<PAGE> 1
PAGE 1 OF 3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) APRIL 18, 1996
------------------
MET-COIL SYSTEMS CORPORATION
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-14057 42-1027215
- ---------------------------- --------------------- ---------------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer No.)
of Incorporation)
5486 SIXTH STREET SW, CEDAR RAPIDS, IOWA 52404
- ------------------------------------------------------ --------------
(Address or Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (319) 363-6566
--------------
<PAGE> 2
PAGE 2 OF 3
ITEM 5. OTHER EVENTS
On April 18, 1996 the Company entered into an agreement with
its insurance company lenders whereby the Company restructured its revolving
lines of credit and senior debt. With the proceeds from the sale of the
Company's Rowe subsidiary, the collection of a note receivable related to the
December 1993 sale of Roper Whitney and the sale of a non-operating facility,
the Company reduced senior debt from $12 million to $8.4 million. The Company
then established a revolving credit agreement with the insurance companies who
hold the senior debt under which the Company can borrow up to $3.5 million,
limited to a borrowing formula (a certain percentage of accounts receivable and
inventory). With the proceeds of the revolving credit agreement the Company
retired the existing revolving credit agreements and further reduced the term
notes to $7.4 million.
Both the term notes and revolving credit agreement bear interest at 11.5%
payable monthly. The revolving credit agreement expires on April 30, 1999 and
the term notes are due in monthly installments of $110,000 expiring December
31, 2000.
On April 18, 1996 the Company also entered into an agreement with Construction
Technology, Inc. ("CTI") whereby the Company paid one-half of the $675,000
annual payment originally due January 27, 1996 and will pay the remainder in
monthly installments of $50,000 including interest at 11.5%.
The description herein of the revolving credit agreement and the CTI extension
agreement are qualified by reference to the Amended and Restated Note Agreement
dated April 18, 1996 and the CTI extension agreement dated April 18, 1996 filed
as Exhibits 4 and 99 respectively and incorporated herein by reference.
<PAGE> 3
PAGE 3 OF 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
C. Exhibits.
4. Amended and Restated Note Agreement dated April 18, 1996.
99. CTI extension agreement dated April 18, 1996.
SIGNATURES
Pursuant to the requirements 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.
Date: April 30, 1996 Met-Coil Systems Corporation
By Joseph H. Ceryanec
---------------------
Name: Joseph H. Ceryanec
Title: Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 4
================================================================================
MET-COIL SYSTEMS CORPORATION
IOWA PRECISION INDUSTRIES, INC.
THE LOCKFORMER COMPANY
AMENDED AND RESTATED
NOTE AGREEMENT
Dated as of April 18, 1996
$7,400,000 Principal Amount
11.5% Amended and Restated
Senior Term Notes of Met-Coil Systems Corporation
Due December 31, 2000
and $3,500,000 Principal Amount
Amended and Restated
Senior Revolving Notes of
Iowa Precision Industries, Inc.
and The Lockformer Company
Due April 30, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. AMENDED AND RESTATEMENT AND DESCRIPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Amendment and Restatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. REVOLVING LOAN FACILITY; FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Agreement to Lend; Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Procedure for Loan Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Reborrowings and Repayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Field Examination Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. PREPAYMENT OF TERM NOTES AND CERTAIN PROVISIONS APPLICABLE
TO ALL NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Required Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Notice of Optional Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Surrender of Notes on Prepayment or Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Direct Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Allocation of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Payments Due on Saturdays, Sundays and Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Representations of the Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Representations of the Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. CLOSING CONDITIONS AND CONDITIONS PRECEDENT TO MAKING
REVOLVING LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Conditions Precedent to Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6. INTERPRETATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Certain Terms Defined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Valuation Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Direct or Indirect Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Taxes, Claims for Labor and Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.5 Maintenance of Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Financial Information and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.7 Inspection of Properties and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Acquisition of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.11 Private Placement Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.12 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.13 Restricted Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.14 Budgets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.15 Met-Coil Automation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Consolidated Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Fixed Charge Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.4 Consolidated Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Debt to Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 EBITDA/Interest Expense Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.8 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.9 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.10 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.11 Change in Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.12 Merger and Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.13 Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.14 Disposition of Stock of Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.15 Dealings with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.16 Consolidated Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9. EVENTS OF DEFAULT AND REMEDIES THEREFOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Nature of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Remedies on Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3 Annulment of Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Conduct No Waiver; Collection Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
Section 10. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.1 Matters Subject to Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.2 Solicitation of Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.3 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND
REPLACEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.1 Form of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.2 Note Register. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3 Issuance of New Notes upon Exchange or Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.4 Replacement of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.3 Reproduction of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.5 Law Governing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.8 Reliance on and Survival of Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.9 Indemnification; Limitation of Liability; Release. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.10 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.12 Integration and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
- iii -
<PAGE> 5
Annex I: List of Subsidiaries and Jurisdictions in
Which MSC and its Subsidiaries are Qualified
as Foreign Corporations
Annex II: Description of Liens
Annex III: List of Investments
Exhibit A: 11.5% Amended and Restated Senior Term Note
of Met-Coil Systems Corporation Senior Note,
Due December 31, 2000
Exhibit B: 11.5% Amended and Restated Senior Revolving
Note of Iowa Precision Industries, Inc. and
The Lockformer Company
Exhibit C: Notice of Borrowing
Exhibit D: Legal Opinions
Schedule I: Purchasers
Schedule 4.1(f): Pending Litigation
Schedule 4.1(w): Environmental Matters
Schedule 5.1(i): Liens
Schedule 6.1: Collateral Documents
Schedule 8.2: Indebtedness
- iv -
<PAGE> 6
MET-COIL SYSTEMS CORPORATION
IOWA PRECISION INDUSTRIES, INC.
THE LOCKFORMER COMPANY
AMENDED AND RESTATED
NOTE AGREEMENT
Dated as of April 18, 1996
To: Each of the Purchasers
Named in Schedule I Hereto
Ladies and Gentlemen:
MET-COIL SYSTEMS CORPORATION, a Delaware corporation ("MSC"), IOWA
PRECISION INDUSTRIES, INC., a Delaware corporation ("IPI"), and THE LOCKFORMER
COMPANY, an Illinois corporation ("TLC"; IPI and TLC being collectively
referred to hereinafter as the "Operating Companies" and sometimes individually
as an "Operating Company", and MSC, IPI and TLC being collectively referred to
hereinafter as the "Companies" and sometimes individually as a "Company") agree
with the Purchasers as follows:
Section 1. AMENDED AND RESTATEMENT AND DESCRIPTION OF NOTES
1.1 Amendment and Restatement. MSC and the Purchasers are parties to
that certain Note Agreement dated as of October 1, 1989, as amended by that
certain First Amendment to Note Agreement dated as of February 1, 1991, that
certain Limited Waiver and Second Amendment Agreement dated as of August 27,
1991, that certain Third Amendment to Note Agreement dated as of October 31,
1991, that certain Fourth Amendment to Note Agreement and Waiver dated of
September 10, 1992, that certain Fifth Amendment to Note Agreement and Waiver
dated as of September 10, 1993, and that certain Sixth Amendment to Note
Agreement and Waiver dated as of April 29, 1994 (collectively the "1989
Agreement") pursuant to which MSC sold to the Purchasers on October 26, 1989
$15,000,000 aggregate principal amount of its senior notes (the "1989 Notes").
The Companies and the Purchasers have agreed that this Amended and Restated
Note Agreement (the "Agreement") should replace in its entirety the 1989
Agreement and that from and after the date of the execution and delivery of
this Agreement and the satisfaction of the conditions set forth in Section 5
(the "Closing Date"), the 1989 Agreement shall be of no force or effect except
(i) as specifically set forth herein, (ii) that if any representation or
warranty made by MSC thereunder, or made by MSC in any written statement or
certificate furnished by MSC in connection with the issuance and sale of the
1989 Notes or furnished by MSC pursuant to the 1989 Agreement proves incorrect
in any material respect as
1
<PAGE> 7
of the date of the issuance or making thereof (a "Prior Misstatement"), the
Purchasers shall be entitled to exercise all of their rights and remedies under
applicable law with respect to any Prior Misstatement, and (iii) that the 1989
Agreement evidences the terms and conditions under which MSC heretofore has
incurred obligations and liabilities to the Purchasers, it being the intent of
the parties hereto that from and after the Closing Date, such obligations and
liabilities shall be governed by this Agreement and the "Term Notes" and
"Revolving Notes" (as defined below). The Operating Companies guaranteed the
obligations of MSC under the 1989 Agreement. The parties hereto agree that the
Operating Companies shall become the primary obligors in lieu of MSC with
respect to the indebtedness evidenced by the Revolving Notes. The Operating
Companies acknowledge that they have received the benefit of the funds advanced
and evidenced as indebtedness under the Revolving Notes. MSC has agreed to
execute those certain Amended and Restated Term Notes in the form of Exhibit A
attached hereto (the "Term Notes") in the respective principal amounts of
$5,426,667 payable to Principal Mutual Life Insurance Company and $1,973,333
payable to Modern Woodmen of America, which Term Notes evidence a portion of
the outstanding indebtedness under the 1989 Notes. Each Operating Company has
agreed to execute those certain Amended and Restated Revolving Notes in the
form of Exhibit B attached hereto ("Revolving Notes") in the respective stated
principal amounts of $2,566,667 payable to Principal Mutual Life Insurance
Company and $933,333 payable to Modern Woodmen of America, which Revolving
Notes evidence the remaining portion of the outstanding indebtedness under the
1989 Notes (the Term Notes and the Revolving Notes being collectively referred
to hereinafter as the "Notes" and sometimes individually as a "Note").
1.2 Description of Notes. The Term Notes and the Revolving Notes
shall be dated as of the Closing Date, and shall bear interest from such date
at 11.50% per annum prior to maturity, such interest being payable monthly in
arrears on the last day of each month, commencing April 30, 1996, and at
maturity to bear interest on overdue principal and any other overdue amount
payable under the Notes (including any overdue or optional prepayment) at the
rate of 13.5% per annum. Interest shall be calculated on the basis of a 360
day year composed of twelve 30-day months. The Term Notes shall be expressed
to mature on December 31, 2000, and the Revolving Notes shall be expressed to
mature on April 30, 1999. The term "Notes" as used herein shall include each
Note delivered pursuant to this Amended and Restated Note Agreement (the
"Agreement") and each Note delivered in substitution or exchange therefor and,
where applicable, shall include the singular number as well as the plural. Any
reference to a Purchaser in this Agreement shall in all instances be deemed to
include any nominee of such Purchaser or any separate account or other person
on whose behalf such Purchaser is purchasing Notes. Such Purchaser and the
other purchaser (the "Other
2
<PAGE> 8
Purchaser") are sometimes referred to herein individually as a "Purchaser" and
collectively as the "Purchasers".
1.3 Guaranty. The Term Notes shall be guaranteed by certain of
MSC's Subsidiaries and the Revolving Notes shall be guaranteed by MSC.
Section 2. REVOLVING LOAN FACILITY; FEES
2.1 Agreement to Lend; Use of Proceeds. Subject to the terms and
conditions hereof and relying upon the representations and warranties of the
Companies herein, the Purchasers agree to make until the Revolving Loan
Facility Termination Date, loans on a revolving basis ("Revolving Loans") to
(i) IPI in an amount not to exceed the lesser of the IPI Sublimit or the IPC
Borrowing Base and (ii) TLC in an amount not to exceed the lesser of the TLC
Sublimit or the TLC Borrowing Base; provided, however, that in no event shall
the aggregate amount of Revolving Loans to IPI and TLC exceed $3,500,000. The
proceeds of the Revolving Loans shall be used by the Operating Companies for
working capital purposes and for other legal corporate purposes not prohibited
herein.
2.2 Procedure for Loan Request. Each Operating Company requesting a
Revolving Loan shall deliver to the Purchasers a Notice of Borrowing
substantially in the form of Exhibit C attached hereto and a certificate
executed by the chief financial officer of such Operating Company as to the
calculation of such Operating Company's Borrowing Base as of the last day of
the calendar month preceding the date on which such Revolving Loan is requested
to be made, at least two Business Days prior to the date such Revolving Loan is
requested to be made. Subject to the terms and conditions hereof, the
Purchasers shall make the Revolving Loan proceeds available to the Operating
Company which requested such Revolving Loan at the bank account specified in
the Notice of Borrowing in U.S. Dollars in immediately available funds.
2.3 Reborrowings and Repayments. Subject to the terms and conditions
hereof, prior to the Revolving Loan Facility Termination Date, any Revolving
Loans may be repaid at any time, together with accrued interest thereon and
such repaid Revolving Loans may be reborrowed at any time. All Revolving Loans
are due and payable on the Revolving Loan Facility Termination Date, together
with accrued interest thereon and any other amounts due and payable on the
Revolving Notes. Payments made with respect to the Revolving Loans shall be
applied by the Purchasers first to unpaid and accrued fees and interest and
then to the outstanding principal balance of the Revolving Loans. If at any
time the Revolving Loans made to an Operating Company exceed either the
Sublimit or the Borrowing Base applicable to such Operating Company, such
Operating Company shall immediately repay
3
<PAGE> 9
the Revolving Loans in the amount of such excess, together with accrued
interest on the amount being prepaid.
2.4 Termination Fee. In the event the Revolving Loan Facility is
terminated by the Operating Companies prior to the third anniversary of the
Closing Date, the Companies shall on the date of such termination pay a
termination fee to the Purchasers equal to (i) 3% of the Maximum Revolving Loan
Facility if such termination occurs prior to the first anniversary of the
Closing Date, (ii) 2% of the Maximum Revolving Loan Facility if such
termination occurs thereafter and prior to the second anniversary of the
Closing Date, and (iii) 1% of the Maximum Revolving Loan Facility if such
termination occurs thereafter and prior to the third anniversary of the Closing
Date.
2.5 Facility Fee. On the first day of each calendar month occurring
after the Closing Date, the Companies shall pay to the Purchasers a facility
fee in an amount equal to one-twelfth of one-half percent (0.50%) of the
Maximum Credit, which fee shall be earned in full and non-refundable as of the
required date of payment.
2.6 Field Examination Fees. The Companies shall reimburse the
Purchasers for their out-of-pocket costs and expenses incurred by the
Purchasers in connection with semiannual field audits of the Operating
Companies' Eligible Accounts and Eligible Inventory.
Section 3. PREPAYMENT OF TERM NOTES AND CERTAIN PROVISIONS APPLICABLE
TO ALL NOTES
3.1 Required Prepayments. In addition to payment of all
outstanding principal of the Term Notes at maturity and regardless of the
amount of Term Notes which may be outstanding from time to time, MSC will
prepay, and there shall become due and payable on (a) the last day of each
calendar month, $110,000, or such lesser amount as would constitute payment in
full on the Term Notes, commencing May 31, 1996 and ending November 30, 2000,
inclusive, and (b) on or prior to first anniversary of the Closing Date,
$1,200,000 of the principal amount of the Term Notes or such lesser amount as
would constitute payment in full of the Term Notes. All prepayments described
above shall be applied to reduce the prepayments required by this Section 3.1
in the order of their maturities. The remaining principal balance of the Term
Notes shall be payable on December 30, 2000. Each such payment shall be at a
price of 100% of the principal amount prepaid, together with interest accrued
thereon to the date of prepayment. In addition, the prepayment of $1,200,000
described in clause (b) above shall be accompanied by payment of a premium
calculated in the manner described in Section 3.2 if the
4
<PAGE> 10
Reinvestment Yield shall on the Determination Date be less than the interest
rate payable on or in respect to the Term Notes.
3.2 Optional Prepayments. (a) Upon notice as provided in Section
3.3, MSC may prepay the Term Notes, in whole or in part at any time after the
Closing Date on any interest payment date, in multiples of $250,000. Each such
prepayment shall be at a price of (i) 100% of the principal amount to be
prepaid, plus interest accrued thereon to the date of prepayment, in the event
that the Reinvestment Yield shall, on the applicable Determination Date, equal
or exceed the interest rate payable on or in respect of the Term Notes, or (ii)
100% of the principal amount to be prepaid, plus interest accrued thereon to
the date of prepayment, plus a premium, in the event that the Reinvestment
Yield shall, on such Determination Date, be less than the interest rate payable
on or in respect of the Term Notes. The premium shall equal (x) the sum of the
amounts representing the present value of the difference between (1) the amount
of each remaining payment of principal and interest which would be required by
Section 3.1 absent such prepayment, and (2) the amount of each payment of
principal and interest which would be required by Section 3.1 following such
prepayment, determined by discounting (on the basis of a 360-day year composed
of twelve 30-day months) each such amount utilizing an interest factor equal to
the Reinvestment Yield, less (y) the principal amount to be prepaid.
(b) Any optional prepayment of the Term Notes shall be applied pro
rata to all holders of Term Notes outstanding and shall be applied to the
outstanding balance of the Term Notes to reduce the prepayments required by
Section 3.1(a) in the order of maturity, in the inverse order of maturity or
pro rata, as determined by the Majority Noteholders in their sole discretion.
(c) Except as provided in Section 3.1 and this Section 3.2, the Term
Notes shall not be prepayable in whole or in part.
3.3 Notice of Optional Prepayment. (a) MSC shall give notice of
any optional prepayment of the Term Notes under Section 3.2 to each holder of
the Term Notes not less than 30 days nor more than 60 days before the date
fixed for prepayment, specifying (i) such date, (ii) the principal amount of
the holder's Term Notes to be prepaid on such date, and (iii) the date (which
date shall be not less than 10 days prior to the date fixed for repayment) upon
which MSC shall give notice to each holder of the Term Notes of the premium, if
any, and accrued interest applicable to the prepayment. Notice of optional
prepayment having been so given, the aggregate principal amount of the Term
Notes specified in such notice, together with the premium, if any, and accrued
interest thereon shall become due and payable on the prepayment date.
5
<PAGE> 11
(b) In the case of any such optional prepayment, MSC shall also
give notice to each holder of the Term Notes by telecopy, telegram, telex or
other same-day written communication, as soon as practicable, but in no event
later than 5 days before the date fixed for a prepayment, of the premium, if
any, applicable to such prepayment and the details of the calculations used to
determine the amount of such premium.
3.4 Surrender of Notes on Prepayment or Exchange. Subject to
Section 3.5, upon any partial prepayment of a Term Note pursuant to this
Section 3 or partial exchange of a Term Note pursuant to Section 11.3, such
Term Note may, at the option of the holder thereof, (i) be surrendered to MSC
pursuant to Section 11.3 hereof in exchange for a new Term Note equal to the
principal amount remaining unpaid on the surrendered Term Note, or (ii) be made
available to MSC for notation thereon of the portion of the principal so
prepaid or exchanged. In case the entire principal amount of any Term Note is
prepaid or exchanged, such Term Note shall be surrendered to MSC for
cancellation and shall not be reissued, and no Term Note shall be issued in
lieu of such Term Note.
3.5 Direct Payment. Notwithstanding any other provision contained
in the Notes or this Agreement, the Companies will pay all sums becoming due on
each Note held by the Purchasers by wire transfer of immediately available
funds to such account in each Purchaser's name as designated in Schedule I
hereto, or as the Purchasers may otherwise designate by notice to MSC, in each
case without presentment and without notations being made thereon, except that
any such Note so paid or prepaid in full shall be surrendered to the applicable
Company for cancellation. Any wire transfer shall identify such payment as in
the manner set forth in Schedule I hereto and shall identify the payment as
principal, premium, if any, and/or interest. Before selling or otherwise
transferring any such Note, the Purchasers agree that they will make a notation
thereon of the aggregate amount of all payments of principal theretofore made
and of the date to which interest has been paid. If the transferee of any Note
held by a Purchaser is an Institutional Holder or its nominee and shall request
the applicable Company to make all payments on account of such Note that are
payable in cash either by check or by wire transfer of immediately available
funds at an address specified in such request, such Company will make such
payments in compliance with such request, provided that such Institutional
Holder undertakes in said request the same obligations in respect of such Note
as those undertaken by the Purchasers in the immediately preceding sentence.
3.6 Allocation of Payments. If less than the entire principal
amount of all the Notes outstanding is to be paid, the Companies will prorate
the aggregate principal amount to be paid
6
<PAGE> 12
among the outstanding Notes in proportion to the unpaid principal.
3.7 Payments Due on Saturdays, Sundays and Holidays. In any case
where the date of any required prepayment of the Term Notes, the date of any
payment or prepayment of the Revolving Notes or any interest payment date on
the Notes or the date fixed for any other payment of any Note or exchange of
any Note shall be on a Saturday, Sunday or a legal holiday or a day on which
banking institutions are authorized by law to close in Cedar Rapids, Iowa, or
Chicago, Illinois, then such payment, prepayment or exchange need not be made
on such date but may be made on the next succeeding business day not a
Saturday, Sunday or a legal holiday or a day upon which banking institutions
are authorized by law to close in Cedar Rapids, Iowa, or Chicago, Illinois,
with the same force and effect as if made on the due date.
Section 4. REPRESENTATIONS
4.1 Representations of the Companies. As an inducement to, and as
part of the consideration for, the Purchasers entering into this Agreement,
each Company represents and warrants to the Purchasers as of the Closing Date
and as of each date that a Revolving Loan is made hereunder as follows:
(a) Corporate Organization and Authority. Such Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with respect to MSC and IPI, and Illinois with
respect to TLC, has full corporate power and authority to carry on its business
as now conducted, to enter into the Agreement and the Collateral Documents and
to issue the Notes executed by it, and to amend and restate the 1989 Notes as
contemplated in this Agreement.
(b) Qualification to Do Business. Such Company is duly licensed
or qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where the nature of its business or the character
of its properties makes such qualification or licensing necessary. A list of
those jurisdictions wherein such Company is qualified to do business is
attached hereto as Annex I.
(c) Subsidiaries. Such Company has no Subsidiaries, as defined in
Section 6.1, except those listed in Annex I hereto which correctly sets forth
the percentage of the outstanding capital stock or equivalent interest of each
Subsidiary which is owned, of record or beneficially, by such Company and/or
one or more Subsidiaries. Each Subsidiary has been duly organized and is
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization and is duly licensed or qualified in each other
jurisdiction where the nature
7
<PAGE> 13
of its business or the character of its properties makes such qualification or
licensing necessary. A list of those jurisdictions wherein each Subsidiary is
qualified to do business is attached hereto as Annex I. Each Subsidiary has
full corporate power and authority to own its properties and to carry on its
business as now conducted. Each Company and/or one or more Subsidiaries have
good and marketable title to all of the shares it purports to own of the
capital stock of each Subsidiary, free and clear in each case of any lien or
encumbrance, and all such shares have been duly issued and are fully paid and
nonassessable.
(d) Financial Statements. The consolidated balance sheets of MSC
and its Subsidiaries for the fiscal quarter ended February 29, 1996 and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal quarter ended February 29, 1996, copies of which have heretofore
been delivered to the Purchasers, were prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein) and present fairly the financial
condition and results of operations and cash flows of MSC and its Subsidiaries
for and as of the end of such fiscal quarter, subject in each case to normal
fiscal year end adjustments.
(e) No Contingent Liabilities or Adverse Changes. Neither any
Company nor any of its Subsidiaries has any contingent liabilities which are
material to MSC and its Subsidiaries taken as a whole other than as indicated
on the financial statements described in the foregoing Paragraph (d) of this
Section 4.1, and since February 29, 1996, there have been no material adverse
changes in the condition, financial or otherwise, of MSC and its Subsidiaries
taken as a whole nor any changes to any Company or any of its Subsidiaries
except those occurring in the ordinary course of business.
(f) No Pending Litigation or Proceedings. Except as described on
Schedule 4.1(f), there are no actions, suits or proceedings pending or
threatened against or affecting any Company or any of its Subsidiaries, at law
or in equity or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which are reasonably likely to result, either individually
or collectively, in any material adverse change in the business, properties,
operations or condition, financial or otherwise, of MSC and its Subsidiaries
taken as a whole.
(g) Compliance with Law. (i) Neither such Company nor any of its
Subsidiaries is: (x) in default with respect to any order, writ, injunction or
decree of any court to which it is a named party; or (y) in default under any
law, rule, regulation,
8
<PAGE> 14
ordinance or order relating to its or their respective businesses, the
sanctions and penalties resulting from which defaults described in clauses (x)
and (y) would have a material adverse effect on the business, properties,
operations, assets or condition, financial or otherwise, of MSC and its
Subsidiaries taken as a whole.
(ii) Neither such Company nor any Subsidiary nor any Affiliate of
such Company is an entity defined as a "designated national" within the meaning
of the Foreign Assets Control Regulations, 31 C.F.R. Chapter V, or for any
other reason, subject to any restriction or prohibition under, or is in
violation of, any federal statute or Presidential Executive Order, or any rules
or regulations of any department, agency or administrative body promulgated
under any such statute or Order, concerning trade or other relations with any
foreign country or any citizen or national thereof or the ownership or
operation of any property, which violation would have a material adverse effect
on the business, properties, operations, assets or condition, financial or
otherwise, of MSC and its Subsidiaries taken as a whole.
(h) Pension Reform Act of 1974. Based upon Section 4.2 of this
Agreement, neither the amendment and restatement of the 1989 Notes by the Term
Notes and the Revolving Notes, nor the consummation of any of the other
transactions contemplated by this Agreement or any Collateral Document is or
will constitute a "prohibited transaction" within the meaning of Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code"), or Section 406
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Internal Revenue Service has issued a determination that each "employee
pension benefit plan," as defined in Section 3 of ERISA (a "Plan"),
established, maintained or contributed to by such Company or any Subsidiary
(except for any Plan which is unfunded and maintained primarily for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees) is qualified under Section 401(a) and related provisions
of the Code and that each related trust or custodial account is exempt from
taxation under Section 501(a) of the Code. All Plans of such Company or any
Subsidiary comply in all material respects with ERISA and other applicable
laws. There exists with respect to such Company or any Subsidiary no
"multiemployer plans," as defined in the Multiemployer Pension Plan Amendments
Act of 1980, for which a material withdrawal or termination liability may be
incurred. There exists with respect to all Plans or trusts established or
maintained by such Company or any Subsidiary: (i) no material accumulated
funding deficiency within the meaning of ERISA; (ii) no termination of any Plan
or trust which would result in any material liability to the Pension Benefit
Guaranty Corporation ("PBGC") or any "reportable event," as that term is
defined in ERISA, which is likely to constitute grounds for termination of
9
<PAGE> 15
any Plan or trust by the PBGC; and (iii) no "prohibited transaction," as that
term is defined in ERISA, which is likely to subject any Plan, trust or party
dealing with any such Plan or trust to any material tax or penalty on
prohibited transactions imposed by Section 4975 of the Code.
(i) Title to Properties. Except as disclosed on the latest
audited consolidated balance sheet of MSC and its Subsidiaries for the fiscal
year ended May 31, 1995, such Company or its Subsidiaries have (i) good title
in fee simple or its equivalent under applicable law to all the real property
owned by them and (ii) good title to all of the other property reflected in
said balance sheet or subsequently acquired by such Company or any Subsidiary
(except as sold or otherwise disposed of in the ordinary course of business),
in each case free from all liens, charges, and encumbrances of any kind, except
(x) those securing Indebtedness of such Company or a Subsidiary, which are
listed in Annex II hereto and (y) other liens, charges and encumbrances that,
in the aggregate, do not materially detract from the value of said properties
or materially impair their use in the operation of the business of such Company
or any of its Subsidiaries.
(j) Leases. Such Company and each Subsidiary enjoy peaceful and
undisturbed possession under all leases under which such Company or such
Subsidiary is a lessee or is operating. None of such leases contains any
provision which might materially and adversely affect the operation or use of
the property so leased. All of such leases are valid and subsisting and none
of them is in default.
(k) Franchises, Patents, Trademarks and Other Rights. Such
Company and each Subsidiary have all franchises, permits, licenses and other
authority as are necessary to enable them to carry on their respective
businesses as now being conducted and as proposed to be conducted, and none of
them is in default under any of such franchises, permits, licenses or other
authority which are material to the business, properties, operations or
condition, financial or otherwise, of MSC and its Subsidiaries taken as a
whole. Such Company and each Subsidiary own or possess all patents,
trademarks, service marks, trade names, copyrights, licenses and rights with
respect to the foregoing necessary for the present conduct of their businesses,
without any known conflict with the rights of others which might result in any
material adverse change in the business, properties, operations or condition,
financial or otherwise, of MSC and its Subsidiaries taken as a whole.
(1) Status of Notes and Issuance of Notes. The Notes issued by
such Company have been duly authorized on the part of such Company and
constitute the legal, valid and binding obligations of such Company,
enforceable in accordance with their
10
<PAGE> 16
terms, except to the extent that enforcement of such Notes may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application relating to or affecting the enforcement of the rights
of creditors or secured parties or by equitable principles if equitable
remedies are sought. The issuance of such Notes to amend and restate the 1989
Notes and the compliance by such Company with all of the provisions of this
Agreement and of such Notes (i) are within the corporate powers of such
Company, (ii) have been duly authorized by proper corporate action and (iii)
are legal and will not result in any breach of any of the provisions of, or
constitute a default under, or result in the creation of any lien or
encumbrance upon any property of such Company or any Subsidiary under the
provisions of, any charter instrument, bylaw, loan agreement or other agreement
or instrument to which such Company or any Subsidiary is a party or by which
any of them may be bound.
(m) No Defaults. No event has occurred and no condition exists
which, upon the issuance of the Notes, would constitute an Event of Default, or
with the lapse of time or the giving of notice or both would become an Event of
Default, under this Agreement. Neither such Company nor any Subsidiary is in
default under any charter instrument, bylaw, loan agreement or other agreement
or instrument to which it is a party or by which it may be bound.
(n) Governmental Consent. Neither the nature of such Company or
any of its Subsidiaries, their respective businesses or properties, nor any
relationship between such Company or any of its Subsidiaries and any other
Person, nor any circumstances in connection with the issuance of the Notes is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
such Company in connection with the execution and delivery of this Agreement or
the issuance of the Notes.
(o) Taxes. (i) All tax returns required to be filed by such
Company or any Subsidiary in any jurisdiction have in fact been filed, and all
taxes, assessments, fees and other governmental charges upon such Company or
any Subsidiary, or upon any of their respective properties, income or
franchises, which are due and payable, have been paid timely or within
appropriate extension periods or contested in good faith by appropriate
proceedings. Neither such Company nor any Subsidiary knows of any proposed
additional tax assessment against it nor of any basis for one which would have
a materially adverse effect on MSC and its Subsidiaries taken as a whole.
(ii) The respective Federal income tax liabilities of MSC and its
Subsidiaries have been finally determined by the Internal Revenue Service and
satisfied for all taxable years to and
11
<PAGE> 17
including the taxable year ended May 31, 1994. The provisions for taxes on the
books of such Company and each Subsidiary are adequate for all open years and
for the current fiscal period.
(p) Status under Certain Statutes. Neither such Company nor any
Subsidiary is: (i) a "public utility company" or a "holding company," or an
"affiliate" or a "subsidiary company" of a "holding company," or an "affiliate"
of such a "subsidiary company," as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public utility" as defined
in the Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(q) Effect of Other Instruments. Neither such Company nor any
Subsidiary is bound by any agreement or instrument or subject to any charter or
other corporate restriction which materially and adversely affects the
business, properties, operations, or condition, financial or otherwise, of such
Company or any Subsidiary.
(s) Use of Proceeds. None of the transactions contemplated in
this Agreement (including, without limitation thereof, the use of the proceeds
of the Revolving Loans) will violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T and X of the
Board of Governors of the Federal Reserve System (12 C.F.R., Chapter II).
Neither such Company nor any Subsidiary owns or intends to carry or purchase
any "margin stock" within the meaning of Regulation G, and none of the proceeds
of the Revolving Loans will be used to purchase or carry or refinance any
borrowing the proceeds of which were used to purchase or carry any "margin
stock" or "margin security" in violation of Regulations G, T and X.
(t) Condition of Property. All of the facilities of such Company
and each of its Subsidiaries are in sound operating condition and repair except
for facilities being repaired in the ordinary course of business.
(u) Books and Records. Such Company and each of its Subsidiaries
maintain books, records and accounts which, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of their respective
assets, and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions are
recorded as necessary (x) to permit preparation of financial statements in
accordance with generally
12
<PAGE> 18
accepted accounting principles, and (y) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) Full Disclosure. Neither MSC's Annual Report on Form 10K for
the year ended May 31, 1995, the financial statements referred to in Paragraph
(d) of this Section 4.1, nor this Agreement, nor any other written statement or
document furnished by such Company to the Purchasers in connection with the
negotiation of this Agreement, taken together, contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading in light of the circumstances under
which they were made. There is no fact known, or which, with reasonable
diligence would be known, by such Company which such Company has not disclosed
to the Purchasers in writing which has a material adverse effect on or, so far
as such Company can now foresee, will have a material adverse effect on the
business, property, operations or condition, financial or otherwise, of such
Company or any of its Subsidiaries or the ability of such Company to perform
its undertakings under and in respect of this Agreement, the Collateral
Documents and the Notes.
(w) Environmental Compliance. Except as set forth on Schedule
4.1(w), such Company and each Subsidiary (i) is in compliance in all material
respects with all applicable environmental, transportation, health and safety
statutes and regulations, including, without limitation, regulations
promulgated under the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Sections 6901 et seq., and (ii) has not acquired, incurred or assumed,
directly or indirectly, any material contingent liability in connection with
the release or storage of any toxic or hazardous waste or substance into the
environment. Such Company and its Subsidiaries have not acquired, incurred or
assumed, directly or indirectly, any material contingent liability in
connection with a release or other discharge of any hazardous, toxic or waste
material, including petroleum, on, in, under or into the environment
surrounding any property owned, used or leased by any of them.
(x) Eligibility of Accounts and Inventory. With respect to the
Operating Companies only, to the best of such Operating Company's knowledge,
each Account or item of Inventory which such Operating Company shall include in
such Operating Company's Borrowing Base, will at the time of delivery of
certification of the Borrowing Base in which such Account or item of Inventory
is included, conform in all respects to the requirements of such classification
set forth in the respective definitions of "Eligible Account" and "Eligible
Inventory".
13
<PAGE> 19
(y) Certain Subsidiaries. Neither Met-Coil Automation, Inc., a
Delaware corporation, nor Met-Coil Systems International, Inc. a Virgin Islands
corporation, both Subsidiaries of MSC, own any assets.
4.2 Representations of the Purchasers. Each Purchaser represents,
and in entering into this Agreement the Companies understand, that such
Purchaser is accepting the Notes to amend and restate the 1989 Notes for the
purpose of investment and not with a view to the resale or distribution
thereof, and that such Purchaser has no present intention of selling,
negotiating or otherwise disposing of the Notes; provided that the disposition
of such Purchaser's property shall at all times be and remain within such
Purchaser's control, subject, however, to compliance with Federal securities
laws.
Each Purchaser acknowledges that the Notes have not been registered
under the Securities Act of 1933, as amended, and the Purchasers understand
that the Notes must be held indefinitely unless they are subsequently
registered under said Securities Act or an exemption from such registration is
available. Each Purchaser has been advised that no Company contemplates
registering, and is not legally required to register, the Notes under said
Securities Act.
Section 5. CLOSING CONDITIONS AND CONDITIONS PRECEDENT TO MAKING
REVOLVING LOANS
5.1 Closing Conditions. This Agreement shall be subject to the
following conditions to be satisfied on or before the Closing Date:
(a) Representations and Warranties. The representations and
warranties of the Companies contained in this Agreement or otherwise made in
writing in connection herewith shall be true and correct on or as of the
Closing Date and the Purchasers shall have received from the Companies a
Closing Certificate dated such Closing Date, and executed by the President or
any Corporate Vice President of each Company to such effect.
(b) Legal Opinions. The Purchasers shall have received from
Shuttleworth & Ingersoll, P.C., counsel for the Companies, its opinion, dated
such Closing Date, in form and substance satisfactory to the Purchasers and
covering substantially the matters set forth or provided in Exhibit D hereto.
(c) Events of Default. No event shall have occurred and be
continuing on the Closing Date which would constitute an Event of Default, as
defined in Section 9.1 hereof, or with notice or lapse of time or both would
become such an Event of Default, and the Companies shall have delivered to the
Purchasers on the
14
<PAGE> 20
Closing Date a certificate signed by the President or any Corporate Vice
President of each Company to such effect.
(d) Closing Fee. The Companies shall have paid the Purchasers a
closing fee of $90,000, which shall be earned in full and nonrefundable as of
the Closing Date.
(e) Payment of Fees and Expenses. The Companies shall have paid all
fees, expenses, costs and charges, including the fees and expenses of Sidley &
Austin, special counsel to Purchasers, Price Waterhouse LLP, consultants to
Purchasers, incurred by the Purchasers through the Closing Date and incident to
the proceedings in connection with, and transactions contemplated by, this
Agreement, the Collateral Documents and the Notes.
(f) Prepayment. A prepayment shall be made by MSC on the 1989 Notes
in the amount necessary to reduce the outstanding principal balance thereof to
$10,900,000, together with interest accrued on the amount being prepaid.
(g) Cash Administrator. The Purchasers shall have retained a bank
to administer the Companies' lockboxes and cash, checks and other funds.
(h) Collateral Documents. Each of the Collateral Documents shall be
in form and substance satisfactory to the Purchasers, and shall have been
executed and delivered by the applicable Obligor(s).
(i) Liens and Guaranties from Operating Companies. Each Operating
Company shall have granted the Purchasers senior and exclusive liens on and
security interests in substantially all of its assets (other than the assets
listed on Schedule 5.1(i), which are subject to the prior Liens described on
such schedule) to secure the payment and performance of its obligations under
this Agreement and the Revolving Notes executed by it, shall have guaranteed to
the Purchasers the payment and performance of the other Operating Company's
obligations under this Agreement and the Revolving Notes executed by such other
Operating Company, and shall have secured such guaranty obligations by granting
the Purchasers senior and exclusive liens on and security interests in
substantially all of its assets (other than the assets listed on Schedule
5.1(i), which are subject to the prior Liens described on such schedule). All
documentation evidencing such actions shall be in form and substance
satisfactory to the Purchasers.
(j) MSC Guaranty. MSC shall have guaranteed to the Purchasers
pursuant to a guaranty agreement in form and substance satisfactory to the
Purchasers the payment by the Operating Companies of the Revolving Notes and
shall have secured such guaranty obligations by granting to the Purchasers
senior and
15
<PAGE> 21
exclusive liens on and security interests in substantially all of its assets.
(k) Contribution Agreement. Each of the Companies and each other
Obligor shall enter into a contribution agreement in form and substance
satisfactory to the Purchasers.
(l) Environmental Audit. The Purchasers shall have received an
environmental audit of the Companies' owned real property.
(m) Articles; Good Standing. The Purchasers shall have received
the Articles or Certificate of Incorporation of each Company and of each other
Obligor, as amended, modified or supplemented to the Closing Date, certified to
be correct and complete by the Secretary of State of the state in which such
Person is incorporated, together with a certification of existence of such
Person from such Secretary of State and a certificate of good standing as a
foreign corporation from the Secretary of State of the state in which such
Person maintains its principal place of business if different from the state of
its incorporation.
(n) Secretary's Certificate. The Purchasers shall have received a
certificate dated the Closing Date of the Secretary of each Person described in
clause (n) above, certifying (i) the names and true signatures of the officers
authorized to sign this Agreement, the Notes and the Collateral Documents to
which such Person is a party, (ii) the resolutions of the Board of Directors of
such Person approving the transactions contemplated by this Agreement, the
Notes and the Collateral Documents, and (iii) such Person's by-laws.
(o) Perfection of Security Interests. Purchasers shall have
received satisfactory evidence that their security interests in the Collateral
have been properly perfected and constitute first and prior security interests.
(p) Loss Payable Endorsements. Purchasers shall have received
loss payable endorsements in form and substance satisfactory to the Purchasers
with respect to each Company's and each other Obligor's insurance policies
relating to the Collateral, and insurance certificates from nationally
recognized insurance brokers with respect to each Obligor's insurance policies.
(q) Restricted Account Agreements. Purchasers shall have received
with respect to each account and lock box of the Operating Companies in which
payments on Accounts are made, restricted account and lock box agreements in
form and substance satisfactory to the Purchasers, which agreements shall have
been duly executed by the Operating Companies and the financial
16
<PAGE> 22
institutions maintaining such accounts or controlling such lock boxes.
(r) Fair Saleable Value Balance Sheet. Purchasers shall have
received a pro forma fair saleable value balance sheet from MSC and its
Subsidiaries on a consolidated basis in form and substance satisfactory to the
Purchasers.
(s) Lien Searches. Purchasers shall have received lien search
reports with respect to each jurisdiction in which any Obligor has any property
and such reports shall be satisfactory to the Purchasers.
(t) No Material Adverse Change. No material adverse change shall
have occurred, as determined by the Purchasers in any Company's condition
(financial or otherwise), operations, properties or prospects since February
29, 1996.
(u) Status of Accounts Payable. No accounts payable owing by any
of the Companies shall as of the Closing Date be more than sixty days past due,
except those accounts payable with respect to which the Companies shall have
set aside adequate reserves.
(v) Status of Tax Liabilities. No taxes owing by any of the
Companies shall as of the Closing Date be past due.
(w) Subordination of Indebtedness. All obligations of any Obligor
for borrowed money and all notes and other debt instruments of any Obligor
shall have been subordinated to the payment and performance of the obligations
evidenced by this Agreement, the Notes and the Collateral Documents in a manner
satisfactory to the Purchasers.
(x) Settlement of Firstar Claims. Firstar Bank Iowa, N.A. shall
have settled its outstanding claims against the Companies with respect to its
revolving credit facility for an amount not greater than the principal amount
outstanding thereunder minus $195,000.
(y) Settlement of Harris Claims. Harris Trust & Savings Bank of
Chicago shall have settled its outstanding claims against the Companies with
respect to its revolving credit facility for an amount not greater than the
principal amount outstanding thereunder minus $370,000.
(z) Restructuring of Certain Accounts. Mechanical Data
Corporation shall have accepted a promissory note of not more than $500,000 on
terms and conditions satisfactory to the Purchaser to reevidence existing
accounts payable owed to it by the Companies and shall have provided such note
to the Purchasers to hold as collateral security.
17
<PAGE> 23
(aa) Due Diligence. The Purchasers shall have satisfactorily
completed their due diligence investigation of the Obligors and their
respective assets.
(bb) Proceedings and Documents. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof shall be satisfactory in form
and substance to the Purchasers and their special counsel, and the Purchasers
and their special counsel shall have received copies (executed or certified as
may be appropriate) of all legal documents or proceedings which the Purchasers
and their special counsel may reasonably request in connection with the
consummation of said transactions.
(cc) Noteholder Agreement. The Purchasers shall have executed and
delivered the Noteholder Agreement.
5.2 Conditions Precedent to Revolving Loans. In the case of each
Revolving Loan to be made hereunder:
(a) The representations and warranties of each Company
set forth in Section 4.1 and of each other Obligor set forth in any
Collateral Document to which such Obligor is a party shall be true and
correct in all material respects on and as of the date of such
Revolving Loan with the same effect as though such representations and
warranties had been made on and as of such date.
(b) At the time of each such Revolving Loan, each Company
and each other Obligor shall be in compliance with all the terms and
provisions set forth in this Agreement, the Notes and the Collateral
Documents on its part to be observed or performed, and no Event of
Default or Default shall have occurred and be continuing.
(c) At the time of each such Revolving Loan and after
giving effect to each such Revolving Loan, there shall have been no
material adverse change in the condition (financial or otherwise),
operations, properties or prospects of any Obligor since February 29,
1996.
(d) Such Revolving Loan, when combined with (i) Revolving
Loans previously made to the Operating Company requesting such
Revolving Loan, shall not exceed such Operating Company's Sublimit or
Borrowing Base, and (ii) Revolving Loans made to both Operating
Companies, shall not exceed the Maximum Revolving Loan Facility.
18
<PAGE> 24
(e) The Purchasers shall have received the Notice
of Borrowing and certificate required by Section 2.2.
(f) All fees and expenses which are due and payable to
the Purchasers on or prior to the date of the advance of such
Revolving Loan shall have been paid.
Section 6. INTERPRETATION OF AGREEMENT
6.1 Certain Terms Defined. The terms hereinafter set forth when
used herein shall have the following meanings:
Accounts - All present and future rights of an Operating Company to
payment for goods sold or leased or for services rendered, and whether or not
they have been earned by performance.
Affiliate- Any Person (other than a Subsidiary) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, MSC. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Borrowing Base - The IPI Borrowing Base or TLC Borrowing Base,
as applicable.
Business Day- Any day of the week other than Saturday or Sunday on
which both Purchasers are open for business at their respective headquarters
offices.
Capitalized Lease - Any lease of property, real or personal, which in
accordance with generally accepted accounting principles, would be required to
be on a balance sheet of the lessee.
Collateral - All property and interests in property now owned or
hereafter acquired by any Company or any other Obligor in or upon which a
security interest, lien or mortgage is granted to the Purchasers under the
Collateral Documents.
Collateral Documents - The documents listed on Schedule 6.1 hereto,
each dated as of the Closing Date, as each such document may be amended or
modified from time to time.
Consolidated Debt - As of any time the same is to be determined, the
aggregate of all indebtedness, obligations, liabilities, reserves and any other
items which could be classified as a liability on a consolidated balance sheet
of MSC
19
<PAGE> 25
and its Subsidiaries in accordance with generally accepted accounting
principles, including all indebtedness or liabilities of any other Person which
MSC or any Subsidiary may guarantee or otherwise be responsible or liable for
(other than any liability arising out of the endorsement of commercial paper
for deposit or collection received in the ordinary course of business), all
indebtedness and liabilities secured by any lien or any security interest on
any property or assets of MSC or any Subsidiary, whether or not the same would
be classified as a liability on a balance sheet, and the aggregate amount of
rentals or other consideration payable by any Company or any Subsidiary under
all leases and other agreements for the use, acquisition or retention of real
or personal property of a nature such that payments due thereunder may under
generally accepted accounting principles in effect on the date hereof be
included in a balance sheet of the lessee, whether or not the same would be
classified as a liability on a consolidated balance sheet, but excluding all
general contingency reserves for deferred income taxes and investment credit,
all computed and determined on a consolidated basis for MSC and its
Subsidiaries after the elimination of inter-company items in accordance with
generally accepted accounting principles consistently applied.
Consolidated Fixed Charges - For any period, the sum of: (i) interest
expense (including the interest component of Capitalized Leases and including
capitalized interest), amortization of debt discount and expense on
Indebtedness of MSC and its Subsidiaries for such period and (ii) total rental
expense of MSC and its Subsidiaries under all leases other than Capitalized
Leases, determined in accordance with generally accepted accounting principles.
Consolidated Income Available for Fixed Charges - For any period, the
sum of (i) Consolidated Net Income, plus (to the extent deducted in determining
Consolidated Net Income), (ii) all provisions for any federal, state, or other
income taxes made by MSC and its Subsidiaries during such period and (iii)
Consolidated Fixed Charges during such period.
Consolidated Indebtedness - The aggregate amount of all Indebtedness
of MSC and its Subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles.
Consolidated Interest Expense - With respect to MSC and its
Subsidiaries for any period, the aggregate amount of interest which, in
conformity with GAAP, would be set forth opposite the caption "interest
expense" or any like caption on an income statement for MSC and its
Subsidiaries on a consolidated basis.
Consolidated Net Income - For any period, the net income and net losses
of MSC and its Subsidiaries determined in accordance
20
<PAGE> 26
with generally accepted accounting principles, but excluding therefrom the sum
of (i) any net loss or any undistributed net income of any Person other than a
Subsidiary, (ii) the gain or loss (net of any tax effect) resulting from the
sale of any capital assets (other than any gain or loss resulting from the sale
by TLC, of twelve acres of undeveloped land in Lisle, Illinois) and (iii) net
income or loss of any Subsidiary for any period prior to the date it became a
Subsidiary; provided, however, that for purposes of Section 8.3 hereof, any
gain resulting from the sale of the twelve acres of undeveloped land in Lisle,
Illinois referred to in clause (ii) shall be excluded from Consolidated Net
Income.
Consolidated Net Tangible Assets - For any period, Consolidated Total
Assets less (i) all liabilities of MSC and its Subsidiaries, determined in
accordance with generally accepted accounting principles, other than Current
Debt, Funded Debt and the long-term portion of deferred income tax credits and
(ii) goodwill, patents, trademarks, unamortized debt discount and expenses,
deferred research and development expenses, organization expense and such other
assets as are properly classified as "intangible assets" in accordance with
generally accepted accounting principles.
Consolidated Tangible Net Worth - The stockholders' equity of MSC and
its Subsidiaries, determined in accordance with generally accepted accounting
principles, less the sum of all goodwill, trade names, trademarks, patents,
organization expense, unamortized debt discount and expense and other similar
intangibles properly classified as intangibles in accordance with generally
accepted accounting principles.
Consolidated Total Assets - The consolidated total assets of MSC and
its Subsidiaries determined in accordance with generally accepted accounting
principles.
Consolidated Working Capital - The excess of the current assets over
the current liabilities of MSC and its Subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting principles.
Contaminant - Any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, as defined in Environmental, Health
or Safety Requirements of Law.
Current Debt - All Indebtedness for borrowed money maturing in one year
or less, excluding current maturities of Funded Debt.
21
<PAGE> 27
Default - An event which with the passage of time or the giving of
notice or both, would constitute an Event of Default.
Determination Date - With respect to each prepayment described in
clause (a) of the first sentence of Section 3.2, the day 15 days before the
date fixed for a prepayment pursuant to a notice required by Section 3.3 or the
day 15 days before the date of declaration pursuant to Section 9.2, and with
respect to each prepayment described in clause (b) of Section 3.1, the date of
such prepayment.
EBITDA - With respect to MSC and its Subsidiaries on a consolidated
basis for any fiscal period, an amount equal to (a) the sum of (i) Consolidated
Net Income for such period, plus (ii) the provision for taxes for such period
based on income or profits to the extent such income or profits were included
in computing Consolidated Net Income and any provision for taxes utilized in
computing net losses under clause (i) hereof, plus (iii) Consolidated Interest
Expense for such period, plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other noncash items reducing Consolidated Net
Income for such period.
Eligible Account - An Account owing to a Company which meets the
following requirements:
(1) it is genuine and in all respects what it purports to be;
(2) it arises from either (a) the performance of services
by an Operating Company, which services have been fully performed and,
if applicable, acknowledged and/or accepted by the account debtor with
respect thereto or (b) the sale or lease of goods by an Operating
Company; and, if it arises from the sale or lease of goods, such goods
comply with such account debtor's specifications (if any) and have
been shipped to, or delivered to and accepted by, such account debtor.
(3) it is evidenced by an invoice or other evidence of
sale rendered to the account debtor with respect thereto which (a) is
dated not earlier than the date of shipment or performance and (b) has
payment terms not unacceptable to the Purchasers;
(4) it is due and payable in full within thirty (30) days
after the date of the invoice evidencing such Account, and is not
unpaid on the date that is ninety (90) days after the date of such
invoice;
22
<PAGE> 28
(5) it is not an Account owing from any account debtor to the
extent that invoices representing fifty percent (50%) or more
of the unpaid net amount of all Accounts from such account debtor are
unpaid more than ninety (90) days after the date of such invoices;
(6) it is not subject to any assignment, claim or Lien,
other than a Lien in favor of the Purchasers;
(7) it is a valid, legally enforceable and unconditional
obligation of the account debtor with respect thereto, and is not
subject to setoff, rebate, counterclaim, credit or allowance or
adjustment by the account debtor with respect thereto, or to any claim
by such account debtor denying liability thereunder in whole or in
part, and such account debtor has not refused to accept any of the
goods or services which are the subject of such Account or offered or
attempted to return any of such goods; provided that an Account which
but for the operation of this Paragraph (7) would be an Eligible
Account, shall be deemed an Eligible Account to the extent of the part
thereof, if any, which is not subject to any setoff, counterclaim,
credit, allowance, adjustment or claim (or nonacceptance of, or offer
or attempt to return, the goods or services which are the subject of
such Account);
(8) it does not arise out of a contract or order which,
by its terms, forbids, restricts or makes void or unenforceable the
assignment by any Operating Company to the Purchasers of the Account
arising with respect thereto;
(9) the account debtor with respect thereto is not a
Subsidiary or an Obligor, or a director, officer, employee or agent of
a Subsidiary, or an Obligor;
(10) the account debtor with respect thereto is a
resident or citizen of, and is located within, the United States of
America;
(11) it is not an Account arising from a "sale on approval,"
"sale or return" or "consignment," or subject to any other repurchase
or return agreement;
(12) on or after the thirtieth day following the Closing
Date, the account debtor thereunder is not located in the State of
Minnesota; provided, however, that such restriction shall not apply to
an Account if at the time the Account was created and at all times
thereafter (a) the applicable Operating Company had
23
<PAGE> 29
filed and has maintained effective a current Notice of Business
Activities Report with the appropriate office or agency of the State
of Minnesota, as applicable, or (b) the applicable Operating Company
was and has continued to be exempt from the filing of such Report and
has provided the Purchasers with satisfactory evidence thereof;
(13) it arises in the ordinary course of an Operating
Company's business; and
(14) if the account debtor is the United States of America
or any department, agency or instrumentality thereof, such Account is
expressly assignable, the account debtor has waived its rights of
offset and the applicable Operating Company has assigned its right to
payment of such Account to the Purchasers pursuant to the Assignment
of Claims Act of 1940, as amended.
Accounts of the Operating Companies which are at any time Eligible Accounts but
which subsequently fail to meet any of the foregoing requirements shall
forthwith cease to be Eligible Accounts.
Eligible Inventory - Inventory which meets the following requirements:
(1) it is owned by an Operating Company, and is not
subject to any assignment, claim or Lien, other than a Lien in favor
of the Purchaser;
(2) if it is held for sale or lease or furnishing under
contracts of service, it is new and unused;
(3) except as the Purchasers may otherwise consent and as
permitted under clause (4) below, it is in the possession and control
of an Operating Company; provided that if it is stored on premises
leased by an Operating Company, the Purchasers are in possession of a
landlord's waiver in form and substance satisfactory to the Purchasers
duly executed by the owner of such premises;
(4) if it is the possession or control of a bailee,
warehouse, consignee, processor or other Person other than an
Operating Company, the Purchasers are in possession of such
agreements, instruments and documents as the Purchasers may require
(each in form and substance satisfactory to the Purchasers and duly
executed, as appropriate, by the bailee, warehouseman, consignee,
processor or other Person in possession or control of such Inventory,
as applicable) including,
24
<PAGE> 30
without limitation, warehouse receipts in the Purchasers' name
covering such Inventory and a bailee's consent, consignment agreement
and a financing statement executed by any such consignee, a
processor's consent or a landlord's consent, as applicable;
(5) it is not Inventory which is dedicated to,
identifiable with, or is otherwise specifically to be used in the
manufacture of, goods which are to be sold or leased to the United
States of America or any department, agency or instrumentality thereof
and in respect of which Inventory, an Operating Company shall have
received any progress or other advance payment which is or may be set
off against any Account generated upon the sale or lease of any such
goods; and
(6) it is not Inventory produced in violation of the Fair
Labor Standards Act and subject to the "hot goods" provisions
contained in Title 29 U.S.C. Section 215 or any successor statute or
section;
Inventory of any Operating Company which is at any time Eligible Inventory but
which subsequently fails to meet any of the foregoing requirements shall
forthwith cease to be Eligible Inventory.
Environmental, Health or Safety Requirements of Law - All requirements
of law derived from or relating to federal, state and local laws, regulations
or judicial decisions relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq., and the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901 et seq., in each case including any amendments
thereto, any successor statutes, and any regulations or guidance promulgated
thereunder, and any state or local equivalent thereof.
Event of Default - Defined in Section 9.1.
Funded Debt - All Indebtedness owed or guaranteed which by its terms
matures more than one year from the date of creation or which may be renewed or
extended at the obligation of the obligor for more than one year from such date
whether or not theretofore renewed or extended.
Governmental Authority - Any nation or government, any federal, state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial,
25
<PAGE> 31
regulatory or administrative functions of or pertaining to government.
Indebtedness - (i) All items of borrowings, including Capitalized
Leases, which in accordance with generally accepted accounting principles would
be included in determining total liabilities as shown on the liability side of
a balance sheet as of the date at which Indebtedness is to be determined, and
(ii) all guarantees (other than guaranties of Indebtedness of any Company by a
Subsidiary or of a Subsidiary by any Company), letters of credit, and
endorsements (other than of notes, bills and checks presented to banks for
collection or deposit in the ordinary course of business), in each case to
support Indebtedness of other Persons.
Institutional Holder - Any bank, trust company, insurance company,
pension fund, mutual fund or other similar financial institution which is or
becomes a holder of any Note.
Inventory - Any and all goods, including, without limitation, goods in
transit, wheresoever located, whether now owned or hereafter acquired by any
Operating Company, which are held for sale or lease, furnished under any
contract of service or held as raw materials, work in process or supplies, and
all materials used or consumed in an Operating Company's business, and shall
include such property the sale or other disposition of which has given rise to
Accounts and which has been returned to or repossessed or stopped in transit by
such Operating Company.
IPI Borrowing Base - (i) 85% of IPI's Eligible Accounts, and (ii) 40%
of IPI's Eligible Inventory consisting of purchased parts and manufactured
parts valued at the lower of cost or market value, and (iii) 50% of IPI's
Eligible Inventory consisting of raw materials (other than purchased parts or
manufactured parts) valued at the lower of cost or market value, subject to
deduction of such reserves and allowances, as the Purchasers may establish in
their sole discretion.
IPI Sublimit - $1,750,000.
Lien - Any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction in connection with any of the
foregoing.
26
<PAGE> 32
Majority Noteholders - Persons holding at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding principal balance of the Notes.
Maximum Revolving Loan Facility - $3,500,000.
Noteholder Agreement - That certain Noteholder Agreement dated as of
the Closing Date between the Purchasers.
Obligor - Any Company or any other Person obligated under a Collateral
Document.
Person - Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Reinvestment Yield - With respect to Notes to be prepaid pursuant to
Section 3.2 or clause (b) of Section 3.1 or Notes the payment of which have
been accelerated pursuant to Section 9.2, the arithmetic mean of the rates,
published for the 5 business days preceding the applicable Determination Date,
in the weekly statistical release designated H.15(519) (or any successor
publication) of the Board of Governors of the Federal Reserve System under the
caption "U.S. Government Securities Treasury Constant Maturities" opposite the
maturity corresponding to the Weighted Average Life to Maturity, rounded to the
nearest month, of the principal amount of the Notes to be prepaid. If no
maturity exactly corresponding to such rounded Weighted Average Life to
Maturity shall appear therein, yields for the two most closely corresponding
published maturities shall be calculated pursuant to the foregoing sentence and
the Reinvestment Yield shall be interpolated from such yields on a straightline
basis (rounding in each of such relevant periods, to the nearest month).
Release- Any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in
the air, soil, surface water or groundwater.
Revolving Loan Facility - The facility for the provision by the
Purchasers of Revolving Loans to the Operating Companies, as described in
Section 2 of the Agreement.
Revolving Loan Facility Termination Date - The earlier of (i) April 30,
1999, or (ii) the date which the Operating Companies specify in a written
notice to the Purchasers as the Revolving Loan Facility Termination Date.
Sublimit - The IPI Sublimit or TLC Sublimit, as applicable.
27
<PAGE> 33
Subordinated Funded Debt - Any unsecured Funded Debt which is
subordinate in right of payment to the Notes and has a Weighted Average Life to
Maturity extending beyond the final maturity of the Notes.
Subsidiary - Any Person of which greater than 50% of the outstanding
shares of voting stock are owned or controlled by any Company.
TLC Borrowing Base - (i) 75% of TLC's Eligible Accounts, (ii) 40% of
TLC's Eligible Inventory consisting of purchased parts and manufactured parts
valued at the lower of cost or market value, and (iii) 50% of TLC's Eligible
Inventory consisting of raw materials (other than purchased parts or
manufactured parts) valued at the lower of cost or market value, subject to
deduction of such reserves and allowances as the Purchasers may establish in
their sole discretion.
TLC Sublimit - $3,000,000.
Weighted Average Life to Maturity - As applied to any prepayment of
principal of the Notes, or to any Subordinated Funded Debt, at any date, the
number of years obtained by dividing (a) the then outstanding principal amount
of the Notes to be prepaid, or the then outstanding principal amount of such
Subordinated Funded Debt, as the case may be, into (b) the sum of the products
obtained by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity, or other required payment, including payment at
final maturity, foregone by such prepayment in the case of a prepayment of the
Notes or in respect of such Subordinated Funded Debt, by (ii) the number of
years (calculated to the nearest 1/12th) which will elapse between such date
and the making of such payment.
Wholly-Owned - When applied to a Subsidiary, any Subsidiary 100% of the
stock entitled to vote in the election of directors of which is owned by MSC
and/or its Wholly-Owned Subsidiaries.
Terms which are defined in other Sections of this Agreement shall have
the meanings specified therein.
6.2 Accounting Principles. 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, the same shall be done in accordance with
generally accepted accounting principles in force at the time this Agreement is
executed to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
28
<PAGE> 34
6.3 Valuation Principles. Except when indicated expressly to the
contrary by the use of terms such as "fair value," "fair market value" or
"market value," each asset, each liability and each capital item of any Person,
and any quantity derivable by a computation involving any of such assets,
liabilities or capital items, shall be taken at the net book value thereof for
all purposes of this Agreement. "Net book value" with respect to any asset,
liability or capital item of any Person shall mean the amount at which the same
is recorded or, in accordance with generally accepted accounting principles,
should have been recorded in the books of account of such Person, as reduced by
any reserves which have been or, in accordance with generally accepted
accounting principles, should have been set aside with respect thereto, but in
every case (whether or not permitted in accordance with generally accepted
accounting principles) without giving effect to any write-up, write-down or
write-off (other than any write-down or write-off the entire amount of which
was charged to Consolidated Net Income or to a reserve which was a charge to
Consolidated Net Income) relating thereto which was made after the date of this
Agreement.
6.4 Direct or Indirect Actions. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
Section 7. AFFIRMATIVE COVENANTS
Each Company agrees that, for so long as any amount remains unpaid on
any Note:
7.1 Corporate Existence. Such Company will maintain and preserve,
and will cause each Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and duly procure all necessary
renewals and extensions thereof and use, and cause each Subsidiary to use, its
best efforts to maintain, preserve and renew all of its rights, powers,
privileges and franchises which in the opinion of the Board of Directors or
senior management of such Company continue to be advantageous to such Company
and its Subsidiaries; provided, however, that the corporate existence of such
Company or of any Subsidiary may be discontinued as a result of a liquidation
or sale of assets or merger in accordance with the provisions of Sections 8.12
or 8.13 hereof.
7.2 Insurance. Such Company will insure and keep insured, and
will cause each Subsidiary to insure and keep insured, at all times all of its
properties which are of an insurable nature and of the character usually
insured by companies operating properties similar to the properties of such
Company or each such Subsidiary, against loss or damage by fire and from other
causes
29
<PAGE> 35
customarily insured against by companies engaged in similar businesses in such
amounts as are usually insured against by such companies. Such Company will
also maintain, and will also cause each Subsidiary to maintain, at all times
adequate insurance against loss or damage from such hazards and risks to the
person and property of others as are usually insured against by companies
operating properties similar to the properties of such Company or each such
Subsidiary. All such insurance shall be carried with financially sound and
reputable insurers rated A-XII or better by A.M. Best Company, Inc.; provided,
however, that such Company may place its product liability insurance with an
insurance carrier owned solely by members of The Machine Tool Manufacturers
Association which reinsures at least 65% of the risk with a reinsurer rated at
least A-VIII by A.M. Best Company, Inc.
7.3 Taxes, Claims for Labor and Materials. Such Company will pay
and discharge when due, and will cause each Subsidiary to pay and discharge
when due, all taxes, assessments and governmental charges or levies imposed
upon it or its property or assets, or upon properties leased by it (but only to
the extent required to do so by the applicable lease), prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon its property or assets, provided that neither such Company
nor any Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim, the payment of which is being contested in good faith and by
proper proceedings that will stay the forfeiture or sale of any property and
with respect to which adequate reserves are maintained in accordance with
generally accepted accounting principles.
7.4 Maintenance of Properties. Such Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its material properties (whether owned in fee or a leasehold interest) in
good repair and working order, ordinary wear and tear excepted, and from time
to time will make all necessary repairs, replacements, renewals and additions
required to maintain the business of such Company and each Subsidiary.
7.5 Maintenance of Records. Such Company will keep, and will
cause each Subsidiary to keep, at all times proper books of record and account
in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of such Company or
such Subsidiary, in accordance with generally accepted accounting principles
consistently applied throughout the period involved (except for such changes as
are disclosed in such financial statements or in the notes thereto and
concurred in by the independent certified public accountants), and such Company
will, and will cause each Subsidiary to, provide reasonable protection against
loss or damage to such books of record and account.
30
<PAGE> 36
7.6 Financial Information and Reports. MSC will furnish to the
Purchasers and to any other Institutional Holder (in duplicate if any Purchaser
or such other holder so requests), the following:
(a) As soon as available and in any event within 45 days after the
end of each of the first three quarterly accounting periods of each fiscal year
of MSC, a consolidated balance sheet of MSC and its Subsidiaries as of the end
of such period and consolidated statements of income and cash flows of MSC and
its Subsidiaries for the periods beginning on the first day of such fiscal year
and the first day of such quarterly accounting period and ending on the date of
such balance sheet, setting forth in comparative form the corresponding
consolidated figures for the corresponding periods of the preceding fiscal
year, all in reasonable detail prepared in accordance with generally accepted
accounting principles, consistently applied throughout the period involved
(except for such changes as are disclosed in such financial statements or in
the notes thereto and concurred in by MSC's independent certified public
accountants) and certified by the chief financial officer of MSC (i) outlining
the basis of presentation, and (ii) stating that the information presented in
such statements presents fairly the financial condition of MSC and its
Subsidiaries and the results of operations for the period, subject to customary
year-end audit adjustments;
(b) As soon as available and in any event within 90 days after the
last day of each fiscal year a consolidated and consolidating balance sheet of
MSC and its Subsidiaries as of the end of such fiscal year and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flows for such fiscal year, in each case setting forth in comparative form
figures for the preceding fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles consistently applied
throughout the period involved (except for changes as are disclosed in such
financial statements or in the notes thereto and concurred in by independent
certified public accountants) and accompanied by a report of Deloitte and
Touche or any firm of independent public accountants of recognized national
standing selected by MSC;
(c) Together with the financial reports delivered pursuant to
Paragraphs (a) and (b) of this Section 7.6, a certificate of the chief
financial officer, (i) to the effect that the signer thereof has reexamined the
terms and provisions of this Agreement and that at the date of such
certificate, during the periods covered by such financial reports and as of the
end of such periods, neither any Company nor any Subsidiary is, or was, in
default in the fulfillment of any of the terms, covenants, provisions and
conditions hereof and that no Event of Default, or event which, with the lapse
of time or the giving of notice, or both, would become an Event of Default
hereunder, is occurring or
31
<PAGE> 37
occurred as of the date of such certificate, during such periods and as of the
end of such periods, or if the signer is aware of any such event or Event of
Default, he shall disclose in such statement the nature thereof, its period of
existence and what action, if any, such Company has taken or proposes to take
with respect thereto, and (ii) stating whether such Company is in compliance
with Sections 8.1 through 8.16 and setting forth, in sufficient detail, the
information and computations required to establish whether or not such Company
was in compliance with the requirements of Sections 8.1 through 8.9, 8.13 and
8.14 during the periods covered by the financial reports then being furnished
and as of the end of such periods;
(d) Together with the financial reports delivered pursuant to
Paragraph (b) of this Section 7.6, a certificate of the independent public
accountants stating that in making the examination necessary for expressing an
opinion on such financial statements, nothing came to their attention that
caused them to believe that there is in existence or has occurred any Event of
Default hereunder, or any event (the occurrence of which is ascertainable by
accountants in the course of normal audit procedures) which, with the lapse of
time or the giving of notice, or both, would become an Event of Default
hereunder or, if such accountants shall have obtained knowledge of any such
event or Event of Default, they shall disclose in such certificate the nature
thereof and the length of time it has existed;
(e) Within 15 days after such Company obtains knowledge thereof,
notice of any litigation not fully covered by insurance or governmental
proceeding pending against such Company or any Subsidiary in which the damages
sought exceed $250,000 or which might otherwise materially adversely affect the
business, operations or condition, financial or otherwise, of such Company or
any of its Subsidiaries;
(f) As soon as available, copies of such financial statements,
notices, reports and proxy statements as such Company shall furnish to its
stockholders; copies of all registration statements and periodic reports which
such Company may file with the Securities and Exchange Commission, and any
other similar or successor agency of the Federal government administering the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, or the Trust Indenture Act of 1939, as amended; and copies of all
reports relating to such Company or its securities which such Company may file
with any securities exchange on which any of such Company's securities may be
registered;
(g) As soon as available, a copy of each other report submitted to
such Company or any Subsidiary by independent accountants retained by such
Company or any Subsidiary in
32
<PAGE> 38
connection with any interim or special audit made by them of the books of such
Company or any Subsidiary;
(h) Not later than fifteen (15) days after the end of each calendar
month, for each Operating Company, detailed reports of Accounts, Inventory,
Eligible Accounts and Eligible Inventory for such calendar month, such reports
to be in such form as shall be acceptable to the Purchasers;
(i) As soon as possible and in any event within ten (10) days after
receipt by any Company, a copy of (i) any notice or claim to the effect that
any Company or any Company's Subsidiaries is or may be liable to any Person as
a result of the Release by any Company, any Company's Subsidiaries, or any
other Person of any Contaminant into the environment, and (ii) any notice
alleging any violation of any Environmental, Health or Safety Requirements of
Law by any Company or any Company's Subsidiaries if, in either case, such
notice or claim relates to an event which could reasonably be expected to
subject any Company or any Company's Subsidiaries to liability in excess of
$100,000; and
(j) Such additional information as the Purchasers or such other
Institutional Holder of the Notes may reasonably request concerning such
Company and its Subsidiaries.
7.7 Inspection of Properties and Records. Such Company will
allow, and will cause each Subsidiary to allow, any representative of the
Purchaser or any other Institutional Holder, so long as any Purchaser or such
other Institutional Holder shall hold any Note, to visit and inspect any of its
properties, to examine its books of record and account and to discuss its
affairs, finances and accounts with its officers and its public accountants
(and by this provision such Company and each Subsidiary hereby authorize such
accountants to discuss with any Purchaser or such Institutional Holder its
affairs, finances and accounts), all at such reasonable times and as often as
any Purchaser or such Institutional Holder may reasonably request; provided
that any proprietary or other confidential, competitively sensitive information
obtained by any Purchaser or any other Institutional Holder shall not be
disclosed to any Person unless required by law.
7.8 ERISA. (a) Such Company agrees that all assumptions and
methods used to determine the actuarial valuation of employee benefits, both
vested and unvested, under any Plan of such Company or any Subsidiary, and each
such Plan, will comply in all material respects with ERISA and other applicable
laws.
(b) Such Company will not at any time permit any Plan established,
maintained or contributed to by it or any Subsidiary or "affiliate" (as defined
in Section 407(d)(7) of ERISA) to:
33
<PAGE> 39
(i) engage in any "prohibited transaction" as such term
is defined in Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such
term is defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to
result in the imposition of a lien on the property of such Company or any
Subsidiary pursuant to Section 4068 of ERISA, if and to the extent such
termination is within the control of such Company;
if the event or condition described in (i), (ii) or (iii) above is
likely to subject such Company or any Subsidiary or "affiliate" to a liability
which, in the aggregate, is material in relation to the business, operations,
property or condition, financial or otherwise, of MSC and its Subsidiaries
taken as a whole.
(c) Upon the request of any Purchaser or any other Institutional
Holder, such Company will furnish a copy of the annual report of each Plan
(Form 5500) required to be filed with the Internal Revenue Service. Copies of
annual reports shall be delivered no later than 30 days after the later of the
date such report has been filed with the Internal Revenue Service or the date
the copy is requested.
7.9 Compliance with Laws. Such Company will comply, and will
cause each of its Subsidiaries to comply, with all laws, rules and regulations
relating to its or their respective businesses, other than laws, rules and
regulations the failure to comply with which and the sanctions and penalties
resulting therefrom, when taken together with the failure to comply with all
other laws, rules and regulations and the sanctions and penalties resulting
therefrom, would not have a material adverse effect on the operations,
business, property, assets or condition, financial or otherwise, of MSC and its
Subsidiaries taken as a whole, or would not result in the creation of a Lien
which, if incurred in the ordinary course of business, would not be permitted
by Section 8.8 on any of the property of such Company or any Subsidiary;
provided, however, that such Company and its Subsidiaries shall not be required
to comply with laws, rules and regulations the validity or applicability of
which are being contested in good faith and by appropriate proceedings.
7.10 Acquisition of Notes. Such Company will forthwith cancel any
Notes in any manner or at any time acquired by such Company or, any Subsidiary
or Affiliate and such Notes shall not be deemed to be outstanding for any of
the purposes of this Agreement or the Notes.
34
<PAGE> 40
7.11 Private Placement Number. Such Company consents to the filing
of copies of this Agreement with Standard & Poor's Corporation ("S&P") and the
National Association of Insurance Commissioners in connection with obtaining a
"private placement number" from S&P.
7.12 Appraisals. The Companies shall upon request of the
Purchasers, not more frequently than on an annual basis, at the sole cost and
expense of the Companies, deliver to the Purchasers an update of the auction
sale value appraisals of the Companies' machinery and equipment from an
independent appraiser satisfactory to the Purchasers.
7.13 Restricted Accounts. The Companies shall establish and maintain
lockboxes and collection account agreements in form and substance satisfactory
to the Purchasers with respect to each financial institution account to which
(i) payment of Accounts may be remitted and for the application of such
payments to the outstanding principal balance of the Revolving Loans and (ii)
payment of any other amounts to the Companies may be remitted. The Companies
shall instruct each of its account debtors at all times to make all payments
owing to any Company to such lockboxes.
7.14 Budgets. The Companies shall deliver to the Purchasers (i)
prior to the end of each fiscal year of MSC, a budget for MSC and its
Subsidiaries for the next succeeding three fiscal year period, (ii) not later
than fifteen days before the end of each fiscal quarter of MSC, a quarterly
budget for MSC and its Subsidiaries for the next succeeding fiscal quarter of
MSC, and (iii) not later than thirty days after the end of each fiscal quarter
of MSC, a variance analysis comparing the actual results of operations of MSC
and its Subsidiaries for such fiscal quarter with the results projected for
such fiscal quarter in the budgets submitted to the Purchasers. Each such
budget shall be in form and substance satisfactory to the Purchasers.
7.15 Met-Coil Automation. MSC shall dissolve Met-Coil Automation,
Inc. not later than May 31, 1996.
Section 8. NEGATIVE COVENANTS
The Companies agree that, for so long as any amount remains unpaid on
any Note:
8.1 Consolidated Tangible Net Worth. MSC will not, at the end of
each fiscal quarter, permit its Consolidated Tangible Net Worth to be less than
the amount set forth below opposite the applicable date:
35
<PAGE> 41
<TABLE>
<CAPTION>
Date Amount
<S> <C>
May 31, 1996 $2,500,000
August 31, 1996 $2,750,000
November 30, 1996 $3,000,000
February 28, 1997 $3,500,000
May 31, 1997 $4,000,000
August 31, 1997 $4,300,000
November 30, 1997 $4,600,000
February 28, 1998 $4,900,000
May 31, 1998 $5,200,000
August 31, 1998 $5,500,000
November 30, 1998 $5,800,000
February 28, 1999 $6,100,000
May 31, 1999 $6,400,000
August 31, 1999 $6,700,000
November 30, 1999 $7,000,000
February 29, 2000 $7,300,000
May 31, 2000 $7,600,000
August 31, 2000 $7,900,000
November 30, 2000 $8,200,000
</TABLE>
8.2 Indebtedness. MSC will not, and will not permit any of its
Subsidiaries at any time to, create or incur any Indebtedness other than (i)
the Indebtedness described on Schedule 8.2, (ii) the Indebtedness evidenced by
the Notes, and (iii) Indebtedness incurred in connection with the lease of
machinery and equipment not to exceed $200,000 at any one time outstanding.
8.3 Fixed Charge Ratio. MSC will not, as of the end of any fiscal
quarter, permit the ratio of Consolidated Income Available for Fixed Charges to
Consolidated Fixed Charges, to be less than the ratio set forth below opposite
the applicable date:
<TABLE>
<CAPTION>
Date Ratio
<S> <C>
May 31, 1996 0.75 to 1.00
August 31, 1996 1.00 to 1.00
November 30, 1996 1.00 to 1.00
February 28, 1997 1.00 to 1.00
May 31, 1997 1.00 to 1.00
August 31, 1997 1.25 to 1.00
November 30, 1997 1.25 to 1.00
February 28, 1998 1.25 to 1.00
May 31, 1998 1.25 to 1.00
August 31, 1998 1.50 to 1.00
November 30, 1998 1.50 to 1.00
February 28, 1999 1.50 to 1.00
May 31, 1999 1.50 to 1.00
August 31, 1999 1.50 to 1.00
</TABLE>
36
<PAGE> 42
<TABLE>
<S> <C>
November 30, 1999 1.50 to 1.00
February 29, 2000 1.75 to 1.00
May 31, 2000 1.75 to 1.00
August 31, 2000 1.75 to 1.00
November 30, 2000 1.75 to 1.00
</TABLE>
8.4 Consolidated Working Capital. MSC will not, at any time,
permit Consolidated Working Capital to be less than $5,000,000.
8.5 Debt to Net Worth. MSC will not, as of the end of each fiscal
quarter, permit its ratio of Consolidated Debt to Consolidated Tangible Net
Worth to exceed the ratios set forth below opposite the applicable date:
<TABLE>
<CAPTION>
Date Ratio not to exceed
<S> <C>
May 31, 1996 9.0 to 1.0
August 31, 1996 8.0 to 1.0
November 30, 1996 7.0 to 1.0
February 28, 1997 6.0 to 1.0
May 31, 1997 5.0 to 1.0
August 31, 1997 4.5 to 1.0
November 30, 1997 4.1 to 1.0
February 28, 1998 3.8 to 1.0
May 31, 1998 3.6 to 1.0
August 31, 1998 3.3 to 1.0
November 30, 1998 3.1 to 1.0
February 28, 1999 2.9 to 1.0
May 31, 1999 2.7 to 1.0
August 31, 1999 2.5 to 1.0
November 30, 1999 2.3 to 1.0
February 29, 2000 2.1 to 1.0
May 31, 2000 1.9 to 1.0
August 31, 2000 1.7 to 1.0
November 30, 2000 1.5 to 1.0
</TABLE>
8.6 EBITDA. MSC will not, at the end of each fiscal quarter,
permit EBITDA to be less than the amount set forth below opposite the
applicable date:
<TABLE>
<CAPTION>
Date Amount
<S> <C>
May 31, 1996 $ 800,000
August 31, 1996 $ 900,000
November 30, 1996 $1,000,000
February 28, 1997 $1,000,000
May 31, 1997 $1,000,000
August 31, 1997 $1,250,000
November 30, 1997 $1,250,000
</TABLE>
37
<PAGE> 43
<TABLE>
<S> <C>
February 28, 1998 $1,250,000
May 31, 1998 $1,250,000
August 31, 1998 $1,500,000
November 30, 1998 $1,500,000
February 28, 1999 $1,500,000
May 31, 1999 $1,500,000
August 31, 1999 $1,750,000
November 30, 1999 $1,750,000
February 29, 2000 $1,750,000
May 31, 2000 $1,750,000
August 31, 2000 $2,000,000
November 30, 2000 $2,000,000
</TABLE>
8.7 EBITDA/Interest Expense Ratio. MSC will not, at the end of
each fiscal quarter permit the ratio of EBITDA to Consolidated Interest Expense
to be less than the percentage set forth below opposite the applicable date:
<TABLE>
<CAPTION>
Date Percentage
<S> <C>
May 31, 1996 140%
August 31, 1996 155%
November 30, 1996 180%
February 28, 1997 185%
May 31, 1997 195%
August 31, 1997 260%
November 30, 1997 270%
February 28, 1998 275%
May 31, 1998 285%
August 31, 1998 350%
November 30, 1998 350%
February 28, 1999 350%
May 31, 1999 350%
August 31, 1999 425%
November 30, 1999 425%
February 29, 2000 425%
May 31, 2000 425%
August 31, 2000 475%
November 30, 2000 475%
</TABLE>
8.8 Liens. Each Company will not, and will not permit any
Subsidiary to, create, assume, incur or permit to exist, directly or
indirectly, any Lien on its properties or assets, whether now owned or
hereafter acquired, except:
(a) Liens existing on property of such Company or any Subsidiary
as of the date of this Agreement that are described in Annex II to this
Agreement;
38
<PAGE> 44
(b) Liens, pledges or deposits in connection with workmen's
compensation, social security, taxes, assessments or other similar charges or
deposits required to be made in the ordinary course of business and not in
connection with borrowing money;
(c) Construction or materialmen's or warehousemen's Liens securing
obligations not overdue, or if overdue, being contested in good faith by
appropriate proceedings;
(d) Pledges or deposits for the purpose of securing a stay or
discharge in the course of any legal proceedings, providing the aggregate
amount of said deposits does not exceed $250,000;
(e) Encumbrances in the nature of zoning restrictions, easements,
rights and restrictions of record on the use of real property, landlord's and
lessor's liens in the ordinary course of business, which do not materially
detract from the value of such property or impair the use thereof; and
(f) Liens in addition to Liens otherwise permitted hereunder,
securing Indebtedness, provided that, after giving effect thereto, such Company
is not in default under Section 8.2.
8.9 Restricted Payments. (a) Each Company will not, directly or
indirectly, and will not permit any Subsidiary to:
(i) Declare or pay any dividends, either in cash or
property, on any class of the capital stock of such Company (except
dividends or stock splits payable solely in common stock of such
Company); or
(ii) Purchase, redeem or retire, directly or indirectly,
any of the capital stock of such Company or any warrants, rights or
options to purchase or acquire any shares of such capital stock; or
(iii) Make any other distribution of assets or property in
respect of the capital stock of such Company; or
(iv) Prepay, purchase or otherwise make any optional
payments with respect to Subordinated Funded Debt; or
(v) Make any investment (whether by way of purchase,
contribution, loan, advance, guarantee, extension of credit or
otherwise) not permitted by Section 8.10;
(the foregoing being hereinafter collectively referred to as "Restricted
Payments") if, after giving effect thereto, the aggregate amount of all
Restricted Payments made during the period from and after the Closing Date, to
and including the date
39
<PAGE> 45
of the making of the Restricted Payment in question, would exceed $54,000. For
purposes of this Section, the amount of any Restricted Payment which is payable
or distributable in property other than cash or shares of capital stock of any
Company shall be deemed to be the greater of the book value or fair market
value (as determined in good faith by the Board of Directors of any Company)
of such property as of the date of the declaration or payment of such
Restricted Payment.
8.10 Investments. Each Company will not, directly or indirectly,
and will not permit any, Subsidiary to, make any investment (whether by way of
purchase, contribution, loan, advance, guarantee, extension of credit or
otherwise), except:
(a) Investments by such Company in Subsidiaries or in Persons
which through such investments become Subsidiaries;
(b) Investments by Subsidiaries in such Company;
(c) Investments by any Operating Company in another Operating Company
or in MSC;
(d) Investments existing on the date hereof and listed in Annex
III hereto;
(e) Investments in direct or indirect obligations of, or
obligations unconditionally guaranteed by, the United States of America or an
agency thereof;
(f) Investments in corporate commercial paper having a maturity of
270 days or less, rated A-1 and P-1 by Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"), respectively;
(g) Investments in certificates of deposit issued by commercial
banks located in the United States, having long term deposits rated A or better
by S&P and Moody's and having capital, surplus and undivided profits of at
least $100,000,000; and
(h) Investments in tax-exempt variable rate demand bonds having
tender periods of not more than 270 days and rated AA and Aa3 or better by S&P
and Moody's, respectively;
provided, however, that any Investment permitted above by any Company in
another Company or a Subsidiary shall be documented pursuant to promissory
notes payable to the Company making such Investment, and each such promissory
note shall be pledged to the Purchasers.
8.11 Change in Business. Each Company and its Subsidiaries will
not, directly or indirectly or through any Subsidiary, enter
40
<PAGE> 46
into any businesses which are substantially different from those presently
conducted by them.
8.12 Merger and Consolidation. Each Company will not, and will not
permit any Subsidiary to, merge or consolidate with any other Person, except
that upon prior written notice to the Purchasers any Subsidiary may merge into
such Company or another Wholly-Owned Subsidiary.
8.13 Sale of Assets. Each Company will not, and will not permit
any Subsidiary to sell, lease, transfer or otherwise dispose of any assets, in
one or a series of transactions, other than sales of Inventory in the ordinary
course of business.
8.14 Disposition of Stock of Subsidiaries. Each Company will not,
and will not permit any Subsidiary to sell or transfer the capital stock of a
Subsidiary.
8.15 Dealings with Affiliates. Each Company will not, and will not
permit any Substo, enter into any transaction (including the furnishing
of goods or services) with an Affiliate except in the ordinary course of
business as presently conducted and on terms and conditions no less favorable
to such Company or such Subsidiary than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate.
8.16 Consolidated Tax Returns. Each Company will not file, or
consent to the filing of, any consolidated Federal income tax return with any
Person other than a Subsidiary or another Company, except to the extent that
such Company is required under the Internal Revenue Code to do otherwise.
Section 9. EVENTS OF DEFAULT AND REMEDIES THEREFOR
9.1 Nature of Events. An "Event of Default" shall exist in case
any one or more of the following occurs and is continuing:
(a) Default in the payment of interest when the same shall have
become due on any of the Notes, or in the making of any required prepayment on
any of the Notes as required or contemplated in Section 3.1;
(b) Default in the payment of the principal of any of the Notes or
the premium thereon, if any, at maturity, upon acceleration of maturity, at any
date fixed in any notice for prepayment, or with respect to the Revolving
Notes, as required by Section 2.3;
(c) Default shall occur (i) in the payment of the principal of or
interest on any other Indebtedness in excess of $250,000, individually or in
the aggregate, as and when the same shall become due and payable, of any
Company or any Subsidiary for
41
<PAGE> 47
borrowed money, (ii) under any mortgage, agreement or other instrument under or
pursuant to which such Indebtedness in excess of $250,000, individually or in
the aggregate, for borrowed money is issued, or (iii) under any Capitalized
Lease of any Company or any Subsidiary, or any operating lease, with aggregate
payments or rentals in excess of $250,000, individually or in the aggregate,
regardless of whether such default would be an Event of Default hereunder, and
such default under (i), (ii) or (iii) above shall continue, unless waived,
beyond the period of grace, if any, allowed with respect thereto;
(d) Default shall occur in the observance or performance of any of
the covenants or conditions contained in Section 7.8, Sections 8.1 through 8.16
and Section 9.7;
(e) Default shall occur under any other covenant or provision of
this Agreement, which is not remedied within 30 days after written notice
thereof to MSC by the holder of any of the Notes, or under any covenant or
provision of any Collateral Document after giving effect to any requirement of
notice or grace period under such Collateral Document;
(f) Any representation or warranty made by any Company herein, or
made by any Company in any written statement or certificate furnished by any
Company in connection with the issuance of the Notes or furnished by any
Company pursuant hereto or in any Collateral Documents, proves incorrect in any
material respect as of the date of the issuance or making thereof;
(g) Any judgment, writ or warrant of attachment or any similar
process in an aggregate amount in excess of $150,000 shall be entered, filed
against or reinstated against any Company or any other Obligor or against any
property or assets of any Company or other Obligor and remain unpaid,
unvacated, unbonded or unstayed (through appeal or otherwise) for a period of
60 days after such Company or Obligor receives notice thereof, provided,
however, that if any such judgment, writ, warrant of attachment or similar
process is in excess of $500,000 or is a judgment, writ, warrant of attachment
or similar process, obtained by any holder of Subordinated Funded Debt or of
any equity interest in any Company, in excess of $50,000, the entry, filing or
reinstatement thereof shall immediately constitute an Event of Default
hereunder;
(h) Any Company shall incur a "Distress Termination" (as defined
in Title IV of ERISA) of any Plan or any trust created thereunder which results
in material liability to the PBGC, the PBGC shall institute proceedings to
terminate any Plan or any trust created thereunder, or a trustee shall be
appointed by a United States District Court pursuant to Section 4042(b) of
ERISA to administer any Plan or any trust created thereunder;
42
<PAGE> 48
(i) Any Company or any Subsidiary shall
(i) generally not pay its debts as they become due or
admit in writing its inability to pay its debts generally as they
become due;
(ii) file a petition in bankruptcy or for reorganization
or for the adoption of an arrangement under the Federal Bankruptcy
Code, or any similar applicable bankruptcy or insolvency law, as now
or in the future amended (herein collectively called "Bankruptcy
Laws"), or an answer or other pleading admitting or failing to deny
the material allegations of such a petition or seeking, consenting to
or acquiescing in relief provided for under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its
property for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of
a receiver, liquidator, custodian or trustee of it or for all or a
substantial part of its property;
(v) be finally adjudicated a bankrupt or insolvent;
(vi) be subject to the entry of a court order, which shall not
be vacated, set aside or stayed within 60 days from the date of entry,
appointing a receiver, liquidator, custodian or trustee of it or for
all or a substantial part of its property, or approving a petition
filed against it for, or effecting an arrangement in, bankruptcy or
for a reorganization pursuant to the Bankruptcy Laws or for any other
judicial modification or alteration of the rights of creditors; or
(vii) be subject to the assumption of custody or sequestration
by a court of competent jurisdiction of all or a substantial part of
its property, which custody or sequestration shall not be suspended or
terminated within 60 days from its inception;
(j) Any Collateral Document shall for any reason fail to create a
valid priority security interest in any Collateral purported to be covered
thereby, except as permitted by the terms of any Collateral Document, or any
Collateral Document shall fail to remain in full force or effect, or any action
shall be taken to discontinue or to assert the invalidity or unenforceability
of any Collateral Document, or any Obligor shall default in its obligations
under any Collateral Document;
(k) Any Company or any other Obligor shall be the subject of any
proceeding or investigation pertaining to (i) the Release
43
<PAGE> 49
by any Company or other Obligor of any Contaminant into the environment,
(ii) the liability of any Company or any other Obligor arising from the Release
by any other Person of any Contaminant into the environment, or (iii) any
violation of any Environmental, Health or Safety Requirements of Law by any
Company or any other Obligor which, in any case, has subjected or could
reasonably be expected to subject any Company or any other Obligor to liability
in excess of $100,000; or
(l) A default shall occur under that certain Settlement Agreement
among Construction Technology, Inc., MSC, TLC, and Mechanical Data, Inc. dated
as of January 27, 1992.
9.2 Remedies on Default. When (i) any Event of Default described
in Section 9.1 hereof, except paragraphs (a), (b) and (c) thereof, has happened
and is continuing, the holder or holders of at least 25% in principal amount of
the Notes then outstanding may, and when (ii) any Event of Default described in
paragraphs (a), (b) and (c) of Section 9.1 has happened and is continuing, any
holder may (in addition to any other right, power or remedy permitted to such
holder or holders by law) declare (i) the entire principal, together with the
premium set forth below, and all interest accrued on all the Notes then
outstanding to be, and such Notes shall thereupon become, forthwith with
respect to the Term Notes, due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
and (ii) any obligation to make Revolving Loans to be terminated. If an Event
of Default described in clause (ii), (v) or (vi) of Section 9.1 (i) shall exist
or occur with respect to any Company, then the entire principal, together with
the premium set forth below, and all interest accrued on all the Notes of such
Company then outstanding shall automatically without any presentment demand,
protest or notice of any kind, all of which are hereby expressly waived, be
immediately due and payable, and any commitment to make Revolving Loans to such
Company shall automatically terminate. The Companies will forthwith pay to the
holder or holders of all the Notes then outstanding the entire principal of and
interest accrued on such Notes, plus a premium with respect to the Term Notes
in the event that the Reinvestment Yield shall, on the Determination Date, be
less than the interest rate payable on or in respect of the Term Notes, and a
premium with respect to the Revolving Notes, as set forth below. Such premium
shall equal (i) the sum of the amounts representing the present value of the
amount of each remaining payment of principal and interest which would be
required by Section 3.1 absent such accelerated payment, determined by
discounting (on the basis of a 360-day year composed of twelve 30-day months)
each such amount by utilizing an interest factor equal to the Reinvestment
Yield (ii) less the principal amount to be paid, plus (ii) the termination
44
<PAGE> 50
fee described in Section 2.4 calculated as if the Maximum Revolving Facility
were terminated on the date of acceleration.
The Companies agree to pay to each holder of the Notes then
outstanding all reasonable costs and expenses incurred by such holder in the
collection or enforcement of any such Notes, including reasonable compensation
to such holder's attorneys for all services rendered in connection therewith to
the extent permitted by law.
9.3 Annulment of Acceleration of Notes. The provisions of the
foregoing Section 9.2 are subject to the condition that if the principal of and
accrued interest on the Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default or any obligation to make
Revolving Loans terminated, the holder or holders of 66 2/3% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with MSC, rescind and annul such declaration and the consequences thereof,
provided that (i) at the time such declaration is annulled and rescinded no
judgment or decree has been entered for the payment of any monies due pursuant
to the Notes or this Agreement, (ii) all arrears of interest upon all the Notes
and all other sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and payable
solely by reason of such declaration under Section 9.2) shall have been duly
paid and (iii) each and every other Event of Default shall have been cured or
waived; and, provided further, that no such rescission and annulment shall
extend to or affect any subsequent Default or Event of Default or impair any
right consequent thereto.
9.4 Other Remedies. If any Event of Default shall be continuing, any
holder of Notes may enforce its rights by suit in equity, by action at law, or
by any other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or in aid of the exercise of any power granted in
this Agreement, and may enforce the payment of any Note held by such holder and
any of its other legal or equitable rights.
9.5 Conduct No Waiver; Collection Expenses. No course of dealing on
the part of any holder of Notes, nor any delay or failure in the part of any
holder of Notes to exercise any of its rights, shall operate as a waiver of
such rights or otherwise prejudice such holder's rights, powers and remedies.
If any Company fails to pay, when due, the principal of, or the interest on,
any Note issued by it, or fails to comply with any other provision of this
Agreement, such Company will pay to each holder, to the extent permitted by
law, on demand, such further amounts as shall be sufficient to cover the cost
and expenses, including but not limited to reasonable attorneys' fees, incurred
45
<PAGE> 51
by such holders of the Notes in collecting any sums due on the Notes or in
otherwise enforcing any of their rights.
9.6 Remedies Cumulative. No right or remedy conferred upon or
reserved to any holder of Notes under this Agreement is intended to be
exclusive of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given hereunder or
now or hereafter existing under any applicable law. Every right and remedy
given by this Agreement or by applicable law to any holder of Notes may be
exercised from time to time and as often as may be deemed expedient by such
holder, as the case may be.
9.7 Notice of Default. With respect to Events of Default or claimed
defaults, the Companies will give the following notices:
(a) The Companies promptly, but in any event within 5 days, will
furnish to each holder of a Note notice in writing by registered mail, return
receipt requested, of the occurrence of an Event of Default or a Default. Such
notice shall specify the nature of such default, the period of existence
thereof and what action the Companies have taken or are taking or propose to
take with respect thereto.
(b) If the holder of any Note or of any other evidence of
indebtedness of any Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default, MSC will forthwith give written
notice thereof to each holder of the then outstanding Notes, describing the
notice or action and the nature of the claimed default.
Section 10. AMENDMENTS, WAIVERS AND CONSENTS
10.1 Matters Subject to Modification. Any term, covenant, agreement
or condition of this Agreement may, with the consent of the Companies, be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the
Companies shall have obtained the consent in writing of the holder or holders
of at least 66 2/3% in aggregate principal amount of outstanding Notes;
provided, however, that without the written consent of the holder or holders of
all of the Notes then outstanding, no such waiver, modification, alteration or
amendment shall be effective which will (i) change the time or amount of
payment (including any required prepayment) of the principal of or the interest
on any Note, (ii) reduce the principal amount thereof or the premium, if any,
or reduce the rate of interest thereon, (iii) change any provision of any
instrument affecting the preferences between holders of the Notes or between
holders of the Notes and other creditors of the Companies, or (iv) change any
of the provisions of Section 9.1, Section 9.2, Section 9.3 or this Section 10.
46
<PAGE> 52
For the purpose of determining whether holders of the requisite
principal amount of Notes have made or concurred in any waiver, consent,
approval, notice or other communication under this Agreement, Notes held in the
name of, or owned beneficially by, any Company, any Subsidiary or any Affiliate
of any thereof, shall not be deemed outstanding.
10.2 Solicitation of Holders of Notes. No Company will solicit,
request or negotiate for or with respect to any proposed waiver or amendment of
any of the provisions of this Agreement or the Notes unless each holder of the
Notes (irrespective of the amount of Notes then owned by it) shall concurrently
be informed thereof by such Company and shall be afforded the opportunity of
considering the same and shall be supplied by such Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 10 shall be delivered by such Company to each
holder of outstanding Notes forthwith following the date on which the same
shall have been executed and delivered by the holder or holders of the
requisite percentage of outstanding Notes. No Company will directly or
indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of the
Notes as consideration for or as an inducement to the entering into by any
holder of the Notes of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to each holder of the then outstanding Notes.
10.3 Binding Effect. Any such amendment or waiver shall apply
equally to all the holders of the Notes and shall be binding upon them, upon
each future holder of any Note and upon the Companies whether or not such Note
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right related thereto.
Section 11. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
11.1 Form of Notes. The Notes initially delivered under this
Agreement will be in the form of two fully registered Notes, in the forms
attached hereto as Exhibits A and B. The Notes are issuable only in fully
registered form and in denominations of at least $100,000 (or the remaining
outstanding balance thereof, if less than $100,000).
11.2 Note Register. Each Company shall cause to be kept at its
principal office a register (the "Note Register") for the registration and
transfer of the Notes issued by it. The names and addresses of the holders of
Notes, the transfer thereof and
47
<PAGE> 53
the names and addresses of the transferees of the Notes shall be registered in
the Note Register. The Companies may deem and treat the person in whose name a
Note is so registered as the holder and owner thereof for all purposes and
shall not be affected by any notice to the contrary, until due presentment of
such Note for registration of transfer as provided in this Section 11.
11.3 Issuance of New Notes upon Exchange or Transfer. Upon surrender
for exchange or registration of transfer of any Note at the office of any
Company designated for notices in accordance with Section 12.2, such Company
shall execute and deliver, at its expense, one or more new Notes of any
authorized denominations requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Notes so surrendered (or,
if no interest has been paid, the date of such surrendered Note), but in the
same aggregate unpaid principal amount as such surrendered Note, and registered
in the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. Such
Company may condition its issuance of any new Note in connection with a
transfer by any Person on compliance with Section 4.2, by Institutional Holders
on compliance with Section 3.5 and on the payment to it of a sum sufficient to
cover any stamp tax or other governmental charge imposed in respect of such
transfer.
11.4 Replacement of Notes. Upon receipt of evidence satisfactory to
any Company of the loss, theft, mutilation or destruction of any Note issued by
it, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory
to such Company or in the event of such mutilation upon surrender and
cancellation of the Note, such Company, without charge to the holder thereof,
will make and deliver a new Note, of like tenor in lieu of such lost, stolen,
destroyed or mutilated Note. If any such lost, stolen or destroyed Note is
owned by a Purchaser or any other Institutional Holder, then the affidavit of
an authorized officer of such owner setting forth the fact of loss, theft or
destruction and of its ownership of the Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note, other than a written agreement of such owner (in form reasonably
satisfactory to such Company) to indemnify such Company.
48
<PAGE> 54
Section 12. MISCELLANEOUS
12.1 Expenses. Whether or not the transactions contemplated herein
shall be consummated, the Companies jointly and severally agree to pay directly
all reasonable expenses in connection with the preparation, execution and
delivery of this Agreement, the Notes and the Collateral Documents, and the
transactions contemplated by such documents, including, but not limited to,
out-of-pocket expenses, filing fees of Standard & Poor's Corporation in
connection with obtaining a private placement number, reasonable charges and
disbursements of special counsel, photocopying and printing costs and charges
for shipping the Notes, adequately insured, to the Purchasers at their
respective home offices or at such other addresses as the Purchasers may
designate, and all reasonable expenses (including the reasonable fees and
expenses of counsel) relating to (i) any amendments, waivers or consents in
connection with this Agreement, the Notes or the Collateral Documents,
including, but not limited to, any such amendments, waivers or consents
resulting from any workout, renegotiation or restructuring relating to the
performance by the Companies or any other Obligors of their obligations under
this Agreement, the Notes or the Collateral Documents, or (ii) the
administration of this Agreement, the Notes, the Collateral Documents or the
Collateral. The Companies also jointly and severally agree that they will pay
and save the Purchasers harmless against any and all liability with respect to
stamp and other documentary taxes, if any, which may be payable, or which may
be determined to be payable in connection with the execution and delivery of
this Agreement, the Notes (but not in connection with a transfer of any Notes),
whether or not any Notes are then outstanding, or the Collateral Documents.
The obligations of the Companies under this Section 12.1 shall survive the
retirement of the Notes.
12.2 Notices. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and delivered or sent
by registered or certified mail, return receipt requested, or by overnight
courier (i) if to the Purchasers, to the address set forth below each
Purchaser's name in Annex I hereto, or to such other address as the Purchasers
may in writing designate, (ii) if to any other holder of the Notes, to such
address as the holder may designate in writing to MSC, and (iii) if to any
Company, c/o Met-Coil Systems Corporation, 5486 6th Street, S.W., Cedar Rapids,
Iowa 52404, Attention: President, or to such other address as MSC may in
writing designate.
12.3 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by the
Purchasers in connection with the closing of the transactions described herein,
except the
49
<PAGE> 55
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to the Purchasers, may be
reproduced by the Purchasers by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process, and the Purchasers
may destroy any original document so reproduced. The Companies agree and
stipulate that any such reproduction which is legible shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by the Purchasers in the regular course of business) and
that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence; provided that nothing herein
contained shall preclude the Companies from objecting to the admission of any
reproduction on the basis that such reproduction is not accurate, has been
altered, is otherwise incomplete or is otherwise inadmissible.
12.4 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
12.5 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois. No provision
of this Agreement may be waived, changed or modified, or the discharge thereof
acknowledged, orally, except only by an agreement in writing signed by the
party against whom the enforcement of any waiver, change, modification or
discharge is sought.
12.6 Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
12.7 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart or reproduction thereof permitted by Section
12.3.
12.8 Reliance on and Survival of Provisions. All covenants,
representations and warranties made by the Companies herein and in any
certificates delivered pursuant hereto, whether or not in connection with a
closing, (i) shall be deemed to have been relied upon by the Purchasers,
notwithstanding any investigation heretofore or hereafter made by the
Purchasers or on the Purchasers' behalf and (ii) shall survive the delivery of
this Agreement and the Notes.
50
<PAGE> 56
12.9 Indemnification; Limitation of Liability; Release.
(a) The Companies jointly and severally agree to protect,
indemnify and hold harmless the Purchasers and each of their respective
officers, affiliates, directors, employees, attorneys, accountants,
consultants, representatives and agents (collectively called the "Indemnitees")
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for and consultants of such Indemnitees in connection
with any investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitees (whether direct, indirect, or
consequential and whether based on any federal or state laws or other statutory
regulations, including, without limitation, securities, environmental and
commercial laws and regulations, under common law or at equitable cause or on
contract or otherwise) in any manner relating to or arising out of this
Agreement, the Notes or any of the Collateral Documents, or any act, event or
transaction related or attendant thereto, the agreements of the Purchasers
contained herein, the making of Revolving Loans, the management of the
Revolving Loans or the Collateral (including any liability under federal, state
or local environmental laws or regulations and any liability to any Person in
connection with the administration of the Companies' cash or the maintenance of
lockboxes and collection account agreements as contemplated by Sections 5.1(g)
and 7.13) or the use or intended use of the proceeds of the Revolving Loans
hereunder (collectively, the "Indemnified Matters"); provided that the
Companies shall not have any obligation to any Indemnitee hereunder with
respect to Indemnified Matters caused by or resulting from the willful
misconduct or gross negligence of such Indemnitee. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Companies shall contribute the maximum portion which they are
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
(b) To the extent permitted by applicable law, no claim may
be made by the Companies or any other Person against the Purchasers or any of
their respective affiliates, directors, officers, employees, agents, attorneys,
accountants, representatives or consultants for any special, indirect,
consequential or punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out
51
<PAGE> 57
of or related to the transactions contemplated by this Agreement,
the Notes or any of the Collateral Documents or any act, omission or event
occurring in connection therewith; and each of the Companies hereby waives,
releases and agrees not to sue upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
Neither the Purchasers nor any of their respective affiliates, directors,
officers, employees, agents, attorneys or consultants shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
any of this Agreement, the Notes or the Collateral Documents, except for its or
their own gross negligence or willful misconduct.
(c) In consideration for the Purchasers agreeing to enter into this
Agreement, each of the Companies hereby unconditionally and absolutely releases
and forever discharges each of the Indemnitees from any and all claims that any
of the Companies may have against any of the Indemnitees (including, without
limitation, cross-claims, counterclaims, rights of set-off and recoupment),
actions, costs, expenses, suits, debts, losses, agreements, damages, attorneys'
fees, compensations and demands whatsoever, in law or in equity, and whether
known or unknown, which arise from any action or inaction of any Indemnitee
prior to the Closing Date.
12.10 Service of Process. EACH OF THE COMPANIES WAIVES PERSONAL
SERVICE OF ANY PROCESS UPON IT AND, CONSENTS THAT ALL SERVICE OF PROCESS SHALL
BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO SUCH COMPANY,
C/O MSC AT THE ADDRESS INDICATED IN SECTION 12.2 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS AFTER SAME SHALL HAVE BEEN POSTED
AS AFORESAID.
12.11 Waiver of Jury Trial. EACH OF THE COMPANIES AND THE PURCHASERS
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN EITHER PURCHASER AND ANY
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, THE
NOTES OR ANY COLLATERAL DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO. EACH OF THE COMPANIES AND PURCHASERS HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
52
<PAGE> 58
12.12 Integration and Severability. This Agreement embodies the
entire agreement and understanding between the Purchasers and the Companies,
and supersedes all prior agreements and understandings relating to the subject
matter hereof. In case any one or more of the provisions contained in this
Agreement or in any Note, or in any Collateral Document, or application
thereof, shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
53
<PAGE> 59
IN WITNESS WHEREOF, the Companies and the Purchasers have caused this
Agreement to be executed and delivered by their respective officer or officers
thereunto duly authorized.
MET-COIL SYSTEMS CORPORATION
By: Joseph H. Ceryanec/s/
------------------------------------------
Title: Vice President
---------------------------------------
IOWA PRECISION INDUSTRIES, INC.
By: Joseph H. Ceryanec/s/
------------------------------------------
Title: Vice President
---------------------------------------
THE LOCKFORMER COMPANY
By: Joseph H. Ceryanec/s/
------------------------------------------
Title: Vice President
---------------------------------------
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: Shabnam B. Miglani/s/
------------------------------------------
Title: Counsel
---------------------------------------
By: Nora Everett/s/
------------------------------------------
Title: Counsel
---------------------------------------
MODERN WOODMEN OF AMERICA
By: Gary E. Stoefen/s/
------------------------------------------
Title: Director, Treasurer & Investment Mgr.
---------------------------------------
<PAGE> 60
SCHEDULE I
Principal Amount of Notes
Name and Address of Purchaser Principal Amount of Notes
Principal Mutual Life Insurance $5,426,667
Company Amended and
Restated 711 High Street Term Notes
of Des Moines, Iowa 50309 Met-Coil Systems
Attention: Investment Department Corporation
Securities Division
Address for all communications is
as above, including notices of
payment and written confirmations
of wire or inter-bank transfers.
All payments are to be by bank
wire transfer of immediately
available funds to:
Norwest Bank Des Moines, $2,566,667
N.A. Amended and
Restated 7th & Walnut
Revolving Notes of Des Moines, Iowa 50304
Iowa Precision
Industries, Inc. and For deposit in the
account of The Lockformer Principal Mutual Life
Company
Insurance Company
Account No. 014752
Each wire transfer shall identify
such payment as "Met-Coil Systems
Corporation, 11.5% Note due
December 31, 2000, Bond No.
1-B-22938."
55
<PAGE> 61
SCHEDULE I
Principal Amount of Notes to be Purchased
(Continued)
Name and Address of Purchaser Principal Amount of Notes
Modern Woodmen of America $1,973,333
1701 First Avenue Amended and Restated
Rock Island, Illinois 61201 Term Notes of
Attention: Investment Department Met-Coil Systems
Corporation (Address for all
communications is as above, except notices of payment and written
confirmations of wire or inter-bank transfers shall be at the address
set forth below. All payments are to be by bank wire transfer of
immediately available funds to:
Harris Trust and Savings Bank $933,333
111 West Monroe Street Amended and Restated
Chicago, Illinois 60690 Revolving Notes of
Iowa Precision For deposit in the
account of Industries, Inc. Modern Woodmen of
America and The Lockformer Account No.
3479045 Company
Each wire transfer shall identify
such payment as "Met-Coil Systems
Corporation, 11.5% Note due
December 31, 2000."
Notices of payment and written
confirmations of wire or inter-bank
transfers shall be sent to:
Modern Woodmen of America
1701 First Avenue
Rock Island, Illinois 61201
Attention: General Accounting
Department]
Schedule 6.1
Collateral Documents
1. GUARANTY executed by MSC in favor of the Purchasers.
2. GUARANTY executed by TLC in favor of the Purchasers.
56
<PAGE> 62
3. GUARANTY executed by IPI in favor of the Purchasers.
4. GUARANTY executed by FEN-PRO INC. in favor of the
Purchasers.
5. GUARANTY executed by MET-COIL-TEXAS in favor of the Purchasers.
6. GUARANTY executed by MET-COIL GREAT LAKES COMPANY in
favor of the Purchasers.
7. AMENDED AND RESTATED SECURITY AGREEMENT executed by
MSC in favor of the Purchasers.
8. AMENDED AND RESTATED SECURITY AGREEMENT executed by
TLC in favor of the Purchasers.
9. AMENDED AND RESTATED SECURITY AGREEMENT executed by
IPI in favor of the Purchasers.
10. AMENDED AND RESTATED SECURITY AGREEMENT executed by
FEN-PRO INC. in favor of the Purchasers.
11. AMENDED AND RESTATED SECURITY AGREEMENT executed by
MET-COIL-TEXAS in favor of the Purchasers.
12. AMENDED AND RESTATED SECURITY AGREEMENT executed by
MET-COIL GREAT LAKES COMPANY in favor of the Purchasers.
13. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by MSC in favor of the Purchasers.
14. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by TLC in favor of the Purchasers.
15. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by IPI in favor of the Purchasers.
16. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by FEN-PRO INC. in favor of the Purchasers.
17. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by MET-COIL-TEXAS in favor of the Purchasers.
18. AMENDED AND RESTATED SECURITY AGREEMENT RE: PATENTS
AND TRADEMARKS executed by MET-COIL GREAT LAKES COMPANY in favor of the
Purchasers.
19. AMENDED AND RESTATED PLEDGE AGREEMENT executed by MSC
in favor of the Purchasers, evidencing the pledge of all of the stock of
57
<PAGE> 63
MSC's subsidiaries, together with stock certificates and appropriate stock
powers undated and endorsed in blank.
20. AGREEMENT AS TO LOCKBOX SERVICES executed by each of
MSC, IPI, TLC, Fen-Pro Inc., Met-Coil- Texas, Met-Coil Great Lakes Company, the
Purchasers and Norwest Bank.
21. LOSS PAYABLE ENDORSEMENTS relating to the insurance
policies Covering the collateral, together with copies of such policies.
22. Assignment of Mortgage and Security Agreement with
Assignment of Rents executed by Harris Trust and Savings Bank in favor of the
Purchasers with respect to Linn County, Iowa property.
23. Assignment of Mortgage and Security Agreement with
Assignment of Rents executed by Harris Trust and Savings Bank in favor of the
Purchasers with respect to DuPage County, Illinois property.
24. Assignment of Deed of Trust and Security Agreement with
Assignment of Rents executed by Harris Trust and Savings Bank in favor of the
Purchasers with respect to Dallas County, Texas property.
25. Amended and Restated Mortgage and Security Agreement with
Assignment of Rents executed by TLC in favor of the Purchasers.
26. Amended and Restated Mortgage and Security Agreement with
Assignment of Rents executed by IPI in favor of the Purchasers.
27. Amended and Restated Deed of Trust and Security Agreement
with Assignment of Rents executed by MCT in favor of August E. Shause, as
Trustee.
58
<PAGE> 64
ANNEX I
List of Subsidiaries and Jurisdictions
in Which the Company and its Subsidiaries
are Qualified as Foreign Corporations
JURISDICTION JURISDICTIONS
PERCENTAGE OF
IN WHICH
NAME OWNERSHIP INCORPORATION
QUALIFIED
Met-Coil Systems Corporation
Delaware Delaware
Iowa
Subsidiaries
1. Iowa Precision 100%
Delaware Delaware Industries, Inc.
Iowa
2. The Lockformer Company 100%
Illinois Illinois
3. Met-Coil Great Lakes 100%
Michigan Michigan Company f/k/a Mark One Corporation
4. FenPro, Inc. 100%
Illinois Illinois f/k/a Roper Whitney Company
5. Met-Coil-Texas, Inc. 100%
Texas Texas f/k/a Rowe Machinery and Automation, Inc.
6. Met-Coil Systems 100% U.S.
Virgin Islands U.S. Virgin Islands International, Inc.
7. Met-Coil Automation, 100%
Delaware Texas Inc.
59
<PAGE> 65
ANNEX II
Description of Liens
MET-COIL SYSTEMS CORPORATION:
SUBSIDIARIES:
Iowa Precision Industries, Inc.
Real estate contract due to A.E. Welty Estate secured by land
and buildings at Iowa Precision.
The Lockformer Company:
Lease of Minolta copy machines to Copelco Credit Corp.
Lease of engineering microfilm machine to Ole-Bruning
Lease of Hurco Milling Machine to Mid-States Financial Corp.
Security Interest to Construction Technology Inc. of patents,
trademarks and all assets
Second Mortgage on real property to Construction Technology Inc.
Met-Coil Great Lakes Company f/k/a Mark One Corporation:
Economic Development Limited Obligation Revenue Bond secured
by land and buildings at Mark One.
60
<PAGE> 66
ANNEX III
Investments
Carrying
Value as of
% of 8/31/89 Entity
Ownership In Thousands
Met-Coil Ltd. 50%
$1,166 Ayase, Japan
EXHIBT4.DOC April 29, 1996 (12:58pm)
61
<PAGE> 1
EXHIBIT 99
| Phone 319/363-6566
[MET-COIL LOGO] 5486 Sixth Street S.W. | Fax 319/362-0225
Cedar Rapids, Iowa 52404 U.S.A. | Compuserve 75402,3277
LETTER AGREEMENT
April 17, 1996
Mr. Richard W. Levine
President
Construction Technology, Inc.
570 Taxter Road
Elmsford, NY 10523
Dear Mr. Levine:
Met-Coil Systems Corporation ("Met-Coil") and The Lockformer Company
("Lockformer") requests that Construction Technology, Inc. ("CTI"), waive or
defer certain provisions of the Settlement Agreement dated as of January 27,
1992 among CTI, Met-Coil, Lockformer and Mechanical Data, Inc. ("Settlement
Agreement"). Met-Coil, Lockformer and CTI agree as follows:
1. CTI accepts on this date payment of $362,500 representing one-half
of the payment of the installment payment due from Lockformer and Mechanical
Data on January 27, 1996 in the amount of $725,000.
2. Met-Coil, Lockformer, Mechanical Data and CTI agree that the full
$725,000 was due on January 27, 1996. Lockformer has already paid interest on
the $725,000 at the rate of 11% per annum through March 27, 1996. Interest
shall accrue from March 27, 1996 on the $725,000 at the rate of 11.5% per annum
until all of it is paid in full.
3. Met-Coil and Lockformer each jointly and severally agree to make
payments to CTI in the amount of $50,000 per month commencing on May 18, 1996
and continuing
<PAGE> 2
Page 2
April 17, 1996
thereafter at the rate of $50,000 per month on the same day of the month until
the entire principal balance of the January 27, 1996 payment from Lockformer
and Mechanical Data , plus all accrued interest has been paid in full. Payment
shall be applied first to accrued interest and the balance to principal.
4. Lockformer will pay CTI $312,906 as the royalty payment due March
31, 1996 and CTI accepts the royalty payment. All future royalty payments shall
be paid on schedule under the License Agreement.
5. All of the other payments due under the agreement shall be paid
under the terms of the original Settlement Agreement, as modified.
6. Subject to and conditioned upon receipt of the payments provided
in Paragraph 1-4, CTI agrees that the Settlement Agreement will not be deemed
to be in default for failure of Lockformer, Met-Coil, and Mechanical Data, to
make any of the payments due on January 27, 1996 and the royalty payment due
March 31, 1996.
5. In the event Lockformer and Met-Coil fail to make any of the
payments provided above, the Settlement Agreement shall be in default, and CTI
shall be entitled to the full remedies provided under Paragraph 19 of the
Settlement Agreement.
Please counter-sign one copy of this letter indicating the terms are
acceptable. Upon receipt of your acceptance, we will wire transfer to you
$675,406.
Very truly yours,
Raymond H. Blakeman/s/
Raymond H. Blakeman
on behalf of The Lockformer Company
and Met-Coil Systems Corporation
<PAGE> 3
Page 3
April 17, 1996
AGREED on behalf of
CONSTRUCTION TECHNOLOGY, INC.
Richard W. Levine 4/18/96
______________________________________
Richard W. Levine, President
