.2. Non-Disclosure. Seller and each Shareholder hereby acknowledge,
covenant and agree that, from and after the date hereof and without regard to
time, it/he will hold any and all items constituting Business Secrets
communicated or transmitted to, or otherwise obtained by, it/him in strictest
confidence; and neither Seller nor any Shareholder shall, regardless of the
reason therefor, directly or indirectly make use of, exploit, disclose or
divulge any Business Secrets to any other person or entity (except to the extent
such information is required to be submitted to any federal, state or local
governmental agent or to any third party pursuant to subpoena or other court
process), or make any false statement or otherwise commit any act (including
contacting any customers of the Business) that could in any way be injurious or
detrimental to Buyer's use of the Transferred Assets, including without
limitation its image, business or customer relations.
For the purposes hereof, "Business Secrets" shall mean all information
and materials pertaining to Seller's Business or the Transferred Assets,
including, without limitation, customer information, Seller's business methods,
policies, procedures, techniques, sales and marketing strategies, financial
statements, sales and gross profit data, employee and independent contractor
rosters and profiles, pricing and cost data, contract information, know-how and
all other information relating to or dealing with the Business or the
Transferred Assets. Furthermore, the term Business Secrets shall apply to any of
the foregoing, whether or not in
40
<PAGE>
written form and whether or not Seller has possession of such writings.
10.3. Non-Solicitation of Customers. During the Restricted Period,
neither Seller nor any Shareholder shall, on its/his own behalf, or for the
benefit of any other person or entity, for any reason, accept any business with
respect to the Business from, or interfere in any manner with the Buyer's
business relationship with, any present or former customer of the Business.
Without limiting the generality of the foregoing, neither Seller nor any
Shareholder shall solicit or induce, or attempt to solicit or induce, any
business with respect to the Business (directly or indirectly through any person
or entity) from any customer, regardless of the purpose. Furthermore, nothing
contained in this Section 10.3 shall be construed to infer that Seller or any
Shareholder is retaining any rights to or in respect of, any customer list, any
customer information or any other Business Secrets for direct or indirect use
after the expiration of the Restricted Period, it being understood that pursuant
to this Agreement Buyer is acquiring all of Seller's rights thereto without
limitation as to time or otherwise.
10.4. Non-Solicitation of Employees. During the Restricted Period,
neither Seller nor any Shareholder shall solicit or induce, or attempt to
solicit or induce (directly or indirectly through any person or entity), for
employment, any employee, agent, consultant or other representative of Buyer.
10.5. Obligation for Employees' Actions. Seller hereby assigns to Buyer
any cause of action or other claim that Seller may have against any present or
former employee, agent, representative or independent contractor where such
claim is based upon such Person's disclosure or use for his own benefit of any
Business Secrets, and Seller will, at Buyer's cost and expense, cooperate with
Buyer, as reasonably requested by Buyer, in the prosecution of such claim.
10.6. Remedies. Seller and each Shareholder acknowledge and agree that
the agreements and covenants contained in this Article X are of a unique and
valuable nature and may, if breached, result in irreparable damage to Buyer that
may not be readily susceptible to monetary valuation; and, accordingly, in the
event of the breach of any covenant or agreement contained in this Article X,
Buyer shall be entitled to seek and obtain injunctive or other equitable relief,
in addition to any other remedies provided by law or equity, in furtherance of
the enforcement thereof. In no event shall the amount or value of any
consideration paid or given by Buyer for the covenants and agreements contained
in this Article X, or otherwise in connection with this Agreement, be used to
determine the scope or extent of damages suffered by Buyer in
41
<PAGE>
the event of a breach by Seller or any Shareholder of such covenants and
agreements.
10.7. ^ Intentionally Omitted.
10.8. Individual Liabilities. The Buyer hereby agrees that its recourse
against the Shareholders on account of a violation by any Shareholder of any
provisions of this Article X shall be individual in nature and any such recourse
shall be limited to the Shareholder committing such violation.
ARTICLE XI.
MISCELLANEOUS
11.1. Notices. Any notice, request, instruction or other communication
to be given hereunder by any party to another shall be given by hand delivery,
certified or registered mail (return receipt requested) or by overnight express
service, addressed to the respective party or parties at the following
addresses:
If to Seller or any Shareholder:
^ c/o Elmo J. Hurst
300 N. Kanawha Street
Suite 101
Beckley, West Virginia 25802
^ Telecopier No.: (304) 256-5005
with a copy (which shall not constitute notice) to:
Arthur E. Stamas, Esq.
Attorney at Law
Suite 2601
One IBM Plaza
330 North Wabash
Chicago, Illinois 60611
Telecopier No.: (312) 222-9516
If to Buyer:
Miller Acquisition Corp.
c/o Roller Bearing Company of America, Inc.
60 Round Hill Road
Fairfield, Connecticut 06430
Attn: Michael Gostomski
Telecopier No: (203) 256-0775
with a copy (which shall not constitute notice) to:
42
<PAGE>
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attn: C. David Goldman, Esq.
Telecopier No.: 212-547-5444
or to such other address or addresses as any party may designate to the others
by like notice as hereinabove set forth. Any notice given hereunder shall be
deemed given and received on the date of hand delivery, or three (3) days after
deposit with the United States Postal Service, or one (1) day after delivery to
an overnight express service for next day delivery, as the case may be.
11.2. Intentionally Omitted.
11.3. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if and
only if such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law; provided, however, that damages shall be
subject to such limitations as are set forth herein.
11.4. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
11.5. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of each other party, except that Buyer may assign any and all of its
right, interests and obligations hereunder as security for obligations to its
lenders and except that Buyer may assign its rights under this
43
<PAGE>
Agreement to an Affiliate; provided that Buyer shall not be released from any of
its obligations hereunder by reason of such assignment.
11.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws (without reference to choice or conflict
of laws) of the State of Illinois.
11.7. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
11.8. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
11.9. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.10. Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
11.11. Construction.
(a) The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder unless the context requires otherwise. Whenever
44
<PAGE>
required by the context, any gender shall include any other gender, the singular
shall include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
11.12. Arbitration of Claims.
(a) Except as otherwise provided elsewhere in this Agreement, any
dispute or difference between or among the parties arising out of this Agreement
or the transactions contemplated hereby Indemnifying Party under Article VIII
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided. Within ten (10) days of a demand for
arbitration, or within such other time period as the parties may agree the
Indemnitee and the Indemnifying Party shall each designate one arbitrator.
Within ten (10) Business Days after the appointment of the two arbitrators, the
two arbitrators shall designate a third arbitrator mutually acceptable to them
who has substantial professional experience with regard to corporate legal
matters. If the arbitrator chosen by the Indemnitee and the arbitrator chosen by
the Indemnifying Party fail to agree upon the third arbitrator within such ten
(10) Business Day period, the third arbitrator shall be appointed by the
American Arbitration Association as soon as practicable and shall be a certified
public accountant who is not affiliated with any party in interest to such
arbitration and who has substantial professional experience with regard to
corporate legal matters.
(b) The three arbitrators shall consider the dispute at issue in
Chicago, Illinois at a mutually agreed upon time within thirty (30) days (or
such longer period as may be acceptable to the Indemnitee and the Indemnifying
Party) of the designation of the arbitrators. The arbitrator shall not have the
authority to modify any term or provision of this Agreement. The arbitration
45
<PAGE>
proceeding shall be held in accordance with the rules for commercial arbitration
of the American Arbitration Association in effect on the date of the initial
request by the Indemnitee or Indemnifying Party, as the case may be, that gave
rise to the dispute to be arbitrated (as such rules are modified by the terms of
this Agreement or may be further modified by mutual agreement of the Indemnitee
and Indemnifying Party or at the direction of the arbitrators) and shall include
an opportunity for the parties to conduct discovery in advance of the
proceeding, which discovery may be limited by rules established by the
arbitrators. Notwithstanding the foregoing, the Indemnitee and Indemnifying
Party agree that they will attempt and they intend that they and the arbitrators
should use their best efforts in that attempt, to conclude the arbitration
proceeding and have a final decision from the arbitrators within ninety (90)
days from the date of selection of the arbitrators; provided, however, that the
arbitrators shall be entitled to extend such 90-day period one or more times to
the extent necessary for such arbitrators to place a dollar value on any claim
that may be unliquidated. The arbitrators shall immediately deliver a written
decision with respect to the dispute to each of the parties, who shall promptly
act in accordance therewith. Each Indemnitee and Indemnifying Party to such
arbitration agrees that any decision of the arbitrators shall be final
conclusive and binding, absent fraud or manifest error, and that they will not
contest any action by any other party thereto in accordance with a decision of
the arbitrators, except if such factors are present. It is specifically
understood and agreed that any party may enforce any award rendered pursuant to
the arbitration provisions of this Section 11.12 by bringing suit in any court
of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees and
expenses) incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 11.12 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 11.12
or seeking to enforce any order or award of any arbitration commenced pursuant
to this Section 11.12 may be used against the party or parties that do not
prevail in such arbitration in such manner as the arbitrators or the court in
such judicial action, as the case may be, may determine to be appropriate under
the circumstances (but subject to such limitations as are set forth in Article
VIII hereof). All costs and expenses attributable to the arbitrators shall be
allocated among the parties to the arbitration in such manner as the arbitrators
shall determine to be appropriate under the circumstances.
11.13. Third Party Beneficiaries. No provision of this Agreement shall
create any third party beneficiary rights in any Person, including any employee
of Buyer or employee or former
46
<PAGE>
employee of Seller or any Affiliate thereof (including any beneficiary or
dependent thereof).
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by an authorized officer as of the day and year
first above written.
BUYER: SHAREHOLDERS:
MILLER ACQUISITION CORP.
/s/ Joseph Miller
-----------------------------
Joseph Miller
By: /s/ Michael S. Gostomski
--------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
/s/ Arthur E. Stamas
-----------------------------
Arthur E. Stamas
Seller:
MILLER BEARING COMPANY, INC.
/s/ Elmo Hurst
-----------------------------
Elmo Hurst
By: /s/ Joesph Miller
--------------------------
Name: Joseph Miller
Title: President
/s/ John Maurer
-----------------------------
John Maurer
48
<PAGE>
Schedules List
<TABLE>
<CAPTION>
Schedule # Brief Description
- ---------- -----------------
<S> <C>
1.2 Permitted Liens
2.1.(b) Equipment
2.2 Excluded Assets
2.3(iii) Assumed Liabilities
2.4.(e) Contingent Liabilities
2.4.(f) Liabilities due to indebtedness and
Capitalized Leases
2.4.(k) Liabilities under Contract
2.4.(l) Liabilities under Contract with, or
indebtedness to, Affiliates
2.9.(c) Indebtedness
2.10 Purchase Price Allocation
3.5.(a) Financial Statements
3.5.(c) Adjusted February 28 Balance Sheet
3.5.(d) Monthly Balance Sheets
2.1 Transferred Assets
3.6.(a) Real Property owned
3.6.(b) Third Party Rights to Real Property
3.7 Personal Property Leases or Licenses
3.8.(b) Transferred Assets in Disrepair
3.8.(d) Transferred Assets subject to Third
Party rights
3.9 Affiliates
3.11 Litigation
3.12 Contracts
3.13 Customers Terminating Relationships
3.14.(a) Permits
3.14.(b) Required Consents
3.15 Applicable Laws
3.16.(a) Employees
3.16.(b) Employment, Retainer, Consulting or
Service Agreements
3.17 Labor Organizations
3.18.(a) Employee Benefit Plans
3.19.(a) Intellectual Property
3.19.(b) Intellectual Property Infringements
3.21.(a) Disclosure of Business Secrets to
Others
3.21.(b) Non-Competition Agreements
3.23 Insurance
3.24 Receivables
3.25.(a) Product Warranties
3.25.(c) Product Liabilities
5.2.(a) Title Insurance
5.2.(b) Survey of Parcels of Real Estate
6.5.(c) Employees not Terminated
8.1.(e) Proportionate Liability of Shareholders
</TABLE>
49
<PAGE>
Exhibit 10.40
SUPPLEMENT NO.2 dated as of June 3, 1998 to
the Guarantee Agreement dated as of June 23, 1997, among each of
the subsidiaries listed on Schedule I thereto (each such
subsidiary individually, a "Guarantor" and collectively, the
"Guarantors") of ROLLER BEARING COMPANY OF AMERICA, INC., a
Delaware corporation (the "Borrower"), and CREDIT SUISSE FIRST
BOSTON, a bank organized under the laws of Switzerland, acting
through its New York branch, as collateral agent (in such
capacity, the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of June 23, 1997,
as amended by Amendment No. 1 dated as of April 15, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for
the Lenders (in such capacity, the "Administrated Agent"), Collateral
Agent and issuing bank (in such capacity, the "Issuing Bank").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement and the
Credit Agreement.
C. The Guarantors have entered into the Guarantee Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit, in each case to or for the account of the Borrower. Pursuant to
Section 5.11 of the Credit Agreement, each Subsidiary of the Borrower that
was not in existence or not a Subsidiary on the date of the Credit Agreement
is required to enter into the Guarantee Agreement as a Guarantor upon
becoming a Subsidiary. Section 20 of the Guarantee Agreement provides that
additional Subsidiaries of the Borrower may become Guarantors under the
Guarantee Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "New
Guarantor") is executing this Supplement in accordance with the requirements
of the Credit Agreement to become a Guarantor under the Guarantee Agreement
in order to induce the Lenders to make additional Loans and the Issuing Bank
to issue additional Letters of Credit and as consideration for Loans
previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 20 of the Guarantee Agreement,
the New Guarantor by its signature below becomes a Guarantor under the
Guarantee Agreement with the same force and effect as if originally named
therein as a Guarantor and the New Guarantor hereby (a) agrees to all the
terms and provisions of the Guarantee Agreement applicable to it as a
Guarantor thereunder and (b) represents and warrants that the representations
and warranties made by it as a Guarantor thereunder are true and correct on
and as of the date hereof. Each reference to a "Guarantor" in the Guarantee
Agreement shall be deemed to include the New Guarantor. The Guarantee
Agreement is hereby incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delievered by it and constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Supplement shall become effective
when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New
Guarantor and the Collateral Agent. Delivery of an executed
<PAGE>
signature page to this Supplement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein and in the Guarantee Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision hereof in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction). The
parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in
writing and given as provided in Section 14 of the Guarantee Agreement. All
communications and notices hereunder to the New Guarantor shall be given to
it at the address set forth under its signature below, with a copy to the
Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, disbursements and other charges of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have
duly executed this Supplement to the Guarantee Agreement as of the day and
year first above written.
MILLER ACQUISITION CORP.,
by /s/ Michael S. Gostomski
---------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
c/o Roller Bearing Company of
America, Inc.
60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by
<PAGE>
/s/ David W. Kratovil
---------------------------------
Name: David W. Kratovil
Title: Director
by /s/ Joel Glodowski
---------------------------------
Name: Joel Glodowski
Title: Managing Director
<PAGE>
Exhibit 10.41
SUPPLEMENT NO. 2 dated as of June 3, 1998 to the Indemnity,
Subrogation and Contribution Agreement dated as of June 23, 1997
(as the same may be amended, supplemented or otherwise modified
from time to time, the "Indemnity, Subrogation and Contribution
Agreement"), among ROLLER BEARING COMPANY OF AMERICA, INC., a
Delaware corporation (the "Borrower"), each Subsidiary of the
Borrower listed on Schedule I thereto (the "Guarantors"), and
CREDIT SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below).
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997, as amended by Amendment No. 1 dated as of April 15, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders") and Credit Suisse First Boston, as administrative agent for
the Lenders (in such capacity, the "Issuing Bank"), and (b) the Guarantee
Agreement dated as of June 23, 1997, among the Guarantors and the Collateral
Agent (the "Guarantee Agreement").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.
C. The Borrower and the Guarantors have entered into the Indemnity,
Subrogation and Contribution Agreement in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit, in each case for the
account of the Borrower. Pursuant to Section 5.11 of the Credit Agreement,
each Domestic Subsidiary of the Borrower that was not in existence or not
such a Subsidiary on the date of the Credit Agreement is required to enter
into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary.
Section 12 of the Indemnity, Subrogation and Contribution Agreement provides
that additional Subsidiaries of the Borrower may become Guarantors under the
Indemnity, Subrogation and Contribution Agreement by execution and delivery
of an instrument in the form of Supplement. The undersigned Subsidiary of the
Borrower (the "New Guarantor") is executing this Supplement in accordance
with the requirements of the Credit Agreement to become a Guarantor under the
Indemnity, Subrogation and Contribution Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters
of Credit previously issued.
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation
and Contribution Agreement, the New Guarantor by its signature below becomes
a Guarantor under the Indemnity, Subrogation and Contribution Agreement with
the same force and effect as if originally named therein as a Guarantor and
the New Guarantor hereby agrees to all the terms and provisions of the
Indemnity, Subrogation and Contribution Agreement applicable to it as a
Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity,
Subrogation and Contribution Agreement shall be deemed to include the New
Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
<PAGE>
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute
a single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Collateral Agent.
Delivery of an executed signatures page to this Supplement by fascimile
transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but
the validity, legality and enforceability of the remaining provisions
contained herein and in the Indemnity, Subrogation and Contribution Agreement
shall not in any way be affected or impaired. The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions in the economic effect of
which comes as close as possible to that of the invalid, illegal or
unforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing
and given as provided in Section 7 of the Indemnity, Subrogation and
Contribution Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Guarantor and the collateral Agent have
duly executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.
MILLER ACQUISITION CORP.,
by /s/ Michael S. Gostomski
-------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
c/o Roller Bearing Company of
America, Inc.
60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ David W. Kratovil
-------------------------------
Name: David W. Kratovil
<PAGE>
Title: Director
by /s/ Joel Glodowski
-------------------------------
Name: Joel Glodowski
Title Managing Director
<PAGE>
Exhibit 10.42
SUPPLEMENT NO. 2 dated as of June 3, 1998 to the Security
Agreement dated as of June 23, 1997, among ROLLER BEARING COMPANY OF AMERICA,
INC., a Delaware Corporation (the "Borrower"), each subsidiary of the
Borrower listed on Schedule I thereto (each subsidiary individually a
"Guarantor" and collectively, the "Guarantors"; the Guarantors and the
Borrower are referred to collectively herein as the "Grantors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the law of Switzerland, acting
through its New York branch, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined herein).
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997, as amended by Amendment No. 1 dated as of April 15, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Collateral Agent and as issuing bank (in such capacity, the
"Issuing Bank") and (b) the Guarantee Agreement dated as of June 23, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Guarantee
Agreement"), among the Guarantors and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Section 7.15 of Security Agreement provides that additional
Subsidiaries of the Borrower may become Grantors under the Security Agreement
by execution and delivery of an instrument in the form of this Supplement.
The undersigned Subsidiary (the "New Grantor") is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a
Grantor under the Security Agreement in order to induce the Lenders to make
additional Loans and the Issuing Bank to issue additional Letters of Credit
and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as follows:
SECTION 1. In accordance with Section 7.15 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions
of the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as
a Grantor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Grantor, as security for the payment
and performance in full of the Obligations (as defined in the Security
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Grantor's right, title and interest in and to the Collateral (as defined in
the Security Agreement) of the New Grantor. Each reference to a "Grantor" in
the Security Agreement shall be deemed to include the New Grantor. The
Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute
a single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the
<PAGE>
Collateral Agent. Delivery of an executed signature page to this Supplement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.
<PAGE>
SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.
SECTION 5. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein and in the Security Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
hereto shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it
at the address set forth under its signature below.
SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year
first above written.
MILLER ACQUISITION CORP.,
by /s/ Michael S. Gostomski
----------------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
c/o Roller Bearing Company of America
Inc.
60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ David W. Kratovil
----------------------------------------
Name: David W. Kratovil
<PAGE>
Title: Director
by /s/ Joel Glodowski
---------------------------------------
Name: Joel Glodowski
Title: Managing Director
<PAGE>
LOCATION OF COLLATERAL
<TABLE>
<CAPTION>
Description Location
------------ --------
<S> <C>
Books and Records of Accounts 60 Round Hill Road
Fairfield, CT 06430
All types 225 Industrial Boulevard
Bremen, IN 46506
</TABLE>
<PAGE>
Exhibit 10.43
SUPPLEMENT NO. 2 dated as of June 3, 1998, to the PLEDGE
AGREEMENT dated as of June 23, 1997, among ROLLER BEARING COMPANY
OF AMERICA, INC., a Delaware corporation (the "Borrower"), each
subsidiary of the Borrower listed on Schedule I thereto (each such
subsidiary individually a "Subsidiary Pledgor" and collectively,
the "Subsidiary Pledgors"; the Borrower and Subsidiary Pledgors
are referred to collectively herein as the "Pledgors") and CREDIT
SUISSE FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured
Parties (as defined in the Credit Agreement referred to below)
A. Reference is made to (a) the Credit Agreement dated as of June 23,
1997, as amended by Amendment No. 1 dated as of April 15,1988 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), Collateral Agent, and
issuing bank (in such capacity, the "Issuing Bank"), and (b) the Guarantee
Agreement dated as of June 23, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Guarantee Agreement") among the Pledgors and
the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to
induce the Lenders to make Loans and the Issuing Bank to issue Letters of
Credit. Pursuant to Section 5.11 of the Credit Agreement, each Subsidiary of
the Borrower that was not in existence or not a Subsidiary on the date of the
Credit Agreement is required to enter into the Pledge Agreement as a
Subsidiary Pledgor upon becoming a Subsidiary if such Subsidiary owns or
possesses property of a type that would be considered Collateral under the
Pledge Agreement. Section 24 of the Pledge Agreement provides that such
Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Pledgor") is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a
Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders
to make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the
New Pledgor by its signature below becomes a Pledgor under the Pledge
Agreement with the same force and effect as if originally named therein as a
Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions
of the Pledge Agreement applicable to it as a Pledgor thereunder and (b)
represents and warrants that the representations and warranties made by it as
a Pledgor thereunder are true and correct on and as of the date hereof. In
furtherance of the foregoing, the New Pledgor, as security for the payment
and performance in full of the Obligations (as defined in the Pledge
Agreement), does hereby create and grant to the Collateral Agent, its
successors and assigns, for the benefit of the Secured Parties, their
successors and assigns, a security interest in and lien on all of the New
Pledgor's right, title and interest in and to the Collateral (as defined in
the Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary
Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include
the New Pledgor. The Pledge Agreement is hereby incorporated herein by
reference.
<PAGE>
SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that,
when taken together, bear the signatures of the New Pledgor and the
Collateral Agent. Delivery of an executed signature page to this Supplement
by facsimile transmission shall be as effect as delivery of a manually signed
counterpart of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set
forth on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable, but
the validity, legality and enforceability of the remaining provisions
contained herein and in the Pledge Agreement shall not in any way be affected
or impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 15 of the Pledge Agreement. All
communications and notices hereunder to the New Pledgor shall be given to it
in care of the Borrower.
SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE>
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
MILLER ACQUISITION CORP.,
by /s/ Michael S. Gostomski
-----------------------------------
Name: Michael S. Gostomski
Title: Executive Vice President
c/o Roller Bearing Company of
America, Inc.
60 Round Hill Road
Fairfield, CT 06430
CREDIT SUISSE FIRST BOSTON, as
Collateral Agent,
by /s/ David W. Kratovil
-----------------------------------
Name: David W. Kratovil
Title: Director
by /s/ Joel Glodowski
-----------------------------------
Name: Joel Glodowski
Title: Managing Director
<PAGE>
Schedule 1 to
Supplement No. 2
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
CAPITAL STOCK
<TABLE>
<CAPTION>
Number of Registered Number and Percentage of
Issuer Certificate Owner Class of Shares Shares
- ------ ----------- ---------- --------------- -------------
<S> <C> <C> <C> <C>
None
</TABLE>
DEBT SECURITIES
<TABLE>
<CAPTION>
Principal
Issuer Amount Date of Note Maturity date
- ------ ----------- ------------ ---------------
<S> <C> <C> <C>
None
</TABLE>
<PAGE>
Exhibit 21
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
1. Industrial Tectonics Bearings Corporation, incorporated in Delaware.
2. RBC Linear Precision Products, Inc., incorporated in Delaware.
3. RBC Nice Bearings, Inc., incorporated in Delaware.
4. Bremen Bearings, Inc., incorporated in Delaware.
5. Roller Bearing Company FSC, Inc., incorporated in Barbados.
6. Miller Bearing Company, incorporated in Delaware.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> MAR-28-1998
<CASH> 10,625
<SECURITIES> 0
<RECEIVABLES> 27,052
<ALLOWANCES> 193
<INVENTORY> 38,563
<CURRENT-ASSETS> 78,043
<PP&E> 71,052
<DEPRECIATION> 25,815
<TOTAL-ASSETS> 156,405
<CURRENT-LIABILITIES> 30,827
<BONDS> 136,200
0
0
<COMMON> 0
<OTHER-SE> (14,922)
<TOTAL-LIABILITY-AND-EQUITY> 156,405
<SALES> 136,009
<TOTAL-REVENUES> 136,009
<CGS> 97,223
<TOTAL-COSTS> 19,492
<OTHER-EXPENSES> 8,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,761
<INCOME-PRETAX> (1,161)
<INCOME-TAX> 131
<INCOME-CONTINUING> (1,292)
<DISCONTINUED> 0
<EXTRAORDINARY> 625
<CHANGES> 0
<NET-INCOME> (1,917)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
