UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
Commission File number 1-5985
NEWCOR, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 38-0865770
- ------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1825 S. Woodward Ave., Suite 240
Bloomfield Hills, MI 48302 (810) 253-2400
- --------------------------------------- -------------------------------
(Address of principal executive office) (Registrant's telephone number)
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 ( ).
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 10, 1996, the Registrant has 4,691,815 outstanding shares of
common stock, $1.00 par value, the Registrant's only class of common stock.
PART I. FINANCIAL INFORMATION
NEWCOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Six Months Ended Three Months Ended
-------------------- --------------------
4/30/96 4/30/95 4/30/96 4/30/95
-------- -------- -------- --------
Sales $ 50,388 $ 44,849 $ 27,128 $ 22,653
Cost of sales 39,556 36,371 21,631 18,749
-------- -------- -------- --------
Gross margin 10,832 8,478 5,497 3,904
SG&A expenses 7,004 5,864 3,818 3,140
-------- -------- -------- --------
Operating income 3,828 2,614 1,679 764
Other income (expense):
Interest expense (857) (748) (439) (364)
Other 212 74 44 36
-------- -------- -------- --------
Income before income taxes 3,183 1,940 1,284 436
Provision for income taxes 1,102 660 450 148
-------- -------- -------- --------
Income from continuing
operations 2,081 1,280 834 288
-------- -------- -------- --------
Discontinued operations:
Loss from discontinued
operations, net of
tax benefit (Note C) (1,203) (1,241) (431) (579)
Loss on sale of discontinued
operations, net of tax
benefit of $1,800 (3,500) - (3,500) -
-------- -------- -------- --------
Loss from discontinued
operations (4,703) (1,241) (3,931) (579)
-------- -------- -------- --------
Net income (loss) $ (2,622) $ 39 $ (3,097) $ (291)
======== ======== ======== ========
Amounts per share of common stock:
Income from continuing
operations $ 0.44 $ 0.27 $ 0.18 $ 0.06
Net income (loss) $ (0.56) $ 0.01 $ (0.66) $ (0.06)
Dividends $ 0.10 $ 0.10 $ 0.05 $ 0.05
Weighted average common
shares outstanding 4,683 4,678 4,687 4,679
The accompanying notes are an integral part of
the condensed consolidated financial statements
NEWCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
4/30/96 10/31/95
-------- --------
ASSETS
Current assets:
Cash and equivalents $ 150 $ 29
Accounts receivable 23,692 24,906
Costs and estimated earnings in excess
of related billings on uncompleted
contracts 4,003 9,784
Inventories 5,215 4,979
Other current assets 4,411 3,196
-------- --------
Total current assets 37,471 42,894
Property, plant and equipment, net of
accumulated depreciation of $19,173
at 4/30/96 and $20,081 at 10/31/95 26,478 24,518
Other long-term assets 17,575 10,141
-------- --------
Total assets $ 81,524 $ 77,553
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,752 $ 7,605
Accrued liabilities 12,842 8,714
-------- --------
Total current liabilities 19,594 16,319
Long-term debt 29,000 26,200
Postretirement benefits and other 10,031 9,125
-------- --------
Total liabilities 58,625 51,644
-------- --------
Shareholders' equity:
Common stock 4,691 4,679
Capital in excess of par 463 395
Unfunded pension liability (536) (536)
Retained earnings 18,281 21,371
-------- --------
Total shareholders' equity 22,899 25,909
-------- --------
Total liabilities & shareholders' equity $ 81,524 $ 77,553
======== ========
The accompanying notes are an integral part of
the condensed consolidated financial statements
NEWCOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
-----------------------
4/30/96 4/30/95
-------- --------
Operating Activities:
Income from continuing operations $ 2,081 $ 1,280
Depreciation and amortization 1,934 1,716
Other (223) 364
Changes in net operating assets 3,531 (2,485)
-------- -------
Net cash from continuing operations 7,323 875
Net cash from discontinued operations 4,661 5,079
-------- --------
Net cash provided by operations 11,984 5,954
-------- --------
Investing Activities:
Capital expenditures, net (2,375) (2,589)
Acquisitions (11,900) -
-------- --------
Net cash used by investing activities (14,275) (2,589)
-------- --------
Financing Activities:
Long-term borrowings on revolving
line of credit, net 2,800 (2,900)
Cash dividends (468) (468)
Shares issued under stock option plans 80 24
-------- --------
Net cash from financing activities 2,412 (3,344)
-------- --------
Increase in cash and equivalents 121 21
Cash and equivalents, November 1 29 55
-------- --------
Cash and equivalents, April 30 $ 150 $ 76
======== ========
The accompanying notes are an integral part of
the condensed consolidated financial statements
NEWCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a
fair presentation have been included, and such adjustments are of
a normal recurring nature. Results for interim periods should
not be considered indicative of results for a full year. The
year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures
required by generally accepted accounting principles. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended October 31, 1995.
Note B. Interest of $807,000 and $870,000 was paid during the six months
ended April 30, 1996 and 1995, respectively. Income taxes of
$540,000 were paid during the six months ended April 30, 1996.
Income tax refunds of $1,652,000 were received during the six
months ended April 30, 1995.
Note C. On May 6, 1996, Newcor sold the business and certain assets of
its Wilson Automation division (Wilson) to ABB Flexible
Automation, a unit of ABB (Asea Brown Boveri). Wilson designs
and manufactures engine, transmission, and axle assembly systems.
All receivables, the land and building, and certain liabilities
were retained by Newcor. The building is being leased to ABB.
Although assets were sold at approximately net book value,
reserves were established for curtailment of the pension plan,
employee separation costs for those employees not hired by ABB
Flexible Automation, costs associated with the collection of
accounts receivable and additional liabilities related to
contracts for which Newcor has retained the responsibility and
liabilities, and the operating loss from the measurement date
(March 31, 1996) to the sale date. These reserves resulted in a
net loss of $3.5 million on the disposition of Wilson. Summary
operating results of discontinued operations through the
measurement date are as follows:
Six Months Ended Three Months Ended
-------------------- --------------------
4/30/96 4/30/95 4/30/96 4/30/95
-------- -------- -------- --------
Revenues $ 9,173 $ 12,563 $ 4,090 $ 6,836
Loss before income taxes (1,814) (1,880) (645) (877)
Provision for income taxes (611) (639) (214) (298)
Net loss from discontinued
operations (1,203) (1,241) (431) (579)
Note D. On December 4 and 5, 1995, the Company signed three separate
definitive agreements to purchase for cash certain assets of
three unrelated companies in the molded rubber and plastic
component parts industry. Each company primarily manufactures
parts for the automotive industry. Two of the acquisitions were
completed on January 2, 1996 and the third was completed on April
1, 1996. The total purchase price for all three acquisitions was
approximately $11.9 million and was financed through an increase
in the Company's existing line of credit facility. The
acquisitions were recorded using the purchase method of
accounting. The three acquisitions had combined sales during
1995 of approximately $22 million and estimated net book value of
$4 million.
Note E. On April 12, 1996, Newcor amended its revolving credit agreement
to allow for a portion of the revolving credit to be replaced
with a fixed-rate term loan. On May 13, 1996, the Company
entered into a $10 million seven-year fixed-rate term loan at
7.85% interest. No principal payments are due for the first two
years. Monthly principal payments of $166,667 are due from June
10, 1998 through May 10, 2003. Effective May 13, 1996, the
amount available under the revolving credit agreement was reduced
from $32.5 million to $20 million. The amendment to the
revolving credit agreement also contains covenants relating to
tangible net worth, funded debt to EBITDA (earnings before
interest, taxes, depreciation and amortization), current ratio
and debt service coverage ratio.
Note F. In October 1995, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 123, " Accounting for Stock-
Based Compensation" (FAS 123) which allows two alternative
methods of accounting for stock-based employee compensation
plans. Either the " fair value based method of accounting" (the
recognition method) set forth in FAS 123 can be applied or the
entity can continue to apply APB No. 25, " Accounting for Stock
Issued to Employees" for financial statement purposes and then
disclose pro forma net income and earnings per share determined
as if the fair value based method had been applied (the
disclosure method). The Company anticipates adopting the
disclosure method effective in fiscal 1997.
NEWCOR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
- --------
Newcor is organized into two business segments: Components and Assemblies
and Special Machines. The Components and Assemblies segment consists of
automotive components and farm equipment parts machined in dedicated
manufacturing cells, molded rubber and plastic parts, and non-symmetrical
machine contoured parts produced and sold in small quantities. This
segment had previously been referred to as the Precision Parts segment but
has been renamed to better reflect the current business of the companies
within the segment. Special machines consist of a range of standard
individual machines, as well as custom designed machines on a made-to-order
basis and sold either individually or incorporated into complete systems.
Revenues and costs for special machines are determined under the percentage
of completion method of accounting.
The events of the past six months mark a turning point in Newcor's history.
The Company completed the acquisition of three rubber and plastic product
companies which, when combined with Midwest Rubber, a division acquired in
1992, has strengthened the Company's market position in this field and
created the critical mass that is necessary to provide the engineering and
manufacturing resources that automotive customers expect from their
suppliers. The Company is also approaching full production on two
important new parts programs within the Components and Assemblies segment,
as well as working on several proposals for other significant new component
business opportunities.
Effective May 6, 1996, the business and certain assets of Newcor's Wilson
Automation Division were sold to ABB Flexible Automation. Wilson designs
and manufactures engine, transmission, and axle assembly systems. The
competition in this market primarily consists of large, multi-billion
dollar global companies that are better able to handle the volatility
relating to both operating results and working capital needs. In addition
to ensuring Wilson's future in the global assembly system market, the
disposition of Wilson will free up capital and management to pursue new
business opportunities, primarily in the Components and Assemblies segment
which currently accounts for approximately 75% of Newcor's revenue. Newcor
is now predominantly an automotive component supplier devoted to
operational excellence.
During the second quarter of 1996, Newcor generated income from continuing
operations of $834,000 on sales of $27.1 million compared to income from
continuing operations of $288,000 on sales of $22.7 million for the second
quarter of 1995. This performance improvement reflects the benefits from a
number of programs initiated throughout the Company to achieve continuous
improvement. Included in this quarter were start-up costs to attain
process capability and productivity objectives on two important new
programs within the Components and Assemblies segment, as well as costs
associated with the integration of the three rubber and plastic component
manufacturers that were acquired.
Results of Continuing Operations
- --------------------------------
Consolidated sales by segment are as follows (in thousands):
Six Months Ended Three Months Ended
4/30/96 4/30/95 4/30/96 4/30/95
-------- -------- -------- --------
Components and Assemblies $ 36,758 $ 30,185 $ 20,687 $ 15,426
Special Machines 13,630 14,664 6,441 7,227
-------- -------- -------- --------
Total Sales $ 50,388 $ 44,849 $ 27,128 $ 22,653
======== ======== ======== ========
Consolidated sales increased 20% for the second quarter of 1996 compared to
the second quarter of 1995 reflecting a 34% increase in Components and
Assemblies segment sales offset by a 11% decrease in Special Machines
segment sales. Approximately $3.5 million of the Components and Assemblies
segment increase was due to the acquisitions of three rubber and plastic
component manufacturers. The remaining increase represented the
incremental new business that this segment has been awarded over the past
twelve months, partially offset by lower automotive releases on parts for
certain models. The decrease in Special Machines segment sales reflects
the stage of certain contracts in process at quarter end.
Consolidated gross profit percentage for the second quarter of 1996 was
20.3% compared to 18.4% for the year ended October 31, 1995 and 17.2% for
the second quarter of 1995. A portion of this improvement was due to the
performance of the rubber and plastic acquisitions, however, the effects of
the company-wide initiatives in the areas of quality, customer focus and
internal operating efficiency are also beginning to be seen in the
financial results. Consolidated gross profit percentage for the first
quarter of 1996 was 22.9% which included the shipment of a large welding
machine by the Special Machines segment.
Selling, general and administrative expenses for the second quarter of 1996
increased 21.6% compared to the second quarter of 1995. This was due to
two main factors: the additional SG&A costs related to the acquisitions
and additional personnel and training costs related to the company-wide
initiatives mentioned above.
Operating income by segment was as follows (in thousands):
Six Months Ended Three Months Ended
4/30/96 4/30/95 4/30/96 4/30/95
-------- -------- -------- --------
Components and Assemblies $ 3,038 $ 2,354 $ 1,706 $ 1,106
Special Machines 1,574 1,220 361 256
Corporate (784) (960) (388) (598)
-------- -------- -------- --------
Total Operating Income $ 3,828 $ 2,614 $ 1,679 $ 764
======== ======== ======== ========
Operating income for the Components and Assemblies segment increased for
the second quarter of 1996 compared to 1995 due to the higher sales and
margins, partially offset by the increased SG&A costs referred to above.
Operating income for the second quarter of 1996 for the Special Machines
segment increased slightly compared to 1995. Significant shipments of
completed machines were made during the first quarter of both 1996 and
1995, which caused the segment's operating income for those quarters to be
in excess of the results for the second quarter of both years. Corporate
expenses were higher during the second quarter of 1995 due to costs related
to various personnel changes.
Interest expense was higher for the second quarter of 1996 as compared to
1995 primarily due to the three acquisitions. The apparent income tax rate
was 35% and 34% for the quarters ended April 30, 1996 and 1995,
respectively.
Discontinued Operations
- -----------------------
The loss from discontinued operations for 1996 reflects the operations of
Wilson Automation through the measurement date, March 31, 1996. Although
assets were sold at approximately net book value, reserves were established
for curtailment of the pension plan, employee separation costs for those
employees not hired by ABB Flexible Automation, costs associated with the
collection of accounts receivable and additional liabilities related to
contracts for which Newcor has retained the responsibility and liabilities,
and the operating loss from the measurement date to the sale date. These
reserves resulted in a net loss of $3.5 million on the disposition of
Wilson.
Liquidity and Capital Resources
- -------------------------------
During the first six months of 1996, Newcor spent over $14 million on
acquisitions and capital spending. However, this necessitated only a $2.8
million increase in debt, as consolidated operations generated almost $12
million. Most of this came from reductions in accounts receivable (due to
receiving progress payments on a major assembly system) and Special
Machines segment inventory (due to the completion and shipment of a major
welding system).
During the first six months of 1995, Newcor's consolidated operations
generated cash of $6 million which was used to fund $2.6 million of capital
purchases and pay down $2.9 million of debt. The positive cash flow from
operations was generated by the net income plus depreciation and
amortization of $1.8 million and a reduction in net operating assets of
$3.8 million. The main cause of the change in net operating assets was a
reduction in the Special Machines segment inventory build due to the stage
of contracts-in-progress.
On April 12, 1996, the Company amended its revolving credit agreement to
allow for a portion of the revolving credit to be replaced with a fixed-
rate term loan. On May 13, 1996, the Company entered into a $10 million
seven-year fixed-rate term loan at 7.85% interest. No principal payments
are due for the first two years. Monthly principal payments of $166,667
are due from June 10, 1998 through May 10, 2003. Effective May 13, 1996,
the amount available under the revolving credit agreement was reduced from
$32.5 million to $20 million.
The Company continues to pay a quarterly cash dividend of $.05 per share of
common stock. Total dividends paid during the first six months of both
1996 and 1995 were $468,000. Future dividends will be determined at the
quarterly meetings of the Board of Directors after considering cash
requirements for operations and reviewing the Company's financial condition
and strategic direction.
The Company believes that existing and potential debt capacity and cash
from operations will be adequate to service debt obligations, continue
capital improvements, and maintain adequate working capital.
NEWCOR, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit 4 (a) - Second Amended and Restated Revolving Credit
Agreement between Newcor, Inc. and Comerica
Bank dated March 6, 1995.
Exhibit 4 (b) - Fourth Amendment to the Second Amended and
Restated Revolving Credit Agreement with
Comerica Bank dated April 12, 1996.
Exhibit 10(i) - Asset Purchase and Sale Agreement between
Newcor, Inc. and ABB Flexible Automation,
Inc. dated May 6, 1996.
Exhibit 10(j) - Service Agreement dated May 6, 1996 between
Newcor, Inc. and ABB Flexible Automation.
Exhibit 27 - Financial Data Schedule-EDGAR version only.
(b) Reports on Form 8-K:
On April 4, 1996, Newcor, Inc. filed a Form 8-K announcing
that ABB Flexible Automation had signed a letter of intent
to purchase the Wilson Automation Division from Newcor.
On May 21, 1996, Newcor, Inc. filed a Form 8-K announcing
the completion of the sale of its Wilson Automation Division
to ABB Flexible Automation.
SIGNATURES
Pursuant to the requirement 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.
NEWCOR, INC.
----------------------------
Registrant
Date: June 14, 1996 /s/ John Garber
------------- ----------------------------
John Garber
Vice President-Finance
Principal Financial and
Accounting Officer
====================================
NEWCOR, INC.
SECOND
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED MARCH 6, 1995
COMERICA BANK
====================================
Execution Copy
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED AGREEMENT, made as of the 6th day of
March, 1995, by and between NEWCOR, INC., a Delaware corporation, of Troy,
Michigan (herein called "Company") and COMERICA BANK, a Michigan banking
corporation, of Detroit, Michigan (herein called "Bank");
RECITALS:
A. Company and Bank entered into an Amended and Restated
Revolving Credit Agreement dated July 26, 1994, as amended
("Existing Credit Agreement").
B. Company and Bank desire to amend the Existing Credit
Agreement in its entirety.
NOW, THEREFORE, Bank and Company agree that the Existing Credit
Agreement is amended in its entirety as follows:
WITNESSETH:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Advance" shall mean a borrowing requested by Company and made by Bank
under this Agreement, including any refunding or conversions of such
borrowing pursuant to Section 2.7 hereof, and shall include a Eurodollar-
based Advance and a Prime-based Advance.
"Alternate Base Rate" shall mean for any day a rate per annum (rounded
upwards, if necessary, to the next higher 1/8 of 1%) equal to the Federal
Funds Effective Rate in effect on such day plus one percent (1%).
"Applicable Interest Rate" shall mean the Eurodollar-based Rate or the
Prime-based Rate, as selected by Company from time to time subject to the
terms and conditions of this Agreement.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business (including dealings in foreign
exchange) in Detroit, London and New York.
"Commitment" shall mean the total commitment of Bank to make Advances
to Company pursuant to this Agreement in the amount of Twenty Eight Million
Dollars ($28,000,000), subject to reduction as herein provided.
"Consolidated" or "Consolidating" shall, when used with reference to
any financial information pertaining to (or when used as a part of any
defined term or statement pertaining to the financial condition of) Company
and its Subsidiaries, mean the accounts of Company and its Subsidiaries
determined on a consolidated or consolidating basis, as the case may be,
all determined as to principles of consolidation and, except as otherwise
specifically required by the definition of such term or by such statements,
as to such accounts, in accordance with generally accepted accounting
principles applied on a consistent basis and consistent with the financial
statements, if any, as at and for the fiscal year ended October 31, 1994.
"Debt to Worth Ratio" shall mean the ratio of total liabilities to
Tangible Net Worth (as hereafter defined).
"Environmental Laws" shall mean all federal, state and local laws
including statutes, regulations, ordinances, codes, rules, and other
governmental restrictions and requirements, relating to environmental
pollution, contamination or other impairment of any nature, any hazardous
or other toxic substances of any nature, whether liquid, solid and/or
gaseous, including smoke, vapor, fumes, soot, acids, alkalis, chemicals,
wastes, by-products, and recycled materials. These Environmental Laws shall
include but not be limited to the Federal Solid Waste Disposal Act, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act of 1986, regulations of the
Environmental Protection Agency, regulations of the Nuclear Regulatory
Agency, regulations of any state department of natural resources or state
environmental protection agency now or at any time hereafter in effect and
local health department ordinances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"Eurodollar-based Advance" shall mean an Advance which bears interest
at the Eurodollar-based Rate.
"Eurodollar-based Rate" shall mean a per annum interest rate which is
one percent (1%) plus the quotient of:
(a) the per annum interest rate at which Bank's Eurodollar
Lending Office offers deposits to prime banks in the eurodollar
market in an amount comparable to the relevant Eurodollar-based
Advance and for a period equal to the relevant Eurodollar-
Interest Period at approximately the time the relevant Eurodollar-
based Advance is made; divided by
(b) a percentage equal to 100% minus the maximum rate on such
date at which Bank is required to maintain reserves on "Euro-
currency Liabilities" as defined in and pursuant to Regulation D
of the Board of Governors of the Federal Reserve System or, if
such regulation or definition is modified, and as long as Bank is
required to maintain reserves against a category of liabilities
which includes eurodollar deposits or includes a category of
assets which includes eurodollar loans, the rate at which such
reserves are required to be maintained on such category.
"Eurodollar-Interest Period" shall mean an Interest Period of one (1),
two (2), three (3), or six (6) months as selected by Company pursuant to
Sections 2.5 or 2.7 of this Agreement.
"Eurodollar Lending Office" shall mean Bank's office located at Grand
Cayman Island, British West Indies or such other branch of Bank, domestic
or foreign, as it may hereafter designate as its Eurodollar Lending Office
by notice to Company.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day
on such transactions received by Bank from three Federal funds brokers of
recognized standing selected by it.
"Guaranty" shall mean the Guaranty Agreement dated March 9, 1992 from
the Guarantors to Bank, together with any additional guaranty delivered to
Bank by a Subsidiary pursuant to the provisions of Section 6.14 hereof, in
each case as the same may be amended from time to time.
"Guarantors" shall mean Eonic, Inc., Newcor Machine Tool, Inc. and
Rochester Gear, Inc. and each other person who from time to time is
required pursuant to the terms of this Agreement to guaranty Company's
obligations to Bank hereunder.
"Interest Period" shall mean a Eurodollar-Interest Period commencing
on the day a Eurodollar-based Advance is made, provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding
Business Day, except that as to a Eurodollar-Interest Period, if
the next succeeding Business Day falls in another calendar month,
the Eurodollar-Interest Period shall end on the next preceding
Business Day, and when a Eurodollar-Interest Period begins on a
day which has no numerically corresponding day in the calendar
month during which such Eurodollar-Interest Period is to end, it
shall end on the last Business Day of such calendar month, and
(b) no Interest Period shall extend beyond the maturity date set
forth in the Note to which such Interest Period is to apply.
"Letter of Credit Maximum Amount" shall mean Three Million Dollars
($3,000,000).
"Net Worth" for any person shall mean, at any date, an amount computed
in accordance with generally accepted accounting principles consistently
applied and determined by subtracting total liabilities from total assets.
"Pension Plans" shall mean all pension plans of Company which are
subject to ERISA.
"Prime Rate" shall mean the per annum interest rate established by
Bank as its prime rate for its borrowers as such rate may vary from time to
time, which rate is not necessarily the lowest rate on loans made by Bank
at any such time.
"Prime-based Advance" shall mean an advance which bears interest at
the Prime-based Rate.
"Prime-based Rate" shall mean a per annum interest rate which is the
greater of (i) the Prime Rate or (ii) the Alternate Base Rate.
"Request for Advance" shall mean a Request for Advance issued by
Company under this Agreement in the form annexed to this Agreement as
Exhibit "B".
"Revolving Credit Maturity Date" shall mean February 28, 1997.
"Revolving Credit Note" shall mean the revolving credit note issued by
Company under this Agreement in the form annexed to this Agreement as
Exhibit "A".
"Subsidiary" shall mean a corporation of which more than fifty percent
(50%) of the outstanding voting stock is owned by Company, either directly
or indirectly, through one or more intermediaries and "Subsidiaries" shall
refer, collectively, to each Subsidiary of Company.
"Tangible Net Worth" for any person shall mean, at any date, an amount
computed in accordance with generally accepted accounting principles
consistently applied and determined by subtracting total liabilities from
total assets and subtracting from such amount goodwill and other intangible
assets and any assets not related to the normal course of such person's
business as conducted on the date of the computation.
"Working Capital" for any person shall mean an amount computed in
accordance with generally accepted accounting principles consistently
applied by subtracting, on any date, the current liabilities of such person
from its current assets.
2. THE INDEBTEDNESS: Revolving Credit
2.1 Bank agrees to make Advances to Company at any time and from time
to time from the effective date hereof until the Revolving Credit Maturity
Date, not to exceed the Commitment in aggregate principal amount at any one
time outstanding. All of the Advances hereunder shall be evidenced by the
Revolving Credit Note under which advances, repayments and readvances may
be made, subject to the terms and conditions of this Agreement. Advances
outstanding under the Existing Agreement shall be deemed to be Advances
under this Agreement with the same Interest Periods and Applicable Interest
Rates. Interest accrued and unpaid under the Existing Agreement shall be
deemed to have accrued hereunder.
2.2 The Revolving Credit Note shall mature on the Revolving Credit
Maturity Date and each Advance from time to time outstanding thereunder
shall bear interest at its Applicable Interest Rate. The amount and date of
each Advance, its Applicable Interest Rate, its Interest Period, and the
amount and date of any repayment shall be noted on Bank's records, which
records will be conclusive evidence thereof.
2.3 Interest on the unpaid balance of all Prime-based Advances from
time to time outstanding, shall be payable quarterly commencing on April
30, 1995 and on the last day of each quarter thereafter. Interest accruing
at the Prime-based Rate shall be computed on the basis of a 360 day year
and assessed for the actual number of days elapsed, and in such computation
effect shall be given to any change in the Prime-based Rate resulting from
a change in the Prime-based Rate on the date of such change in the Prime-
based Rate.
2.4 Interest on each Eurodollar-based Advance shall be payable on the
last day of the Interest Period applicable thereto. Interest accruing at
the Eurodollar-based Rate shall be computed on the basis of a 360 day year
and assessed for the actual number of days elapsed from the first day of
the Interest Period applicable thereto to but not including the last day
thereof.
2.5 Company may request an Advance upon the delivery to Bank of a
Request for Advance executed by an authorized officer of Company, subject
to the following:
(a) each such Request for Advance shall set forth the
information required on the Request for Advance form annexed
hereto as Exhibit "B";
(b) each such Request for Advance shall be delivered to Bank by
4:00 p.m. on the proposed date of Advance;
(c) the principal amount of such Advance, plus the amount of any
outstanding indebtedness to be then combined therewith having the
same Applicable Interest Rate and Interest Period, if any, shall
be (i) in the case of a Prime-based Advance at least $100,000 and
(ii) in the case of a Eurodollar-based Advance at least $500,000
or any larger amount in $100,000 increments;
(d) a Request for Advance, once delivered to Bank, shall not be
revocable by Company.
2.6 Company may prepay all or part of the outstanding balance of the
Prime-based Advance(s) under the Line of Credit Note at any time, provided
that the amount of any such partial prepayment shall be at least $100,000
and the aggregate balance of Prime-based Advance(s) remaining outstanding
shall be at least $100,000. Upon two (2) Business Days prior notice to
Bank, Company may prepay all or part of any Eurodollar-based Advance on the
last day of the Interest Period therefor, provided that the amount of any
such partial prepayment shall be at least $500,000 and the unpaid portion
of such Advance which is refunded or converted under Section 2.7 shall be
subject to the limitations of subsection (c) thereof. Any prepayment made
in accordance with this Section shall be without premium, penalty or
prejudice to Company's right to reborrow under the terms of this Agreement.
Any other prepayment shall be restricted by Section 3.1 hereof.
2.7 Company may refund any Advance in the same type of Advance or
convert any Advance to any other type of Advance upon the delivery to Bank
of a Request for Advance, subject to the following:
(a) each such Request for Advance shall set forth the
information required on the Request for Advance form annexed
hereto as Exhibit "B";
(b) each such Request for Advance shall be delivered to Bank by
11:00 a.m. on the proposed date of refunding or conversion, which
proposed date in the case of an outstanding Eurodollar-based
Advance shall only be on the last day of the Interest Period
applicable thereto;
(c) the amount to be converted to or refunded, plus the amount
of any outstanding indebtedness or new Advance to be then
combined therewith having the same Applicable Interest Rate and
Interest Period, if any, shall be (i) in the case of a Prime-
based Advance at least $100,000 and (ii) in the case of a
Eurodollar-based Advance at least $500,000;
(d) a Request for Advance, once delivered to Bank, shall not be
revocable by Company.
If, as to any outstanding Eurodollar-based Advance, Bank shall not receive
a timely Request for Advance, the principal amount thereof which is not
then prepaid shall be automatically converted to a Prime-based Advance on
the last day of the Interest Period applicable thereto, subject in all
cases to the requirement that the aggregate outstanding amount of Prime-
based Advances shall be at least $100,000.
2.8 Subject to the terms and conditions of this Agreement, Bank may,
at any time and from time to time until the Revolving Credit Maturity Date,
upon the request of Company, issue letters of credit ("Letters of Credit")
for the account of Company, in an aggregate amount at any one time
outstanding not to exceed the Letter of Credit Maximum Amount. Each Letter
of Credit shall provide an initial expiration date not later than the
Revolving Credit Maturity Date. All applications by Company for Letters of
Credit will be submitted, and all Letters of Credit issued, in accordance
with United States Treasury Foreign Assets Control and Cuban Control
Regulations and, further, no Letters of Credit will be issued in favor of
any beneficiary in Libya, Syria, Iraq or Iran. Letters of Credit shall be
issued upon terms and conditions acceptable to Bank. A Letter of Credit
commission in the amount of one half of one percent (1/2%) per annum shall
be payable with respect to each Letter of Credit, which shall be payable
annually in advance. Letters of Credit issued under the Existing Agreement
shall be deemed to be Letters of Credit issued hereunder.
2.9 No Letter of Credit shall be issued unless, as of the date the
issuance of such Letter of Credit is requested:
(a) the face amount of the Letter of Credit requested
when added to the face amount of all other outstanding
Letters of Credit does not exceed the Letter of Credit
Maximum Amount;
(b) the face amount of the Letter of Credit requested
when added to the principal amount of all Advances under the
Line of Credit Note outstanding and other outstanding
Letters of Credit, does not exceed the Commitment;
(c) the obligations of Company set forth in this
Agreement are valid, binding and enforceable obligations of
Company;
(d) no event of default hereunder exists and no event
which, with the giving of notice or lapse of time, or both,
would constitute an event of default hereunder exists;
(e) the representations and warranties contained in
this Agreement are true in all material respects;
(f) no order, judgment or decree of any court,
arbitrator or governmental authority shall purport by its
terms to enjoin or restrain Bank from issuing the Letter of
Credit.
2.10 Company agrees to pay to Bank a commitment fee on the average
daily balance of the unused portion of the revolving credit (less any
outstanding Letters of Credit) at the rate of one quarter percent (1/4%)
per annum, computed on the actual number of days elapsed using a year of
360 days. The commitment fee shall be payable quarterly commencing April
30, 1995. Commitment fees accrued and unpaid under the Existing Agreement
shall be deemed to have accrued hereunder.
3. SPECIAL PROVISIONS, CHANGES IN CIRCUMSTANCES AND YIELD
PROTECTION.
3.1 As to any Eurodollar-based Advance, if any prepayment thereof
shall occur on any day other than the last day of an Interest Period
(whether pursuant to this Article, or by acceleration, or otherwise), or if
an Applicable Interest Rate shall be changed during any Interest Period
pursuant to this Article, Company shall reimburse Bank on demand for any
costs incurred by Bank as a result of the timing thereof including but not
limited to any costs incurred in liquidating or employing deposits from
third parties, provided that Bank shall have delivered to Company a
certificate setting forth the basis for determining such costs, which
certificate shall be conclusively presumed correct save for manifest error.
3.2 For any Interest Period for which the Applicable Interest Rate is
the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending
Office which maintains books separate from those of the rest of Bank, Bank
shall have the option of maintaining and carrying the relevant Advance on
the books of such Eurodollar Lending Office.
3.3 If with respect to any Interest Period Bank determines that, by
reason of circumstances affecting the foreign exchange and interbank
markets generally, deposits in Eurodollars in the applicable amounts are
not being offered to the Bank for such Interest Period, then Bank shall
forthwith give notice thereof to the Company. Thereafter, until Bank
notifies Company that such circumstances no longer exist, the obligation of
Bank to make Eurodollar-based Advances, and the right of Company to convert
an Advance to or refund an Advance as a Eurodollar-based Advance shall be
suspended.
3.4 If, after the date hereof, the introduction or implementation of,
or any change in, any applicable law, rule or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by
Bank (or its Eurodollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, shall make
it unlawful or impossible for the Bank (or its Eurodollar Lending Office)
to honor its obligations hereunder to make or maintain any Advance with
interest at the Eurodollar-based Rate, Bank shall forthwith give notice
thereof to Company. Thereafter (a) the obligation of Bank to make
Eurodollar-based Advances and the right of Company to convert an Advance or
refund an Advance as a Eurodollar-based Advance shall be suspended and
thereafter Company may select as Applicable Interest Rates only those which
remain available, and (b) if Bank may not lawfully continue to maintain an
Advance to the end of the then current Interest Period applicable thereto,
the Prime-based Rate shall be the Applicable Interest Rate for the
remainder of such Interest Period.
3.5 If the adoption or implementation after the date hereof, or any
change after the date hereof in, any applicable law, rule or regulation of
any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not
having the force of law) made by any such authority, central bank or
comparable agency after the date hereof:
(a) shall subject Bank (or its Eurodollar Lending Office) to any
tax, duty or other charge with respect to any Advance or the
Revolving Credit Note or shall change the basis of taxation of
payments to Bank (or its Eurodollar Lending Office) of the
principal of or interest on any Advance or the Revolving Credit
Note or any other amounts due under this Agreement in respect
thereof (except for changes in the rate of tax on the overall net
income of Bank or its Eurodollar Lending Office imposed by the
jurisdiction in which Bank's principal executive office or
Eurodollar Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the
account of, or credit extended by Bank (or its Eurodollar Lending
Office) or shall impose on Bank (or its Eurodollar Lending
Office) or the foreign exchange and interbank markets any other
condition affecting any Advance or the Revolving Credit Note;
and the result of any of the foregoing is to increase the costs to Bank of
maintaining any part of the indebtedness hereunder or to reduce the amount
of any sum received or receivable by Bank under this Agreement or under the
Revolving Credit Note, by an amount deemed by the Bank to be material, then
Bank shall promptly notify Company of such fact and demand compensation
therefor and, within fifteen days after demand by Bank, Company agrees to
pay to Bank such additional amount or amounts as will compensate Bank for
such increased cost or reduction. Bank will promptly notify Company of any
event of which it has knowledge which will entitle Bank to compensation
pursuant to this Section. A certificate of Bank setting forth the basis for
determining such additional amount or amounts necessary to compensate Bank
shall be conclusively presumed to be correct save for manifest error.
3.6 In the event that at any time after the date of this Agreement
any change in law such as described in Section 4.5, hereof, shall, in the
reasonable opinion of Bank require that the credit provided under this
Agreement be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by Bank or
any corporation controlling Bank, Bank shall notify Company. Company and
Bank shall thereafter negotiate in good faith an agreement to increase the
commitment fee payable to Bank hereunder, to a rate which in the reasonable
opinion of Bank will adequately compensate the Bank for the costs
associated with such change in law. If Company and Bank are unable to agree
on such increase within thirty (30) days from the date of the notice to
Company, Company shall have the option, exercised by written notice to Bank
within forty-five (45) days from the date of the aforesaid notice to
Company from Bank, to terminate this Agreement, in which event, all sums
then outstanding to Bank hereunder shall be due and payable in full. If (a)
Company and Bank fail to agree on an increase in the commitment fee, or (b)
Company fails to give timely notice that it has elected to exercise its
option to terminate this Agreement as set forth above, then this Agreement
shall automatically terminate as of the last day of the aforesaid forty-
five (45) day period, in which event all sums then outstanding to Bank
hereunder shall be due and payable in full.
4. CONDITIONS
4.1 Company agrees to furnish Bank prior to the initial borrowing
under this Agreement, in form and substance to be satisfactory to Bank,
with (i) certified copies of resolutions of the Board of Directors of
Company and each Guarantor evidencing approval of the borrowing hereunder
and the transactions contemplated hereby; (ii) certified copies of
Company's and each Guarantor's Certificate of Incorporation and Bylaws; and
(iii) a certificate of good standing from the state of Company's and each
Guarantor's incorporation and from the states in which each of them is
qualified to do business.
4.2 Bank shall not be obligated to make any Advance if at the time of
such request for Advance, the Advances outstanding under the Revolving
Credit Note and the stated amount of outstanding Letters of Credit when
added to the amount requested would exceed the Commitment.
4.3 As security for all indebtedness of Company to Bank hereunder,
Company agrees to furnish, execute and deliver to Bank, or cause to be
furnished, executed and delivered to Bank, prior to or simultaneously with
the initial borrowing hereunder, in form to be satisfactory to Bank and
supported by appropriate resolution in certified form authorizing same, the
following:
(a) Negative pledge letters from each Guarantor; and
(b) A Guaranty from each of Company's Subsidiaries in form
similar to that annexed as Exhibit "C".
To the extent that Company or a Guarantor has heretofore given a security
interest to Bank to certain of the foregoing and such documents and
agreements comply with the requirements of this Agreement, it is hereby
agreed that such documents and agreements shall remain in full force and
effect for the purposes of this Agreement, but Bank may, if it deems it
necessary or desirable, require execution of a new agreement or agreements.
5. REPRESENTATIONS AND WARRANTIES
Company represents and warrants and such representations and
warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement:
5.1 It and each of its Subsidiaries is a corporation duly organized
and existing in good standing under the laws of their respective states of
incorporation; it and each of its Subsidiaries is duly qualified and
authorized to do business as a foreign corporation in each jurisdiction
where the character of their assets or the nature of their activities makes
such qualification necessary; execution, delivery and performance of this
Agreement, and any other documents and instruments required under this
Agreement, and the issuance of the Revolving Credit Note by Company are
within its corporate powers, have been duly authorized, are not in
contravention of law or the terms of Company's Articles of Incorporation or
Bylaws, and do not require the consent or approval of any governmental
body, agency or authority; and this Agreement and any other documents and
instruments required under this Agreement, when issued and delivered under
this Agreement, will be valid and binding in accordance with their terms.
5.2 The execution, delivery and performance of this Agreement and any
other documents and instruments required under this Agreement, and the
issuance of the Revolving Credit Note by Company, are not in contravention
of the unwaived terms of any indenture, agreement or undertaking to which
Company is a party or by which it is bound.
5.3 No litigation or other proceeding before any court or
administrative agency is pending, or to the knowledge of the officers of
Company is threatened against Company or any of its Subsidiaries, the
outcome of which could materially impair Company's or any of its
Subsidiaries' financial condition or its ability to carry on its business.
5.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of Company's or any of its Subsidiaries' assets, except
to Bank, or as permitted in this Agreement.
5.5 There are no Subsidiaries of Company except Eonic, Inc., Newcor
Machine Tool, Inc., and Rochester Gear, Inc.
5.6 There exists no default by Company or any Subsidiary under the
provisions of any instrument evidencing any permitted debt or of any
agreement relating thereto.
5.7 Neither Company nor any Subsidiary maintains or contribute to any
Pension Plans subject to ERISA except the plans listed on Exhibit "D"
hereto ("Pension Plans"). The "unfunded past service liability" of the
Pension Plans, as of October 31, 1993, was approximately as noted on
Exhibit "D", and there is no accumulated funding deficiency within the
meaning of ERISA, or any existing liability with respect to the Pension
Plan owed to the Pension Benefit Guaranty Corporation or any successor
thereto.
5.8 The balance sheet and operating statements of Company and its
Consolidated Subsidiaries dated October 31, 1994, previously furnished
Bank, is complete and correct and fairly presents the financial condition
of Company and its Consolidated Subsidiaries and the results of its and
their operations; since said date there has been no material adverse change
in the financial condition of Company and its Consolidated Subsidiaries; to
the knowledge of Company's officers, neither Company nor any Subsidiary has
any contingent obligations (including any liability for taxes) not
disclosed by or reserved against in said balance sheet, and at the present
time there are no material unrealized or anticipated losses from any
present commitment of Company or any of its Consolidated Subsidiaries.
5.9 All tax returns and tax reports of Company and its Subsidiaries
required by law to be filed have been duly filed or extensions obtained,
and all taxes, assessments and other governmental charges or levies (other
than those presently payable without penalty and those currently being
contested in good faith for which adequate reserves have been established)
upon Company and its Subsidiaries (or any of its or their properties) which
are due and payable have been paid. The charges, accruals and reserves on
the books of Company and its Subsidiaries in respect of the Federal income
tax for all periods are adequate in the opinion of Company.
5.10 Company and its Subsidiaries are, in the conduct of their
business, in compliance in all material respects with all federal, state or
local laws, statutes, ordinances and regulations applicable to it, the
enforcement of which, if they were not in compliance, would adversely
affect their business or the value of their property or assets. Company and
its Subsidiaries have all approvals, authorizations, consents, licenses,
orders and other permits of all governmental agencies and authorities,
whether federal, state or local, required to permit the operation of their
business as presently conducted, except such approvals, authorizations,
consents, licenses, orders and other permits with respect to which the
failure to have can be cured without having an adverse effect on the
operation of such business.
5.11 No representation or warranty by Company in this Agreement, nor
any statement or certificate (including financial statements) furnished or
to be furnished to Bank pursuant hereto contains or will contain any
materially untrue statement of any fact or omits or will omit to state a
fact necessary to make such representation, warranty, statement or
certificate not misleading.
5.12 Neither Company nor any Subsidiary is a party to any litigation
or administrative proceeding, nor so far as is known by Company is any
litigation or administrative proceeding threatened against Company or any
Subsidiary, which in either case (A) asserts or alleges that Company or any
Subsidiary violated Environmental Laws (B) asserts or alleges that Company
or any Subsidiary is required to clean up, remove, or take remedial or
other response action due to the disposal, depositing, discharge, leaking
or other release of any hazardous substances or materials, (C) asserts or
alleges that Company or any Subsidiary is required to pay all or a portion
of the cost of any past, present, or future cleanup, removal or remedial or
other response action which arises out of or is related to the disposal,
depositing, discharge, leaking or other release of any hazardous substances
or materials by Company or any Subsidiary.
5.13 To the best knowledge of Company, there are no conditions
existing currently or likely to exist during the term of this Agreement
which would subject Company or any Subsidiary to damages, penalties,
injunction relief or cleanup costs under any applicable Environmental Laws
or which require or are likely to require cleanup, removal, remedial action
or other response pursuant to applicable Environmental Laws by Company or
any Subsidiary.
5.14 Neither Company nor any Subsidiary is subject to any judgment,
decree, order or citation related to or arising out of applicable
Environmental Laws and to the best knowledge of the Company, neither
Company nor any Subsidiary has been named or listed as a potentially
responsible party by any governmental body or agency in a matter arising
under any applicable Environmental Laws.
5.15 Company and it Subsidiaries have all permits, licenses and
approvals required under applicable Environmental Laws.
6. AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, so long as Bank is
committed to make any advances or issue Letters of Credit under this
Agreement and so long as any indebtedness or any Letters of Credit remain
outstanding under this Agreement:
6.1 Furnish Bank:
(a) within one hundred twenty (120) days after and as of the end
of each of Company's fiscal years, a detailed Consolidated audit
report of Company and its Consolidated Subsidiaries certified to
by independent certified public accountants satisfactory to Bank;
(b) within forty five (45) days after and as of the end of each
fiscal quarter, excluding the last quarter of each fiscal year, a
Consolidated and Consolidating balance sheet and statement of
profit and loss and surplus reconciliation of Company and its
Consolidated Subsidiaries certified by an authorized officer of
Company;
(c) such information as required by the terms and conditions of
any security agreements referred to in this Agreement;
(d) promptly, and in form to be satisfactory to Bank, such other
information as Bank may request from time to time.
6.2 On a Consolidated statement basis, maintain, as of the end of
each fiscal quarter, a ratio of current assets to current liabilities of
not less than 1.75 to 1.0.
6.3 On a Consolidated statement basis, maintain, as of the end of
each fiscal quarter, Tangible Net Worth of not less than Nineteen Million
Dollars ($19,000,000).
6.4 On a Consolidated statement basis, maintain, as of the end of
each fiscal quarter, a Debt to Worth Ratio of not more than 3.3 to 1.0
through October 31, 1994 and thereafter, not more than 3.0 to 1.0.
6.5 Pay and discharge, and cause its Subsidiaries to pay and
discharge, all taxes and other governmental charges and all contractual
obligations calling for the payment of money, before the same shall become
overdue, unless and to the extent only that such payment is being contested
in good faith.
6.6 Maintain, and cause its Subsidiaries to maintain, insurance
coverage on their physical assets and against other business risks in such
amounts and of such types as are customarily carried by companies similar
in size and nature, and in the event of acquisition of additional property,
real or personal, or of incurrence of additional risks of any nature,
increase such insurance coverage in such manner and to such extent as
prudent business judgment and present practice would dictate; and in the
case of all policies covering property mortgaged or pledged to Bank or
property in which Bank shall have a security interest of any kind
whatsoever, other than those policies protecting against casualty
liabilities to strangers, all such insurance policies shall provide that
the loss payable thereunder shall be payable to Company and Bank as their
respective interests may appear; copies of all said policies, including all
endorsements thereon and those required hereunder, to be deposited with
Bank.
6.7 Permit, and cause its Subsidiaries to permit, Bank, through its
authorized attorneys, accountants, and representatives, to examine
Company's and its Subsidiaries' books, accounts, records, ledgers and
assets of every kind and description at all reasonable times upon oral or
written request of Bank.
6.8 Promptly notify Bank of any condition or event which constitutes
or with the running of time and/or the giving of notice would constitute a
default under this Agreement, and promptly inform Bank of any material
adverse change in Company's or any Subsidiary's financial condition.
6.9 Furnish to the Bank concurrently with the delivery of each of the
financial statements required by Section 6.1(a) and (b) hereof, a statement
prepared and certified by the chief financial officer of Company (or in his
absence, a responsible senior officer of Company) (a) setting forth all
computations necessary to show compliance by Company with the financial
covenants contained in Section 6.2, 6.3 and 6.4 of this Agreement as of the
date of such financial statements, (b) stating that as of the date thereof,
no condition or event which constitutes an event of default or which with
the running of time and/or the giving of notice would constitute an event
of default has occurred and is continuing, or if any such event or
condition has occurred and is continuing or exists, specifying in detail
the nature and period of existence thereof and any action taken with
respect thereto taken or contemplated to be taken by Company and (c)
stating that the signer has personally reviewed this Agreement and that
such certificate is based on an examination sufficient to assure that such
certificate is accurate.
6.10 Maintain in good standing, and cause each Subsidiary to maintain
in good standing, all licenses required by the State of Michigan, or any
agency thereof, or other governmental authority that may be necessary or
required for Company or any Subsidiary to carry on its general business
objects and purposes.
6.11 Furnish, and cause each Subsidiary to furnish, Bank, upon Bank's
request, in form satisfactory to Bank with pledges, assignments, mortgages,
lien instruments or other security instruments covering any or all of
Company's and each Subsidiary's real or personal property, of every nature
and description, whether now owned or hereafter acquired, to the extent
that Bank may in its sole reasonable discretion require.
6.12 Comply, and cause each Subsidiary to comply, with all
requirements imposed by ERISA as presently in effect or hereafter
promulgated including, but not limited to, the minimum funding requirements
of the Pension Plans.
6.13 Promptly notify Bank after the occurrence thereof in writing of
any of the following events:
(a) the termination of Company's or any Subsidiary's Pension
Plan pursuant to Subtitle C of Title IV of ERISA or otherwise;
(b) the appointment of a trustee by a United States District
Court to administer the Pension Plan;
(c) the commencement by the Pension Benefit Guaranty
Corporation, or any successor thereto of any proceeding to
terminate the Company's or any Subsidiary's Pension Plan;
(d) the failure of the Company's or any Subsidiary's Pension
Plan to satisfy the minimum funding requirements for any plan
year as established in Section 412 of the Internal Revenue Code
of 1954, as amended;
(e) the withdrawal of the Company or any Subsidiary from a
Pension Plan; or
(f) a reportable event, within the meaning of Title IV of ERISA.
6.14 Company shall cause each person which now is or hereafter becomes
a Subsidiary to deliver to Bank, in accordance with this Section 6.14, a
fully executed guaranty agreement in the form attached as Exhibit "C" and
such other instruments and documents related to such guaranty as Bank shall
reasonably request, including a negative pledge letter as required of
Company's existing Subsidiaries pursuant to the provisions of Section 4.3
hereof. Within three (3) Business Days after a person becomes a Subsidiary,
Company shall notify Bank of such occurrence in writing. The guaranty and
other documents to be executed and delivered pursuant to this Section 6.14
shall be delivered to Bank within fifteen (15) days after the date such
notice is required.
7. NEGATIVE COVENANTS
Company covenants and agrees that so long as Bank is committed to make
any advances or issue Letters of Credit under this Agreement and so long as
any indebtedness or any Letters of Credit remain outstanding under this
Agreement, it will not, and it will cause its Subsidiaries not to, without
the prior written consent of Bank:
7.1 Purchase, acquire or redeem any of its capital stock or make any
material change in its capital structure or general business objects or
purpose.
7.2 Enter into any merger or consolidation or sell, lease, transfer,
or dispose of all, substantially all, or any material part of its assets,
except in the ordinary course of its business.
7.3 Guarantee, endorse, or otherwise become secondarily liable for or
upon the obligations of others, except (i) by endorsement for deposit in
the ordinary course of business, (ii) Company's guaranty of Rochester Gear,
Inc.'s obligations to Bank under the Guaranty dated as of November 1, 1989
from Company to Bank, and (iii) Company's guaranty of Rochester Gear,
Inc.'s obligations to Bank under the Guaranty dated as of October 1, 1991
from Company to Bank.
7.4 Become or remain obligated for any indebtedness for borrowed
money, or for any indebtedness incurred in connection with the acquisition
of any property, real or personal, tangible or intangible, except:
(a) indebtedness to Bank;
(b) current unsecured trade, utility or non-extraordinary
accounts payable arising in the ordinary course of Company's
business;
(c) indebtedness described in attached Exhibit "E".
7.5 Purchase or otherwise acquire or become obligated for the
purchase of all or substantially all of the assets or business interests of
any person, firm or corporation or any shares of stock of any corporation,
trusteeship or association or in any other manner effectuate or attempt to
effectuate an expansion of present business by acquisition.
7.6 Make or allow to remain outstanding any investment (whether such
investment shall be of the character of investment in shares of stock,
evidences of indebtedness or other securities or otherwise) in, or any
loans or advances to, any person, firm, corporation or other entity or
association, except:
(a) advances in the ordinary course of business to officers
payable within thirty days;
(b) advances to Company's domestic Subsidiaries in the ordinary
course of business;
(c) investments in an amount not exceeding Five Hundred Thousand
Dollars ($500,000) in the aggregate; and
(d) short-term investments of cash in cash equivalents for the
purposes of cash management in accordance with Company's normal
business practices.
7.7 Affirmatively pledge or mortgage any of its assets, whether now
owned or hereafter acquired, or create, suffer or permit to exist any lien,
security interest in, or encumbrance thereon, except to Bank.
7.8 Sell, assign, transfer or confer a security interest in any
account, contract, note, trade acceptance or other receivable, except to
Bank.
7.9 Enter into, maintain, or make contribution to, directly or
indirectly, any Pension Plan that is subject to ERISA, except the Pension
Plans.
7.10 Enter into or allow to exist any agreement, document or
instrument which would restrict or prevent Company or any Subsidiary from
granting Bank liens upon, security interests in and pledges of its assets
which are senior in priority to all other liens and encumbrances.
8. ENVIRONMENTAL PROVISIONS
8.1 Company shall comply, and shall cause its Subsidiaries to comply,
in all material respects with all applicable Environmental Laws.
8.2 Company shall provide to Bank, immediately upon receipt, copies
of any correspondence, notice, pleading, citation, indictment, complaint,
order, decree, or other document from any source asserting or alleging a
circumstance or condition which requires or may require a financial
contribution by Company or any Subsidiary or a cleanup, removal, remedial
action, or other response by or on the part of Company or any Subsidiary
under applicable Environmental Laws or which seeks damages or civil,
criminal or punitive penalties from Company or any Subsidiary for an
alleged violation of Environmental Laws.
8.3 Company shall promptly notify Bank in writing as soon as Company
becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or
inaccurate in any material respect as of any date.
8.4 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or
inaccurate in any material respect as of any date, Company shall, at the
reasonable request of Bank, at Company's sole expense, retain an
environmental professional consultant, reasonably acceptable to Bank, to
conduct a thorough and complete environmental audit regarding the changed
condition and/or circumstance and any environmental concerns arising from
that changed condition and/or circumstance. A copy of the environmental
consultant's report will be promptly delivered to Bank upon completion.
8.5 At any time Company or any Subsidiary, directly or indirectly
through any professional consultant or other representative, determines to
undertake an environmental audit, assessment or investigation, Company
shall promptly provide Bank with written notice of the initiation of the
environmental audit, fully describing the purpose and intended scope of the
environmental audit. Upon receipt, Company will promptly provide to Bank
copies of all final findings and conclusions of any such environmental
investigation. Preliminary findings and conclusions shall be provided if
final reports have not been completed and delivered to Bank within 60 days
following completion of the preliminary findings and conclusions.
8.6 Company hereby indemnifies, saves and holds Bank and any of its
past, present and future officers, directors, shareholders, employees,
representatives and consultants harmless from any and all loss, damages,
suits, penalties, costs, liabilities and expenses (including but not
limited to reasonable investigation, environmental audit(s), and legal
expenses) arising out of any claim, loss or damage of any property,
injuries to or death of persons, contamination of or adverse affects on the
environment, or any violation of any applicable Environmental Laws, caused
by or in any way related to property owned by Company or any Subsidiaries,
or due to any acts of Company, its officers, directors, shareholders,
employees, consultants and/or representatives; provided, however, that the
foregoing indemnification shall not be applicable when arising from events
or conditions occurring while the Bank is in sole possession (subject to
the rights of any creditors of Company) of the property. In no event shall
Company be liable hereunder for any loss, damages, suits, penalties, costs,
liabilities or expenses arising from any act of gross negligence or willful
misconduct of Bank, or its agents or employees.
9. DEFAULTS
9.1 Upon non-payment of the principal or interest due under the terms
of this Agreement or on the Revolving Credit Note due in accordance with
the terms thereof, the Revolving Credit Note shall automatically become
immediately due and payable, and Bank's commitment to make further advances
and to issue Letters of Credit under this Agreement shall automatically
terminate.
9.2 Upon occurrence of any of the following events of default:
(a) default in the observance or performance of any of the
conditions, covenants or agreements of Company set
forth in Sections 6, 7 or 8, hereof;
(b) default in the observance or performance or any of the other
conditions, covenants or agreements of Company herein set forth
and continuance thereof for thirty (30) days after notice to
Company by Bank;
(c) any representation or warranty made by Company herein or in
any instrument submitted pursuant hereto proves untrue in any
material respect when made;
(d) default in the observance or performance of any of the
conditions, covenants or agreements of Company or any Subsidiary
set forth in any collateral document of security which may be
given to secure the indebtedness hereunder or in any other
collateral document related to or connected with this agreement
or the indebtedness hereunder;
(e) default in the payment of any other obligation of Company or
any Subsidiary for borrowed money, or in the observance or
performance of any conditions, covenants or agreements related or
given with respect thereto and such default shall be continued
for a period sufficient to permit acceleration of the
indebtedness prior to its expressed maturity;
(f) judgments for the payment of money in excess of the sum of
One Hundred Thousand Dollars ($100,000) in the aggregate shall be
rendered against Company or any Subsidiary, and such judgments
shall remain unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of sixty (60) consecutive days from the
date of its entry;
(g) the occurrence of any "reportable event", as defined in
ERISA, which is determined to constitute grounds for termination
by the Pension Benefit Guaranty Corporation of any Pension Plan
maintained by or on behalf of the Company or any Subsidiary for
the benefit of any of its employees or for the appointment by the
appropriate United States District Court of a trustee to
administer such Pension Plan and such reportable event is not
corrected and such determination is not revoked within 30 days
after notice thereof has been given to the plan administrator or
the Company; or the institution of proceedings by the Pension
Benefit Guaranty Corporation to terminate any such Pension Plan
or to appoint a trustee to administer such Pension Plan; or the
appointment of a trustee by the
appropriate United States District Court to administer any
such Pension Plan;
(h) revocation of any Guaranty or any negative and deferred
pledge letter;
(i) default by Company in the observance or performance of any
obligation under any agreement made by Company with Bank in
connection with the issuance of any of the Letters of Credit;
(j) if there shall be any change for any reason whatsoever in
the management or control of Company or any Subsidiary which
shall in the sole judgment of Bank adversely affect future
prospects for the successful operation of Company or any
Subsidiary;
(k) if Bank shall deem itself insecure;
then, or at any time thereafter, unless such default is remedied, Bank may
give notice to Company declaring all outstanding indebtedness hereunder to
be due and payable, whereupon the Revolving Credit Note and all
indebtedness then outstanding hereunder shall immediately become due and
payable without further notice and demand, as the case may be, and Bank's
commitment to make further advances and to issue Letters of Credit under
this Agreement shall automatically terminate.
9.3 If a creditors' committee shall have been appointed for the
business of Company or any Subsidiary; or if Company or any Subsidiary
shall have made a general assignment for the benefit of creditors or shall
have been adjudicated bankrupt, or shall have filed a voluntary petition in
bankruptcy or for reorganization or to effect a plan or arrangement with
creditors; or shall file an answer to a creditor's petition or other
petition filed against it, admitting the material allegations thereof for
an adjudication in bankruptcy or for reorganization; or shall have applied
for or permitted the appointment of a receiver or trustee or custodian for
any of its property or assets; or such receiver, trustee or custodian shall
have been appointed for any of its property or assets (otherwise than upon
application or consent of Company or a Subsidiary) and such receiver,
trustee, or custodian so appointed shall not have been discharged within
forty-five (45) days after the date of his appointment; or if an order
shall be entered and shall not be dismissed or stayed within forty-five
(45) days from its entry, approving any petition for reorganization of
Company or any Subsidiary; then the Revolving Credit Note and all
indebtedness then outstanding hereunder shall automatically become
immediately due and payable, and Bank's commitment to make further advances
and to issue Letters of Credit under this Agreement shall automatically
terminate.
9.4 From and after the occurrence of any event of default under this
Agreement or any event which automatically causes the indebtedness
outstanding hereunder or under the Revolving Credit Note to become
immediately due and payable, said indebtedness shall bear interest at three
percent (3%) above the Prime-based Rate as it may vary from time to time,
which interest shall be payable on demand.
10. MISCELLANEOUS
10.1 This Agreement shall be binding upon and shall inure to the
benefit of Company and Bank and their respective successors and assigns,
except that the credit provided for under this Agreement and no part
thereof and no obligation of Bank hereunder shall be assignable or
otherwise transferable by Company.
10.2 Company shall pay all closing costs and expenses, including, by
way of description and not limitation, reasonable outside attorney fees and
lien search fees incurred by Bank in connection with the commitment,
consummation and closing of this Agreement. All of said amounts required to
be paid by Company may, at Bank's option, be charged by Bank as an advance
against the proceeds of the Revolving Credit Note. All costs, including
attorney fees and auditor fees, incurred by Bank in reviewing, revising,
protecting or enforcing any of its or any of the Bank's rights against
Company or defending Bank from any claims or liabilities by any party or
otherwise incurred by Bank in connection with an event of default or the
enforcement of this Agreement or the related documents, including by way of
description and not limitation, such charges in any court or bankruptcy
proceedings or arising out of any claim or action by any person against
Bank which would not have been asserted were it not for Bank's relationship
with Company hereunder, shall also be paid by Company.
10.3 Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or
other accounting computation is required to be made for the purposes of
this Agreement, it shall be done in accordance with generally accepted
accounting principles consistently applied.
10.4 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall
any single or partial exercise thereof preclude any further exercise
thereof, or the exercise of any other power, right or privilege. The rights
of Bank under this Agreement are cumulative and not exclusive of any right
or remedies which Bank would otherwise have.
10.5 All notices with respect to this Agreement shall be deemed to be
completed upon mailing by certified mail to the following:
To Company:
1825 S. Woodward
Suite 240
Bloomfield Hills, Michigan 48302
Attention: Director of Corporate Finance
To Bank:
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Metropolitan Loan Division - D
10.6 This Agreement and the Revolving Credit Note have been delivered
at Detroit, Michigan, and shall be governed by and construed and enforced
in accordance with the laws of the State of Michigan. Whenever possible
each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
10.7 No amendments or waiver of any provisions of this Agreement nor
consent to any departure by Company therefrom shall in any event be
effective unless the same shall be in writing and signed by the Bank, and
then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No
amendment, waiver or consent with respect to any provision of this
Agreement shall affect any other provision of this Agreement.
10.8 In the event Company's obligation to pay interest on the
principal balance of the Revolving Credit Note is or becomes in excess of
the maximum interest rate which Company is permitted by law to contract or
agree to pay, giving due consideration to the execution date of this
Agreement, then, in that event, the rate of interest applicable shall be
deemed to be immediately reduced to such maximum rate and any payments in
excess of such maximum rate shall be deemed to have been payments in
reduction of principal and not of interest.
10.9 This Agreement shall become effective upon the execution hereof
by Bank and Company.
10.10 COMPANY AND BANK HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY AND ALL ACTIONS OR PROCEEDINGS AT ANY TIME IN
WHICH COMPANY AND BANK ARE PARTIES ARISING OUT OF THIS AGREEMENT OR THE
OTHER DOCUMENTS CONTEMPLATED HEREBY.
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK NEWCOR, INC.
By: By:
Daniel J. Neumeyer W. John Weinhardt
Its: Vice President Its: President
By:
John J. Garber
Its: Treasurer
ACKNOWLEDGEMENT
The undersigned accept and agree to the amendment and restatement of
the Existing Agreement and agree to the continued effectiveness of the
Guaranty originally executed and delivered to Comerica Bank (successor in
interest by reason of merger to Manufacturers Bank, N.A.) by the
undersigned on March 9, 1992.
ROCHESTER GEAR, INC.
By:___________________________
W. John Weinhardt
Its: Chairman of the Board
By:___________________________
John J. Garber
Its: Treasurer
NEWCOR MACHINE TOOL, INC.
By:___________________________
W. John Weinhardt
Its: Chairman of the Board
By:___________________________
John J. Garber
Its: Treasurer
EONIC, INC.
By:___________________________
W. John Weinhardt
Its: Chairman of the Board
By:___________________________
John J. Garber
Its: Treasurer
EXHIBIT "A"
REVOLVING CREDIT NOTE
Detroit, Michigan
$28,000,000 March 6, 1995
On or before the Revolving Credit Maturity Date (which
initially is February 28, 1997), FOR VALUE RECEIVED, NEWCOR,
INC., a Delaware corporation (herein called "Company") promises
to pay to the order of COMERICA BANK, a Michigan banking
corporation (herein called "Bank") at its Main Office at 500
Woodward Avenue, Detroit, Michigan, 48226 in lawful money of the
United States of America the indebtedness or so much of the sum
of Twenty Eight Million Dollars ($28,000,000) as may from time to
time have been advanced and then be outstanding hereunder
pursuant to the Second Amended and Restated Revolving Credit
Agreement dated March 6, 1995, made by and between Company and
Bank (herein called "Agreement"), together with interest thereon
as hereinafter set forth.
Each of the Advances made hereunder shall bear interest at
the Eurodollar-based Rate or the Prime-based Rate as elected by
Company or as otherwise determined under the Agreement.
Interest on the unpaid balance of all Prime-based Advances
shall be payable quarterly commencing on April 30, 1995 and on
the last day of each calendar quarter thereafter. Interest
accruing at the Prime-based Rate shall be computed on the basis
of a 360 day year and assessed for the actual number of days
elapsed, and in such computation effect shall be given to any
change in the Prime-based Rate on the date of such change in the
Prime-based Rate.
Interest on each Eurodollar-based Advance shall be payable
on the last day of the Interest Period applicable thereto.
Interest accruing at the Eurodollar-based Rate shall be computed
on the basis of a 360 day year and assessed for the actual number
of days elapsed from the first day of the Interest Period
applicable thereto to but not including the last day thereof.
From and after the occurrence of any event of default
hereunder or under the Agreement or any event which automatically
causes the indebtedness outstanding hereunder to become
immediately due and payable, the indebtedness outstanding
hereunder shall bear interest at Three percent (3%) above the
Prime-based Rate as it may vary from time to time, which interest
shall be payable daily.
This Note is a note under which advances, repayments and
readvances may be made from time to time, subject to the terms
and conditions of the Agreement. This Note evidences borrowing
under, is subject to, is secured in accordance with, and may be
matured under, the terms of the Agreement, to which reference is
hereby made. As additional security for this Note, Company grants
Bank a lien on all property and assets including deposits and
other credits of the Company, at any time in possession or
control of or owing by Bank for any purpose.
Company hereby waives presentment for payment, demand,
protest and notice of dishonor and nonpayment of this Note and
agrees that no obligation hereunder shall be discharged by reason
of any extension, indulgence, release, or forbearance granted by
any holder of this Note to any party now or hereafter liable
hereon or any present or subsequent owner of any property, real
or personal, which is now or hereafter security for this Note.
Any transferees of, or endorser, guarantor or surety paying this
Note in full shall succeed to all rights of Bank, and Bank shall
be under no further responsibility for the exercise thereof or
the loan evidenced hereby. Nothing herein shall limit any right
granted Bank by other instrument or by law.
This Note is a replacement for a Revolving Credit Note dated
July 26, 1994 in the original principal amount of $35,000,000 by
Company payable to Bank.
All capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Agreement.
NEWCOR, INC.
By:
W. John Weinhardt
Its: President
By:
John J. Garber
Its: Treasurer
EXHIBIT "B"
REQUEST FOR ADVANCE
Pursuant to the Second Amended and Restated Revolving Credit
Agreement dated March 6, 1995, (herein called "Agreement"), the
undersigned hereby requests COMERICA BANK to make a(an) 1
Advance to the undersigned on , 19 , in the
amount of DOLLARS, ($ ) under
the Revolving Credit Note dated March 6, 1995, issued by the
undersigned to said Bank (herein called "Note"). The Interest
Period for the requested Advance, if applicable, shall be
.2 The last day of the Interest Period for the amounts being
converted or refunded hereunder, if applicable, is
, 19 .
The undersigned certifies that no event has occurred or
condition exists which constitutes, or with the passage of time
and/or giving of notice would constitute, a default under the
Agreement or the Note, and none will exist upon the making of the
Advance requested hereunder. The undersigned further certifies
that upon advancing the sum requested hereunder, the aggregate
principal amount outstanding under the Note will not exceed the
face amount thereof. If the amount advanced to the undersigned
under the Note shall at any time exceed the face amount thereof,
the undersigned will pay such excess amount on demand.
The undersigned hereby authorizes said Bank to disburse the
proceeds of this Request for Advance by crediting the account of
the undersigned with Bank separately designated by the
undersigned or as the undersigned may otherwise direct, unless
this Request for Advance is being submitted for a conversion or
refunding, in which case it shall refund or convert that portion
stated above of the existing outstandings under the Note.
Dated this day of , 19 .
NEWCOR, INC.
By:
Its:
By:
Its:
_______________________________
1Insert, as applicable, "Eurodollar-based", or "Prime-based".
2For a Eurodollar-based Advance insert, as applicable, "one
month", "two months", "three months", or "six months".
AMENDMENT NO. 4
FOURTH AMENDMENT TO SECOND AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
THIS FOURTH AMENDMENT, dated as of the 12th day of April, 1996, by and
between Newcor, Inc., a Delaware corporation, of Bloomfield Hills, Michigan
(herein collectively called "Company") and Comerica Bank, a Michigan
banking corporation, of Detroit, Michigan (herein called "Bank");
WITNESSETH:
WHEREAS, Company and Bank desire to amend that certain Second Amended
and Restated Revolving Credit Agreement dated as of March 6, 1995, entered
into by and between Company and Bank, as previously amended on December 29,
1995, January 31, 1996 and March 22, 1996 (herein called "Agreement");
NOW, THEREFORE, it is agreed that the Agreement is amended as follows:
1. The definitions of "Commitment" and "Revolving Credit Maturity
Date" set forth in Section 1 of the Agreement are amended to read in their
entirety as follows:
"'Commitment' shall mean the total commitment of Bank to
make Advances to Company pursuant to this Agreement in the amount
of (a) Thirty Two Million Five Hundred Thousand Dollars
($32,500,000) for the period from April 12, 1996 through the
Commitment Reduction Date, and (b) thereafter, in the amount of
Twenty Million Dollars ($20,000,000), subject to reduction as
herein provided."
"'Revolving Credit Maturity Date' shall mean February 28,
1998."
2. The following definitions are hereby added to Section 1 of the
Agreement in alphabetical order:
"'Base Tangible Net Worth' shall initially mean $9,080,000.
On the last day of each fiscal quarter of Company, base Tangible
Net Worth shall be increased by an amount equal to fifty percent
(50%) of Net Income for the fiscal quarter then ended. Base
Tangible Net Worth shall also be increased by one hundred percent
(100%) of the amount of the Reserves which Company determines
from time to time no longer to be necessary to be maintained.
Such increase shall be effective on the last day of the fiscal
quarter in which such determination is made. For any fiscal
quarter with respect to which Net Income is less than zero, Net
Income shall be deemed to be zero."
"'Capital Expenditure' shall mean with respect to any
person, without duplication, any payment made directly or
indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with
generally accepted accounting principles consistently applied
would be added as a debit to the fixed asset account of such
person, including, without limitation, amounts paid or payable
under any conditional sale or other title retention agreement or
under any lease or other periodic payment arrangement which is of
such a nature that payment obligations of such person thereunder
would be required by generally accepted accounting principles
consistently applied to be capitalized and shown as liabilities
on the balance sheet of such person."
"'Capital Lease' shall mean with respect to any person any
lease of any property (whether real, personal or mixed) by such
person as lessee which, in conformity with generally accepted
accounting principles consistently applied, is, or is required to
be accounted for as a capital lease on the balance sheet of such
person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms."
"'Commitment Reduction Date' shall mean the earlier to occur
of May 30, 1996 and the date of the funding of the term loan
under Section 2.A hereof."
"'Debt Service Coverage Ratio' shall mean as of any date of
determination, a ratio, the numerator of which is EBITDA for the
preceding four fiscal quarters ending on such date of
determination during such period less Capital Expenditures of
Company and its Consolidated Subsidiaries during such period and
the denominator of which is the sum of principal and interest
payments due and payable with respect to any indebtedness of
Company (including obligations under Capital Leases) during such
period."
"'EBITDA' shall mean as of any date of determination, Net
Income for the four fiscal quarters preceding such date of
determination plus, to the extent deducted in determining Net
Income, (i) depreciation and amortization expense of Company and
its consolidated Subsidiaries for such period, (ii) interest
expense of Company and its consolidated Subsidiaries for such
period and (iii) income taxes of Company and its consolidated
subsidiaries for such period, all as determined in accordance
with generally accepted accounting principles consistently
applied."
"'Funded Debt' shall mean as of any date of determination
Company's and its consolidated Subsidiaries' indebtedness for
borrowed money as of such date and the principal component of
Company's and its consolidated Subsidiaries' Capital Lease
obligations as of such date."
"'Funded Debt to EBITDA Ratio' shall mean as of any date of
determination a ratio the numerator of which is Funded Debt as of
such date and the denominator of which is EBITDA for the four
fiscal quarters preceding such date of determination."
"'Net Income' shall mean the net income (or loss) of Company
and its consolidated Subsidiaries for any period determined in
accordance with generally accepted accounting principles
consistently applied but excluding in any event (i) any
extraordinary gains or losses, (ii) any gains or losses from
discontinued operations, and (iii) any taxes on the excluded
gains and any tax deductions or credits on account of any
excluded losses."
"'Notes' shall mean the Revolving Credit Note and the Term
Note and 'Note' shall refer to each of them."
"'Reserves' shall mean each and all of the reserves
established by Company in connection with the sale of Company's
Wilson Automation Division."
"'Term Loan Maturity Date' shall mean May 10, 2003."
"'Term Note' shall mean the term note issued by Company
under this Agreement in the form annexed to this Agreement as
Exhibit 'F'."
3. Section 2.11 of the Agreement is amended to read in its entirety
as follows:
"2.11 On the Commitment Reduction Date, the amount of
the Commitment shall automatically be reduced to Twenty Million
Dollars ($20,000,000). On the date that the Commitment
automatically reduces, Company shall pay to Bank the amount, if
any, by which the aggregate amount of outstanding Advances and
outstanding Letters of Credit exceeds the amount of the
Commitment as so reduced. If such payment requires the prepayment
of a Eurodollar-based Advance, Company shall pay to Bank on such
date any amount required to be paid pursuant to the provisions of
Section 3.1."
4. Each reference in Sections 5.1, 5.2, 9.1, 9.2, 9.3 and 10.2 to
the "Revolving Credit Note" is amended to read in lieu thereof "Notes".
5. The following Section 2.A (consisting of Sections 2.A.1 through
2.A.5) is hereby added to the Agreement:
"2.A. THE INDEBTEDNESS: TERM CREDIT
2.A.1 Bank agrees to loan to Company and Company agrees
to borrow, on or before May 30, 1996, the sum of Ten Million
Dollars ($10,000,000). At the time of borrowing, Company agrees
to execute the Term Note with appropriate insertions as evidence
of the indebtedness hereunder. The loan made under this Section
2.A shall be subject to the terms and conditions of this
Agreement.
2.A.2 The indebtedness represented by the Term Note
shall be repaid in monthly principal installments each equal to
One Hundred Sixty Six Thousand Six Hundred Sixty Seven Dollars
($166,667), commencing on June 10, 1998 and on the tenth day of
each month thereafter, until the Term Loan Maturity Date, when
the entire unpaid balance of principal and interest thereon shall
be due and payable.
2.A.3 The proceeds of the Term Note shall be used solely
for acquisition financing and for general corporate purposes.
2.A.4 The Term Note and the term loan hereunder shall
bear interest from the date thereof on the unpaid principal
balance thereof from time to time outstanding, at a fixed rate
per annum as quoted by Bank to Company prior to the funding of
the term loan and as accepted by Company ("Fixed Rate"), payable
monthly on the tenth day of each month commencing on the tenth
day of the first month following the disbursement of the term
loan under this Section 2.A. Notwithstanding the foregoing from
and after the occurrence of an Event of Default, the principal
outstanding under the Term Note shall bear interest payable on
demand, at a rate per annum equal to the greater of (i) three
percent (3%) above the Fixed Rate and (ii) three percent (3%)
above the Bank's Prime Rate.
2.A.5 All partial prepayments with respect to the Term
Note shall be applied to the Term Note in the inverse order of
their respective maturities. The Term Note may be prepaid on any
principal installment payment date upon five (5) days written
notice to Bank, in whole or in part (in amounts of at least
$200,000) upon payment of a premium equal to the sum of the
discounted net present values of the interest payments that would
otherwise be payable on the principal amount being prepaid, after
reducing each such interest payment by the amount of the interest
that would be payable on each interest payment due date if the
principal amount being prepaid were re-invested at the Current
Market Rate therefor plus $500. For these purposes, "Current
Market Rate" shall mean a per annum interest rate equal to one
half percent (1/2%) above the rate reasonably determined by Bank
(based on quotations from established dealers) to be in effect
two days prior to the repayment date in the secondary market for
United States Treasury securities of a comparable amount and with
a comparable term to maturity as the principal amount being
prepaid. For the purposes of computation, the discount rate for
each computation will be the Current Market Rate for the relevant
principal installment. Upon any involuntary prepayment of the
Term Note, Company shall pay to Bank a prepayment premium equal
to the prepayment premium which would be due and payable
hereunder if Company had voluntarily elected to prepay the Term
Note (in an amount equal to such involuntary prepayment) on such
date of involuntary prepayment."
6. Section 6.3 of the Agreement is amended to read in its entirety
as follows:
"6.3 On a Consolidated statement basis, maintain, as of the
end of each fiscal quarter, Tangible Net Worth of not less than
the base Tangible Net Worth."
7. Section 6.4 of the Agreement is amended to read in its entirety
as follows:
"6.4 On a Consolidated statement basis, maintain, as of the
end of each fiscal quarter, a Debt to Worth Ratio of not more
than 7.0 to 1.0 through October 30, 1996 and not more than 6.5 to
1.0 beginning October 31, 1996 and thereafter."
8. The following Section 6.15 is hereby added to the Agreement:
"6.15 On a Consolidated statement basis, maintain as of the
end of each fiscal quarter, a Debt Service Coverage Ratio of not
less than the following amounts during the periods specified
below:
May 1, 1996 through October 30, 1996 1.5 to 1.0
October 31, 1996 and thereafter 2.0 to 1.0"
9. The following Section 6.16 is hereby added to the Agreement:
"6.16 On a Consolidated statement basis, maintain as of
October 31, 1996 a Funded Debt to EBITDA Ratio of not more than
3.25 to 1.0."
10. Section 6.9 of the Agreement is amended to change the reference
therein to "Sections 6.2, 6.3 and 6.4" to "Sections 6.2, 6.3, 6.4, 6.15 and
6.16."
11. Exhibit "A" to the Agreement is deleted and attached Exhibit "A"
substituted therefor and attached Exhibit "F" is hereby added to the
Agreement.
12. Company hereby represents and warrants that, after giving effect
to the amendments contained herein, (a) execution, delivery and performance
of this Amendment and any other documents and instruments required under
this Amendment or the Agreement are within Company's corporate powers, have
been duly authorized, are not in contravention of law or the terms of
Company's Certificate of Incorporation or Bylaws, and do not require the
consent or approval of any governmental body, agency, or authority; and
this Amendment and any other documents and instruments required under this
Amendment or the Agreement, will be valid and binding in accordance with
their terms; (b) the continuing representations and warranties of Company
set forth in Sections 5.1 through 5.7 and 5.9 through 5.15 of the Agreement
are true and correct on and as of the date hereof with the same force and
effect as made on and as of the date hereof; (c) the continuing
representations and warranties of Company set forth in Section 5.8 of the
Agreement are true and correct as of the date hereof with respect to the
most recent financial statements furnished to the Bank by Company in
accordance with Section 6.1 of the Agreement; and (d) no event of default,
or condition or event which, with the giving of notice or the running of
time, or both, would constitute an event of default under the Agreement,
has occurred and is continuing as of the date hereof.
13. This Amendment shall be effective upon (i) execution of this
Amendment by Company and Bank and delivery to Bank of a replacement
Revolving Credit Note in the form attached hereto as Exhibit "A", (ii)
execution and delivery to Bank of a Term Note in the form attached hereto
as Exhibit "F", and (iii) payment to the Bank by Company of a non-
refundable commitment fee for the term loan in the amount of $25,000.
14. Except as modified hereby, all of the terms and conditions of the
Agreement shall remain in full force and effect.
WITNESS the due execution hereof on the day and year first above
written.
COMERICA BANK NEWCOR, INC.
By: By:
W. John Weinhardt
Its: Vice President Its: President
By:
John J. Garber
Its: Treasurer
The undersigned accept and agree to the Amendment No. 4 to the Second
Amended and Restated Revolving Credit Agreement and agree to the continued
effectiveness of the Guaranty originally executed and delivered to Comerica
Bank by the undersigned on March 9, 1992.
ROCHESTER GEAR, INC.
By:
W. John Weinhardt
Its: Chairman of the Board
By:
John J. Garber
Its: Treasurer
NEWCOR MACHINE TOOL, INC.
By:
W. John Weinhardt
Its: Chairman of the Board
By:
John J. Garber
Its: Treasurer
EONIC, INC.
By:
W. John Weinhardt
Its: Chairman of the Board
By:
John J. Garber
Its: Treasurer
LRS\D3146
EXHIBIT "A"
REVOLVING CREDIT NOTE
Detroit, Michigan
$32,500,000 April 12, 1996
On or before the Revolving Credit Maturity Date (which initially is
February 28, 1998), FOR VALUE RECEIVED, NEWCOR, INC., a Delaware
corporation (herein called "Company") promises to pay to the order of
COMERICA BANK, a Michigan banking corporation (herein called "Bank") at its
Main Office at 500 Woodward Avenue, Detroit, Michigan, 48226 in lawful
money of the United States of America the indebtedness or so much of the
sum of Thirty Two Million Five Hundred Thousand Dollars ($32,500,000) as
may from time to time have been advanced and then be outstanding hereunder
pursuant to the Second Amended and Restated Revolving Credit Agreement
dated March 6, 1995, made by and between Company and Bank (herein called
"Agreement"), together with interest thereon as hereinafter set forth. For
the period from April 12, 1996 through the Commitment Reduction Date (as
defined in the Agreement), the amount available hereunder shall, subject to
the terms of the Agreement, be Thirty Two Million Five Hundred Thousand
Dollars ($32,500,000). After the Commitment Reduction Date, the amount
available hereunder shall, subject to the terms of the Agreement, be Twenty
Million Dollars ($20,000,000). Company agrees to reduce the indebtedness
outstanding hereunder to an amount not to exceed Twenty Million Dollars
($20,000,000) on or before the Commitment Reduction Date.
Each of the Advances made hereunder shall bear interest at the
Eurodollar-based Rate or the Prime-based Rate as elected by Company or as
otherwise determined under the Agreement.
Interest on the unpaid balance of all Prime-based Advances shall be
payable quarterly commencing on July 31, 1996 and on the last day of each
quarter thereafter. Interest accruing at the Prime-based Rate shall be
computed on the basis of a 360 day year and assessed for the actual number
of days elapsed, and in such computation effect shall be given to any
change in the Prime-based Rate on the date of such change in the Prime-
based Rate.
Interest on each Eurodollar-based Advance shall be payable on the last
day of the Interest Period applicable thereto. Interest accruing at the
Eurodollar-based Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first day of the
Interest Period applicable thereto to but not including the last day
thereof.
From and after the occurrence of any event of default hereunder or
under the Agreement or any event which automatically causes the
indebtedness outstanding hereunder to become immediately due and payable,
the indebtedness outstanding hereunder shall bear interest at Three percent
(3%) above the Prime-based Rate as it may vary from time to time, which
interest shall be payable daily.
This Note is a note under which advances, repayments and readvances
may be made from time to time, subject to the terms and conditions of the
Agreement. This Note evidences borrowing under, is subject to, is secured
in accordance with, and may be matured under, the terms of the Agreement,
to which reference is hereby made. As additional security for this Note,
Company grants Bank a lien on all property and assets including deposits
and other credits of the Company, at any time in possession or control of
or owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no
obligation hereunder shall be discharged by reason of any extension,
indulgence, release, or forbearance granted by any holder of this Note to
any party now or hereafter liable hereon or any present or subsequent owner
of any property, real or personal, which is now or hereafter security for
this Note. Any transferees of, or endorser, guarantor or surety paying this
Note in full shall succeed to all rights of Bank, and Bank shall be under
no further responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted Bank by other
instrument or by law.
This Note is a replacement for a Revolving Credit Note dated March 22,
1996 in the original principal amount of $32,500,000 by Company payable to
Bank.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
NEWCOR, INC.
By:
W. John Weinhardt
Its: President
By:
John J. Garber
Its: Treasurer
LRS\D3146
EXHIBIT "F"
TERM NOTE
Detroit, Michigan
$10,000,000 May 13, 1996
FOR VALUE RECEIVED, Newcor, Inc., a Delaware corporation (herein
called "Company") promises to pay to the order of COMERICA BANK, a Michigan
banking corporation (herein called "Bank"), at its Main Office at 500
Woodward Avenue, Detroit, Michigan, the principal sum of Ten Million
Dollars ($10,000,000) in lawful money of the United States of America
payable in monthly principal installments each in the amount of One Hundred
Sixty Six Thousand Six Hundred Sixty Seven Dollars ($166,667), commencing
on June 10, 1998 and on a like day of each month thereafter until May 10,
2003, when the entire unpaid balance of principal and interest thereon
shall be due and payable, together with interest thereon as hereinafter set
forth.
The principal balance from time to time outstanding hereunder shall
bear interest at the per annum interest rate of seven and eighty five one
hundredths percent (7.85%) or as otherwise determined under the Agreement
(as defined below), and interest shall be computed, assessed and payable as
set forth in the Agreement.
This Note evidences borrowing under, is subject to, is secured in
accordance with, and may be matured under, the terms of the Second Amended
and Restated Revolving Credit Agreement dated March 6, 1995 between Company
and Bank (as the same may be amended or modified from time to time,
("Agreement")), to which reference is hereby made. As additional security
for this Note, Company grants Bank a lien on all property and assets
including deposits and other credits of the Company, at any time in
possession or control of or owing by Bank for any purpose.
Company waives presentment for payment, demand, protest and notice of
dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, or
forbearance granted by any holder of this Note to any party now or
hereafter liable hereon. Any transferees of, or endorser, guarantor or
surety paying this Note in full shall succeed to all rights of Bank, and
Bank shall be under no further responsibility for the exercise thereof or
the loan evidenced hereby. Nothing herein shall limit any right granted
Bank by any other instrument or by law.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
NEWCOR,
INC., a Delaware corporation
By:
Its:
By:
Its:
LRS\D3146
50
ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT, dated as of May 6, 1996 (the
"Agreement"), between Newcor, Inc., a Delaware corporation ("Seller"), and
ABB Flexible Automation, Inc., a New York corporation ("Buyer").
WHEREAS, Seller wishes to sell, and Buyer wishes to purchase certain
assets of the industrial automation and assembly business and product
lines of Seller's Wilson Automation Division (the "Division") including
certain tangible and intangible assets used in or relating to the Division,
its business or product lines (the "Business")
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent covenants and representations hereinafter set forth, the parties
hereto, intending to be legally bound, agree as follows:
1. PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions of this Agreement and in reliance upon the mutual
representations and warranties of the parties hereto, at the Closing
(hereafter defined) Seller shall sell, transfer and convey to Buyer, and
Buyer shall purchase and acquire from Seller, Seller's right, title and
interest in and to the following assets wherever located (the "Assets"):
1.1 Intangible Assets. All intangible assets owned by Seller
or which Seller has a right to convey and which relate primarily to or are
primarily associated with any product(s) or product lines of the Division
or which are used or employed in the Business including, without
limitation, (a) Seller's patents, patent applications and registrations,
trade secrets, know-how, shop rights, and licenses thereof, processes,
formulae, customer lists and files, inventions, discoveries, improvements,
proprietary or technical information, data, plans, designs, specifications,
drawings, CAD files and related computer software and the like; (b) Trade
names, trademarks and service marks and registrations thereof and
applications for registration, together with the goodwill of the Business
symbolized by the marks and names, and copyrights, copyright registrations
and applications for registration, and licenses in connection therewith,
including without limitation the name "Wilson"; (c) all financial,
inventory, production, sales, marketing records, product-related computer
software including customer service database software, product literature,
advertising and trade show literature; (d) Sales, marketing and business
plans and forecasts; and (e) Rights of Seller under licenses, assignments,
secrecy and royalty agreements relating to any patents, trademarks,
copyrights, proprietary rights or trade secrets of others, and under
agreements of the Seller with others, including employees, relating to
disclosure, ownership, assignment or patenting with respect to any
proprietary rights, trade secrets, know-how, inventions, discoveries,
processes, or formulae (all of the foregoing being hereinafter referred to
individually as an "Intangible Asset" and collectively as the "Intangible
Assets") including, without limitation the Intangible Assets listed on the
attached Schedule 1.1.
1.2 Tooling. The tools, patterns and fixtures ("Tooling") as
listed on the attached Schedule 1.2.
1.3 Designated Inventories. Certain inventories of the Division
(the "Designated Inventories") as itemized in the following Schedules:
Schedule 1.3.1 - "Finished Units" - Complete, fully
assembled assembly and automation units ("Finished Units").
Schedule 1.3.2 - "Systems Inventories" - Complete or
partially completed assembly and automation systems ("Systems
Inventories") for particular customer applications or orders and
all work in progress in respect thereof including, without
limitation, all software, and the work product of engineering and
related services performed by the Division on each such system up
to the date hereof, and all materials, components or assemblies
on hand or on order from vendors for each such system as of the
date hereof.
Schedule 1.3.3 - "Service Parts Inventories" - Parts,
components, items and materials for the maintenance and servicing
of assembly and automation systems.
Schedule 1.3.4 - "Stock Inventories" - Spare parts,
components and/or assemblies for the Finished Units and Systems
Inventories referred to in 1.3.1 and 1.3.2 above (i.e., "Sof
Stop" components, aluminum extrusions, gears, rollers, etc., for
transport).
Schedule 1.3.5 - "Consigned Inventories" - Finished Units,
Systems Inventories, Finished and Service Parts Inventories and
any spare or maintenance parts therefor which are in the physical
possession or custody of others whether pursuant to any
Designated Contract which is a "Consignment Agreement" (as
defined in Subsection 8.1.9 hereof) or otherwise.
1.4 Designated Contracts. Those certain contracts,
agreements, leases, licenses, sales or purchase orders in effect between
the Division and customers, suppliers, vendors, distributors, agents or
other parties relating to the Assets or the Division and/or its business
which are specifically identified on the attached Schedule 1.4 and purchase
orders issued by the Division to vendors to the extent such purchase orders
are specifically identified to customer contracts set forth on Schedule 1.4
(the "Designated Contracts").
1.5 Miscellaneous Assets. Those miscellaneous items of
personal property which are itemized on the attached Schedule 1.5,
including, without limitation, certain telephone system, computers and
furniture.
1.6 Machinery and Equipment. The machinery and equipment set
forth on Schedule 1.6.
2. EXCLUDED ASSETS/LIABILITIES.
2.1 Excluded Assets. Buyer will purchase the Assets, and only
the Assets, as described in Section 1 hereof. All other assets and
properties of the Division, whether reflected in the Balance Sheet,
including, without limitation, all cash, cash deposits, marketable
securities and other cash equivalents, real estate, buildings, plant and
building and plant improvements, overhead adjustments of every type,
capitalized POC profit, good will, accounts receivable, all inventories
other than the Designated Inventories, the names "Newcor", and all
contracts, agreements, leases, sales and purchase orders other than the
Designated Contracts (being hereinafter referred to individually as an
"Excluded Asset" and collectively as the "Excluded Assets") shall be
retained by and remain the property of Seller.
2.2 Excluded Liabilities. All liabilities and obligations of
the Seller in respect of (i) the Business except in respect of certain
trade payables and customer advances to the extent such payables and
advances are reflected in the Closing Balance Sheet and the forward
obligations of the Division under Designated Contracts expressly assumed
by Buyer at Closing, (ii) the Assets and (iii) the employees shall be
expressly excluded and retained by Seller, including without limitation
commissions payable to employees and to agents.
3. CONSIDERATION AND PAYMENT.
3.1 The consideration for the Assets and for Seller's non-
competition covenant contained in Subsection 11.1 hereto ("Seller's Non-
Competition Covenant") is as follows (the "Purchase Price"):
3.1.1 An amount to be paid in cash at Closing equal to the
"net book value" (hereafter defined) of the Assets at the Closing
Date, as estimated by Seller in good faith (utilizing, among
other things, the most recent unaudited balance sheet of the
Business available at the time such estimate is made), adjusted
as provided in Subsection 3.3, hereof, plus one (1) million
dollars ($1,000,000), which amount the Seller has estimated is a
negative value, in which case, Seller shall pay Buyer an amount
equal to each value by wire transfer in immediately available
funds to an account designated by Buyer and notified to Seller
within three (3) days prior to the Closing Date. For purposes of
this Agreement " net book value" shall be determined as set forth
in Schedule 3.1.1. pursuant to the Accounting Principles (as
defined in Schedule 3.1.1). For greater clarity at Closing,
Buyer and Seller shall exchange a Closing Statement which shall
identify the net book value of the Assets and the amounts paid by
Seller.
3.1.2 On or before March, 1, 1997 an amount in cash (the
"Earn Out") equal to the amount by which the "operating profit"
of the "Wilson Business" exceeds $1,950,000; provided that the
Earn Out shall not exceed $1,250,000 plus one-half (1/2) of the
operating profit of the Wilson Business in excess of three
million two hundred thousand dollars ($3,200,000). If operating
profit of the Wilson Business is less than $1,950,000, there
shall be no Earn Out payment and Seller shall pay Buyer an amount
in cash (the "Short Fall") equal to the result obtained after
subtracting the actual operating profit of the Wilson Business as
at 12/31/96 from $1,950,000; provided that the maximum amount
payable by Seller as the Short Fall shall not exceed $350,000.
In the event that the operating profit of the Wilson Business
exceeds $3,200,000 the Buyer and Seller shall share equally such
excess after giving effect to provisions of the first sentence of
this Section 3.1.2. On or before February 1, 1997, Buyer shall
advise Seller of its calculation of the operating profit of the
Wilson Business, and its calculation of the Earn Out or Short
Fall. Buyer shall promptly afford Seller and its representatives
an opportunity to review the accounts of the Wilson Business,
together with all supporting detail and Seller's working papers
used in calculating the operating profit of the Wilson Business.
Buyer and Seller agree that the payments, if any, required to be
made by each hereunder shall be made on or before March 1, 1997,
unless either shall have objected in writing to the amount to be
paid by the other under this Section (an "Earn Out Objection").
In the event of an Earn Out Objection the parties shall submit
the objection for resolution under Section 3.3.4, hereof. For
purposes of this Agreement "operating profit" and "operating
loss" shall each be calculated as provided in Schedule 3.1.2.
The term "Wilson Business" shall have the meaning set forth in
Schedule 3.1.2.
3.1.3 Buyer shall have the right to set-off any amounts due
to it under Subsection 3.1.2 hereof, against any amounts payable
by it under Subsection 3.1.1 hereof.
3.2 Allocation of Purchase Price. Buyer and Seller agree to
allocate the Purchase Price in a mutually agreeable manner following
Closing, as required pursuant to section 1060 of the United States Internal
Revenue Code in their respective filings with the Internal Revenue Service.
Buyer shall propose an allocation following Closing subject to mutual
agreement of Seller and Buyer.
3.3 Purchase Price Adjustment.
3.3.1 Inventory Adjustment. Immediately prior to
Closing, Buyer and/or Seller shall cause a physical audit of
the inventory to be taken. To the extent the audit is not
complete prior to Closing, it may be continued following
Closing. Representatives of Seller's auditor, Coopers &
Lybrand may assist in the audit. Buyer and its
representatives, KPMG Peat Marwick, may assist during the
audit. Seller and Buyer shall coordinate and cooperate one
with the other in respect of the timing and conduct of the
physical audit. Inventory is to consist of items of a
quality and quantity usable and salable in the normal course
of the Business and will be valued at the lower of cost or
realizable market value or adequate reserves will be
provided therefor as of the date of the Balance Sheet and as
of the date of Closing Balance Sheet (hereafter defined)
all in accordance with the Accounting Principles. The
Seller shall promptly afford the Buyer and its
representatives an opportunity to review the accounts of the
Division in respect of the Balance Sheet, the net book value
of the Assets and the Closing Balance Sheet, together with
all supporting detail and Seller's and its auditor's working
papers used in the preparation of the Balance Sheet.
3.3.2 Net Book Value Adjustment.
Within sixty (60) days following the Closing Date, Buyer
shall prepare pursuant to the Accounting Principles and
deliver to Seller a balance sheet as of the close of
business on the Closing Date which shall reflect among other
things the (i) adjustment to inventory resulting from the
physical audit conducted pursuant to Subsection 3.3.1 hereof
(the "Closing Balance Sheet") and (ii) Buyer's determination
of the net book value of the Assets as at the Closing Date
(the "Closing Book Value"). Unless the Seller shall give
written notice to the Buyer of any objection (the
"Objection") to the Closing Balance Sheet or the
determination of Closing Book Value on or before thirty (30)
days after its receipt thereof, the Seller will be deemed to
have accepted the Closing Balance Sheet and such
determination.
3.3.3 If the Closing Book Value as finally
determined pursuant to Subsection 3.3.2 above, exceeds the
"net book value" of the Assets at the Closing Date, as
estimated by Seller and used under Section 3.1.1 (not
including the $1,000,000 amount added thereto under Section
3.1.1) then the Buyer shall pay to the Seller an amount in
cash equal to such excess within ten (10) days following
such determination. If the Closing Book Value is less than
the Seller's estimate of the "net book value" of the Assets
at the Closing Date used under Section 3.1.1, then the
Seller shall pay to the Buyer an amount in cash equal to
such difference within ten (10) days following such
determination. In either case, with interest from and
including the Closing Date to, but excluding the date of
payment, at the prime rate in effect on the Closing Date as
reported by Citibank, N.A.
3.3.4 The Objection or Earn Out Objection, if
any, shall specify in reasonable detail the items as to
which the party objects and the basis of each such
objection and in the case of an objection under Section
3.3.2, the Seller's determination of the Closing Book Value
based upon the Objection. If the Objection or Earn Out
Objection cannot be satisfied by negotiation between the
parties within thirty (30) days of the Objection or Earn Out
Objection, as the case may be, the Objection or Earn Out
Objection, as the case may be, will be referred for
arbitration to Ernst & Young (Detroit office), or, if such
firm is unable or unwilling to act, such other independent
accounting firm as shall be agreed upon by the parties
hereto in writing (in either case, the "Accounting
Arbitrator"). The Accounting Arbitrator will be instructed
to select, at its discretion, the individual members of its
firm who will have primary responsibility for this matter
and will be instructed to reach a determination within sixty
(60) days from the date of referral. The Accounting
Arbitrator will be instructed further that it must choose
(i) either the Seller's determination of the Closing Book
Value or the Buyer's determination of the Closing Book Value
in the case of an Objection or (ii) Buyer's determination of
the Earn Out or the Short Fall or Seller's determination of
the Earn Out or the Short Fall, as the case may be. The
decision of the Accounting Arbitrator will be final and
binding upon the parties and enforceable as an arbitration
award pursuant to the Uniform Arbitration Act and the
Federal Arbitration Act. The Accounting Arbitrator shall
have no power to alter or amend the provisions, terms or
conditions of this Agreement or to render a determination
inconsistent with the same. The fees and expenses of the
Accounting Arbitrator engaged pursuant to this Subsection
shall be borne by the party whose position the Accounting
Arbitrator does not choose.
4. CLOSING/TITLE. Completion of the sale and purchase of the Assets
shall be effected at a closing (the "Closing") to be held at the offices of
the Buyer at 1250 Brown Road, Auburn Hills, MI, on May 6, 1996,
commencing and deemed to be effective at 9:00 A.M., or at such other place,
date and time as shall be mutually agreed upon by the parties but not later
than May 15, 1996. If the Closing is not consummated on or before May 15,
1996, either Seller or Buyer may at any time thereafter terminate its
obligations under this Agreement by written notice to the other party or
parties, without liability of any kind; provided, however, that this right
of termination shall not be available to any party whose breach of this
Agreement caused or permitted the non-occurrence of the Closing. The date
of the Closing is referred to herein as the "Closing Date". Title to the
Assets shall pass to Buyer in place upon Closing.
5. ACCESS TO ASSETS, RECORDS, INFORMATION, ETC. Seller agrees that,
during the period commencing on the date hereof, (a) it will give or cause
to be given to Buyer and its representatives reasonable access to all of
the Assets and the properties, inventories, offices, books, contracts,
commitments and records of Seller wherever situated relating, in whole or
in part, to the Business and will exert its best efforts to obtain similar
access to the premises of others, including customers of Seller or the
Division, upon which any Assets are located, for the purpose of inspecting
same including, in particular, Consigned Inventories, if any; (b) it will
furnish or cause to be furnished to Buyer and its representatives such
lists, schedules, records, documents, financial and operating data and
information with respect to the Business and Assets as Buyer shall from
time to time reasonably request; and (c) the Buyer and its representatives
shall be entitled to consult with representatives, officers and employees
of the Division and/or Seller having knowledge of the Assets, and the
Division, its products, and the Business.
6. NO ASSUMPTION OF DEBTS, OBLIGATIONS OR LIABILITIES.
Except for the payment and/or performance of obligations expressly assumed
by Buyer in respect of the Designated Contracts which will be assigned to
Buyer at Closing and the liabilities specifically identified on the Closing
Balance Sheet (the "Closing Balance Sheet liabilities"), Buyer is not
assuming and shall not assume and shall have no responsibility for or be
or become liable in any manner to pay, perform or discharge any debt,
liability, obligation or expense of or relating to the Seller, the Division
or the Business, or arising out of or in connection with any materials,
products, goods or services, manufactured, processed, assembled, sold,
rendered, delivered or placed in commerce prior to the Closing by Seller,
the Division or the Business other than in respect of the Designated
Contracts, without regard to when the event, occurrence, contingency or
condition giving rise to such debt, liability, obligation or expense shall
occur, whether before or after the Closing, of any nature, whether direct,
indirect, accrued, absolute, contingent, secured, unsecured, known,
unknown, foreseen or unforeseen, and Seller shall retain and be responsible
for all such debts, liabilities, obligations and expenses.
7. TRANSACTIONS TO BE EFFECTED AT CLOSING. At Closing:
7.1 Seller shall:
7.1.1 execute and deliver to Buyer such bills of sale
with covenants of title, instruments of assignment, third
party consents, releases and acceptances, each in form and
substance satisfactory to Buyer's counsel, as shall be good
and sufficient to transfer to and vest in Buyer title in and
to the Assets, free and clear of all liens, security
interests, charges, levies and encumbrances of any kind. If
and to the extent that the full and effective assignment of
any of the Designated Contracts to be transferred to Buyer
pursuant hereto shall require the consent of any person or
entity, Seller shall use its best efforts to obtain such
consent and to deliver to Buyer written confirmation thereof
in a form satisfactory to Buyer's counsel at Closing. If
Seller shall not have obtained such consent(s) on or prior
to the Closing Date, then such contract(s) shall be
retained by and remain the responsibility of Seller,
provided that if Seller shall not have obtained the written
consent of the persons listed in Schedule 7.1.3, attached
on or before the Closing Date then Buyer may in its
discretion terminate this Agreement whereupon Buyer shall
have no liability of any kind to Seller and this Agreement
shall be null and void and without force and effect.
7.1.2 execute and deliver to Buyer a lease of the plant
and premises currently used by the Division at 27191
Groesbeck Highway, Warren, Michigan (the "Plant")
substantially in the form attached as Exhibit 7.1.2 (the
"Lease").
7.1.3 execute and deliver to Buyer a Service Agreement
pursuant to which Buyer will perform manufacturing, assembly
installations, warranty work and the like for Seller as an
independent contractor, substantially in the form attached
as Exhibit 7.1.3 (the "Service Agreement").
7.1.4 execute and deliver to Buyer an assignment of
manufacturers' warranties applicable to the Assets.
7.2 Buyer shall:
7.2.1 pay or cause to be paid to Seller the amounts as
specified in Subsection 3.3.1 hereof; and
7.2.2 execute and deliver a written undertaking,
substantially in the form set forth in Exhibit 7.2.2 (the
"Assignment and Assumption Agreement") pursuant to which Buyer
shall assume the "forward obligations" of Seller under the
Designated Contracts and certain trade payables and customer
advances expressly set forth as the Closing Balance Sheet as and
to the extent the same shall be assigned to and accepted by Buyer
at Closing under the Assignment and Assumption Agreement. As
used herein, "forward obligations" shall mean obligations of
Seller under Designated Contracts in respect of which performance
by Seller in accordance with the terms of such contract shall be
due as of a date or time subsequent to the Closing.
7.3 Conditions to Obligation to Close.
7.3.1 Conditions of Buyer's Obligations.
The Buyer's obligation to effect the sale at Closing is subject
to the satisfaction as of the Closing Date of the following
conditions precedent:
7.3.1.1 Each representation and warranty of Seller
set forth in Section 8 hereof shall be true and correct as
of the Closing as though then made and Seller shall have
performed and observed in all material respects each covenant
required to be performed by it hereunder prior to Closing.
7.3.1.2All applicable waiting periods (and extensions
thereof) under all applicable laws, if any, shall have expired or
terminated.
7.3.1.3 No action, suit or proceeding is pending or
threatened the result of which could prevent or prohibit the
consummation of the transaction contemplated hereby or adversely
affect the Buyer's right to own or operate the Assets or conduct
the Buyer's business or the Seller's obligations hereunder or
under the Lease or Service Agreement and no judgment, order,
decree or injunction having any such effect shall exist.
7.3.1.4 All consents will have been obtained and
Seller shall have executed and delivered the Lease, the Service
Agreement and the Warranty Assignment.
7.3.1.5 Seller shall have delivered or caused the
delivery of such opinions, certificates (including a "good
standing" certificate) and other documents and instruments as
Buyer and its counsel shall reasonably request.
7.3.2 Seller's obligations to effect the sale at Closing
is subject to the satisfaction of the following conditions
precedent:
7.3.2.1 Each representation and warranty of Buyer set
forth in Section 9 hereof shall be true and correct as of the
Closing as though then made and Buyer shall have performed and
observed in all material respects each covenant required to be
performed by it hereunder prior to Closing.
7.3.1.2 All applicable waiting periods (and extension
thereof) under all applicable laws, if any, shall have expired or
terminated.
7.3.2.3 No action, suit or proceeding is pending or
threatened the result of which could prevent or prohibit the
consummation of the transaction contemplated hereby or adversely
affect the Buyer's obligations hereunder or under the Lease or
Service Agreement and no judgment, order, decree or injunction
having any such effect shall exist.
7.3.2.4 Buyer shall have executed and delivered the
Lease, the Service Agreement and the Assignment and Assumption
Agreement.
7.3.1.5 Buyer shall have delivered or caused the
delivery of such opinions, certificates (including a "good
standing" certificate) and other documents and instruments as
Seller and its counsel shall reasonably request.
8. REPRESENTATIONS AND WARRANTIES OF SELLER.
8.1 Seller represents and warrants to Buyer as follows:
8.1.1 Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified to
do business in the State of Michigan and it
has all requisite power and authority to own, lease and operate
the Assets and to conduct the Business as now being conducted,
and to enter into this Agreement and any other agreement provided
herein or contemplated hereby and to perform its obligations
hereunder and thereunder.
8.1.2 Authority Relative to this Agreement. The
execution, delivery and performance of this Agreement, and the
consummation by Seller of the transactions provided for herein
and contemplated hereby have been duly and validly authorized by
the Board of Directors of Seller and no other corporate action is
necessary therefor. This Agreement has been duly executed and
delivered by Seller and constitutes, and the agreements and
instruments relating to the transactions provided for herein and
contemplated hereby, after being duly executed and delivered by
Seller, will constitute the legally valid, binding and
enforceable obligations of Seller in accordance with their
respective terms, except as the same may be limited or otherwise
affected by applicable bankruptcy, insolvency and other laws
affecting creditors' rights generally and equitable principles.
Except as set forth on Schedule 8.1.2, the execution, delivery
and performance of this Agreement, and the consummation of the
transactions provided for herein and contemplated hereby by
Seller, will not violate, result in a breach of, constitute a
default under, extinguish or adversely affect any rights under,
require consent, waiver, approval, notice or other actions under,
result in the creation of any lien on any of the Assets under, or
otherwise conflict with, any applicable federal, state or local
law or regulation or any of the provisions of, the Certificate
of Incorporation or by-Laws of Seller or any indenture, mortgage,
deed of trust, loan or credit agreement, promissory note,
evidence of indebtedness or decree or judgment, lease, agreement
or instrument to which Seller is a party or to which any of the
Assets may be subject or be bound.
8.1.3 Balance Sheet/Income Statement. Attached as
Schedule 8.1.3 are the balance sheet for the Division (the
"Balance Sheet") as at March 31, 1996 (the "Balance Sheet
Date"), (prepared by Seller and reviewed by Seller's auditor's,
Coopers & Lybrand ) which consolidates all operations of the
Division and a Statement of Income as at the Balance Sheet Date
(prepared by Seller and reviewed by Coopers & Lybrand) which
fairly presents the results of operations of the Business for the
period indicated. The Balance Sheet fairly presents the Assets
and liabilities as of the Balance Sheet Date. Except as set
forth in Schedule 8.1.3, the Balance Sheet and Statement of
Income were prepared in accordance with the Accounting Principles
applied on a basis consistent with the preparation of Seller's
prior year end audited financial statements.
8.1.4 Accounts Payable. The accounts payable of the
Division reflected on the Balance Sheet and all accounts payable
arising after the Balance Sheet Date and on or prior to the
Closing Date arose and will arise from bona fide arms length
transactions in the ordinary course of the Seller's Business,
have been or shall be reflected in full on the books of the
Seller's Business and are not yet due and payable.
8.1.5 Equipment Etc. All of the machinery, equipment and
vehicles of a material nature currently used in the Business,
whether reflected on the Balance Sheet and whether owned or
leased, are in good repair and operating condition, are
structurally sound and are free from defects except such normal
wear and tear and such defects as will not substantially
interfere with continued use thereof in the conduct of usual
operations of the Business.
8.1.6 Designated Inventories. The Designated
Inventories shown on the Balance Sheet and the inventories
acquired after the date of the Balance Sheet consist and on and
prior to the Closing Date will consist of items of merchantable
and standard quality and condition, usable or saleable in the
normal course of the Business and, if saleable, are saleable at
values not less than the book value amounts thereof. The value
of the Designated Inventories as carried on the books of Seller's
Business reflects the lower of cost or realizable market value of
said inventories using the first-in, first out method of
inventory accounting, all in accordance with the Accounting
Principles consistently applied. The values of all items of
obsolete materials and of materials below standard quality have
been written down to realizable market value or adequate reserves
have been provided therefor.
8.1.7 Title to Assets: Absence of Liens and
Encumbrances. Except as set forth in Schedule 8.1.7, Seller
has good and marketable title to all of the Assets, the Plant and
to the real and personal property of the Division, free and clear
of all liens, charges, security interests, leases and
encumbrances except the liens for current taxes not yet due and
payable. Seller has not received notice of any material
violation that remains uncured of any applicable zoning,
environmental or other law order, regulation, ordinance or
requirement relating to the Plant, the Division, the Assets, the
Business or the real property used by the Division, and to the
best of its knowledge after due inquiry all plants, buildings and
structures used by the Division or the Business conform with all
applicable laws, ordinances, codes and regulations in all
material respects.
8.1.8 Tax Matters. The Seller has duly filed with the
appropriate federal, state, local and other governmental
agencies, including foreign governmental authorities where
appropriate, all tax returns, including sales tax returns,
information returns and reports required to be filed; has paid in
full or made adequate provision for the payment of all taxes
(including taxes withheld from employees' salaries and other
withholding taxes and obligations), interest, penalties,
assessments or deficiencies shown to be due on such tax returns
or by any taxing authority, except such amounts being contested
in good faith by appropriate proceedings; and all information
reported on such returns is true, accurate and complete in all
material respects. All claims for taxes due and payable by the
Seller have been paid or are being contested in good faith by
appropriate proceedings. Except as set forth in Schedule 8.1.8.,
the Seller is not a party to any pending action or proceeding,
assessment or collection of taxes with respect to it by any
governmental authority, foreign or domestic and no tax statute of
limitations applicable to the Division or the Business has been
extended by consent of Seller.
8.1.9 Agreements in Respect to Consigned Inventories.
Attached hereto as Schedule 8.1.9 hereof is a complete list and
description of all arrangements, contracts, agreements and
documents reflecting all lease, rental, lease-purchase,
conditional sale, sale on consignment or similar arrangements
(collectively referred to as the "Consignment Agreements")
applicable to the Division between Seller and others pursuant to
which others have possession, custody or possessory or non-
possessory rights or interests in any Consigned Inventories.
Except as otherwise indicated on Schedule 8.1.9, in respect of
the Consigned Inventories under each such Consignment Agreement,
the Division is entitled to the return thereof within 90 days
from the date hereof.
8.1.10 Backlog of Orders. The backlog of orders of the
Division is set forth in the attached Schedule 8.1.10 (to be
supplemented at the Closing) which describes all orders over
$25,000 under which the Division is obligated for the design,
manufacture, assembly, sale, delivery or installation of
automation, equipment and/or assembly systems, products or
services. Except as described on Schedule 8.1.10, all such
orders are, or will be as of the Closing, legally binding and
enforceable in accordance with their respective terms except as
the same may be limited or otherwise affected by applicable
bankruptcy, insolvency or other laws affecting creditors' rights
generally and equitable principles. In respect of each of the
orders or contracts identified in Schedule 8.1.10, having an
order or contract price of $ 25,000 or more, Seller's full
manufacturing costs (i.e., material, labor and burden applied to
the orders in backlog) as reflected on Seller's books to date
have not in each case exceeded the price as provided in each such
order or contract. Seller warrants that (a) to the best of
Seller's knowledge the cost to date and the cost to complete such
contract or order within the time as specified therein will not
exceed the price as provided in such contract or order, (b) no
delay in the completion of performance of such contract or order
within the time specified for performance on the part of the
Division is now expected or anticipated and Seller has no reason
to believe that there will be any such delay and (c) no such
contract or order has been canceled nor has Seller any reason to
believe after due inquiry that any such contract or order will be
canceled.
8.1.11 Certain Contracts. Attached hereto as Schedule
8.1.11 hereof is a list of each presently existing lease,
contract, commitment or other understanding of Seller pertaining
to the Division, its Business or the Assets which involves (i)
the procurement of any materials, items, components, services or
software in connection with any of the orders identified in
Schedule 8.1.10 or (ii) payment by Seller of more than $10,000 or
(iii) a period of time more than six (6) months from the date
hereof.
8.1.12 Employees/Employee Relations. There has been
delivered to Buyer a list dated as of May 2, 1996, of the names,
titles, date of hire, date of birth, and social security numbers
for employee benefit purposes and current annual compensation,
including bonuses and commissions, of those employees of Seller
who are employed in the Business. The Seller has good employment
relations and good labor relations insofar as the Division is
concerned. There are no controversies pending between, or to the
best of Seller's knowledge, threatened against, Seller and any of
the Division's employees, former employees, job applicants or any
association or group of such persons. The Seller has complied in
all material respects with all the laws applicable to the
Business relating to employment, including any provisions thereof
relating to wages, hours, collective bargaining, equal employment
opportunity, discrimination, fair-employment practices and the
payment of social security and similar taxes. The Seller knows
of no activities or proceedings of any labor union (or
representatives thereof) to organize any unorganized employees of
the Seller employed in the Division, nor of any work stoppages,
or threats thereof, by or with respect to any such employees of
the Seller. During the twelve-month period preceding the date
hereof, there have not been any significant employee relations or
labor troubles involving persons employed in the Division.
Except as set forth in Schedule 8.1.12, to the best of the
knowledge of the Seller, there are no present employees of the
Seller employed in the Division who will not be available for
employment by or for the benefit of the Buyer. There are no
pension plans in which employees of the Division participate
(the "Pension Plans"), consulting agreements, employment
contracts or collective bargaining agreements relating to any
employees of the Seller employed in the Division except as
disclosed in Schedule 8.1.12 hereto. Schedule 8.1.12 sets forth
all commission, bonus and incentive compensation contracts,
policies and arrangements written or oral under which employees
employed in the Division receive or will receive compensation.
There have been no prohibited transactions as defined in the
Employee Retirement Income Security Act of 1974, as amended, in
respect of the Pension Plans. Each of the respective Pension
Plans is, or following Closing will be, funded in compliance with
applicable law. None of the Pension Plans are "multi-employer"
pension plans.
8.1.13 Patents, Trademarks, Trade Secrets, Know-How,
Copyrights.
The Intangible Assets identified in Schedule 1.1, are all
patents, patent applications and registrations and all trade
names, trademarks and service marks and the registrations thereof
and applications for registration, and all copyright
registrations and applications for registration, and all trade
secrets, unpatented know-how and license rights employed in the
Business. Attached hereto as Schedule 8.1.13 is a list of all
agreements under which Seller has granted any rights or licensed
or conveyed any interest in respect to any of the Intangible
Assets. Except as set forth in Schedule 8.1.13 Seller owns, or
is licensed or entitled to use, all technology, know-how, trade
secrets and processes necessary for the operation of the Business
as currently operated. All trade names, trademarks and service
marks and the registration thereof and applications for
registration, all copyrights, copyright registrations and
applications for registration and all patents and patent
applications and registrations assigned or licensed hereunder are
in good standing, are free from any security interest, lien or
encumbrance, Seller is not in default in respect thereof and have
not been, and are not now being, challenged or involved in any
pending or, to the best of Seller's knowledge threatened
infringement proceeding, except as disclosed in attached Schedule
8.1.13. None of the products manufactured or sold by the Seller
in the Business or processes used by the Seller in the
manufacture of such products in the Business infringes upon any
patent, trademark, shopright, or copyright of any other person,
except as disclosed in attached Schedule 8.1.13. There are no
pending or, to the best of Seller's knowledge, threatened claims
of infringement of any rights of any third party in respect of
the products manufactured or sold, or processes utilized by the
Seller in the Business, except as disclosed in Schedule 8.1.13.
8.1.14 Franchises, Sales Agencies, Distributorships.
Attached hereto as Schedule 8.1.14 hereof is a list of all
franchises, concessions, sales, agencies, distributorships and
similar contracts or arrangements pertaining to the Division.
8.1.15 Powers of Attorney. Except as otherwise described
on the attached Schedule 8.1.15, no person, firm or corporation
holds any power of attorney with respect to the Division, the
Business or any of the Assets which will have any binding effect
upon the Business, the Assets or the Buyer on or after the
Closing.
8.1.16 Permits and Authorizations. The attached
Schedule 8.1.16 lists all licenses, permits, consents, approvals,
authorizations, qualifications, orders and similar permissions of
governmental authorities (federal, state and local) of a material
nature held or required for the operation of the Division, the
Business, the Plant or any of the Assets. Seller acknowledges
delivery to Buyer of the originals or certified copies of each
such license permit, consent, etc.
8.1.17 Insurance. The Assets and the Plant are
insured for the benefit of Seller under the policies indicated on
Schedule 8.1.17. The Seller is covered by comprehensive
general liability insurance with respect to the Assets and the
Division including insurance against all product liability claims
relating to products or services manufactured, assembled, sold or
delivered by the Division under the policies indicated on
Schedule 8.1.17. Each of the insurance policies listed on
Schedule 8.1.17 attached is issued by an issuer of recognized
responsibility, is in full force and effect, has such unused
amounts of coverage as of the date hereof as are indicated on
Schedule 8.1.17, and has not been canceled, bargained away or
compromised by any insured party thereto.
8.1.18 Validity of Contracts, Leases and Agreements.
All contracts, orders, leases, agreements and arrangements
identified on Schedules 8.1.9, 8.1.10, 8.1.11, and 8.1.14 are
in full force and effect and are valid and enforceable in
accordance with their respective terms, except as the same may
be limited or otherwise affected by applicable bankruptcy,
insolvency and other laws affecting creditors' rights generally
and equitable principles, are entered into consistent with good
business practice on "arms length" terms and conditions, are
adequate for the purposes for which they are intended. Except as
disclosed on Schedule 8.1.18, Seller is not in breach or default
in the performance of any of its material obligations thereunder;
and, to the best of Seller's knowledge no other party thereto is
in default thereunder and no event has occurred or has failed to
occur whereby any of the other parties thereto have been or will
be released therefrom or will be entitled to refuse to perform
thereunder or which with the passage of time will constitute or
result in a breach of, or default under, any such contract, lease
or agreement.
8.1.19 [Reserved]
8.1.20 Government Licenses, Permits and Compliance with
Law. Seller holds all requisite licenses and permits from
federal, state and local governmental authorities for the
operation of the Assets and the business of the Division as
presently conducted by Seller ("Permits") including without
limitation permits required in connection with the painting
activities at the Plant. All such licenses and permits are
listed in Schedule 8.1.20.
Seller has operated the Business so as to comply in all material
respects with all permits and applicable laws and regulations.
Except as set forth on Schedule 8.1.20, all permits issued to
Seller in respect of the operation of the Assets at the Plant may
be assigned by Seller to Buyer without the consent of the
permitting authority.
8.1.21 Certain Claims. Attached hereto as Schedule
8.1.21 is a listing of all claims made or asserted against Seller
in writing, whether the subject of litigation or not, within the
last five (5) years, which involved or allege injury to or death
of persons or damage to property arising from or in connection
with any products, assembled, manufactured, sold or supplied or
services rendered by the Division or in connection with the
Business.
8.1.22 Litigation and Contingent Liabilities.
Except as described in Schedules 8.1.21 and the attached Schedule
8.1.22, there is no litigation, action, suit, proceeding,
investigation or claim pending, or, to the best of Seller's
knowledge, threatened by or against or relating to the Seller or
the Division, the Business or the materials, products, systems or
services whether purchased, used, assembled, manufactured, sold
or supplied by or for the benefit of the Division or in respect
of the Assets or the transactions contemplated by this
Agreement, nor, to the best of Seller's knowledge is there any
basis for any such litigation or claim. Neither the Seller nor
any of its properties, including the Plant, is subject to any
decree, judgment or order of any court, agency or by consent,
affecting the Division, the Assets or the Business. Except as
expressly stated in the Balance Sheet, there is no contingent
liability of the Seller as of the Balance Sheet Date relating to
the Division, the Business or the Assets.
8.1.23 Conditions Affecting the Division; Forecasts.
To Seller's best knowledge after due inquiry, there are no
conditions existing or anticipated (whether as a result of the
transactions contemplated hereby or otherwise) with respect to
the Division's products, customers or suppliers which will
materially adversely affect the Division's business, assets or
prospects other than the matters as disclosed in the attached
Schedule 8.1.23.
8.1.24 No Brokers. All negotiations relative to
this Agreement and the transactions contemplated hereby have been
carried on by Seller and its counsel directly with Buyer and its
counsel without the intervention of any person as the result of
any act of Seller or its counsel in such manner as to give rise
to any valid claim against any of the parties hereto for a
brokerage commission, finder's fee or other like payment,
provided that Seller has retained, and will stand responsible for
all fees, costs and expenses in connection with the services of
Roney & Co.
8.1.25 Absence of Undisclosed Liabilities. Except as
and to the extent specifically provided for in the Balance Sheet,
as of the Balance Sheet Date, the Seller had, and except as and
to the extent specifically provided for in the Closing Balance
Sheet, the Closing Balance Sheet will have, no liabilities or
obligations of any kind relating to the Assets, the Division or
the Business (whether secured, unsecured, accrued, absolute,
contingent, direct, indirect, or otherwise) of a nature or type
customarily reflected in a corporate consolidated balance sheet
prepared in accordance with the Accounting Principles,
including, without limitation, any tax liabilities due or to
become due, and whether or not incurred in respect of or measured
by the operations or income of the Division for any period prior
to the close of business on the Balance Sheet Date, or on the
Closing Date, as the case may be, or arising out of transactions
entered into, or any state of facts existing, prior thereto.
8.1.26 No Adverse Change. Except as disclosed on
Schedule 8.1.26 attached, during the period from the Balance
Sheet date to the date hereof, there has not been any material
adverse change in the assets or business of the Division or any
material adverse change in the financial condition or results of
operations of the Division and there has not occurred any act of
God, action of government, labor dispute, civil disturbance,
natural disaster, accident or other act or event beyond the
control of Seller which has resulted in any material damage or
destruction of the Assets or impairment of their value.
8.1.27 Disclosure: No representation or warranty by
the Seller, nor any statement or certificate furnished or to be
furnished to Buyer pursuant hereto or in connection with the
transaction contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements contained
herein or therein not misleading.
8.1.28 Environmental Matters. The Seller is in
compliance
with all Environmental Laws (hereafter defined), except as
disclosed in Schedule 8.1.28, attached. The Seller is in
compliance with all permits, licenses and other authorizations
that are required pursuant to Environmental Laws for the
occupation and operation of the Plant, the Assets and the
Business, except as disclosed in Schedule 8.1.28, attached. The
Seller has not received any written notice of any violations or
liabilities, including any investigatory, remedial or corrective
obligations, arising under Environmental Laws and relating to the
operation of the Division, the Plant, the Business or the Assets.
The Seller has not assumed or undertaken any liability or
corrective or remedial obligation of any other person relating to
Environmental Laws. "Environmental Laws" means all federal,
state, and local statutes, regulations, ordinances and judicial
or administrative orders concerning the pollution or protection
of the environment, including without limitation the Clean Air
Act, the Clean Water Act, the Solid Waste Disposal Act, the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
the Federal Insecticide, Fungicide and Rodenticide Act, the
Occupational Safety and Health Act, and the Emergency Planning
and Community Right-to-Know Act of 1986.
9. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
9.1 Due Organization, Good Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has all requisite power and authority to
enter into this Agreement (and any other agreement contemplated hereunder
and thereunder) and to perform its obligations hereunder and thereunder.
9.2 Authorization and Validity of Agreement. The execution,
delivery and performance of this Agreement by Buyer and the consummation by
Buyer of the transactions contemplated hereby have been duly and
effectively authorized by its Board of Directors. No other corporate
action is necessary for the execution, delivery and performance by Buyer of
this Agreement and the consummation by Buyer of the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by Buyer and constitutes, and the agreement and instruments relating to the
transactions provided for herein and contemplated hereby, after being duly
executed and delivered by Buyer, will constitute the legally valid and
binding obligation of Buyer enforceable in accordance with its terms,
except as the same may be limited or otherwise affected by applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally,
and the entering into of such Agreement does not, and the consummation of
the transactions contemplated hereby will not, violate any of the
provisions of Buyer's Certificate of Incorporation, By-Laws or any
indenture or conflict with or result in a breach of any agreement,
judgment, decree, law or regulation to which it is a party or by which it
may be bound, in such
fashion as to prevent Buyer from performing its obligations hereunder and
in accordance herewith.
9.3 No Broker. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by Buyer and
its counsel directly with Seller and its counsel without the intervention
of any person as a result of any act of Buyer or its counsel in such manner
as to give rise to any valid claim against any of the parties hereto for a
brokerage commission, finders' fee or other like payment.
10. EMPLOYEES.
10.1 Except as otherwise provided in Section 10.5, Buyer may, but
it shall not be obligated to, offer employment to any person or persons
currently employed by the Division following the Closing. In respect to
those employees of the Division, to whom Buyer shall offer employment,
Seller agrees to encourage such persons to accept employment with Buyer.
Each of Buyer and Seller agree that, for a period of two (2) years
following the Closing, neither will, without the express written consent of
the other to be obtained in each case, employ or offer employment (i) in
the case of Seller, to any employees of the Division to whom Buyer shall
have offered employment at a base salary equal or greater than their
current base salary as employees of the Division; provided, however, that
Seller may, during such time period, employ or offer employment to any such
employee who declined Buyer's offer of employment or whose employment with
Buyer has terminated and (ii) in the case of Buyer, key employees of Seller
other than employees of the Division with whom Buyer's representatives had
contact in connection with the transaction contemplated hereby.
10.2 The Seller shall be solely responsible for all Liabilities
(hereafter defined) in respect of all employees under all employee benefit
plans of the Seller incurred on and prior to the Closing Date. Without
limiting the foregoing: (i) the Seller shall be solely responsible for
severance obligations, if any, based on actions of the Seller on and prior
to Closing; (ii) the Seller shall be solely responsible for workers'
compensation, short and long term disability, salary continuation and
unemployment compensation Liabilities in existence as of the Closing Date
and for long term disability Liabilities with respect to any employee
disabled prior to the Closing Date; (iii) the Seller shall be solely
responsible for retirement benefits (including pension, medical and dental
benefits, if any) for all employees who were terminated, and for employees
who retired, on or before the Closing Date; and (iv) the Seller shall be
solely responsible for all obligations accruing prior to the Closing Date
under any of Seller's employee benefit plans including all pension accruals
under any collective bargaining agreement. The Seller shall indemnify and
hold harmless the Buyer from and against all Liabilities and obligations of
the Seller described in this Section.
10.3 In respect to those employees of the Division to whom Buyer
elects not to offer employment, said employees shall be former, terminated
employees of Seller and Buyer shall have no liability or responsibility
whatsoever in respect to said employees and Seller shall be responsible for
the payment of all compensation and other benefits and payments to which
such persons may be entitled by virtue of their employment by Seller and/or
any discontinuance of their employment by Seller.
10.4 In respect to any employees of the Division who are offered
and accept employment with Buyer, Seller agrees to continue to provide
health and medical insurance coverage to such persons under any group
health, medical and dental plans or programs of Seller in which they
currently participate, for a period up to sixty (60) days following
Closing, and Buyer agrees to reimburse Seller for the actual, out of pocket
cost and actual charges of the third party administrator incurred by Seller
in providing such coverage to such persons for said period.
10.5 Seller represents and warrants to Buyer that on May 6, 1996, the
number of employees of Seller in the Division in the United States is 137
and that during the one hundred eighty (180) day period preceding the date
hereof, Seller has permanently laid off no more than three (3) of its
employees. Buyer agrees to offer to hire on a full time basis and on
reasonably comparable compensation arrangements, respectively, no less than
ninety-one (91) of Seller's former employees of the Division of Buyer's
choosing as of the Closing Date. This Section is not intended, nor shall
it be interpreted or applied, to create or give rise to any third party
beneficiary rights for the employees of Seller, their heirs and assigns, or
any other person who is not a party to this Agreement. Buyer agrees not to
discriminate in respect of its employment offers and hiring hereunder.
10.6 Seller agrees to assist Buyer at Buyer's request and expense by
enforcing Seller's rights under each employee confidentiality agreement
following Closing.
11. TRANSACTIONS SUBSEQUENT TO CLOSING.
11.1 Confidentiality/ No Competition. For a period of five (5)
years following the Closing Date, Seller agrees to keep confidential and
not disclose to any person any confidential information relating to the
Division or the Assets except information which becomes a matter of public
knowledge and except as Seller may be legally required to disclose
pursuant to applicable laws, regulations, court or administrative orders.
Seller agrees to obtain for Buyer the benefit of any confidentiality
agreement executed by others in connection with the review by others of
information preliminary to their potential acquisition of the Division.
Seller and its affiliates shall not, for a period of five (5) years from
and after the Closing Date, without in each instance obtaining the prior
written consent of Buyer, directly or indirectly, (i) manufacture,
assemble, sell or provide any of the products or services which are, have
been or are planned to be manufactured, assembled, sold or provided by the
Division as of Closing Date anywhere in the United States or in any foreign
country or territory or (ii) enter into an agreement for the distribution,
agency, representation or private labeling of products which are, have
been or are planned to be manufactured by the Division; provided, however,
Seller may manufacture, assemble, sell or provide any products or
services; (i) which Seller purchases from Buyer; (ii) which are part of, or
assembled from, inventories retained by Seller as of the Closing Date or
(iii) to fulfill any order in Seller's backlog as of the Closing Date which
is not assumed by Buyer under this Agreement or (iv) to perform any
installation, manufacturing, assembly or warranty work not performed by
Buyer under the Service Agreement.
11.2 Transfer Taxes, Recording Fees and Other Expenses.
Seller and Buyer agree to share equally the cost of, sales tax or fees, if
any, incident to the transfer of Assets hereunder.
11.3 Receivables/Collections from Customers. Seller shall retain
the accounts receivable of the Division as at the Closing Date. On the
Closing Date Seller shall deliver to Buyer a list identifying each
receivable to which Seller is entitled, which list shall include the name,
address and amount of receivable due in respect of each customer. Buyer
agrees to take reasonable steps to assist in the billing and collection of
Seller's receivables after the Closing Date, in a manner consistent with
Buyer's usual receivables collection policies, provided that Seller shall
pay Buyer's out-of-pocket costs and expenses in connection with such
assistance and further provided that Buyer shall have no obligation to make
extra-ordinary collection efforts or to participate in any way in dunning
activities, litigation or collection proceedings, except as and to the
extent Buyer may agree with Seller in writing following the Closing. If
either party receives any proceeds of any sales of the other party on or
after the date of Closing, the party receiving such proceeds shall apply
receipts as identified by each customer's remittance and shall apply
unidentified receivables at the direction of such customer after inquiry,
and shall, within five (5) days of its receipt thereof, remit same to the
party entitled to such proceeds together with a statement identifying
customer(s) and sales transactions(s) to which such remittance relates.
11.4 Access. On or after the Closing Date, on reasonable
notice, Buyer shall permit Seller and the employees, representatives and
agents of Seller to have reasonable access to records of the Division
("Records") in Buyer's possession related to the Assets or the business of
the Division prior to the Closing and to make copies thereof for purposes
of (a) completion of any physical inventory or (b) completion and filing
of any tax returns for periods prior to the Closing Date, subject to the
confidentiality provision of Section 11.1, hereof..
11.5 Retention of Records. For a period of two (2) years
following the Closing Date, Buyer will not destroy any records in Buyer's
possession which are related to the Assets or to the Business conducted by
the Division prior to the Closing, without Seller's prior consent, and
thereafter will provide Seller thirty (30) days prior written notice of its
intent to destroy such Records and an opportunity to collect and carry away
such Records at the expense of Seller.
12. BULK SALES LAW. Buyer hereby waives compliance with all
applicable bulk sales laws. Seller hereby agrees to indemnify and hold
harmless Buyer from and against any and all loss, damage, claims and
liability (including reasonable attorney's fees) arising out of or in
connection with any assertion against Buyer or the Assets of any claims of
creditors of Seller except in respect of the forward obligation of Seller
under the Designated Contracts and the trade payables and customer advances
expressly set forth in the Closing Balance Sheet expressly assigned to and
assumed by Buyer at Closing under the Assignment and Assumption Agreement.
13. INDEMNIFICATION
.
13.1 Seller. Seller hereby agrees to indemnify and hold
harmless Buyer against and in respect of the following:
13.1.1 Certain Liabilities. Any and all claims,
debts, obligations, liabilities, costs, expenses, charges,
assessments, liens or levies and all taxes (domestic and foreign)
of any nature or kind, including without limitation claims for
personal injury, death or property damage ("Liabilities") of
Seller, arising out of or in connection with Seller's ownership
or operation of the Assets and the Division, and its business and
affairs on and prior to the Closing Date including, without
limitation, Liabilities arising from or in connection with any
and all materials, products, goods or services purchased, used,
processed, generated handled, transported, provided,
manufactured, processed, assembled, sold, supplied, delivered or
placed in commerce by Seller or the Division and its predecessors
prior to the Closing Date other than forward obligations under
the Designated Contracts and the trade payables and customer
advances expressly set forth in the Closing Balance Sheet,
without regard to when the event, occurrence, contingency or
condition giving rise to any such Liabilities shall occur.
13.1.2 Misrepresentations, Breach of
Warranty,
Nonfulfillment. Any and all loss, damage, liability or
deficiency resulting from any misrepresentation, breach of
warranty, breach of covenant or nonfulfillment of any covenant or
agreement on the part of Seller under this Agreement or any
Schedule hereto, including any misrepresentation in, or
occasioned by, any certificate or any document attached as an
Exhibit hereto or furnished by Seller pursuant to this Agreement
or the instruments and agreements contemplated hereby.
13.1.3 Certain Patent Matters. Seller hereby
indemnifies and holds Buyer harmless from and against any
and all loss, damage or liability, out-of-pocket costs and
expenses including reasonable attorneys' fees and expert
witness fees, arising out of or in connection with any
claim, demand, action, proceeding or suit brought by a third
party that asserts or alleges that certain patents or
processes included in the Assets or products is infringes
upon a patent of such party as disclosed in Schedule 8.1.13
(hereinafter referred to as the "Lemelson Claim").
13.1.4 Litigation and Claims. Any
and all actions, suits, proceedings, demands, claims,
assessments, judgments, costs and reasonable legal and other
expenses incidental to any of the foregoing.
13.2 Buyer. Buyer hereby agrees to indemnify and hold harmless
Seller against and in respect of the following:
13.2.1 Certain Liabilities. Any and
all Liabilities of Buyer arising out of or in connection
with (i) the non-performance of those obligations expressly
assumed by Buyer in its undertaking as given under
Subsection 7.2.2, hereof, or (ii) the ownership and/or
operation by Buyer of the Assets after the Closing Date.
13.2.2 Misrepresentations, Breach of Warranty,
Nonfulfillment.
Any and all loss, damage, liability or deficiency resulting
from any misrepresentation, breach of warranty, breach of
covenant or nonfulfillment of any covenant or agreement on
the part of Buyer under this Agreement, including any
misrepresentation in, or occasioned by, any certificate or
any document attached as an Exhibit hereto or furnished by
Buyer pursuant to this Agreement or the instruments and
agreements contemplated hereby.
13.2.3 Litigation and Claims. Any and all actions,
suits,
proceedings, demands, claims, assessments, judgments, costs
and reasonable legal and other expenses incidental to any of
the foregoing.
13.3 Limitations Upon Indemnification Obligations.
13.3.1 Except in respect of Seller's obligation
under Sections 10, 11.1 and 12, which shall not be limited, the
monetary liability of either party to indemnify and hold harmless
the other party under Subsections 13.1.2 and 13.2.2,
respectively, shall not exceed in the aggregate eight million
dollars ($8,000,000) and neither party shall have any obligation
to indemnify the other party until the aggregate amount of all
claims for which the indemnifying party is obligated to indemnify
exceeds $75,000 in the aggregate (the "Threshold"), whereupon
the indemnifying party shall be liable to the indemnified party
for all amounts in excess of the Threshold. All claims for
indemnification shall be net of recoveries under insurance
policies and after tax effect of the party to be indemnified.
13.3.2 Except in respect of Seller's
obligations under Sections 10, 11.1 and 12, the obligations of
either party to indemnify and hold harmless the other party shall
cease and no longer be effective after two (2) years following
the Closing Date; that such obligations shall continue (i) for
the applicable statute of limitations period and any period of
waiver or extension thereof with respect to any tax or employee
liabilities, and (ii) without limit as to time with respect to
Liabilities arising from product liability claims, claims
relating to the title to, and liens in respect of, the Assets,
claims for personal injury, death and property damage, the
Lemelson claims and claims based upon alleged violation of
Environmental Laws .
13.4 Indemnified Litigation. Promptly after receipt by a party
to be indemnified under this Section 13 ("Indemnified Party") of
notice of any claim or the commencement of any action, the Indemnified
Party shall, if a claim in respect thereof is to be made hereunder,
notify the party which is to indemnify hereunder ("Indemnifying
Party") in writing of the claim of the commencement of that action.
If any such claim shall be brought against an Indemnified Party, and
it shall notify the Indemnifying Party thereof, the Indemnifying Party
shall be obligated to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party and entitled to
settle and compromise any such claim or action; provided, however,
that if the Indemnified Party has a legitimate business, reputational
or other interest with respect to the matter in controversy, the
defense of the matter shall be conducted with reasonable regard to
such legitimate interest of the Indemnified Party. After assuming the
defense of such claim or action, the Indemnifying Party shall not be
liable to the Indemnified Party under this Section 13 for any legal or
other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Indemnified Party shall
have the right to employ counsel to represent it if, in the
Indemnified Party's reasonable judgment, it is advisable for the
Indemnified Party to be represented by separate counsel, and in that
event, the fees and expenses of such separate counsel shall be paid by
the Indemnified Party. Buyer and Seller shall render to each other
such assistance as may reasonably be requested in order to insure the
proper and adequate defense of any such claim or proceeding.
14. ENTIRE AGREEMENT; NATURE AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. This Agreement (including the Schedules hereto) and the
agreements, documents and instruments entered into as provided herein
constitute the entire agreement between the parties hereto and supersede
all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof. Except as
provided in Subsection 13.3.2, hereof, the representations, warranties,
covenants, agreements and indemnifications provided for shall survive the
Closing for a period of two (2) years following Closing and shall be
unaffected by any investigation made by any party hereto.
15. AMENDMENT; WAIVER. This Agreement may be amended, supplemented
or otherwise modified only by a written instrument executed by the parties
hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and executed by the party
so waiving. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein or in
any documents delivered or to be delivered pursuant to this Agreement or in
connection with the Closing hereunder. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
16. EXPENSES. Whether or not the transactions contemplated by this
Agreement are completed, and except as specifically provided otherwise
herein, each party to this Agreement shall bear and pay its own respective
costs and expenses in connection with the negotiations, preparation,
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, any and all legal and
accounting fees and expenses.
17. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Any usage of the term "person" and/or reference to the male
gender in this Agreement is made for convenience only and said term and
such reference shall be deemed to include natural persons of either sex and
corporations, unless a contrary meaning is indicated.
18. NOTICES. All notices, requests, demands and other communications
which are required or may be given hereunder shall be in writing and except
as otherwise specifically provided for herein, shall be deemed to have been
duly given if delivered personally, by overnight courier, by telefax or by
U.S. mail, first class, postage prepaid, return receipt requested, as
follows:
(a) If to Seller: Newcor, Inc.
1825 South Woodward Ave., Suite 240
Bloomfield Hills, MI 48302-0574
Attention: W. John Weinhardt
President
with a copy to: J. Kevin Trimmer, Esq.
Miller, Canfield, Paddock and Stone, P.L.C.
1400 N. Woodward, Suite 1400
Bloomfield Hills, MI 48304
(b) If to Buyer: ABB Flexible Automation Inc.
1250 Brown Road
Auburn Hill, MI 48326
Attention: Joseph D. Carney
Executive Vice President
Systems Divisions
with a copy to: E. Barry Lyon, Esq.
ABB Inc.
501 Merritt 7
6th Floor
Norwalk, CT 06851
or to such other address as either party shall have specified by notice in
writing to the other party. Except as otherwise specifically provided for
herein, all such notices, requests, demands and communications shall be
deemed to have been received on the date of delivery by courier or telefax
or on the third (3rd) business day after the mailing thereof.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns, provided that any assignment of this Agreement or
of the rights hereunder by Seller without the written consent of Buyer
(which consent may be withheld by Buyer with or without reason) shall be
void, and any assignment of this Agreement or of the rights hereunder by
Buyer (except to an affiliate of Buyer) without the written consent of
Seller (which consent shall not be unreasonably withheld) shall be null and
void and without force and effect. No assignment shall relieve Buyer or
Seller of their respective obligations under this Agreement..
21. TERMINATION.
In addition to the termination provisions set forth in
Sections 4 and 7 hereof, this Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time by mutual
written consent of Buyer and Seller, whereupon there shall be no liability
on the part of Buyer or Seller or their respective officers, directors,
employees or agents in respect to the subject matter hereof.
22. SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected
and shall remain in full force and effect.
23. FURTHER ASSURANCES. At the Closing, and from time to time
thereafter, at the reasonable request of Buyer and at Buyer's expense for
any out-of-pocket costs to Seller, Seller shall execute and deliver to
Buyer or at Buyer's direction such other instruments of sale, transfer,
conveyance, assignment, setting over and delivery and such assurances, and
shall take or cause to be taken all such other actions, as the Buyer may
reasonably request in order to more effectively transfer, convey, assign
and deliver to and vest in Buyer, and to place Buyer in possession and
control of, the Assets, or to enable Buyer to exercise and enjoy the rights
and benefits of ownership thereof, as provided in this Agreement.
24. MICHIGAN LAW TO GOVERN. This Agreement shall be governed by, and
construed in accordance with, the laws (except as to conflicts of law) of
the State of Michigan.
.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
Witness: NEWCOR, INC.
By:_________________________ By:_____________________________
Title:____________________________
Witness: ABB FLEXIBLE AUTOMATION INC.
By:__________________________ By:______________________________
Title:_____________________________
newcosa.agm
10
SERVICE AGREEMENT
This Agreement made this 6th day of May, 1996, by and between
Newcor, Inc., a Delaware corporation, with offices at 1825 S. Woodward,
Bloomfield Hills, MI 48302-0574 ("Seller"), and ABB Flexible Automation
Inc., a New York Corporation, with offices at 1250 Brown Road, Auburn
Hills, Michigan ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller has been engaged in the business of developing,
manufacturing, marketing and servicing industrial automation and assembly
products and systems (collectively, "Products");
WHEREAS, Buyer and Seller have entered into an Asset Purchase
and Sale Agreement of even date herewith (the "Asset Purchase Agreement")
providing for the purchase by Buyer of certain assets of Seller's Wilson
Automation Division; and,
WHEREAS, Seller desires Buyer to install certain finished
products retained by Seller, to provide manufacturing and assembly
services in respect of certain contracts retained by Seller and to provide
warranty service, and Buyer is willing to provide installation,
manufacturing, assembly and warranty services, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter described, the parties agree as
follows:
1. DEFINED TERMS. All defined terms used herein shall have the
meaning ascribed to them in the Asset Purchase Agreement unless otherwise
specifically defined herein.
2. INSTALLATION SERVICES. With respect to the Products
described in Schedule I, hereof, Buyer shall provide installation services
at Seller's customers' locations identified in Schedule I.
3. WARRANTY SERVICE AND PARTS. With respect to the Products set
forth in Schedule II, hereof, Buyer shall provide service and parts on
behalf of Seller to each customer identified in Schedule II, in accordance
with Seller's warranty obligations set forth in Seller's standard terms
and conditions of sale (the "Warranty"), an example of which is attached
as Exhibit A. Buyer will provide Seller with notice of warranty work
requested by customers as soon as reasonably practicable.
4. MANUFACTURING AND ASSEMBLY SERVICES. At Seller's request,
Buyer shall provide manufacturing and assembly services to Seller in
respect of certain customer contracts retained by Seller and described in
Schedule III, hereof. Buyer shall have no responsibility or liability for
the design, engineering or materials selection of the products and systems
assembled or manufactured by Buyer hereunder.
5. Ford Mexico Chihuahua P.O. Notwithstanding any other
provisions hereof, with respect to the Ford Mexico Chihuahua Purchase
Orders as identified in Schedule I and III (The Mexico Orders), Buyer
shall provide installation, manufacturing and assembly services. As
compensation for such services, Buyer shall be paid by Seller at Buyer's
cost (Buyer's Cost). Seller and Buyer shall share equally any profit from
the Mexico Orders (Profit); Profit shall be determined after installation
and customer sign-off, charging all manufacturing and engineering costs,
including reimbursable out-of-pocket travel expenses insofar as this
category of costs was included in cost budget(s) related to the Mexico
Orders, incurred in respect of the Mexico Orders through said date.
"Profit" shall mean the actual standard margin before any warranty expense
or provisioning following customer sign-off; provided that Buyer shall at
a minimum be paid $100,000 in excess of Buyer's Costs.
6. TERM. This Agreement shall commence on the Closing Date and
shall remain in effect for a period of four (4) years provided that, on and
after the second (2nd) anniversary date hereof, either party may terminate
this Agreement upon one hundred eighty (180) days prior written notice.
7. WARRANTY. Buyer warrants that it shall perform all services
hereunder in a good and workmanlike manner. THE FOREGOING WARRANTY IS IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
8. PRICES; PAYMENT.
8.1 As compensation for services performed in accordance with
the terms of this Agreement, Buyer shall be paid at rates set forth in
Schedule IV for installation, manufacture, assembly and warranty labor,
plus out-of-pocket costs and expenses incurred in connection herewith,
including reasonable travel and living expenses incurred by Buyer's
installation and service representatives.
8.2 For parts and materials supplied by Buyer to Seller's
customers in accordance with the terms of this Agreement, Buyer shall be
paid an amount equal to (i) Buyer's actual cost (i.e., price paid by
Buyer) for such parts and materials that Buyer purchases commercially, and
(ii) an amount equal to Buyer's "manufactured cost" of parts for such
parts that Buyer manufactures and (iii) all shipping/freight costs and
expenses for all such parts and materials and (iv) 10% of the sum of the
total of (i) and (iii) respectively except that the 10% markup shall not
be charged on the direct labor or fully absorbed overhead components of
item (ii). For purposes of this Agreement "manufactured cost" means
Buyer's cost of direct labor, purchased materials or services and fully
absorbed overhead.
8.3 Buyer shall render invoices to Seller on a calendar month
basis. All payments by Seller to Buyer hereunder are to be made in U.S.
Dollars net within thirty (30) days of the date of any invoice rendered by
Buyer. Buyer's invoices shall set forth with reasonable detail the costs
accumulated by project, nature and location of the services performed; on
request, details of expenses including time spent in the performance of
such services; the parts and materials supplied; and the expenses related
thereto and shall be made available for review. In the event that Seller
objects to any invoice or part thereof, Buyer and Seller shall meet to
resolve the dispute. Seller shall pay that portion of any invoice which
is not in dispute. In the event the dispute is not resolved, then Buyer
and Seller shall submit the matter to a mediator. If the parties cannot
agree upon the selection of a mediator, then the matter shall be submitted
to binding arbitration in Oakland County, Michigan, to be conducted in
accordance with the rules and regulations of the American Arbitration
Association.
8.4 Simultaneously upon the execution hereof Seller shall
place on deposit with Buyer as an advance payment $100,000, against which
Buyer may credit amounts due and owing under invoices issued to Seller
which remain unpaid for a period of fifteen (15) days following the date
upon which payment is due. Upon expiration or earlier termination of this
Agreement Buyer shall promptly remit to Seller any advance payment balance
less amounts due and owing to Buyer.
9. INDEPENDENT CONTRACTOR. The relationship of Buyer to Seller
is that of an independent contractor and nothing contained herein shall be
construed to create an agency, partnership, joint venture or any other
similar relationship between them. Buyer and Seller each shall assume and
fulfill any and all responsibilities which are imposed upon an independent
contractor by any statute, regulation, rule of law or otherwise. Neither
party is, and neither shall be, authorized to bind the other party or to
use the other party's name.
10. FORCE MAJEURE. Buyer shall not be deemed to be in default or
breach of this Agreement due to, and shall not be liable for, any delay in
performance or nonperformance which is due to war, fire, flood, acts of
God, acts of third parties, acts of governmental authority or any agency
or commission thereof, accident, breakdown of equipment, differences with
employees or employee representatives or similar or dissimilar causes
beyond Buyer's reasonable control, including but not limited to, acts
interfering with production, supply or transportation of products, raw
materials or components or the ability to obtain, on reasonable terms,
material, labor, equipment or transportation.
11. LIMITATION OF LIABILITY. The liability of the Buyer, its
agents, employees, subcontractors and suppliers with respect to any and
all claims arising out of the performance or nonperformance of obligations
in connection with the products, the services, or the contract therefor,
whether based on contract, warranty, tort (including negligence), strict
liability or otherwise, shall not exceed in the aggregate the amount of
the price paid by the Seller, in request of and products or service.
In no event shall the liability of the Buyer, its agents, employees,
subcontractors and suppliers with respect to any and all claims arising
out of the performance or nonperformance of obligations in connection with
the goods, the services, or the contract therefor, whether based on
contract, warranty, tort (including negligence), strict liability or
otherwise, include damages for loss of profits or revenue or the loss of
use of either; increased costs of purchasing or providing goods or
services outside of the contractor's scope of supply; or claims of
Seller's customers; inventory or use charges.
No claim shall be asserted against the Buyer, its agents, employees,
subcontractors or suppliers, unless the injury, loss, or damage giving
rise to the claim is sustained prior to one year after shipment of
products or performance of services and no suit or action thereon shall be
instituted or maintained unless it is filed in a court of competent
jurisdiction within one year after the date the cause of action accrues.
This limitation of liability article shall prevail over any conflicting
or inconsistent provisions contained in any of the documents comprising
the contract.
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY HAVE ANY LIABILITY WHATSOEVER
FOR ANY INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
12. NOTICES. Unless otherwise specified herein, all notices
and other communications hereunder shall be deemed to have been duly given
by telefax, by hand delivery, by overnight courier or mailed by certified
or registered U.S. mail, return receipt requested, postage prepaid to
either Buyer or Seller at the respective address provided below or to such
other address or addresses as may hereafter be furnished by any party to
any other party in compliance with the terms of this Section:
If to Buyer: ABB Flexible Automation Inc.
1250 Brown Road
Auburn Hills, Michigan
Attention: Joseph Carney
Telefax No: 810/391-7330
If to Seller:
Newcor, Inc.
1825 S. Woodward
Bloomfield Hills, Michigan
Attention: John Garber
Telefax No: 810/253-2413
Notice shall be deemed given upon receipt if by telefax, hand delivery or
overnight courier or three (3) business days after posting if by U.S.
Mail.
13. BINDING AGREEMENT. Subject to the provisions of the
following sentence, this Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective successors, permitted
assigns and legal representatives.
14. GOVERNING LAW. This Agreement shall be construed and
interpreted according to the laws of the State of Michigan.
15. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party.
16. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
17. MODIFICATION/INTERPRETATION. The parties hereto may amend,
modify or supplement this Agreement only in writing executed with the same
formalities as this Agreement. The terms and provisions of this Agreement
shall supersede and control the terms and provisions of any purchase order
issued by Seller in respect of work to be performed hereunder.
18. LIMITED LICENSE. If Buyer shall default in its performance of
its service obligations hereunder Buyer hereby grants to Seller a limited
right to use the Patents and know-how assigned to Buyer pursuant to the
Asset Purchase Agreement to perform the installation, manufacturing,
assembly and warranty services described herein above and to perform
manufacture and assemble activities all in respect of the products,
customers and contracts specifically described in Schedules I, II and III
hereof. The limited right granted hereunder does not extend to any
product, customer or contract other than those aforementioned. Buyer and
Seller agree that this provision is not intended to and it does not modify
or amend Section 11.1 of the Asset Purchase and Sale Agreement except for
the limited purposes herein described and that except to the extent hereby
modified Seller's obligations under Section 11.1 of the Asset Purchase
Agreement are not being amended or modified and remain in full force and
effect.
IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement
to be executed by their duly authorized representatives and have executed
this Agreement as of the date first set forth above.
BUYER:
ABB FLEXIBLE AUTOMATION INC.
By:________________________
Title:_______________________
SELLER:
NEWCOR, INC.
By:________________________
Title:_______________________
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<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
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