<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995.
[_] Transition Report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
for the transition period from___________to____________.
Commission file number 0-14275
-------------------------------
Edac Technologies Corporation
-----------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1515599
- ------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification No.)
organization)
1790 New Britain Avenue, Farmington, Connecticut 06032
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203)-677-2603
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
N/A N/A
- -------------------------------- ----------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0025 par value
- -----------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of The Securities Exchange Act of
1934 during the preceding 12 months (or for such a shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___.
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
1
<PAGE>
As of April 4, 1996, 3,653,540 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the $1 1/8 closing
bid on that date in the over-the-counter market) held by nonaffiliates (excludes
shares reported as beneficially owned by directors and officers - does not
constitute an admission as to affiliate status) was approximately $1,750,600.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Into Which Portions of
DOCUMENT Document are Incorporated
-------- -------------------------
Annual Report to Shareholders for the
fiscal year ended December 31, 1995 Part II
Information Statement relating to
1996 Annual Meeting of Shareholders Part III
2
<PAGE>
PART I
ITEM 1. BUSINESS.
---------
General
- -------
Edac Technologies Corporation ("Edac") was formed in 1985 for the purpose
of acquiring Gros-Ite Industries, Incorporated (which had three operating
divisions: Time Engineering, Gros-Ite and Spectrum). In 1988 and 1989 Edac
sold the assets of its other operations and now operates only the Gros-Ite
division ("Gros-Ite").
Products
- --------
Edac currently offers design and manufacturing services for the aerospace
industry in areas such as special tooling, equipment and gauges, and components
used in the manufacture, assembly and inspection of jet engines. Edac also
offers design and manufacturing services for the medical instruments industry in
such areas as components used in the manufacture of medical instruments and
special tooling. Edac also designs and manufactures specialized machines for a
variety of other applications.
Edac maintains manufacturing facilities with computerized numerically
controlled machining centers, and grinding, welding, and sheet metal
fabrication, painting and assembly capabilities. Items manufactured by Edac
include precision rings, and other components for jet engines, components for
medical instruments, as well as industrial spindles, environmental test chambers
and specialized machinery designed by Edac or others and other assemblies
requiring close tolerances.
Patents and Trademarks
- ----------------------
Edac currently holds no patents or registered trademarks, tradenames or
similiar intellectual property. The Company believes that the nature of its
business presently does not require the development of patentable products or
registered tradenames or trademarks to maintain market growth.
Marketing and Competition
- -------------------------
Edac has numerous competitors both in design and manufacturing. Many of
the independent design firms with which it competes are smaller than Edac and do
not provide the variety of services that Edac provides. Edac also competes with
its customers' in-house design and technical services capabilities. Edac
believes that it is able to compete effectively with independent design firms
and in-house design staffs because of its experience and the timeliness and
competitive pricing of its services.
Many firms also compete with Edac's manufacturing operations. However,
Edac believes that it will be able to compete effectively with these firms on
price, ability to meet customer deadlines and the stringent quality control
standards it employs. Edac also believes that its integration of design and
manufacturing capabilities offers a competitive advantage.
3
<PAGE>
Edac's manufactured products are sold primarily through individual purchase
orders on a quotation or bid basis. Its sales personnel and management maintain
contacts with purchasing sources to keep informed as to manufacturing projects
available for quotation. Edac occasionally enters into annual manufacturing
contracts on specific components.
For its fiscal year ended December 31, 1995, approximately 69% and 10% of
Edac's net sales were derived from sales to United Technologies Corporation and
Zapata Technologies Inc., respectively.
Approximately 70% of Edac's design business is done on a time and material
basis based on hourly rates established annually. Most of Edac's manufacturing
is done on a firm quotation basis. Less than 10% of Edac's net sales are
attributed to government contracts subject to termination or renegotiation at
the option of the U.S. Government. United Technologies Corporation annually
negotiates hourly billing rates for design work and is free to audit costs
actually charged.
Backlog
- -------
Edac's backlog as of December 31, 1995, was approximately $24,677,000
compared to $24,487,000 as of December 31, 1994. Backlog consists of accepted
purchase orders that are cancellable by the customer without penalty, except for
payment of costs incurred, and may involve delivery times that extend over
periods as long as two or three years. Edac presently expects to complete
approximately $15,900,000 of its December 31, 1995 backlog within the next 12
months.
Employees
- ---------
As of March 29, 1996 Edac had approximately 171 employees.
ITEM 2. PROPERTIES.
-----------
<TABLE>
<CAPTION>
Square Owned or Principal
Address Feet Leased Activity
- ------- ------ -------- ---------
<S> <C> <C> <C>
1790 New Britain Ave. 47,000 Owned Manufacturing
Farmington, Ct. 06032 Design engineering
(1) services
1798 New Britain Ave. 20,800 Owned Design and manu-
Farmington, Ct. 06032 (1) facture of spindles
and specialized
machines
1806 New Britain Ave. 19,200 Owned Manufacturing
Farmington, Ct. 60632 (1)
1838 New Britain Ave. 10,000 Leased Design and manu-
Farmington, Ct. 06032 facture of environ-
mental test equip-
ment
</TABLE>
4
<PAGE>
(1) Property subject to mortgage securing certain corporate indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
------------------
None
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS.
-----------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDERS MATTERS.
---------------------
Information in response to this item is incorporated herein by reference to
"Market Information" on page 3 of the Registrant's 1995 Annual Report to
Shareholders.
ITEM 6. SELECTED FINANCIAL DATA.
------------------------
Information in response to this item is incorporated herein by reference to
"Selected Financial Information" on page 3 of the Registrant's 1995 Annual
Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS.
--------------------------
Information in response to this item is incorporated herein by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 4 through 7 of the Registrant's 1995 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
--------------------------------------------
Information in response to this item is incorporated herein by reference to
pages 8 through 20 of the Registrant's 1995 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
------------------------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
Information in response to this item is incorporated herein by reference to
"Election of Directors" in the Registrant's definitive Information Statement for
its 1996 Annual Meeting of Shareholders, which will be filed within 120 days
after the end of the Registrant's fiscal year ended December 31, 1995.
5
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
Information in response to this item is incorporated herein by reference to
"Executive Compensation" in the 1996 Information Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------------------------------------
Information in response to this item is incorporated herein by reference to
"Principal Security Holders and Security Holdings of Management" in the 1996
Information Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Information in response to this item is incorporated herein by reference to
"Certain Transactions" in the 1996 Information Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) Documents filed:
---------------
1. Financial Statements.
The financial statements required to be filed by Item 8 hereof
have been incorporated by reference to the Registrant's 1995
Annual Report to Shareholders and consist of the following:
Report of Independent Public Acountants
Consolidated Statements of Operations--Years ended December 31,
1995, 1994 and 1993.
Consolidated Balance Sheets--December 31, 1995 and 1994.
Consolidated Statements of Cash Flows--Years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Changes in Shareholders'
Equity--Years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
6
<PAGE>
2. Financial statement schedule.
-----------------------------
The following financial statement schedule of Edac is included in
Item 14(d) hereof:
Report of Independent Public Accountants on Schedule
Schedule II: Valuation and qualifying accounts
All other schedules for which provisions are made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
(b) Reports on Form 8-K
-------------------
None.
(c) Exhibits:
--------
See Exhibit Index included as the last part of this Report, which
Index is incorporated herein by this reference.
(d) Financial Statements and Schedules
----------------------------------
Refer to Item 14a above for listing of financial statements and
schedule.
7
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
----------------------------------------------------
To the Shareholders and Board of Directors of
Edac Technologies Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in Edac Technologies Corporation's annual report
to shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated March 1, 1996, except with respect to certain matters as to
which the date was April 10, 1996. Our audit was made for the purpose of forming
an opinion on those statements taken as a whole. The schedule presented on page
9 of this Form 10-K is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
March 1, 1996
<PAGE>
----------------------------------------------------
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
EDAC TECHNOLOGIES CORPORATION AND SUBSIDIARIES
----------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------
ADDITIONS
DESCRIPTION Balance at Beginning Charged to Costs Charged to Other Deductions Balance at End
of Year and Expenses Accounts-Describe Describe of Year
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Reserves and allowances deducted
from asset accounts:
Allowance for
doubtful accounts 40,000 0 0 0 40,000
YEAR ENDED DECEMBER 31, 1994:
Reserves and allowances deducted
from asset accounts:
Allowance for (1)
doubtful accounts 40,000 5,050 0 5,050 40,000
YEAR ENDED DECEMBER 31, 1993:
Reserves and allowances deducted
from asset accounts:
Allowance for
doubtful accounts 40,000 0 0 0 40,000
</TABLE>
(1) Represents write-off of specific accounts receivable.
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EDAC TECHNOLOGIES CORPORATION
BY /s/ Robert T. Whitty .
-------------------------------
Robert T. Whitty,
Chief Executive Officer
BY /s/ Glenn L. Purple .
-------------------------------
Glenn L. Purple
Vice President-Finance
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/John J. DiFrancesco . Chairman of the Board April 12, 1996
- ------------------------
John J. DiFrancesco
/s/Robert T. Whitty . Chief Executive Officer April 12, 1996
- ----------------------
Robert T. Whitty and Director
/s/Francis Moskey . President, Chief April 12, 1996
- -----------------------
Francis Moskey Operating Officer
and Director
/s/Gerald C. Smith . Executive Vice April 12, 1996
- -----------------------
Gerald C. Smith President and
Director
</TABLE>
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
- ------ -----------
<S> <C>
3.1 Edac's Amended and Restated (1)
Articles of incorporation
3.2 Edac's By-Laws
10.1 Consulting Agreement between (1)
Gros-Ite and William Giannone
10.2 Gros-Ite division Pension Plan (1)
10.3 Gros-Ite division Self-Insured (1)
Medical Reimbursement Plan
10.4 Edac Technologies Corporation (2)
Employee Stock Ownership Trust,
effective May 1, 1989
10.5 Amended Employment Agreement dated (2)
May 12, 1989 between Edac and
Robert P. Luzzi
10.6 $700,000 Limited Recourse Term (2)
Promissory Note dated May 12, 1989
between the Plan and CNB
10.7 Edac Technologies Corporation (3)
1991 Stock Option Plan
10.8 $4,000,000 Term Promissory Note (4)
dated March 22, 1993 between
Edac and Shawmut
10.9 Employment Agreement dated (4)
January 1,1994 between Edac and
Robert Whitty
10.10 Stock Option Agreement dated (4)
January 1,1994 between Edac and
Robert Whitty
10.11 Amendment dated December 19, 1994 (5)
to Employment Agreement dated
October 1, 1990 between Edac and
Robert P. Luzzi
10.12 Construction to Permanent Loan
Promissory Note
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
10.13 Open-End Construction to Permanent
Mortgage Deed
10.14 Sixth Amendment to Revolving Loan,
Term Loan, Equipment Loan and
Security Agreement
10.15 Modification of Construction to
Permanent Loan Promissory Note
and Open-End Construction to
Permanent Mortgage Deed
10.16 Seventh Amendment to Revolving Loan,
Term Loan, Equipment Loan and
Security Agreement and
Reaffirmation of Guarantees
10.17 Eighth Amendment to Revolving Loan,
Term Loan, Equipment Loan and
Security Agreement and
Reaffirmation of Guarantees,
Modification of Notes and
Reaffirmation of Guarantees
10.18 Seventh Modification Agreement to
Open-End Mortgage Deed
10.19 Second Modification of Construction
to Permanent Loan Promissory Note
and Open-End Construction to
Permanent Mortgage Deed
11.1 Statement regarding computation of
earnings per share
13.1 The Registrant's 1995 Annual Report
to Shareholders
</TABLE>
(1) Exhibit incorporated by reference to the Company's registration statement
on Form S-1 dated August 6, 1985, commission File No. 2-99491, as amended.
(2) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1989.
(3) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1991.
(4) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1993.
(5) Exhibit incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
12
<PAGE>
BY-LAWS
OF
EDAC TECHNOLOGIES CORPORATION
As Amended
April 10, 1996
<PAGE>
REFERENCE TABLE
BY-LAWS OF
EDAC TECHNOLOGIES CORPORATION
Section Subject Matter Page
- ------- -------------- ----
I OFFICES
-------
1.01 Principal and Business Offices I-1
1.02 Registered Office I-1
II SHAREHOLDERS
------------
2.01 Annual Meeting II-1
2.02 Special Meeting II-1
2.03 Place of Meeting II-1
2.04 Notice of Meeting II-1
2.05 Closing of Transfer Books or Fixing of Record Date II-2
2.06 Voting Lists II-2
2.07 Quorum II-3
2.08 Conduct of Meetings II-3
2.09 Proxies II-3
2.10 Voting of Shares II-3
2.11 Voting of Shares by Certain Holders II-4
(a) Other Corporations II-4
(b) Legal Representatives and Fiduciaries II-4
(c) Pledges II-4
(d) Treasury Stock and Subsidiaries II-4
(e) Minors II-4
(f) Incompetents and Spendthrifts II-5
(g) Joint Tenants II-5
2.12 Waiver of Notice by Shareholders II-5
2.13 Unanimous Consent Without Meeting II-5
<PAGE>
Section Subject Matter Page
- ------- -------------- ----
III BOARD OF DIRECTORS
------------------
3.01 General Powers and Number III-1
3.02 Tenure and Qualifications III-1
3.03 Regular Meetings III-1
3.04 Special Meetings III-1
3.05 Notice; Waiver III-1
3.06 Quorum III-2
3.07 Manner of Acting III-2
3.08 Conduct of Meetings III-2
3.09 Vacancies III-2
3.10 Compensation III-3
3.11 Presumption III-3
3.12 Committees III-3
3.13 Unanimous Consent Without Meeting III-4
IV OFFICES
-------
4.01 Number IV-1
4.02 Election and Term of Office IV-1
4.03 Removal IV-1
4.04 Vacancies IV-1
4.05 Chairman of the Board IV-1
4.06 Chief Executive Officer IV-2
4.07 President IV-3
4.08 The Executive Vice President IV-4
4.09 The Vice Presidents IV-4
4.10 The Secretary IV-4
4.11 The Treasurer IV-5
4.12 Assistant Secretaries and Assistant Treasurers IV-5
4.13 Other Assistants and Acting Officers IV-5
4.14 Salaries IV-6
V CONTRACTS BETWEEN CORPORATION AND
---------------------------------
RELATED PERSONS V-1
---------------
ii
<PAGE>
Section Subject Matter Page
- ------- -------------- ----
VI CONTRACTS, LOANS, CHECKS AD DEPOSITS;
------------------------------------
SPECIAL CORPORATE ACTS
----------------------
6.01 Contracts VI-1
6.02 Loans VI-1
6.03 Checks, Drafts, etc. VI-1
6.04 Deposits VI-1
6.05 Voting of Securities Owned by this Corporation VI-1
VII CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------
7.01 Certificates for Share VII-1
7.02 Facsimile Signatures and Seal VII-1
7.03 Signature by Former Officers VII-1
7.04 Transfer of Shares VII-1
7.05 Lost, Destroyed or Stolen Certificates VII-2
7.06 Consideration for Shares VII-2
7.07 Restrictions on Transfer VII-2
7.08 Stock Regulations VII-2
VIII INDEMNIFICATION
---------------
8.01 Actions Other Than by Corporation VIII-1
8.02 Actions by or in the Right of Corporation VIII-1
8.03 Successful Defense of Actions VIII-2
8.04 Procedure for Indemnification VIII-2
8.05 Advance Payment of Expenses VIII-2
8.06 Other Rights VIII-3
8.07 Severability of Provisions VIII-3
8.08 Purchase of Insurance VIII-3
IX SEAL IX-1
----
X AMENDMENTS
----------
10.01 By Shareholders X-1
10.02 By Directors X-1
10.03 Implied Amendments X-1
iii
<PAGE>
BY-LAWS
OF
EDAC TECHNOLOGIES CORPORATION
ARTICLE I. OFFICES
SECTION 1.01. Principal and Business Offices. The Corporation may
------------------------------
have such principal and other business offices, either within or without the
State of Wisconsin, as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
SECTION 1.02. Registered Office. The registered office of the
-----------------
Corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin, and the address of the registered office may
be changed from time to time by the Board of Directors. The business office of
the registered agent of the Corporation shall be identical to such registered
office.
RESOLVED, that Section 2.01 of the Company's By-Laws is hereby amended to
read in its entirety as follows:
Section 2.01 Annual Meeting. The annual meeting of the shareholders
--------------
shall be held on the first Monday of the month of May or at such other date
as may be authorized by the Board of Directors and set forth in the Notice
of meeting, for the purpose of electing Directors and for the transaction
of such other business as may come before the meeting. If the day fixed
for the annual meeting shall be a legal holiday of the State of Wisconsin,
such meeting shall be held on the next succeeding business day. If the
election of Directors shall not be held on the day designated herein for
any annual meeting of the shareholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as conveniently may be; and
I-1
<PAGE>
FURTHER RESOLVED, that the Secretary of the Company is hereby directed
to insert such amendment in the appropriate place in the Company's By-Laws.
The foregoing motion was adopted by a unanimous vote of the Directors.
I-2
<PAGE>
ARTICLE II. SHAREHOLDERS
SECTION 2.01. Annual Meeting. The annual meeting of the shareholders
--------------
shall be held on the first Monday in the month of May in the year beginning with
the year 1986, or at such other date within 30 days thereof as may be authorized
by the Board of Directors and set forth in the notice of meeting, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
SECTION 2.02. Special Meeting. Special meetings of the shareholders,
---------------
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the Chairman of the Board, President or the Board of Directors, and
shall be called by the President at the written request (a) of the holders of
not less than one-third of all shares of the Corporation entitled to vote at the
meeting, or (b) of one-half of the directors then in office.
SECTION 2.03. Place of Meeting. The Board of Directors may designate
----------------
any place, either within or without the State of Wisconsin, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of
Wisconsin, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal business office of the Corporation in the State of Wisconsin or
such other suitable place in the county of such principal office as may be
designated by the person calling such meeting, but any meeting may be adjourned
to reconvene at any place designated by vote of a majority of the shares
represented thereat.
SECTION 2.04. Notice of Meeting. Written notice stating the place,
-----------------
day and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 50 days before the date of the meeting, either personally or by
mail, by or at the direction of the President, or the Secretary, or other
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the
II-1
<PAGE>
United States mail, addressed to the shareholder at his address as it appears on
the stock record books of the Corporation, with postage thereon prepaid.
SECTION 2.05. Closing of Transfer Books or Fixing of Record Date.
--------------------------------------------------
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, 50 days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least 10 days
immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than 50 days and, in case of a meeting of shareholders, not less than 10 days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. If the stock transfer books are not closed and
no record date is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the close of business on the date on which notice of the
meeting is mailed or on the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall be applied to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
SECTION 2.06. Voting Lists. The officer or agent having charge of
------------
the stock transfer books for shares of the Corporation shall, before each
meeting of shareholders, make a complete list of the record shareholders
entitled to vote at such meeting, or any adjournment thereof, with the address
of and the number of shares held by each which list shall be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting for the purpose of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at such meeting.
II-2
<PAGE>
SECTION 2.07. Quorum. Except as otherwise provided in the Articles
------
of Incorporation, a majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of shareholders. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless the vote of a greater number or voting by
classes is required by law or the Articles of Incorporation. Though less than a
quorum of the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
SECTION 2.08. Conduct of Meetings. The Chairman of the Board, and in
-------------------
his absence, the President or a Vice President in the order provided under
SECTIONS 4.07 and 4.08 and in their absence, any person chosen by the
shareholders present shall call the meeting of the shareholders to order and
shall act as chairman of the meeting, and the Secretary of the Corporation shall
act as secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting.
SECTION 2.09. Proxies. At all meetings of shareholders, a
-------
shareholder entitled to vote may vote in person or by proxy appointed in writing
by the shareholder or by his duly authorized attorney in fact. Such proxy shall
be filed with the Secretary of the Corporation before or at the time of the
meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted, either by written notice filed with the Secretary or
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation. No proxy shall
be valid after 11 months from the date of its execution, unless otherwise
provided in the proxy. The Board of Directors shall have the power and
authority to make rules establishing presumption as to the validity and
sufficiency of proxies.
SECTION 2.10. Voting of Shares. Each outstanding share shall be
----------------
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, except to the extent that the voting rights of the shares of any
class or classes are enlarged, limited or denied by the Articles of
Incorporation.
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SECTION 2.11. Voting of Shares by Certain Holders.
-----------------------------------
(a) Other Corporations. Shares standing in the name of another
------------------
corporation may be voted either in person or by proxy, by the president of such
corporation or any other officer appointed by such president. A proxy executed
by any principal officer of such other corporation or assistant thereto shall be
conclusive evidence of the signer's authority to act, in the absence of express
notice to this Corporation, given in writing to the Secretary, of the
designation of some other person by the Board of Directors or the By-Laws of
such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by an
-------------------------------------
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver
or assignee for creditors may be voted by him either in person or by proxy,
without a transfer of such shares into his name, provided that there is filed
with the Secretary before or at the time of meeting proper evidence of his
incumbency and the number of shares held. Shares standing in the name of a
fiduciary may be voted by him, either in person or by proxy. A proxy executed
by a fiduciary shall be conclusive evidence of the signer's authority to act, in
the absence of express notice to this Corporation, given in writing to the
Secretary of this Corporation. that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
(c) Pledges. A shareholder whose shares are pledged shall be
-------
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor
-------------------------------
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by this
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares entitled to vote, but shares of its own issue held
by this Corporation in a fiduciary capacity, or held by such other corporation
in a fiduciary capacity, may be voted and shall be counted in determining the
total number of outstanding shares entitled to vote.
(e) Minors. Shares held by a minor may be voted by such minor in
------
person or by proxy and no such vote shall be subject to disaffirmance or
avoidance, unless prior to such vote the Secretary of the Corporation has
received written notice or has actual knowledge that such shareholder is a
minor.
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<PAGE>
(f) Incompetents and Spendthrifts. Shares held by an incompetent
-----------------------------
or spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance, unless
prior to such vote the Secretary of the Corporation has actual knowledge that
such shareholder has been adjudicated an incompetent or spendthrift or actual
knowledge of filing of judicial proceedings for appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or more
-------------
individuals who are named in the registration as joint tenants may be voted in
person or by proxy signed by any one or more of such individuals if either
(a) no other such individual or his legal representative is present and claims
the right to participate in the voting of such shares or prior to the vote files
with the Secretary of the Corporation a contrary written voting authorization or
direction or written denial of authority of the individual present or signing
the proxy proposed to be voted or (b) all such other individuals are deceased
and the Secretary of the Corporation has no actual knowledge that the survivor
has been adjudicated not to be the successor to the interests of those deceased.
SECTION 2.12. Waiver of Notice by Shareholders. Whenever any notice
--------------------------------
whatever is required to be given to any shareholder of the Corporation under the
Articles of Incorporation or By-Laws or any provision of law, a waiver thereof
in writing, signed at any time, whether before or after the time of meeting, by
the shareholder entitled to such notice, shall be deemed equivalent to the
giving of such notice; provided that such waiver in respect to any matter of
which notice is required under any provision of the Wisconsin Business
Corporation Law, shall contain the same information as would have been required
to be included in such notice, except the time and place of meeting.
SECTION 2.13. Unanimous Consent Without Meeting. Any action required
---------------------------------
to be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
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<PAGE>
ARTICLE III. BOARD OF DIRECTORS
SECTION 3.01. General Powers and Number. The business and affairs of
-------------------------
the Corporation shall be managed by its Board of Directors. The number of
directors of the Corporation shall be five.
SECTION 3.02. Tenure and Qualifications. Each director shall hold
-------------------------
office until the next annual meeting of shareholders and until his successor
shall have been elected, or until his prior death, resignation or removal. A
director may be removed from office by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such director, taken at
a meeting of shareholders called for that purpose. A director may resign at any
time by filing his written resignation with the Secretary of the Corporation.
Directors need not be residents of the State of Wisconsin or shareholders of the
Corporation.
SECTION 3.03. Regular Meetings. A regular meeting of the Board of
----------------
Directors shall be held without other notice than this By-Law immediately after
the annual meeting of shareholders, and each adjourned session thereof. The
place of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of Wisconsin,
for the holding of additional regular meetings without other notice than such
resolution.
SECTION 3.04. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the President, Secretary or any
three directors. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State of
Wisconsin, as the place for holding any special meeting of the Board of
Directors called by them, and if no other place is fixed, the place of meeting
shall be the principal business office of the Corporation in the State of
Wisconsin.
SECTION 3.05. Notice; Waiver. Notice of each meeting of the Board of
--------------
Directors (unless otherwise provided in or pursuant to SECTION 3.03) shall be
given by written notice delivered personally or mailed or given by telegram to
each director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary, in each case not less
than 48 hours prior thereto if by mail, and not less than 24 hours if by
telegram or personal delivery. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
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<PAGE>
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. Whenever
any notice whatever is required to be given to any director of the Corporation
under the Articles of Incorporation or By-Laws or any provision of law, a waiver
thereof in writing, signed at any time, whether before or after the time of
meeting, by the director entitled to such notice, shall be deemed equivalent to
the giving of such notice. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting and objects thereat to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 3.06. Quorum. Except as otherwise provided by law or by the
------
Articles of Incorporation or these By-Laws, a majority of the number of
directors set forth in SECTION 3.01 shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but a majority
of the directors present (though less than such quorum) may adjourn the meeting
from time to time without further notice.
SECTION 3.07. Manner of Acting. The act of the majority of the
----------------
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the act of a greater number is required by law or
by the Articles of Incorporation or these By-Laws.
SECTION 3.08. Conduct of Meetings. The President, and in his
-------------------
absence, a Vice President who is a director, in the order provided under
SECTIONS 4.07 and 4.08 and in their absence, any director chosen by the director
present, shall call meetings of the Board of Directors to order and shall act as
chairman of the meeting. The Secretary of the Corporation shall act as
secretary of all meetings of the Board of Directors, but in the absence of the
Secretary, the residing officer may appoint any Assistant Secretary or any
director or other person present to act as secretary of the meeting.
SECTION 3.09. Vacancies. Any vacancy occurring in the Board of
---------
Directors, including a vacancy created by an increase in the number of
directors, may be filled until the next succeeding annual election by the
affirmative vote of a majority of the directors then in office, though less than
a quorum of the Board of Directors; provided that in case of a vacancy created
by the removal of a director by vote of the shareholders, the shareholders shall
have the right to fill such vacancy at the same meeting or any adjournment
thereof.
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<PAGE>
SECTION 3.10. Compensation. The Board of Directors, by affirmative
------------
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the Corporation as directors, officers or
otherwise, or may delegate such authority to an appropriate committee. Members
of the Board shall be paid their expenses, if any, of attendance at each meeting
of the Board at any place other than the county in which the principal business
office of the Corporation in the State of Wisconsin is located. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits and other benefits or payments, to directors, officers and employees
and to their estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers and employees to the Corporation.
SECTION 3.11. Presumption of Assent. A director of the Corporation
---------------------
who is present at a meeting of the Board of Directors or a committee thereof of
which he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
SECTION 3.12. Committees. The Board of Directors by resolution
----------
adopted by the affirmative vote of a majority of the number of directors set
forth in SECTION 3.01 may designate one or more committees, each committee to
consist of three or more directors elected by the Board of Directors, which to
the extent provided in said resolution as initially adopted, and as thereafter
supplemented or amended by further resolution adopted by a like vote, shall have
and may exercise, when the Board of Directors is not in session, the powers of
the Board of Directors in the management of the business and affairs of the
Corporation, except action in respect to dividends to shareholders, election of
the principal officers or the filling of vacancies in the Board of Directors or
committees created pursuant to this section. The Board of Directors may elect
one or more of its members as alternate members of any such committee who may
take the place of any absent member or members at any meeting of such committee,
upon request by the President or upon request by the chairman of such meeting.
Each such committee shall fix its own rules governing the conduct of its
activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
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<PAGE>
SECTION 3.13. Unanimous Consent Without Meeting. Any action required
---------------------------------
or permitted by the Articles of Incorporation or By-Laws or any provision of law
to be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors then in office.
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<PAGE>
ARTICLE IV. OFFICERS
SECTION 4.01. Number. The principal officers of the Corporation
------
shall be a President, one or more Vice Presidents (the number, precedence and
duties thereof to be determined by the Board of Directors), a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board
of Directors may also designate and elect a Chairman of the Board and may
designate one of the Vice Presidents as Executive Vice President. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. Any two or more offices may be held by the
same person, except the offices of President and Secretary and the offices of
President and Vice President.
SECTION 4.02. Election and Term of Office. The officers of the
---------------------------
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected or until his or her prior death, resignation or removal.
SECTION 4.03. Removal. Any officer or agent may be removed by the
-------
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment shall not of itself create contract rights.
SECTION 4.04. Vacancies. A vacancy in any principal office because
---------
of death, resignation, removal, disqualification or otherwise, shall be filled
by the Board of Directors for the unexpired portion of the term.
SECTION 4.05. Chairman of the Board. Anything in these By-Laws to
---------------------
the contrary, the Chairman of the Board, if one be designated and elected,
(a) shall, when present, preside at all meetings of the shareholders and of the
Board of Directors, (b) may call a meeting of the Board of Directors, and
(c) may sign with the Secretary or other proper officer thereunto authorized
by the Board of Directors, deeds, mortgages, bonds, contracts, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
the Board of Directors or other instrument which the Board of Directors has
authorized to be executed except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by the By-Laws
to some other
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<PAGE>
agent of the Corporation or shall be required by law to be otherwise signed and
executed. The Chairman of the Board shall have such other powers and duties as
he may be called upon to perform by the Board of Directors. The Chairman shall
be the representative of the Board of Directors in the management of the
Company. The Chairman shall have the necessary authority and responsibility to
manage the affairs of the Company in all its activities and departments in
accordance with such policies and orders as may be issued by the Board of
Directors or by any of its committees to which it has delegated power for such
action. The authority and responsibility of the Chairman of the Board shall
include, at the:
(a) Carrying out all policies established by the Board of
Directors and advising on the formation of these policies.
(b) Developing and submitting to the Board of Directors for
approval, a plan of organization for the conduct of the corporation's business
and recommend changes when necessary.
(c) Preparing an annual budget showing the expected revenue and
expenditures.
(d) Selecting, replacing, controlling, retiring and discharging
employees; and developing and maintaining personnel policies and practices for
the corporation.
(e) Presenting to the Board of Directors periodic reports
reflecting the activities and financial condition of the corporation.
(f) Attending meetings of the Board of Directors.
(g) Delegating such authority and responsibility to such
subordinate administrative personnel as is required to enable them to manage the
affairs of the corporation during his absence.
(h) Performing such other duties as may be necessary or from time
to time delegated to him by the Board.
SECTION 4.06. Chief Executive Officer. The Chief Executive Officer,
-----------------------
if one be designated and elected, shall generally act as the duly authorized
representative of the Chairman of the Board. The person selected for the
position of Chief Executive Officer shall serve at the pleasure of the Board and
report
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<PAGE>
directly to the Chairman of the Board. The authority and responsibility
of the Chief Executive Officer shall include, at the:
(a) Carrying out all policies established by the Board of
Directors and advising on the formation of these policies.
(b) Developing and submitting to the Board of Directors for
approval, a plan of organization for the conduct of the corporation's business
and recommend changes when necessary.
(c) Preparing an annual budget showing the expected revenue and
expenditures.
(d) Selecting, replacing, controlling, retiring and discharging
employees; and developing and maintaining personnel policies and practices for
the corporation.
(e) Presenting to the Board of Directors periodic reports
reflecting the activities and financial condition of the corporation.
(f) Attending meetings of the Board of Directors.
(g) Delegating such authority and responsibility to such
subordinate administrative personnel as is required to enable them to manage the
affairs of the corporation during his absence.
(h) Performing such other duties as may be necessary or from time
to time delegated to him by the Board.
The Chief Executive Officer shall assist the Chairman of the Board in
the discharge of supervisory, managerial and executive duties and functions, and
undertake such other duties as from time to time shall be assigned by the
Chairman of the Board.
SECTION 4.07. President. The President shall be the principal
---------
operating officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, in the absence of a Chairman of the Board
if one be designated, when present, preside at all meetings of the shareholders
and of the Board of Directors. He shall have authority, subject to such rules
as may be prescribed by the Board of Directors, to appoint such agents and
employees of the Corporation as he shall deem necessary, to prescribe their
powers, duties and
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<PAGE>
compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the President. He shall have authority to sign,
execute and acknowledge, on behalf of the Corporation, all deeds, mortgages,
bonds, stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board of
Directors, he may authorize any Vice President or other officer or agent of the
Corporation to sign, execute and acknowledge such documents or instruments in
his place and stead. In general he shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 4.08. The Executive Vice President. The Executive Vice
----------------------------
President, if one be designated, shall assist the President in the discharge of
supervisory, managerial and executive duties and functions. In the absence of
the President or in the event of his death, inability or refusal to act, the
Executive Vice President shall perform the duties of the President and when so
acting shall have all the powers and duties of the President. He shall perform
such other duties as from time to time may be assigned to him by the Board of
Directors or the President.
SECTION 4.09. The Vice Presidents. In the absence of the President
-------------------
or Executive Vice President, if one be designated, or in the event of his death,
inability or refusal to act, or in the event for any reason it shall be
impracticable for the President to act personally, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Secretary or Assistant Secretary certificates for shares of the Corporation; and
shall perform such other duties and have such authority as from time to time may
be delegated or assigned to him by the President or by the Board of Directors.
The execution of any instrument of the Corporation by any Vice President shall
be conclusive evidence, as to third parties, of his authority to act in the
stead of the President.
SECTION 4.10. The Secretary. The Secretary shall: (a) keep the
-------------
minutes of the meetings of the shareholders and of the Board of Directors in one
or more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that
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<PAGE>
the seal of the Corporation is affixed to all documents, the execution of which
on behalf of the Corporation under its seal is duly authorized; (d) keep or
arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general perform all duties and exercise such
authority as from time to time may be delegated or assigned to him by the
President or by the Board of Directors.
SECTION 4.11. The Treasurer. If required by the Board of Directors,
-------------
the Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
He shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; (b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of SECTION
6.04; and (c) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as from
time to time may be delegated or assigned to him by the President or by the
Board of Directors.
SECTION 4.12. Assistant Secretaries and Assistant Treasurers. There
----------------------------------------------
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Secretaries
may sign with the President or a Vice President certificates for shares of the
Corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors shall
determine. The Assistant Secretaries and Assistant Treasurers, in general,
shall perform such duties and have such authority as shall from time to time be
delegated or assigned to them by the Secretary or the Treasurer, respectively,
or by the President or the Board of Directors.
SECTION 4.13. Other Assistants and Acting Officers. The Board of
------------------------------------
Directors shall have the power to appoint any person to act as assistant to any
officer, or as agent for the Corporation in his stead, or to perform the duties
of such officer whenever for any reason it is impracticable for such officer to
act personally, and such assistant or acting officer or other agent so appointed
by the Board of Directors shall have the power to perform all the duties of the
office to
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<PAGE>
which he is so appointed to be assistant, or as to which he is so appointed to
act, except as such power may be otherwise defined or restricted by the Board of
Directors.
SECTION 4.14. Salaries. The salaries of the principal officers shall
--------
be fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the Corporation.
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<PAGE>
ARTICLE V. CONTRACTS BETWEEN
CORPORATION AND RELATED PERSONS
Any contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any firm of which one or
more of its directors are members or employees, or in which he or they are
interested, or between the Corporation and any corporation or association of
which one or more of its directors are shareholders, members, directors,
officers or employees, or in which he or they are interested, shall be valid for
all purposes, notwithstanding the presence of such director or directors at the
meeting of the Board of Directors of the Corporation which acts upon, or in
reference to, such contract or transaction, and notwithstanding his or their
participation in such action, if the fact of such interest shall be disclosed or
known to the Board of Directors and the Board of Directors shall, nevertheless,
authorize, approve and ratify such contract or transaction by a vote of a
majority of the directors present, such interested director or directors to be
counted in determining whether a quorum is present, but not to be counted as
voting upon the matter or in calculating the majority of such quorum necessary
to carry such vote. This ARTICLE V shall not be construed to invalidate any
contract or other transaction which would otherwise be valid under the common
and statutory law applicable thereto.
V-1
<PAGE>
ARTICLE VI. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
SECTION 6.01. Contracts. The Board of Directors may authorize any
---------
officer or officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the President or one of the Vice Presidents and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or
an Assistant Secretary, when necessary or required, shall affix the corporate
seal thereto; and when so executed no other party to such instrument or any
third party shall be required to make any inquiry into the authority of the
signing officer or officers.
SECTION 6.02. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by or under the authority of a resolution of the Board of Directors.
Such authorization may be general or confined to specific instances.
SECTION 6.03. Checks, Drafts, Etc. All checks, drafts or other
--------------------
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time to time
be determined by or under the authority of a resolution of the Board of
Directors.
SECTION 6.04. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as may be selected by or
under the authority of a resolution of the Board o Directors.
SECTION 6.05. Voting of Securities Owned by this Corporation.
----------------------------------------------
Subject always to the specific directions of the Board of Directors, (a) any
shares or other securities issued by any other corporation owned or controlled
by this Corporation may be voted at any meeting of security holders of such
other corporation by the President of this Corporation if he be present, or in
his absence, by any Vice President of this Corporation who may be present, and
(b) whenever, in the judgment of the President, or in his absence, of any Vice
President, it is desirable for this Corporation to execute a proxy or written
consent in respect to any shares or other securities issued by any other
corporation and owned by this Corporation, such proxy or consent shall be
executed in the name of this
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<PAGE>
Corporation by the President or one of the Vice Presidents of this Corporation,
without necessity of any authorization by the Board of Directors, affixation of
corporate seal or countersignature or attestation by another officer. Any person
or persons designated in the manner above stated as the proxy or proxies of this
Corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this Corporation
the same as such shares or other securities might be voted by this Corporation.
VI-2
<PAGE>
ARTICLE VII. CERTIFICATES FOR SHARES
AND THEIR TRANSFER
SECTION 7.01. Certificates for Shares. Certificates representing
-----------------------
shares of the Corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President and by
the Secretary or an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except as
provided in SECTION 7.05.
SECTION 7.02. Facsimile Signatures and Seal. The seal of the
-----------------------------
Corporation on any certificates for shares may be a facsimile. The signatures
of the President or Vice President and the Secretary or Assistant Secretary upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the Corporation itself
or an employee of the Corporation.
SECTION 7.03. Signature by Former Officers. In case any officer, who
----------------------------
has signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer at the date of its issue.
SECTION 7.04. Transfer of Shares. Prior to due presentment of a
------------------
certificate for shares for registration of transfer, the Corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and otherwise to exercise all the rights and powers of
an owner. Where a certificate for shares is presented to the Corporation with a
request to register for transfer, the Corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the Corporation had no duty to inquire into adverse claims
or had discharged any such duty. The Corporation may require reasonable
assurance that said endorsements are genuine and effective and comply with such
other regulations as may be prescribed by or under the authority of the Board of
Directors.
VII-1
<PAGE>
SECTION 7.05. Lost, Destroyed or Stolen Certificates. Where the
--------------------------------------
owner claims that his certificate or shares has been lost, destroyed or
wrongfully taken, then a new certificate shall be issued in place thereof if the
owner (a) so requests before the Corporation has notice that such shares have
been acquired by a bona fide purchaser and (b) files with the Corporation a
sufficient indemnity bond, and (c) satisfies such other reasonable requirements
as the Board of Directors may prescribe.
SECTION 7.06. Consideration for Shares. The shares of the
------------------------
Corporation may be issued for such consideration, not less than the par value
thereof (if any), as shall be fixed from time to time by the Board of Directors.
The consideration to be paid for shares may be paid in whole or in part, in
money, in other property, tangible or intangible, or in labor or services
actually performed for the Corporation. When payment of the consideration for
which shares are to be issued shall have been received by the Corporation, such
shares shall be deemed to be fully paid and nonassessable by the Corporation.
No certificate shall be issued for any share until such share is fully paid.
SECTION 7.07. Restrictions on Transfer. The face or reverse side of
------------------------
each certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
SECTION 7.08. Stock Regulations. The Board of Directors shall have
-----------------
the power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
VII-2
<PAGE>
ARTICLE VIII. INDEMNIFICATION
SECTION 8.01. Actions Other Than by Corporation. The Corporation
---------------------------------
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director or officer of the Corporation, or by reason of the fact that such
director or officer of the Corporation is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or is or was serving at
the request of the Corporation as a fiduciary of an employee benefit plan
(subject to the provisions of SECTIONS 8.03, 8.04 and 8.05 of this ARTICLE VIII
and except as prohibited by law), or as an employee or agent of the corporation
against expenses (including attorneys' fees), judgment, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 8.02. Actions by or in the Right of Corporation. Any person
-----------------------------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact he is or was a director or
officer of the Corporation, or by reason of the fact that such director or
officer of the Corporation is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise or is or was serving at the request of
the Corporation as a fiduciary of an employee benefit plan, or as an employee or
agent of the Corporation shall (subject to the provisions of SECTIONS 8.03, 8.04
and 8.05 of this ARTICLE VIII and except as prohibited by law), be indemnified
by the Corporation against expenses, including attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation except that no
indemnification
VIII-1
<PAGE>
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
SECTION 8.03. Successful Defense of Actions. To the extent that a
-----------------------------
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding of the type
referred to in SECTIONS 8.0l and 8.02 of this ARTICLE VIII, he shall be
indemnified by the Corporation against expenses, including attorneys' fees
actually and reasonably incurred by him in connection therewith.
SECTION 8.04. Procedure for Indemnification. Any indemnification
-----------------------------
under SECTIONS 8.01 and 8.02 of this ARTICLE VIII, unless ordered by a court,
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of such director or officer of the
Corporation is proper in the circumstances because he has met the applicable
standard of conduct set forth in said SECTIONS 8.01 and 8.02. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding; (b) if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion; or (c) by the affirmative vote of a majority of the shares
entitled to vote thereon. Nothing contained in this Article VIII shall preclude
the Board of Directors from determining, in its discretion, that persons serving
as agents or employees of the Corporation or as fiduciaries of an employee
benefit plan of the Corporation shall be entitled to the indemnification
provided to directors and officers of the Corporation in this Article VIII.
SECTION 8.05. Advance Payment of Expenses. Expenses, including
---------------------------
attorneys' fees, incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized in a specific case upon receipt of
an undertaking by or on behalf of the director, officer, employee, agent or
employee benefit plan fiduciary to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the Corporation as
authorized in this ARTICLE VIII.
VIII-2
<PAGE>
SECTION 8.06. Other Rights. The indemnification provided for in this
------------
ARTICLE VIII shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 8.07. Severability of Provisions. The provisions of this
--------------------------
ARTICLE VIII and the several rights to indemnification created hereby are
independent and severable and, in the event that any such provision and/or right
shall be held by a court of competent jurisdiction in which an action relating
to such provisions and/or rights is brought to be against public policy or
otherwise to be unenforceable, the other provisions of this ARTICLE VIII shall
remain enforceable and in full effect.
SECTION 8.08. Purchase of Insurance. The Corporation may purchase
---------------------
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or is or was serving at
the request of the Corporation as a fiduciary of an employee benefit plan
against liability asserted against him or incurred by him in any such capacity
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
ARTICLE VIII.
VIII-3
<PAGE>
ARTICLE IX. SEAL
The Board of Directors may provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."
IX-1
<PAGE>
ARTICLE X. AMENDMENTS
SECTION 10.01. By Shareholders. These By-Laws may be altered,
---------------
amended or repealed and new By-Laws may be adopted by the shareholders by
affirmative vote of not less than a majority of the shares present or
represented at any annual or special meeting of the shareholders at which a
quorum is in attendance.
SECTION 10.02. By Directors. These By-Laws may also be altered,
------------
amended or repealed and new By-Laws may be adopted by the Board of Directors by
affirmative vote of a majority of the number of directors present at any meeting
at which a quorum is in attendance; but no By-Law adopted by the shareholders
shall be amended or repealed by the Board of Directors if the By-Law so adopted
so provides.
SECTION 10.03. Implied Amendments. Any action taken or authorized by
------------------
the shareholders or by the Board of Directors, which would be inconsistent with
the By-Laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
By-Laws so that the By-Laws would be consistent with such action, shall be given
the same effect as though the By-Laws had been temporarily amended or suspended
so far; but only so far, as is necessary to permit the specific action so taken
or authorized.
X-1
<PAGE>
CONSTRUCTION TO PERMANENT LOAN
PROMISSORY NOTE
---------------
$1,000,000.00 Hartford, Connecticut
July __, 1995
FOR VALUE RECEIVED, the undersigned (hereinafter sometimes referred to as
the "BORROWER"), promises to pay to the order of SHAWMUT BANK CONNECTICUT, N.A.,
a national banking association, at its office at 777 Main Street, Hartford,
Connecticut 06115 (hereinafter referred to as the "LENDER"), or at such other
place as the holder hereof may from time to time designate in writing, the
principal sum of ONE MILLION DOLLARS ($1,000,000) (the "LOAN"), or so much
thereof as may be advanced pursuant to the terms hereof, with interest from the
date hereof until and including the day prior to the Conversion Date (as defined
herein) at the rate announced periodically by the Lender as its Base Rate (as
defined herein) (the "CONSTRUCTION INTEREST RATE") and from and after the
Conversion Date at the applicable Permanent Interest Rate (as defined herein).
The Construction Interest Rate and the Permanent Interest Rate shall each be
computed on the basis of a three hundred sixty (360) day year for the actual
number of days in each period for which interest is charged.
This Note is secured by the Mortgage (as defined herein) on the Property
(as defined herein) and by the Security Agreement (as defined herein) and the
Borrower agrees to construct upon the Property a building containing
approximately 20,000 gross square feet (the "IMPROVEMENTS"), in accordance with
final plans and specifications approved by the Lender. The Lender has this day
advanced to the Borrower the sum of $244,020.60 and during the course of said
construction, the Lender agrees to advance to the Borrower, but not to the
Borrower's assigns, the sum of up to $500,000 until October 31, 1995, for said
construction, by paying said sum over to the Borrower in installments as the
work progresses, the time and amount of each advancement to be subject to the
satisfaction of the conditions contained in Schedule A of the Commitment Letter
----------
("SCHEDULE A") and in any event at the sole discretion and upon the estimate of
the Lender. Notwithstanding anything contained herein or in any of the Loan
Documents to the contrary, in the event that the Borrower requires additional
funds for the Project, the Lender may, in its sole discretion, advance to the
Borrower, but not to the Borrower's assigns, up to an additional $500,000 until
October 31, 1995 in one or more installments provided that, at the time each
such installment is required, (a) the conditions contained in Schedule A have
----------
been satisfied and (b) the Lender is satisfied with the progress and status of
the Phase II Environmental Site Assessment or any remediation then being
conducted with respect to the Property (the "ENVIRONMENTAL CONDITIONS"). In no
event shall the aggregate principal amount advanced under the Construction Loan
exceed $1,000,000.
<PAGE>
A. DEFINITIONS.
-----------
As used in this Note, the following terms shall have the following
meanings:
(1) "ADJUSTMENT DATE" shall mean the date upon which the Borrower
elects to fix the Permanent Interest Rate at the LIBOR Rate
plus two percent (2%) or the Cost of Funds Rate plus two
percent (2%).
(2) "ANNIVERSARY DATE" shall mean (a) if this Note is dated the
first day of a month, the date of this Note, or (b) if this
Note is dated after the first day of a month, the first day of
the month immediately following the date of this Note.
(3) "BASE RATE" shall mean the variable interest rate announced
from time to time by the Lender at its head office in Hartford,
Connecticut. The Base Rate shall be adjusted daily so that a
change in the Lender's Base Rate shall immediately cause a
change in the Base Rate hereunder. The Base Rate may not
necessarily be the lowest or best rate available from the
Lender at any given time.
(4) "COMMITMENT LETTER" shall mean the commitment letter dated
April 13, 1995 from the Lender to the Borrower relating to the
Loan.
(5) "CONSTRUCTION LOAN" shall mean the loan of up to $1,000,000.00
from the Lender to the Borrower until Conversion for the
purpose of the construction of the Improvements, as evidenced
by this Note.
(6) "CONVERSION" shall mean the conversion of the Loan at the
Borrower's request from the Construction Loan to the Permanent
Loan (as defined herein) on the Conversion Date (as defined
herein), upon the Borrower's satisfaction of the following
conditions:
(a) the Borrower shall give the Lender at least fifteen (15)
days prior notice of its intent to convert the Loan,
which notice shall specify the Conversion Date (the
"CONVERSION NOTICE");
(b) the Borrower has fulfilled all of its obligations
required as a condition to the final disbursement of the
Construction Loan or the Loan Agreement and has completed
the Improvements in accordance with the Plans (as defined
in Schedule A);
----------
(c) no event of default has occurred under the Construction
Loan or the Loan Agreement;
- 2 -
<PAGE>
(d) the representations and covenants made under Paragraph 15
of the Commitment Letter and under Section Four of the
Loan Agreement (as defined herein) and contained in the
Mortgage remain true and correct;
(e) all governmental approvals or contractual arrangements
required for the operation of the Project (as defined
herein) including without limitation an unconditional
certificate of use and occupancy have been obtained and,
to the extent permitted by law and to the extent then
available, have been assigned to the Lender;
(f) the Borrower has provided the Lender with such additional
documents as the Lender may reasonably require to effect
such Conversion, including, without limitation, (i)
mortgage modification agreements, (ii) title insurance
endorsements, including such endorsements as may be
necessary to insure the priority of the advances under
the Loan which bring the principal balance of the
Permanent Loan up to $1,000,000 and (iii) casualty and
liability insurance endorsements demonstrating coverage
for the completed Improvements;
(g) the Borrower, upon the Lender's request, has placed in
escrow with the Lender an amount sufficient to enable the
Lender to be holding the amount required to pay the next
installment of Taxes (as defined in the Mortgage) at
least thirty (30) days before the same becomes due; and
(h) the Borrower has complied with the Environmental
Conditions;
(i) the Lender has granted its written consent to the
Conversion, which consent shall not be unreasonably
withheld in the event the conditions provided in
SUBPARAGRAPHS (A) through (H) above are satisfied.
(7) "CONVERSION DATE" shall mean the date, occurring no later than
October 31, 1995, on which the Loan is converted from the
Construction Loan to the Permanent Loan. Provided that the
Lender determines that the Borrower has satisfied the
conditions specified in this Note for Conversion, such date
shall be the first day of the month occurring no less than
fifteen (15) days after the Conversion Notice.
(8) "COST OF FUNDS RATE" shall mean the Lender's cost of funds rate
which shall be based on number of months remaining until the
Maturity Date, (as
- 3 -
<PAGE>
defined herein) calculated three (3) business days prior to the
effective date of such interest rate.
(9) "LIBOR RATE" shall mean the rate quoted by the Lender two (2)
business days prior to the interest period agreed upon between
the Borrower and the Lender (the "INTEREST PERIOD") for the
offering by prime commercial banks to other prime commercial
banks in the interbank Eurodollar market of dollar deposit for
a period equal to the Interest Period. The LIBOR Rate shall be
increased by the marginal reserve percentages as prescribed by
the Board of Governors of the Federal Reserve System for
determining reserve requirements for the Lender for Eurodollar
deposits having a maturity equal to the Interest Period.
(10) "LOAN ADVANCES" shall mean and include the initial advance of
the Loan on the date hereof and all subsequent advances of the
Loan by the Lender;
(11) "LOAN AGREEMENT" shall mean that certain Fifth Amended and
Restated Revolving Loan, Term Loan, Equipment Loan and Security
Agreement dated February 28, 1995 by and between EDAC
Technologies Corporation and the Lender as amended and in
effect from time to time.
(12) "LOAN DOCUMENTS" shall mean the Commitment Letter, this Note,
the Loan Agreement, the Supplemental Agreements (as defined in
the Loan Agreement) the mortgage of even date herewith from the
Borrower to the Lender on certain real property located at 1790
New Britain Avenue, Farmington, Connecticut (the "MORTGAGE"),
and every other instrument now or hereafter securing,
evidencing or relating to the Loan.
(13) "MATURITY DATE" shall mean the date which is five years from
the Anniversary Date.
(14) "NOTICE DATE" shall mean the date which is at least fifteen
(15) but not more than thirty (30) days prior to the Adjustment
Date on which the Borrower gives the Lender written notice of
its election of the new interest rate.
(15) "PERMANENT INTEREST RATE" shall mean a variable rate equal (a)
to the Base Rate until such time as the Borrower elects a fixed
rate of either: (i) the LIBOR Rate plus two percent (2%) or
(ii) Cost of Funds Rate plus two percent (2%) and (b)
thereafter at such fixed rate.
(16) "PERMANENT LOAN" shall mean the loan of up to $1,000,000 made
from the Lender to the Borrower for a term of five (5) years
after the Anniversary Date for the purpose of providing
permanent financing for the
- 4 -
<PAGE>
Project. The Construction Loan and the Permanent Loan are
sometimes referred to jointly herein as the "LOAN".
(17) "PROJECT" shall mean the 20,000 square foot manufacturing
facility to be constructed on the Property.
(18) All other capitalized terms utilized herein (to the extent they
are utilized herein), including, without limitation, "Leases",
"Loan Documents", "Personal Property" and "Property" shall have
the same meaning as set forth in the Loan Documents unless
otherwise specifically defined herein or unless the context
clearly requires otherwise.
B. CONSTRUCTION LOAN TERMS.
-----------------------
Prior to the Conversion Date, interest only, at the Construction
Interest Rate, shall accrue on each payment or advancement from the date of same
and on all unpaid balances thereafter existing from time to time until repayment
has been made to the Lender of the entire principal sum advanced, said interest
being due and payable in arrears commencing on September 1, 1995, and monthly
thereafter until the principal sum has been paid in full, until the occurrence
of an Event of Default or until the Conversion of the Construction Loan to the
Permanent Loan pursuant to the terms hereof, whichever is applicable. Each
payment shall be applied first to the payment of late charges, then to accrued
and unpaid interest and the balance on account of principal. If not sooner
paid, the entire outstanding principal sum together with accrued interest
thereon shall be due and payable in full on October 31, 1995, unless the
Construction Loan is converted to the Permanent Loan pursuant to the terms
hereof.
The Construction Interest Rate shall be adjusted on a daily basis so
that any changes in said announced Base Rate shall immediately cause a
corresponding change in the interest rate hereunder, which change shall be
effective without notice or demand of any kind, and shall continue until the
imposition of the Construction Default Rate (as defined herein), until the
Construction Loan is paid in full, or until the Conversion of the Construction
Loan to the Permanent Loan pursuant to the terms hereof, whichever is
applicable.
Upon the occurrence of an Event of Default (as defined herein) prior
to Conversion, or if the Construction Loan matures without Conversion occurring,
interest shall accrue from and after such event at an annual rate of one percent
(1%) per annum above the Construction Interest Rate (the "CONSTRUCTION DEFAULT
RATE"). The Construction Default Rate shall be adjusted whenever a change in the
Construction Interest Rate occurs so that the Construction Default Rate shall
remain at all times one percent (1%) per annum above the Construction Interest
Rate. Any adjustment in the Construction Default Rate shall be effective
simultaneously with a change in the Construction Interest Rate.
- 5 -
<PAGE>
C. CONVERSION FROM CONSTRUCTION LOAN TO PERMANENT LOAN.
---------------------------------------------------
On the Conversion Date, if the Borrower has complied with the
conditions to Conversion set forth herein, including without limitation
complying with the Environmental Conditions, and the Lender has consented to the
Conversion, the Construction Loan shall convert to the Permanent Loan.
D. PERMANENT LOAN TERMS.
--------------------
From the Conversion Date until the Adjustment Date (as defined
herein), the Permanent Interest Rate shall be payable upon the principal amount
of the Permanent Loan at the Base Rate. On the Adjustment Date, the Permanent
Interest Rate shall be adjusted so that the rate of interest shall be two
percent (2%) per annum above, at the Borrower's election, the LIBOR Rate or the
Cost of Funds Rate. The Permanent Interest Rate shall continue as a fixed rate
until the imposition of the Permanent Default Rate (hereinafter defined), or
until the Permanent Loan is paid in full, whichever is applicable.
Commencing on the first day of the month following the Conversion
Date, payments of principal and interest shall be paid monthly in arrears, such
payment being calculated on the principal balance of the Permanent Loan at the
Base Rate based on a fifteen year straight-line amortization schedule. On the
Notice Date, the Lender shall determine the new monthly installment that will be
required to amortize in full the then outstanding principal balance of the
Permanent Loan at the new Permanent Interest Rate put into effect hereunder on
the Adjustment Date in substantially equal monthly installments, equal in number
to the difference obtained by subtracting from 180 the number of prior monthly
installments made by the Borrower after the Conversion Date. The result of this
calculation shall be the new monthly payment. Each installment shall be applied
first to the payment of late charges, then to accrued and unpaid interest and
the balance on account of the principal of the Permanent Loan. If not sooner
paid, the entire unpaid principal balance of the Permanent Loan, with interest,
shall be due and payable on the Maturity Date.
Upon the occurrence of an Event of Default after Conversion, or after
maturity, interest shall accrue from and after such event at one percent (1%)
per annum above the Permanent Interest Rate as the same shall be in effect from
and after such default (the "PERMANENT DEFAULT RATE"). If the interest rate in
effect is the Base Rate, the Permanent Default Rate shall be adjusted whenever a
change in the Base Rate occurs, so that the Permanent Default Rate shall remain
at all times one percent (1%) per annum above the Base Rate. Any such
adjustment in the Permanent Default Rate shall be effective simultaneously with
a change in the Base Rate.
E. PAYMENT OF EXPENSES.
-------------------
The Borrower promises to pay, in addition to said principal sum and
interest, all taxes and assessments which may be levied against the Lender upon
this indebtedness, or upon any collateral securing this Note, together with all
costs of collection including reasonable
- 6 -
<PAGE>
attorney's fees incurred by the Lender (the "LOAN INDEBTEDNESS") to (1) collect
the Loan Indebtedness due hereunder from any party liable for the payment of the
Loan Indebtedness whether as maker, endorser, guarantor, surety or otherwise
(hereinafter the "PARTIES") and realize its rights under this Note, (2) enforce,
foreclose and realize its rights under this Note or any other Loan Documents (as
defined herein), and (3) defend and protect the validity of the Loan Documents
in connection with any litigation or controversy arising from or connected with
the Loan Documents. Said costs, expenses and attorney's fees enumerated above
shall expressly include those as may be incurred by the Lender to collect the
Loan Indebtedness due hereunder from any of the Parties after judgment in favor
of the Lender by any court of competent jurisdiction, including those incurred
by the Lender to foreclose any judgment lien or to realize upon any collateral
or to otherwise obtain payment and satisfaction of such judgment from any of the
Parties. The Borrower's obligation to pay such costs and reasonable attorney's
fees of the Lender in connection with the protecting, enforcing or realizing of
the rights and remedies above described shall exist whether or not proceedings
are instituted or legal appearances made in any court of competent jurisdiction
on behalf of the Lender.
F. EVENTS OF DEFAULT.
-----------------
At the option of the Lender, the entire principal balance of the Loan
and accrued interest thereon shall at once become due and payable, without
notice or demand, upon the occurrence of any one or more of the following
events, together with the passage of the applicable grace period, if any,
without cure (each referred to herein as an "EVENT OF DEFAULT"), which will give
the Lender the right to accelerate the Loan:
(1) The failure to pay the Loan Indebtedness in full by the Maturity
Date, or the failure to pay any installment of principal and/or interest due
hereunder upon maturity or when such installment is otherwise due and payable;
(2) The failure to pay taxes on the Loan or any tax or assessment
upon any collateral securing the Loan before the same shall become delinquent;
(3) The occurrence of an Event of Default (as defined therein) under
the Loan Documents (beyond any grace periods set forth in said agreements);
(4) The filing by or against the Borrower of any petition,
arrangement, reorganization, or the like under any insolvency or bankruptcy law,
or the adjudication of the Borrower as a bankrupt (and if such filing is
involuntary, the failure to have the same dismissed within sixty (60) days of
the date of filing), or the making of an assignment for the benefit of
creditors, or the appointment of a receiver for any part of the Borrower's
properties or the admission in writing by the Borrower of the inability to pay
debts as they become due;
(5) The breach of any warranty or the untruth of any representation
of the Borrower contained in the Loan Documents;
- 7 -
<PAGE>
(6) The occurrence of a default under or demand for the payment of
any other note or obligation of the Borrower to the Lender;
(7) The attempted revocation or termination by any guarantor of any
guaranty of the Loan;
(8) The failure of any of the Parties to provide, on request of the
Lender, any financial statement or copy of a tax return required under the terms
of any guaranty of the Loan.
(9) The passage or enforcement of any federal, state, or local law,
regulation, rule or order, or the rendition of a final decision of any court
(other than a law or decision with respect to a tax upon the general revenues of
the Lender) which in any way materially and directly changes or affects the
repayment of the Loan in a fashion which cannot be, and is not, corrected or
reimbursed by the Borrower;
(10) The passage or enforcement of any federal, state, or local law,
or the rendition of a final decision of any court in any way impairing the
Lender's ability to charge and collect the interest stated under the Loan,
including without limitation, the ability to vary the interest payable under the
Loan in accordance with the terms hereof; and
(11) The Borrower or any of the Parties shall (a) fail to pay any
indebtedness for borrowed money including any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise), and (b) fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration after the giving of notice or passage of time, or
both, of the maturity of such indebtedness, whether or not such indebtedness; or
any such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof.
(12) The failure to convert the Loan from the Construction Loan to the
Permanent Loan on or before October 31, 1995.
Failure by the Lender to exercise its option to accelerate the Loan
shall not constitute a waiver of the right to exercise the same in the event of
any subsequent Event of Default.
G. PREPAYMENT OF LOAN.
------------------
If the interest rate in effect under this Note is based upon the Base
Rate, the Borrower may prepay this Note in whole or in part at any time without
penalty. All such prepayments shall be applied on account of principal
remaining unpaid and shall be accompanied by payment of unpaid late charges and
accrued and unpaid interest, if any, thereon. All partial prepayments of
principal shall be credited to the unpaid principal of this Note in the inverse
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<PAGE>
order of maturity and shall not affect the Borrower's obligation to make the
regular installments required hereunder until this Note is fully paid.
If the interest rate in effect under this Note is based upon the LIBOR
Rate or Cost of Funds Rate, the Borrower may not prepay this Note except as set
forth in this paragraph. Under no circumstances may there by a partial
prepayment of this Note. The Borrower may prepay only the entire unpaid balance
of this Note upon payment of such amounts, as determined by the Lender, in its
sole and absolute discretion, as may be necessary to reimburse the Lender for
any losses and expenses incurred by the Lender as a result of prepayment of this
Note, including without limitation any losses (including loss of anticipated
profits) and expenses incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by the Lender to fund or maintain this Note.
The Borrower hereby acknowledges that in reliance upon this agreement, the
Lender has made certain commitments of funds upon the terms and conditions of
this Note. In the event that this Note is accelerated for any reason whatsoever
by the Lender, such payment of the Lender's losses and expenses shall be paid by
the Borrower.
In the event that the Loan shall be accelerated for any reason
whatsoever, the prepayment fee in effect as of the date of such acceleration
shall be paid.
H. MISCELLANEOUS PROVISIONS.
------------------------
The Borrower agrees to pay to the Lender a late charge equal to five
percent (5%) of any payment due to the Lender which is not received within ten
(10) days after the same is due.
The Borrower and all Parties give the Lender a lien and right of
setoff for all the Borrower's liabilities hereunder upon and against all the
deposits, credits and property of the Borrower or the Parties now or hereafter
in the possession or control of the Lender or in transit to it. The Lender may,
at any time apply the same, or any part thereof, to any liability of the
Borrower even though unmatured.
Any check, draft or money order remitted in settlement of this Note
may be handled for collection in accordance with the practice of the collecting
bank or banks, and shall not be deemed payment until and unless good funds are
actually received by or credited to the Lender.
Any notice to the Borrower provided for in this Note shall be given by
mailing such notice by prepaid, first class mail addressed to the Borrower at
the address listed below or to such other address as the Borrower may designate
by notice to the Lender. Any notice to the Lender shall be given by mailing
such notice by prepaid, first class mail, return receipt requested, to the
Lender at the address stated in the first paragraph of this Note, or at such
other address as may have been designated by notice to the Borrower. Notice
shall be deemed given when mailed in accordance with this paragraph.
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<PAGE>
The Borrower hereby represents, covenants and agrees that the proceeds
of the Loan shall be used for general commercial purposes and that the Loan is a
commercial transaction.
THE BORROWER AND ALL PARTIES HEREBY WAIVE ALL RIGHTS TO NOTICE AND
PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTION
52-278a ET SEQ., AS AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH
RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE LENDER MAY EMPLOY TO ENFORCE ITS
RIGHTS AND REMEDIES HEREUNDER. THE BORROWER AND ALL PARTIES FURTHER CONSENT TO
THE ISSUANCE OF ANY SUCH PREJUDGMENT REMEDIES WITHOUT A BOND AND AGREE NOT TO
REQUEST OR FILE MOTIONS SEEKING TO REQUIRE THE POSTING OF A BOND UNDER PUBLIC
ACT 93-431 IN CONNECTION WITH THE LENDER'S EXERCISE OF ANY PREJUDGMENT REMEDY.
This Note shall be governed by and construed in accordance with the
laws of the State of Connecticut.
Time is of the essence of each and every term, condition and provision
of this Note.
Presentment, protest and notice are hereby waived.
All references to the "Lender", the "Borrower" or the "Parties" shall
apply to their respective heirs, successors and assigns.
EDAC TECHNOLOGIES CORPORATION
By:_______________________
Glenn L. Purple
Its Vice President
(Duly authorized)
ADDRESS: 1790 New Britain Avenue
Farmington, CT 06032
This Note is secured, inter alia, by a
----- ----
Mortgage on the Property.
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<PAGE>
OPEN-END
--------
CONSTRUCTION TO PERMANENT MORTGAGE DEED
---------------------------------------
TO ALL PEOPLE TO WHOM THESE PRESENTS SHALL COME, GREETINGS:
KNOW YE, that EDAC TECHNOLOGIES CORPORATION, a Wisconsin corporation, with
an office in the Town of Farmington, County of Hartford, and State of
Connecticut (hereinafter called the "BORROWER"), for the consideration of One
Dollar ($1.00) and other valuable consideration received to the Borrower's full
satisfaction of SHAWMUT BANK CONNECTICUT, N.A., a national banking association
having an office in the Town of Hartford, County of Hartford, and State of
Connecticut (hereinafter called the "LENDER"), does hereby give, grant, bargain,
sell and confirm, with MORTGAGE COVENANTS, unto the Lender, the Lender's
successors and assigns forever:
THE PROPERTY
(A) LAND: That certain piece or parcel of real property known as 1790 New
Britain Avenue, Farmington, Connecticut, more particularly described in SCHEDULE
A attached hereto and made a part hereof, and all rights, privileges and
easements appurtenant thereto (the "LAND").
(B) IMPROVEMENTS: All the buildings, structures and improvements now or
hereafter placed on the Land (the "IMPROVEMENTS").
(C) SERVICE EQUIPMENT: All fixtures, appliances, machinery and equipment
now or hereafter installed, including without limitation gas and electric
fixtures, radiators, heaters, engines and machinery, boilers, stoves, ranges,
elevators, escalators, incinerators, motors, dynamos, sinks, disposals,
dishwashers, water closets, basins, medicine chests, pipes, faucets and other
plumbing and heating fixtures, ventilating apparatus, dryers, washing machines,
heating, ventilating and air-conditioning equipment and units, panelling,
refrigerating plants, refrigerators, whether mechanical or otherwise, fire
prevention and extinguishing apparatus, shades, awnings, screens, blinds,
carpeting, wall cabinets, furniture and equipment, and such other goods and
chattels and personal property as are now or hereafter attached to, used, or
furnished in connection with the letting or operation of the Property
(hereinafter defined) or in connection with the activities conducted thereon,
and all renewals or replacements thereof or additions thereto or articles of
substitution thereof (the "SERVICE EQUIPMENT").
The Service Equipment shall be conclusively deemed fixtures and part
of the Land or Improvements encumbered hereby, whether or not it is attached to
same, to the fullest extent permitted by law. If the lien of this Mortgage is
subject to a conditional bill of sale and/or security agreement covering any
Service Equipment, then all the right, title and interest of the Borrower in and
to same, together with the benefit of any deposits or payments now or hereafter
made thereon, shall be embraced within this Mortgage.
<PAGE>
(D) CONDEMNATION PROCEEDS: All awards or payments, including interest
thereon, which may be made with respect to the Property as a result of the
exercise of the right of eminent domain in accordance with, and subject to, the
terms and conditions of SECTION 1.4 hereof.
(E) LEASES: All right, title and interest of the Borrower in and to any
and all leases, tenancies or rights of use and occupancy, with amendments, if
any, and any extensions, renewals or guaranties of the tenants' obligations
thereunder, now or hereafter on or affecting the Property, whether or not
recorded, including all those leases listed on SCHEDULE C hereto, with all
security therefor and all monies payable thereunder, and all books and records
which reflect payments made under the leases (hereinafter the "LEASES") in
accordance with, and subject to, the terms and conditions of SECTION 1.8 hereof.
(F) PROPERTY INCOME: All rents, income, profits, security deposits and
other benefits to which the Borrower may now or hereafter be entitled from the
Property and/or the business operations conducted at or from the Property
(hereinafter the "PROPERTY INCOME") in accordance with, and subject to, the
terms and conditions of SECTION 1.9 hereof.
(G) TAX REFUNDS: All rights of the Borrower now or hereafter arising in
and to any refunds of Taxes (as defined herein), or other charges relating to
the Property or the debt secured hereby.
TO HAVE AND TO HOLD the above granted and bargained premises, with the
privileges and appurtenances thereof (collectively referred to herein as the
"PROPERTY") but subject to those encumbrances, if any, listed upon SCHEDULE B
(the "PERMITTED ENCUMBRANCES"), unto the Lender, the Lender's successors and
assigns forever, to the Lender's and their own proper use and behoof.
THE CONDITION OF THIS DEED IS SUCH THAT:
WHEREAS, the Borrower has applied to the Lender for a loan in the amount of
up to $1,000,000.00 (the "LOAN") secured by the Property; and
WHEREAS, a portion of the Improvements (the "NEW IMPROVEMENTS") on the Land
are to be erected; and
WHEREAS, the Lender has agreed to make the loan herein-described to be paid
over to the Borrower in installments as the work progresses, the time and amount
of each advancement to be subject to the satisfaction of certain conditions
precedent and in any event at the sole discretion and upon the estimate of the
Lender; and
WHEREAS, the Borrower agrees to complete the erection of the New
Improvements to the satisfaction of the Lender within a reasonable time from the
date hereof or at the latest on or before October 31, 1995; and
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<PAGE>
WHEREAS, the Lender has this day advanced to the Borrower the sum of
$244,020.60 for the construction of the New Improvements on the Land; and
WHEREAS, if at any time during the repair or construction of the New
Improvements on the Land, the Lender in its sole discretion shall determine that
the balance of the Loan proceeds remaining to be advanced will not be sufficient
to complete said construction or repair in accordance with the approved plans
and specifications, the Borrower shall be required to advance funds in the
amount of such shortage prior to the Lender's making any additional advances;
and
WHEREAS, if the total cost for construction or repair of the New
Improvements on the Land incurred by Borrower shall be less than $1,000,000.00,
the Lender shall not be required to disburse additional proceeds of the Loan
above the actual cost of construction or repair incurred by Borrower; and
WHEREAS, the Borrower, in consideration of the foregoing, has executed and
delivered to Lender a promissory note for the sum of $1,000,000.00, a copy of
which is attached hereto as SCHEDULE D (the "NOTE"), and subject to the
following additional terms and conditions:
ARTICLE 1.
----------
COVENANTS AND REPRESENTATIONS OF THE BORROWER
---------------------------------------------
The Borrower covenants and represents to the Lender as follows:
1.1 PAYMENT AND PERFORMANCE
The Borrower will pay the debt evidenced by the Note and all other
sums due thereunder in lawful money of the United States and pay and perform all
of its obligations under the Note, this Mortgage, the commitment letter signed
and accepted by the Borrower in connection with the Loan (the "COMMITMENT
LETTER") and every other instrument now or hereafter securing, evidencing or
relating to the Note and the Mortgage Debt (collectively referred to herein as
the "LOAN DOCUMENTS") at the times and in the manner set forth in such Loan
Documents. All amounts due the Lender under any of the aforesaid instruments
shall be secured by the lien of this Mortgage and shall hereinafter be referred
to as the "MORTGAGE DEBT". If the Borrower consists of one or more parties, all
of the obligations, covenants and warranties of the Borrower contained in this
Mortgage shall be the joint and several obligations of the parties constituting
the "Borrower".
1.2 INSURANCE
A. The Borrower shall keep the Property insured against loss by
fire, flood and other hazards, casualties, contingencies and all other "extended
coverage" risks, including builder's risk, business interruption, liability,
indemnity, if available, in such amounts and with such deductibles and companies
as the Lender may reasonably require. Borrower shall promptly
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<PAGE>
pay when due the premiums on such insurance policies. If the Borrower fails to
pay any such insurance premiums, the Lender may pay same and the amount of such
payments shall constitute Lender Advances pursuant to SECTION 3.4 hereof.
B. Each insurance policy maintained pursuant to SUBSECTION A. above
shall contain, in a form acceptable to the Lender, (1) a provision to the effect
that the policy will not be canceled without at least ten (10) days prior
written notice to the Lender, (2) the standard non-contributing mortgagee
endorsement (entitling the Lender to collect all proceeds payable under such
insurance), (3) the standard waiver of subrogation endorsement, and (4) any
other endorsement required by the Lender. All insurance carried on the Property
must show the Lender as an additional insured. The Borrower shall deliver
copies of all existing policies to the Lender at the Lender's request and shall
deliver copies of all additional and renewal policies, with current premium
bills therefor marked "Paid", to the Lender at least thirty (30) days before the
expiration of the old policies. The Borrower shall claim no cancellation or
return of any policy or premium except from and after the redemption of this
Mortgage by the Borrower.
C. In the event of any loss or damage to the Property, the Borrower
shall give immediate notice thereof to the Lender. The Borrower authorizes the
Lender, at its option, to collect, adjust and compromise any losses under any
hazard insurance policy maintained hereunder and to endorse the Borrower's name
on any instrument in payment of any insured loss; provided, if such option is
not exercised, the Lender shall not be responsible or liable for the collection,
adjustment or compromise of any such loss and the Borrower does hereby indemnify
the Lender and hold the Lender harmless against and from any and all claims and
liabilities asserted against the Lender in connection with the collection,
adjustment or compromise of any insured loss. In case of loss and payment by
any insurance company, the amount of insurance proceeds received shall be
applied either in whole or in part upon the payment of the Mortgage Debt or to
rebuilding or restoring the Property, as the Lender may elect in its sole
discretion.
1.3 TAXES
A. The Borrower shall pay within any applicable grace period and
before the same become delinquent, all taxes, assessments, and governmental
charges and impositions of any kind whatsoever for which lien rights exist,
which may now or hereafter be assessed or levied upon any part of the Property,
or upon the Loan Documents, in lieu of or in addition to a tax on the Property
(all such charges and payments collectively referred to herein as the "TAXES").
B. If the Borrower fails to pay any Taxes due pursuant to SUBSECTION
A. above, the Lender may pay same and the amount of such payments shall
constitute Lender Advances pursuant to SECTION 3.4 hereof.
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<PAGE>
C. The Borrower will deliver to the Lender, receipts for the payment
of each item specified in SUBSECTION A. above, prior to the date the item will
become delinquent if not paid.
D. The Borrower shall promptly notify the Lender of the delinquency
in the payment of any Taxes due pursuant to SUBSECTION A. above.
E. Upon the request of the Lender, the Borrower shall pay to the
Lender, together with and in addition to the monthly installments of principal
and interest provided in the Note, an amount (as estimated from time to time by
the Lender in its sole discretion) equal to one-twelfth (1/12th) of the yearly
Taxes assessed against the Property and sufficient funds to pay the insurance
premiums required under SECTION 1.2 when due. The Borrower agrees that any
funds deposited with or paid to the Lender pursuant to this SUBSECTION E. shall
create only an indebtedness, and not a trust or agency relationship, between the
Borrower and the Lender, which shall be liquidated to the extent of the Lender's
payments as aforesaid. Unless otherwise required by law, no interest shall be
payable on such funds. If the tax escrow payments are not sufficient to pay the
Taxes on the date they become due and payable, the Borrower shall pay to the
Lender the amount necessary to make up the deficiency on or before said date.
Upon, and any time after, the occurrence of an Event of Default, the Lender may,
at its option, apply the accumulated escrow balance remaining as a credit
against the Mortgage Debt.
F. If the Lender receives any refund of any Taxes paid hereunder and
the Borrower is not in default hereunder, then the Lender shall promptly pay
over the same to the Borrower; if the Borrower is in default hereunder, beyond
any applicable grace period, the Lender may apply said refund in reduction of
any amount secured hereby or pay the same to the Borrower.
1.4 CONDEMNATION
A. The Borrower will give the Lender immediate notice of the actual
or (if known to the Borrower) threatened commencement of any eminent domain
proceedings affecting any part of the Property, and will deliver to the Lender
copies of all papers served in connection therewith. The Borrower hereby
appoints the Lender as its attorney-in-fact, coupled with an interest, and
authorizes the Lender to collect, receive, and retain, subject to the terms
hereof, the proceeds of any such award or payment, to give proper receipts
therefor and, if an Event of Default has occurred, to adjust, compromise and
settle the claim therefor.
The Lender shall have the right to intervene and participate in
any eminent domain proceedings and the Borrower shall consult with the Lender in
all matters pertaining to the adjustment, compromise or settlement of such
proceedings and shall not enter into any agreement with respect to such matters
without the prior written consent of the Lender. The Borrower further agrees to
execute and deliver upon request any other instruments deemed necessary by the
Lender to confirm or assign to the Lender all awards and other compensation to
be made for any taking of the Property under eminent domain proceedings.
- 5 -
<PAGE>
B. The Lender may, in its sole discretion, retain and apply any
eminent domain award or payment toward payment of the Mortgage Debt, or pay same
over wholly or in part to the Borrower.
C. If a part of the Property shall have been taken in any eminent
domain proceedings and the remaining part of the Property shall have been sold
on foreclosure of this Mortgage prior to the receipt by the Lender of the award
or payment, the Lender, to the extent permitted by applicable law, shall have
the right to receive the award or payment to the extent of any deficiency found
to be due upon such sale, with legal interest thereon, and including reasonable
counsel fees, costs and disbursements incurred by the Lender in connection with
the collection of such award or payment.
1.5 COMPLIANCE WITH LAW, ETC.
A. The Borrower presently does and will continue to observe and
comply with (1) all laws, regulations, ordinances, rules, and orders affecting
the Property or the business operations thereon; (2) the terms of each insurance
policy applicable to the Property; and (3) all conditions and requirements
necessary to preserve and maintain all rights, licenses, permits, privileges,
franchises and concessions which are applicable to the Property or business
activities conducted at or from the Property, or which have been granted to or
contracted for by the Borrower or by any tenant under the Leases.
B. The Borrower shall provide the Lender with copies of all notices,
orders, summonses, correspondence and other similar items delivered to or served
upon the Borrower pertaining to any of the foregoing. Upon request, the
Borrower shall furnish to the Lender, or its designee, copies of all
correspondence from the Connecticut Department of Environmental Protection (the
"DEP") (or the Federal Environmental Protection Agency (the "EPA"), or any
similar entity, to the Borrower (other than routine mass informational mailings)
and, upon request, shall direct such entity to send copies of all such
correspondence directly to the Lender. Upon request, the Borrower shall furnish
to the Lender copies of all correspondence from the Borrower to the DEP, the
EPA, or any similar entity, copies of all periodic reports required by any
environmental law or any permit, and copies of all records, forms and documents
which the Borrower is required to produce or maintain pursuant to any
environmental law or any permit.
C. If the Lender believes in its reasonable discretion that the
value of the Property may be adversely affected due to a potential violation of
any environmental law, rule or regulation, then the Lender may (but will not be
obligated to) hire an environmental engineer acceptable to the Lender, and after
reasonable notice to Borrower, enter upon, inspect, monitor and conduct all
environmental site assessments (including a phase I, phase II or phase III),
tests and surveys of the Property as the Lender may reasonably require.
Borrower must, within ten (10) business days of demand therefor by the Lender,
reimburse the Lender for all reasonable costs and expenses incurred by the
Lender in connection with such assessment, environmental test, survey or
additional work. All site assessments, environmental test reports, survey
reports and documentation relating to additional work will be the property of
the Lender and the Lender
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<PAGE>
will have no obligation to disclose any such information to any third person,
including Borrower; provided, however, that so long as no Event of Default has
occurred and upon (i) payment in full by Borrower of all reasonable costs and
expenses incurred by the Lender in connection with such assessment, test, survey
or additional work, and (ii) execution by Borrower of a confidentiality and
wavier letter in form provided by the Lender, the Lender will provide copies of
all such assessments, reports or documentation to Borrower.
D. The Borrower shall indemnify the Lender and hold the Lender
harmless from and against all loss, liability, damage and expense, including
attorneys' fees, suffered or incurred by the Lender, whether as holder of this
Mortgage, as mortgagee in possession or as a successor in interest to the
Borrower as owner of the Property by virtue of foreclosure or acceptance of a
deed in lieu of foreclosure (i) under or on account of Chapter 446K of the
Connecticut General Statutes Revision of 1958, as amended (the "ACT") or related
regulations, or any similar applicable federal laws or regulations, including
the assertion of any lien thereunder; (ii) with respect to any discharge,
spillage, uncontrolled loss, seepage or filtration of oil or petroleum or
chemical liquids or solid, liquid or gaseous products or hazardous waste which,
if contained or removed or mitigated by the State of Connecticut, would give
rise to a lien under Connecticut General Laws Section 22a-452a, as amended (a
"SPILL") affecting the Property (whether or not the same originates or emanates
from the Property or any contiguous real estate) including any loss of value of
the Property as a result of such Spill; and (iii) with respect to any other
matter affecting the Property and governed by the provisions of the Act or
related regulations or any similar applicable federal laws or regulations.
E. In the event of any Spill affecting the Property, whether or not
the same originates or emanates from the Property or any contiguous real estate,
the Borrower shall contain, remove or mitigate same immediately and in
accordance with any directives of the State of Connecticut. If the Borrower
shall fail to remedy such Spill or otherwise comply with any of the requirements
of the Act or related regulations or any other environmental law or regulation,
the Lender may at its election, but without the obligation to do so, give such
notices and/or cause such work to be performed at the Property and/or take any
and all other actions as the Lender shall deem necessary or advisable in order
to remedy the Spill or cure such failure of compliance, and any amounts paid as
a result thereof shall be reimbursed by the Borrower upon demand by the Lender,
shall bear interest at the "Default Rate" provided for in the Note, and shall be
secured by the lien of this Mortgage.
1.6 MAINTENANCE AND REPAIR; INSPECTION; APPRAISAL; SIGN
A. The Borrower will (1) keep and maintain the Property in good
condition, working order and repair; (2) not commit or suffer any waste of the
Property; (3) repair, replace, rebuild or restore any part of the Property which
may be damaged or destroyed by any casualty or affected by eminent domain,
whether or not the proceeds of any insurance or eminent domain proceedings are
available therefor; (4) complete and pay for when due any construction
undertaken on the Property; and (5) make all other repairs and replacements to
the Property which the Lender may reasonably require. All such work shall be
done promptly in good and
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<PAGE>
workman-like manner. If the Borrower fails to make such required repairs and
replacements, the Lender may perform same and the cost thereof shall constitute
Lender Advances pursuant to SECTION 3.4 hereof. The covenants in this SECTION
1.6.A. shall be limited in their application to account for customary
construction conditions and such demolition and destruction as is contemplated
under the plans and specifications submitted to and approved by the Lender (the
"PLANS").
B. Until the Loan is paid in full, Borrower shall provide the Lender
and/or its agents, consultants or representatives with access to the Property,
during normal business hours and after reasonable advance notice, for the
purpose of enabling the Lender and/or its agents, consultants or representatives
to perform appraisals, environmental site assessments and inspections of the
Property.
C. The Lender may obtain appraisals of the Property, under such
circumstances as the Lender may in its reasonable discretion determine, and
Borrower shall, within ten (10) business days after demand by the Lender,
reimburse the Lender for all reasonable costs related to each such appraisal;
provided, however, that so long as no Event of Default has occurred, Borrower
will be required to reimburse the Lender for only one appraisal every twelve
months. Appraisals will be the property of the Lender and the Lender will have
no obligation to disclose any appraisal to any person, including Borrower,
provided, however, that so long as no Event of Default has occurred and upon (i)
payment in full by Borrower of all reasonable costs associated with an
appraisal, and (ii) execution by Borrower of a confidentiality and waiver letter
in form provided by the Lender, the Lender will provide a copy of the appraisal
to Borrower.
1.7 SALE, ENCUMBRANCE AND USE
A. The Borrower, and if applicable any guarantor, shall not, without
the Lender's prior written consent which may be withheld in the Lender's sole
discretion for any reason whatsoever, (1) initiate or allow any transfer or
other disposition of title (as said terms are defined in SUBSECTION C. below) to
all or any part of the Property; (2) voluntarily create or grant any liens,
mortgages or encumbrances against such title; (3) initiate or allow any change
in the nature of the use and occupancy of the Property, including any such
change which materially increases the possibility of a Spill; or (4) record any
Declaration of Common Interest Community.
B. The Borrower will keep and maintain the Property free from the
claim of all persons supplying labor or materials in connection with the
construction or repair of any Improvements constituting a part of the Property.
The Borrower will furnish, at the Lender's request, all waivers and releases of
liens or claims upon or with respect to the Property or any Service Equipment.
C. The term "transfer or other disposition of title" as used in this
SECTION 1.7 shall mean:
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<PAGE>
(1) any sale, conveyance, transfer, gift or other disposition,
whether voluntary, involuntary, or by operation of law or the Borrower's entry
into any contract or option agreement to accomplish same;
(2) if the Borrower is a corporation, a merger, consolidation,
division, recapitalization, spin-off, or other corporate reorganization of the
Borrower;
(3) if the Borrower is a corporation, any change in ownership of
fifty percent (50%) or more of the voting stock of the Borrower;
(4) if the Borrower is a general partnership, any transfer of
ten percent (10%) or more of any general partner's interest in the Borrower;
(5) if the Borrower is a limited partnership, any transfer of
ten percent (10%) or more of any general partner's or limited partner's interest
in the Borrower;
(6) any dissolution or liquidation of, or the filing of a suit
to dissolve or liquidate, a corporate or partnership Borrower;
(7) if the Borrower is a limited liability company, any transfer
of a member's interest, whether caused by the member's death or otherwise, or
any change in the articles of organization or operating agreement of the
company, or any change in a manager of the company that has not been approved by
the Lender, or any termination of the company.
(8) a lease or leases of more than fifty per cent (50%) of the
Land, Improvements or Service Equipment, wherein the proposed tenant or tenants
do not intend to occupy the Property but intend to sell, sublease or assign
their interest in a lease or leases of the Land and/or Improvements. It is the
express intention of this provision to prohibit a long-term lease or sale and
leaseback for either financing purposes or to effectuate a transfer of the
Property;
(9) any other act by which the economic benefit, entrepreneurial
risk or management responsibility with respect to the Property is shifted to
someone other than the Borrower or a corporation in which the Borrower is the
sole stockholder or a limited or general partnership in which the Borrower is
the sole general partner.
D. The Borrower shall promptly notify the Lender if any lien,
attachment or encumbrance is recorded against the Property without the
Borrower's consent and will cause the lien to be canceled and discharged of
record within thirty (30) days after its recording. If the Borrower fails to
obtain the release of such lien or encumbrance, the Lender may take such action
and make such payments as are necessary to accomplish same and the cost thereof
shall constitute Lender Advances pursuant to SECTION 3.4 hereof.
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<PAGE>
E. Any attempted action contrary to the provisions of this SECTION
1.7 shall be void, but shall constitute an Event of Default hereunder. The
Borrower agrees that if the ownership of the Property or any part thereof
becomes vested in a person or entity other than the Borrower, the Lender may,
upon notice to the Borrower, deal in any way with such successor or successors
in interest without in any way impairing or discharging the Borrower's liability
hereunder, under the Note or the Mortgage Debt.
1.8 LEASES
The Borrower will not take any action, the effect of which would be to
cause any Lease to cease to be in full force and effect, and will not, except
with the prior written consent of the Lender, (1) cancel or terminate any Lease,
or consent to any cancellation, termination or surrender thereof, or any
assignment thereof; (2) amend, modify or subordinate any Lease; (3) enter into
any new lease; (4) waive any default under or breach of any Lease; (5) consent
to any prepayment or discount of rent or advance rent under any Lease; or (6)
take any other action in connection with any Lease which may impair or
jeopardize the validity of such Lease or the Lender's interest therein. The
Lender shall have the right to review and reasonably refuse written consent to
any of the above proposed actions of the Borrower based upon the substance of
the proposed transaction, the creditworthiness of the Borrower or the tenant,
the financial condition of the Property or otherwise.
1.9 PROPERTY INCOME
A. The Borrower hereby assigns, transfers and grants a security
interest to the Lender in and to the Property Income to secure the Mortgage
Debt. The Borrower will not otherwise assign, transfer or encumber the Property
Income in any manner.
B. The Borrower may, so long as no Event of Default, as defined
hereinafter, has occurred hereunder, collect and use the Property Income, as the
same becomes due and payable, but may not collect same more than thirty (30)
days in advance of the date the same becomes due without the prior written
consent of the Lender. Upon the occurrence of any such Event of Default, the
permission hereby given to the Borrower to collect the Property Income shall
terminate and such permission shall not be reinstated upon a cure of such Event
of Default without the Lender's specific written consent.
C. The foregoing provisions hereof shall constitute an absolute and
present assignment of the Property Income, subject, however, to the conditional
permission given to the Borrower to collect and use such Property Income as
hereinabove provided. The existence or exercise of such right of the Borrower
shall not operate to subordinate this assignment to any subsequent assignment,
in whole or in part, and any such subsequent assignment by the Borrower shall be
subject to the rights of the Lender hereunder.
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1.10 REMOVALS, ALTERATIONS AND DEMOLITION
A. Except as contemplated under the Plans, no Improvements or
Service Equipment constituting part of the Property shall be removed, altered,
demolished or erected (except for normal replacement of the Service Equipment)
without the prior written consent of the Lender. All such changes, additions
and alterations shall become part of the Property immediately upon the
installation thereof. Any replacement equipment shall constitute Service
Equipment and be subject to the lien of this Mortgage.
B. The Borrower may, without the consent of the Lender, remove,
dispose of and replace, at the Borrower's discretion, any item of Service
Equipment which has become worn out or obsolete. Any Service Equipment which is
essential or customary for the normal operation of the Property shall be
replaced. Any replacement equipment shall be of at least equivalent type and
quality as the replaced item of Service Equipment when it was originally
installed or located at the Property, shall be subject to the lien of this
Mortgage, and shall be free and clear of all other liens and encumbrances other
than set forth on SCHEDULE B. The Borrower agrees to execute any mortgage,
security agreement or other document the Lender may require with respect
thereto.
C. Borrower may remove from the Property any machinery and equipment
used in its business operations, so long as such removal does not violate any
other agreement, including without limitation, any security agreement between
the Borrower and Lender.
1.11 PROTECTION OF LIEN AND OTHER EXPENSES
The Borrower shall pay, indemnify, defend and hold the Lender harmless
from:
A. All costs, disbursements, expenses and reasonable counsel fees
incurred by the Lender in connection with:
(1) Protecting or sustaining the lien of this Mortgage;
(2) Any proceeding, action, suit, hearing, motion or
application in which the Lender is a party by reason hereof or in which, in the
Lender's opinion, it becomes necessary to defend and uphold the terms or
priority of this Mortgage;
(3) The preparation for enforcement of Lender's Loan
Documents after the occurrence of an Event of Default and negotiations with
Borrower in connection with the existence or cure of such an Event of Default;
(4) Any proposed refinancing by Lender of the Mortgage
Debt;
(5) The transfer of the Property in lieu of foreclosure; or
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(6) The approval by Lender of actions taken or proposed to
be taken by Borrower or others, which approval is required by the terms of this
Mortgage or other Loan Documents.
B. All damages, reasonable costs and expenses (including, without
limitation, attorney's fees) paid by or imposed upon the Lender in connection
with any bodily injury or death or property damage occurring in or upon or in
the vicinity of the Property through any cause whatsoever or asserted against
Lender on account of any act performed or omitted to be performed hereunder
(other than such acts or omissions constituting the gross negligence of the
Lender) or on account of any transaction arising out of or in any way connected
with the Property, or with this Mortgage or the Mortgage Debt.
C. All amounts paid or incurred by the Lender under this SECTION
1.11 shall constitute Lender Advances pursuant to SECTION 3.4 hereof.
D. The Borrower has contemporaneously with the execution and
recording of this Mortgage executed and recorded as additional security for the
payment of the Mortgage Debt a Collateral Assignment of Leases, Rentals and
Property Income. All amounts paid or incurred by the Lender pursuant to the
Collateral Assignment of Leases and Rentals shall constitute Lender Advances
pursuant to SECTION 3.4 hereof.
1.12 ESTOPPEL CERTIFICATES; INSTRUMENTS OF FURTHER ASSURANCE
The Borrower will deliver to the Lender within ten (10) days after any
request a duly acknowledged Borrower's certificate setting forth the amount of
principal and interest due and payable on the Loan and whether any offsets or
defenses exist with respect to this Mortgage or the Mortgage Debt. Upon the
Lender's request, the Borrower will use its best efforts and due diligence to
obtain delivery of the duly acknowledged certificate of any person having or
acquiring an interest in or encumbrance on all or any part of the Property
setting forth the nature and extent of the interest and stating (1) that the
interest is subordinate to this Mortgage and (2) whether any offsets or defenses
exist with respect to this Mortgage or the Mortgage Debt.
1.13 BOOKS, RECORDS AND ACCOUNTS
The Borrower will keep and maintain proper and accurate books, records
and accounts reflecting all items of income and expense received or paid by the
Borrower or any other person in connection with the Property and all business
operations conducted at or from the Property. The Lender shall have the right
at any time during normal business hours to examine and copy any such books,
records and accounts wherever located.
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1.14 FINANCING STATEMENT
This Mortgage is intended to be effective as a financing statement
pursuant to the Connecticut Uniform Commercial Code with respect to the Service
Equipment. The Lender is the secured party and the Borrower is the debtor with
respect to this financing statement and the mailing addresses of the secured
party and the debtor for the purpose of this financing statement are set forth
in SECTION 4.4 hereof. Upon request the Borrower shall execute and deliver to
the Lender any security agreement, financing or continuation statement or other
document the Lender deems necessary to protect or perfect its lien on the
Service Equipment, and pay all filing fees and other costs, disbursements,
expenses and reasonable counsel fees incurred by the Lender in connection
therewith. The Borrower authorizes the Lender, to the extent permitted by
applicable law, to sign and file any financing or continuation statement at any
time with respect to the Service Equipment in the absence of any signature by or
on behalf of the Borrower. With respect to goods that became fixtures after the
recording of this Mortgage and before the completion of construction of the
Improvements, this mortgage is, and shall be construed to be a "Construction
Mortgage" under Connecticut General Statute Section 42a-9-313(6), as amended,
and any mortgage given to refinance this Mortgage shall be, and shall be
construed to be a mortgage given to refinance a construction mortgage.
1.15 REQUIRED NOTICES
The Borrower shall notify the Lender promptly of the occurrence of any
of the following: (1) an event requiring notice with respect to the following
matters under the following subsections of this Mortgage:
(i) 1.2.C. (Loss or Damage to Property)
(ii) 1.3.E. (Taxes)
(iii) 1.4.A. (Condemnation)
(iv) 1.5.B. (Compliance with Law)
(v) 1.7.D. (Recordation of Liens)
(vi) 1.10. (Removal of Improvements and Service
Equipment)
(vii) 1.20.B.&D. (Compliance of Construction with Law);
(2) receipt of notice from any governmental authority relating to the Property;
(3) receipt of any notice from the holder of any other lien or security interest
in the Property; or (4) commencement of any judicial or administrative
proceedings by or against or otherwise affecting the Borrower, the Property or
any entity controlled by or under common control of the Borrower or any other
action by any creditor thereof as a result of any default under the terms of any
loan.
1.16 OTHER DOCUMENTS
The Borrower upon request shall deliver to the Lender copies or
originals of all reports, licenses, permits, approvals, orders, contracts,
agreements, rights, options, franchises
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and applications relating to or affecting the Property and all business
operations conducted at or from the Property.
1.17 GENERAL REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that as of the date of this
Mortgage:
A. The Borrower is generally paying its debts as such debts become
due, the fair market value of its assets exceeds its liabilities and no
bankruptcy or insolvency proceedings are pending or contemplated by or against
the Borrower.
B. All reports, statements and other data furnished by the Borrower
to the Lender in connection with the Loan are true, correct and complete in all
material respects and do not omit any fact or circumstance which would make the
statements contained therein misleading; present fairly the financial position
of the Borrower as of the date stated therein, and the results of the Borrower's
operation and changes in financial position for the years then ended and the
statements are prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and that no material adverse change
has occurred in the financial condition of the Borrower or the Property since
the date of said financial statement.
C. The Property and all Improvements thereon have not suffered any
damage from fire or other casualty, no part of the Property has been condemned
or taken by eminent domain and no condemnation or other taking of the Property
or any part thereof is threatened or pending, or has been threatened with, any
other title proceedings.
D. There does not now exist on, under or within the Property (or any
contiguous land included in the legal description of the Property within three
years prior to the date hereof) any Spill. There does not now exist any
condition, nor will the current or proposed operations cause there to exist any
condition upon the Property or said contiguous land which would materially
increase the possibility of the occurrence of (1) a Spill, or (2) a material
violation of the Act or any related regulations or any similar federal laws or
regulations.
E. The Borrower, if a corporation, is a valid corporation in good
standing under the laws of the jurisdiction of incorporation and is authorized
to do business in the State of Connecticut.
F. The Borrower, if a limited liability company, is a valid
Connecticut limited liability company, legally existing under Connecticut law,
and is authorized to do business in the State of Connecticut.
G. The Borrower has the legal capacity and is authorized to execute
and deliver all Loan Documents; the Loan Documents are valid and binding
obligations enforceable in accordance with their respective terms and the
execution and delivery thereof do not contravene any contract or agreement to
which the Borrower is a party or by which the
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Borrower or any of its respective properties may be bound and do not contravene
any law, order, decree, rule or regulation to which the Borrower is subject.
H. There is no action, suit or proceeding pending, or, to the
knowledge of the Borrower, threatened against or materially affecting the
Borrower or the Property or the business operations conducted at or from the
Property or which involve the possibility of any judgment or liability not fully
covered by insurance or which, in the Borrower's opinion, might result in any
adverse change in the business, assets or operations of the Borrower which
would, in any way, materially and adversely affect the Property or the validity
or enforceability of the Loan Documents.
I. The Borrower is not a party to or bound by any contract,
agreement or other instrument, or subject to any charter or other restriction or
any judgment, order, writ, injunction, decree, rule or regulation which now or
in the future may materially and adversely affect the business, operations,
properties, assets or condition, financial or otherwise, of the Borrower.
J. The Borrower has filed all required federal, state and local tax
returns, and no claims have been asserted and/or unpaid with respect to such
taxes.
K. The Property has frontage on, and direct access for ingress and
egress to, the public street(s) appurtenant thereto.
L. Electric, gas, sewer, septic, water facilities and any other
necessary utilities are or will be, available in sufficient capacity to service
the Property satisfactorily, and any easements necessary to the furnishing of
such utility service by the Borrower have been or will be obtained and duly
recorded.
M. The Borrower is not in default under the terms of any instrument
evidencing or securing any indebtedness of the Borrower and there has occurred
no event which would, if uncured or uncorrected, constitute a default under any
such instrument with the giving of notice, passage of time, or both.
1.18 PREJUDGMENT REMEDY WAIVER
The Borrower represents, warrants and acknowledges that the
transaction of which this Mortgage is a part is a commercial transaction and not
a consumer transaction. Monies now or in the future to be advanced to or on
behalf of Borrower are not and will not be used for personal, family or
household purposes.
THE BORROWER ACKNOWLEDGES THAT IT HAS THE RIGHT UNDER SECTION 52-278a
ET SEQ. OF THE CONNECTICUT GENERAL STATUTES, SUBJECT TO CERTAIN LIMITATIONS, TO
NOTICE OF AND HEARING ON THE RIGHT OF THE LENDER TO OBTAIN A PREJUDGMENT REMEDY,
SUCH AS ATTACHMENT,
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GARNISHMENT OR REPLEVIN, UPON COMMENCING ANY LITIGATION AGAINST THE BORROWER.
NOTWITHSTANDING SUCH RIGHT, THE BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE,
JUDICIAL HEARING OR PRIOR COURT ORDER TO WHICH IT MIGHT OTHERWISE HAVE THE RIGHT
UNDER SAID STATUTE OR UNDER ANY OTHER STATE OR FEDERAL STATUTE OR CONSTITUTION
IN CONNECTION WITH THE OBTAINING BY THE LENDER OF ANY PREJUDGMENT REMEDY IN
CONNECTION WITH THIS MORTGAGE. THE BORROWER FURTHER CONSENTS TO THE ISSUANCE OF
ANY PREJUDGMENT REMEDIES WITHOUT A BOND AND AGREES NOT TO REQUEST OR FILE
MOTIONS SEEKING TO REQUIRE THE POSTING OF A BOND UNDER PUBLIC ACT 93-431 IN
CONNECTION WITH THE LENDER'S EXERCISE OF ANY PREJUDGMENT REMEDY. THE BORROWER
ALSO WAIVES ANY AND ALL OBJECTION WHICH IT MIGHT OTHERWISE ASSERT, NOW OR IN THE
FUTURE, TO THE EXERCISE OR USE BY THE LENDER OF ANY RIGHT OF SETOFF,
REPOSSESSION OR SELF HELP AS MAY PRESENTLY EXIST UNDER STATUTE OR COMMON LAW,
AND TO THE EXTENT PERMITTED BY LAW,THE BENEFITS OF ALL PRESENT AND FUTURE
VALUATION, APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM
LAWS.
1.19 WAIVER OF TERMINATION RIGHTS
The Borrower hereby waives, for itself or any of its assigns who
assume this Mortgage, any right it may have under Section 49-2(c)(7) of the
Connecticut General Statutes, as amended, or otherwise, to terminate the right
of the Lender to make "optional future advances" as defined under said statute,
including without limitation, Loan Advances made by the Lender pursuant to this
Mortgage, the Note and/or any other Loan Documents.
1.20 CONSTRUCTION COVENANTS
The Borrower hereby covenants to the Lender that it shall:
A. Immediately proceed with the construction and erection of the New
Improvements in accordance with the Plans not substantially cease said
construction and erection for any period of fifteen (15) consecutive days and
complete such construction no later than October 31, 1995.
B. Complete all construction and erection of Improvements in
conformity with the Plans and any and all applicable present and future
requirements of municipal, state or federal authorities having jurisdiction
thereover and promptly notify the Lender of any notice, communication or order
from any such authority.
C. Receive the Loan Advances secured hereby as a trust fund to be
applied by the Borrower solely for the purpose of paying the cost of developing
the Property in accordance with the Plans and for no other purpose.
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D. In the event of the termination, cancellation or suspension of
any governmental agreement, approval, certificate, license or permit which is
necessary for the commencement and completion of all construction, the Borrower
shall restore or remedy such termination, cancellation or suspension within
fifteen (15) days thereafter. The Borrower shall give notice to the Lender of
any such termination, suspension or cancellation within two (2) days thereafter.
If the Borrower is threatened with any such termination, cancellation or
suspension, the Borrower shall immediately notify the Lender thereof and shall
use every reasonable means to prevent such termination, cancellation or
suspension from occurring. The Borrower further agrees to promptly forward a
copy of any notice or communication from any governmental authority pertaining
to the aforesaid construction.
E. Furnish requests for advances during the construction phase in
AIA form satisfactory to and approved by Lender, based on satisfactory
inspectors' certifications and paid receipts and accompanied by such additional
documentation as the Lender may reasonably request.
F. Furnish the Lender a Certificate of Occupancy with respect to the
Property as and when required by the Note.
G. Not perform any further work on the New Improvements after the
Lender has ordered stoppage of construction without the prior written consent of
the Lender unless and until the condition that led to such stop order has been
fully corrected. The Lender shall have the right to order such stoppage and
demand that a condition be corrected when any deviation from the Plans appears,
or defective or unworkmanlike labor or materials are being used in the
construction of the New Improvements, or upon receipt of knowledge of
encroachments to which there has been no written consent by the Lender, or upon
the occurrence of any breach of or default under the general contract.
H. Comply with each and every term and condition contained in
Schedule A to the Commitment Letter.
ARTICLE 2.
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DEFAULT
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2.1 EVENTS OF DEFAULT
Any one or more of the following shall constitute an "EVENT OF
DEFAULT" hereunder:
A. The failure to pay the Mortgage Debt in full by the "MATURITY
DATE" as defined in the Note, or the failure to pay any other installment of
principal and/or interest or any other sums due with respect to the Mortgage
Debt upon maturity or when such installment is otherwise due and payable in
accordance with the provisions of SECTION 1.1 hereof.
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B. The occurrence of an Event of Default (as defined therein) under,
or demand for the payment of any Loan Documents beyond any grace periods set
forth in said agreements, if any.
C. The failure to (1) pay the premiums on or keep in force any
insurance required under SECTION 1.2 hereof; or (2) either deliver the policies
of insurance or reimburse the Lender for premiums paid on such insurance, after
notice and demand as herein provided.
D. The failure to pay any Taxes or other installments within the
applicable time periods set forth under SECTION 1.3 hereof.
E. The failure to reimburse the Lender for Lender Advances pursuant
to SECTION 3.4 hereof.
F. The transfer, encumbrance or change in use of, or other action or
non-action with respect to, the Property or the composition of the Borrower in
contravention of the provisions of SECTION 1.7 hereof.
G. The failure of the Borrower to contain, remove or mitigate any
Spill or the Borrower's failure to immediately upon request reimburse the State
of Connecticut or the Lender for any amounts expended by them with respect to
any Spill.
H. The assignment of the whole or any part of the Leases or the
Property Income except as permitted by the provisions of SECTIONS 1.8 and 1.9.
I. The failure to have any lien, attachment or encumbrance which is
levied against the Property without the Lender's consent (other than the lien
for ad valorem taxes not yet due) discharged within thirty (30) days of its
filing or recording pursuant to the provisions of SUBSECTION 1.7.D. hereof.
J. The actual or threatened waste, removal or demolition of, or
material alteration to, any part of the Property without the Lender's prior
written consent.
K. The failure to observe or perform any other agreements, covenants
or representations of the Borrower contained in this Mortgage for a period of
thirty (30) days after the occurrence of such failure.
L. The occurrence of a default under, or demand for the payment of,
any other note or obligation secured by a mortgage on or security interest in
the Property.
M. The cancellation, revocation, suspension or failure to receive a
grant or renewal of any and all franchises, concessions, licenses and permits
pertaining to or necessary for the construction and operation of the
Improvements on the Property.
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N. The taking of all or any part of the Property through
condemnation, or if the value of the Property shall be impaired by condemnation
or casualty, either temporarily for a period in excess of thirty (30) days, or
permanently.
O. The failure to complete the construction or repair of the
Improvements on the Property to the satisfaction of the Lender on or before
October 31, 1995.
P. The failure to keep, perform or carry out the construction terms
and provisions set forth in SECTION 1.20 hereof.
Q. If the Borrower shall be deprived of title, possession or control
of the Property by process or operation of law or order of any court, or if any
foreclosure proceeding shall be instituted with regard to any lien or mortgage
of any kind affecting the Property.
ARTICLE 3.
----------
REMEDIES
--------
Whenever an Event of Default shall have occurred, the Lender may take any
one or more of the following remedial steps:
3.1 ACCELERATION
The Lender may declare, without demand or notice to the Borrower, the
outstanding principal amount of the Loan and the interest accrued thereon, and
the Mortgage Debt, to be due and payable immediately, and upon such declaration
such principal and interest and other sums shall immediately become, and be, due
and payable.
3.2 FORECLOSURE
A. The Lender may foreclose this Mortgage and exercise its rights as
a secured party for all or any portion of the Mortgage Debt which is then due
and payable, subject to the continuing lien of this Mortgage for the balance not
then due and payable.
B. In the event this Mortgage is foreclosed there shall be included
in the Mortgage Debt, to the extent permitted by law, the costs, disbursements,
and fees paid or incurred by the Lender in connection with the foreclosure
proceedings.
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3.3 POSSESSION OF PROPERTY; APPOINTMENT OF RECEIVER
A. Without notice to the Borrower and without regard to the adequacy
of the security for the Mortgage Debt, proof of depreciation of the value of the
Property or the financial condition of the Borrower, the Lender may, at its
option:
(1) By itself or by agent, with or without bringing any action,
suit or proceeding, immediately enter upon and take possession and control of
the Property and the Property Income with those rights and powers more
particularly set forth in SUBSECTION 3.3.C. hereof.
(2) Either in addition to, by supplement to, as an alternative
to, but not by way of limitation of those rights of the Lender set forth in
SUBSECTION 3.3 A.(1) make application to a court of competent jurisdiction for
and obtain the immediate ex parte appointment of a receiver authorized to
immediately enter upon and take possession and control of the Property and the
Property Income with those rights and powers more particularly set forth in
SUBSECTION 3.3.C. hereof.
(3) Without taking possession and control of the Property,
immediately commence action to collect directly all Property Income due to the
Borrower with full rights and powers to notify all parties liable to make
payments of Property Income to make said payments directly to the Lender or its
agents, and the Lender or its agents shall have the further power and authority
to sue for or otherwise collect and receive all Property Income.
B. The Borrower hereby waives to the fullest extent permitted by law
all rights to prior notice or court hearing in connection with any action by
Lender of the types set forth in SUBSECTIONS 3.3 A.(1), (2), AND (3), and the
Borrower further waives any requirement that Lender provide any bond, surety, or
other security in connection with any said action.
C. In the event the Lender, the Lender's agent and/or a receiver
enters upon and takes possession and control of the Property and/or the Property
Income pursuant to SUBSECTIONS 3.3 A.(1), (2) AND/OR (3), said person or entity
shall have all of the Borrower's rights and powers with respect to the Property
and/or the Property Income in addition to such other rights and powers as may
subsequently be authorized including without limitation the right and power to:
(1) hold, store, use, operate, manage and control the Property
and conduct the business which is or may be conducted therefrom;
(2) make all necessary and proper maintenance, repairs,
renewals, replacements, additions, betterments and improvements to the Property
and purchase or otherwise acquire additional fixtures, personalty and other
property;
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(3) obtain such insurance with respect to the Property and the
business operations conducted therefrom as may be determined necessary;
(4) manage and operate the Property and the business conducted
therefrom and exercise all the rights and powers of the Borrower in its name or
otherwise with respect to the same;
(5) enter into agreements with others to exercise the powers
herein granted, all as the Lender, its agents or a receiver from time to time
may determine;
(6) collect and receive all Property Income;
(7) enforce all terms of existing Leases at the Property and all
other contracts or agreements pertaining to the Property or the business
operations conducted therefrom; and
(8) enter into such new or additional leases and such other
contracts or agreements pertaining to the Property or the business operations
conducted at or from the Property from time to time as the Lender, its agents or
the receiver may determine necessary in its sole discretion.
D. In the event the Lender, the Lender's agent and/or a receiver
enters upon and takes possession and control of the Property and/or the Property
Income pursuant to SUBSECTIONS 3.3 A.(1), (2) AND/OR (3) at a time prior to the
completion, to the Lender's satisfaction, of the construction of the
Improvements required under SECTION 1.20, said person or entity shall, in
addition to such other rights and powers provided in SUBSECTION 3.3 C., have the
right and power to:
(1) Perform any and all work and labor necessary to complete the
Improvements substantially in accordance with the Plans;
(2) Employ watchmen to protect the Property from injury;
(3) Make such additions, changes and corrections in the Plans as
shall be necessary or desirable to complete the New Improvements;
(4) Employ such contractors, subcontractors, agents, architects
and inspectors as shall be required to complete the New Improvements;
(5) Pay, settle or compromise all existing bills and claims
which may be liens against the Property, or as may be necessary or desirable, in
the sole discretion of the Lender, to complete the Improvements or to clear the
title;
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(6) Take over and use all or any part of the labor, materials,
supplies and equipment contracted for, owned by or under the control of the
Borrower, whether or not previously incorporated into the New Improvements;
(7) Execute all applications and certificates in the name of the
Borrower which may be required by any of the construction contract documents;
and
(8) Prosecute and defend all actions or proceedings in
connection with the Property or the construction of the New Improvements and
take such action and require such performance as the Lender shall deem necessary
under any guaranty of completion.
The Lender's rights under this SECTION 3.3.D. shall be subject at
all times to the Lender's right, at its election, at any time to discontinue any
work commenced with respect to the New Improvements or change any course of
action undertaken by it and to not be bound by any limitations or requirements
of time whether set forth herein or otherwise. Effective upon an Event of
Default, the Borrower hereby assigns to the Lender all of the Borrower's
interest in contracts relating to the construction of the Improvements, but this
assignment shall not, in the absence of affirmative ratification of such
contracts by the Lender, be deemed to impose upon the Lender any of the
Borrower's obligations under such contracts.
E. All Property Income collected by the Lender, the Lender's agent
or a receiver pursuant to SUBSECTIONS 3.3 A.(1), (2) OR (3) shall be applied to
the following in such order of priority as the Lender may determine in its sole
discretion:
(1) interest and principal due on the Mortgage Debt;
(2) taxes, assessments and insurance premiums due with respect
to the Property and/or the business operations conducted from the Property;
(3) all costs and expenses of constructing the Improvements,
operating, maintaining, repairing and improving the Property and conducting the
business operations which are or may be conducted at the Property; and
(4) the compensation, salaries, expenses and disbursements of
any agents, employees, attorneys or other representatives of the Lender, the
Lender's agent or the receiver in connection with the possession, control,
construction of the Improvements and/or operation of the Property and the
business operations conducted therefrom, expressly including the payment of any
management agent's fees, and in the event the Lender manages the Property itself
with its own employees, the Lender shall be entitled to charge and collect a
management fee equal to the customary management agent's fee charged for
performing similar management functions in the area where the Property is
located.
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F. The Lender, its agents, or any receiver acting pursuant to
SUBSECTIONS 3.3 A.(1), (2) OR (3) hereof shall in no event be liable or
accountable for more moneys than actually are received from the Property during
the period which the Lender, its agent or any receiver actually is in possession
and control of the Property. Neither the Lender, its agents or any receiver
shall be liable or accountable in any manner for the failure to collect Property
Income for any reason whatsoever.
G. All costs, expenses and liabilities of every character incurred
by the Lender in constructing the Improvements and managing, operating and
maintaining the Property, not paid from Property Income as hereinabove provided,
shall constitute and be treated as Lender Advances pursuant to SECTION 3.4
hereof.
H. The Borrower shall pay monthly, in advance, to the Lender, its
agent or any receiver in possession and control of the Property pursuant to
SUBSECTIONS 3.3 A.(1), (2) OR (3) the fair and reasonable rental value for all
or any part of the Property which is in the use, occupancy and possession of the
Borrower.
I. In the event of foreclosure, the Lender, its agent or any
receiver acting pursuant to SUBSECTIONS 3.3 A.(1), (2) OR (3) may remain in
possession of the Property until (i) the foreclosure sale; (ii) the redemption
of the Property; or (iii) the expiration of any redemption period of the United
States of America extending subsequent to the foreclosure sale, if a deficiency
exists. The Lender, its agents or the receiver shall incur no liability for,
nor shall Borrower assert any claim or setoff as a result of, any action taken
while the Lender, its agent or a receiver is in possession of the Property.
3.4 LENDER ADVANCES
A. The Lender may, without notice or demand, pay any amount which
the Borrower has failed to pay ("LENDER ADVANCES"), or perform any act which the
Borrower has failed to perform hereunder (including, without limitation, (1) the
payment of insurance premiums and/or the furnishing of insurance required under
SECTION 1.2 hereof; (2) the payment of Taxes required under SECTION 1.3 hereof;
(3) the performance of and the payment for repairs and replacements required
under SECTION 1.6. hereof; (4) the cost of discharging any liens or encumbrances
under SUBSECTION 1.7.D. hereof; (5) all expenses incurred or other amounts paid
by Lender pursuant to SECTION 1.11 AND 1.14 and ARTICLE 3 HEREOF; (6) the
payment of costs attendant to the Lender's possession as set forth in SUBSECTION
3.3.G. hereof; and (7) the payment of sums for all purposes otherwise allowed
under the Note. In such event the costs, disbursements, expenses and reasonable
counsel fees thereof, together with interest thereon from the date the expense
is paid or incurred, at the highest interest rate allowed under the Note shall
be (i) added to the Mortgage Debt, (ii) payable on demand to the Lender and
(iii) secured by the lien of this Mortgage, prior to any right, title, interest,
lien or claim attaching or accruing to the Property subsequent to the lien
hereof.
- 23 -
<PAGE>
B. The Lender, in making any Lender Advances which (1) relate to
Taxes asserted against the Property, may do so according to any bill, statement
or estimate procured from the appropriate public office without inquiry into the
accuracy or validity thereof; (2) relate to insurance premiums, may do so
according to any notice, bill, statement or estimate procured from the
appropriate insurer without inquiry into the accuracy or validity thereof; (3)
relate to any apparent or threatened adverse title, lien or encumbrance shall be
the sole judge of the legality or validity of same; (4) relate to the expense of
repairs or replacement of any Property shall be the sole judge of the state of
repairs and the necessity for incurring the expense of any such repairs or
replacement; (5) otherwise relate to any other purpose referred to in SUBSECTION
3.4.A. may do so whenever, in its sole judgment and discretion, such payment
shall seem necessary or desirable to protect the full security intended to be
created by this Mortgage.
3.5 NO MARSHALLING
The Lender shall not be (1) compelled to release, or be prevented from
foreclosing or enforcing this Mortgage upon all or any part of the Property,
unless the entire Mortgage Debt shall be paid in lawful money as aforesaid; (2)
required to accept any part or parts of the Property, as distinguished from the
entire whole thereof, as payment of or upon the Mortgage Debt to the extent of
the value of such part or parts; (3) compelled to accept or allow any
apportionment of the Mortgage Debt to or among any separate parts of the
Property; or (4) prevented from selling the Property in one or more parcels or
as an entirety and in such manner and order as the Lender in its sole discretion
may elect.
3.6 LENDER'S DISCRETION
The Lender, in exercising any remedy provided herein (including the
making of any Lender Advances) which relates to (1) any Taxes, insurance
premiums or other amounts to be paid by the Borrower hereunder, including
without limitation, payments due pursuant to SECTIONS 1.2 AND 1.3 hereof, may do
so in accordance with any notice, bill, statement or estimate procured from the
appropriate public office or insurer without inquiry into the accuracy or
validity thereof; (2) any apparent or threatened adverse title, lien, statement
of lien, encumbrance, claim or charge, shall be the sole judge of the legality
or validity thereof; (3) any repair, maintenance or replacement expense or other
amount to be paid by the Borrower under SECTION 1.6 hereof, or any expense
incurred in connection with the Lender's possession under SECTION 3.3, shall be
the sole judge of the state of repair of the Property and the necessity of
incurring the expense; and (4) any other item or purpose not otherwise
specifically provided for herein, may do so whenever in its sole judgment and
discretion such payment or performance is necessary or desirable to protect the
full security intended by this Mortgage.
3.7 REMEDIES CUMULATIVE
No remedy conferred upon or reserved to the Lender hereunder is or
shall be deemed to be exclusive of any other available remedy or remedies. Each
such remedy shall be distinct, separate and cumulative, shall not be deemed to
be inconsistent with or in exclusion of
- 24 -
<PAGE>
any other available remedy, may be exercised in the sole discretion of the
Lender at any time, in any manner, and in any order, and shall be in addition to
and separate and distinct from every other remedy given the Lender under this
Mortgage or any other Loan Documents, or now or hereafter existing in favor of
the Lender at law or in equity or by statute.
3.8 DELAY, OMISSION OR RELEASE NO WAIVER
A. Time and punctuality shall be of the essence in this Mortgage,
but any delay, omission or failure by the Lender to insist upon the strict
performance by the Borrower of any of the covenants, conditions and agreements
herein set forth, or to exercise any right or remedy available to it upon the
occurrence of an Event of Default hereunder, shall not impair any such right or
remedy or be considered or taken as a waiver or relinquishment of the right in
the future to insist upon and to enforce, by injunction or other appropriate
legal or equitable remedy, strict compliance by the Borrower with all of the
covenants, conditions and agreements herein, or of the right to exercise any
such rights or remedies if such Event of Default by the Borrower be continued or
repeated.
B. The Lender may, without notice to or the consent of the Borrower,
any other person primarily or contingently liable for the payment of the
Mortgage Debt or the holders of any subordinate lien on the Property, (1)
release any part of the security described herein, (2) release the obligation of
any person primarily or contingently liable for the Mortgage Debt secured
hereby, (3) extend the time for payment or otherwise modify the terms of the
Mortgage Debt or this Mortgage, and (4) take any additional security for the
Mortgage Debt. No such release, extension, modification or additional security
shall impair or affect the lien of this Mortgage or its priority over any
subordinate lien and no such party shall be relieved of any liability by reason
thereof.
C. Neither the Borrower nor any other person primarily or
contingently liable for the payment of the Mortgage Debt secured hereby shall be
relieved of any liability by reason of (1) any such release, extension,
modification or taking of additional security; (2) the failure of the Lender to
comply with any request of the Borrower or any such person to foreclose this
Mortgage or exercise any other remedy available hereunder or under or with
respect to the Mortgage Debt; or (3) any agreement or stipulation between any
subsequent owner of the Property and the Lender extending the time of payment or
modifying the terms of the Mortgage Debt or this Mortgage.
3.9 POWER OF ATTORNEY
The Borrower hereby irrevocably appoints, grants and constitutes the
Lender its attorney-in-fact, coupled with an interest, to so execute, deliver
and submit all applications, requests, forms or reports of any kind for all
applicable, desirable or necessary licenses, permits, approvals, authorization,
tax credits or abatements or benefits, of any kind relating, applicable to or
affecting the use and enjoyment of, or construction on, or the business
operations conducted at or from the Property; provided, the foregoing power of
--------
attorney shall be
- 25 -
<PAGE>
exercisable by the Lender only after the occurrence of one or more Events of
Default. Any party dealing with the Lender shall not be required to investigate
the right of the Lender to exercise its authority or to take any action under or
pursuant to this power of attorney nor inquire as to whether or not any Event of
Default exists or has occurred.
3.10 NO MERGER
In the event the Lender shall acquire title to the Property by
conveyance from the Borrower or as a result of the foreclosure of any other
mortgage which the Lender at any time holds with respect to the Property, this
Mortgage shall not merge in the fee of the Property but shall remain and
continue as an existing and enforceable lien for the Mortgage Debt secured
hereby until the same shall be released of record by the Lender in writing.
ARTICLE 4.
----------
MISCELLANEOUS PROVISIONS
------------------------
4.1 FUTURE ADVANCES
This is an "Open-End Mortgage" and the holder hereof shall have all of
the rights, powers and protection to which the holder of any Open-End Mortgage
is entitled under Connecticut law. Upon request the Lender may, in its
discretion, make future advances to the Borrower. Any future Advance, and the
interest payable thereon, shall be secured by this Mortgage when evidenced by a
promissory note stating that the note is secured hereby. At no time shall the
principal amount of the debt secured by this Mortgage exceed the original
principal amount of the Note, nor shall the maturity of any future advance
secured hereby extend beyond the date the final principal payment is due on the
Note. With respect to goods that became fixtures after the recording of this
Mortgage and before the completion of construction of the New Improvements, this
Mortgage is, and shall be construed to be a "construction mortgage" under
Connecticut General Statutes 42a-9-313(6), as amended, and any mortgage given to
refinance this Mortgage shall be, and shall be construed to be a mortgage given
to refinance a construction mortgage.
4.2 GOVERNING LAW; BINDING EFFECT
This Mortgage shall be governed by and construed, interpreted,
regulated and enforced in accordance with the applicable laws of the State of
Connecticut. All covenants, conditions and agreements herein shall run with the
land, and shall be binding upon and inure to the benefit of the respective
heirs, successors and assigns of the Lender and the Borrower.
4.3 MODIFICATIONS, ETC.
No modification, amendment, change, or discharge of any term or
provision of this Mortgage shall be valid or binding unless the same is in
writing and signed by the Lender and the Borrower. The modification of this
Mortgage or of the Mortgage Debt or any other
- 26 -
<PAGE>
instrument securing the Mortgage Debt or the release of any part of the Property
from the lien hereof shall not impair the priority of the lien of this Mortgage.
4.4 NOTICE
A. Any notice, report, demand or other written instrument required
under SECTION 1.15 hereof or otherwise permitted or required to be given, made,
or sent under this Mortgage, shall be in writing, signed by the party giving or
making the same, and shall be sent by certified mail, return receipt requested,
to all parties hereto simultaneously at their respective addresses as follows:
As to the Lender: with a copy to:
----------------
Shawmut Bank Connecticut, N.A. Pepe & Hazard
777 Main Street, MSN 240 Goodwin Square
Hartford, CT 06115 Hartford, CT 06103
Attn: John D. Behan, Vice President Attn: James C. Schulwolf, Esq.
As to the Borrower:
------------------
EDAC Technologies Corporation
1790 New Britain Avenue
Farmington, CT 06032
Attn: Glenn L. Purple, Vice President
B. The date of receipt of any notice shall be deemed to be, and
shall be effective from, the earlier of (1) the date of the actual receipt of
such notice, or (2) three days after same is deposited in the United States mail
as provided above, whether or not the same is actually received by such party.
C. Any party hereto shall have the right to change the place to
which any such notice shall be sent by a similar notice sent in like manner to
all parties hereto.
4.5 NO AGENCY OR JOINT VENTURE
A. Nothing contained in this Mortgage shall be construed to cause
the Borrower to become the agent for, or joint venturer with, the Lender for any
purpose whatsoever, nor shall the Lender be responsible for any shortage,
discrepancy, damage, loss or destruction of any part of the Property for
whatever cause unless same is the direct result of the gross negligence of the
Lender.
B. Whether or not the Lender elects to employ any or all remedies
available to it upon demand or the occurrence of an Event of Default under the
Loan Documents, the Lender shall not be liable for the construction or failure
to construct or complete or protect the Improvements or for payment of any
expense incurred in connection with the exercise of any
- 27 -
<PAGE>
remedy available to the Lender or for the performance or nonperformance of any
other obligation of the Borrower.
4.6 INVALID PROVISIONS
If any clause, provision, section or subsection of this Mortgage shall
be ruled invalid by any court of competent jurisdiction, the invalidity of such
clause, provision, section or subsection shall not affect any of the remaining
provisions hereof. Such invalid or unenforceable term or provision shall be
severed and all other terms and provisions herein shall continue to be effective
and binding; provided, however, if any term or provision herein is invalid or
unenforceable then the same shall be reduced in scope to the extent necessary to
be valid or enforceable.
4.7 INTERPRETATION
In this Mortgage, unless the context otherwise requires:
A. The term "Borrower" shall mean and include any guarantor of all
or any part of the Mortgage Debt or any other person directly or indirectly
responsible for the payment of all or any part of the Mortgage Debt.
B. The terms "hereby", "hereof", "hereto", "herein", "hereunder" and
any similar terms, as used in this Mortgage, shall refer to this Mortgage.
C. Words of the masculine gender shall mean and include correlative
words of the feminine and neuter genders and words importing the singular number
shall mean and include the plural number and vice versa.
D. Words importing persons shall include firms, associations,
partnerships (including limited partnerships), trusts, corporations and other
legal entities, including public bodies, as well as natural persons.
E. Any headings or captions preceding the texts of the several
sections of this Mortgage shall be solely for convenience of reference and shall
not constitute a part of this Mortgage, nor shall they affect its meaning,
construction or effect.
NOW, THEREFORE, if all agreements and provisions contained herein are fully
kept and performed by the Borrower, and all the Mortgage Debt shall be fully
paid in all respects, then this deed shall be void; otherwise to remain in full
force and effect.
- 28 -
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed
and delivered this _____ day of July, 1995.
Signed, sealed and delivered
in the presence of: EDAC TECHNOLOGIES CORPORATION
__________________________ By:_______________________________
Glenn L. Purple
Its Vice President
__________________________
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On this ______ day of July, 1995, before me, the undersigned officer,
personally appeared Glenn L. Purple, Vice President of EDAC Technologies
Corporation, signer and sealer of the foregoing instrument and acknowledged the
same to be her/his free act and deed and the free act and deed of said
corporation.
__________________________________
Notary Public
My commission expires:
- 29 -
<PAGE>
SIXTH AMENDMENT TO REVOLVING LOAN, TERM LOAN, EQUIPMENT LOAN AND SECURITY
------------
AGREEMENT
---------
This SIXTH AMENDMENT TO REVOLVING LOAN, TERM LOAN, EQUIPMENT LOAN AND
SECURITY AGREEMENT, dated as of July ___, 1995 (this "AMENDMENT") is by and
between SHAWMUT BANK CONNECTICUT, N.A., a national banking association with a
principal place of business at 777 Main Street, Hartford, Connecticut 06115
("LENDER") and, EDAC TECHNOLOGIES CORPORATION, a Wisconsin corporation with a
principal place of business at 1790 New Britain Avenue, Farmington, Connecticut
06032 ("BORROWER").
On October 3, 1985, Lender and Borrower entered into a certain Revolving
Loan and Security Agreement which has been amended and restated in its entirety
by a certain Fifth Amended and Restated Revolving Loan, Term Loan, Equipment
Loan and Security Agreement dated February 28, 1995 (as amended and in effect
from time to time, collectively, the "LOAN AGREEMENT").
Pursuant to the Loan Agreement, the Lender has made: (i) a $7,000,000.00
revolving loan (the "REVOLVING LOAN") as evidenced by a certain Revolving
Promissory Note dated February 28, 1995 (the "REVOLVING NOTE"), (ii) a
$500,000.00 equipment loan (the "FIRST EQUIPMENT LOAN") as evidenced by a
certain Equipment Promissory Note dated March 29, 1994 (the "FIRST EQUIPMENT
NOTE"), (iii) a second $500,000.00 equipment loan (the "SECOND EQUIPMENT LOAN")
as evidenced by a certain Equipment Promissory Note II dated February 28, 1995
(the "SECOND EQUIPMENT NOTE") and (iv) a $4,000,000.00 term loan (the "TERM
LOAN") as evidenced by a certain Term Promissory Note dated March 22, 1993 (the
"TERM NOTE").
On July 30, 1992, Gros-Ite Industries, Inc. and Natural Cool LTD
(collectively, the "GUARANTOR") each executed a separate guaranty (collectively,
the "GUARANTY") of the obligations of the Borrower to the Lender. The Loan
Agreement, Revolving Note, the First Equipment Note, the Second Equipment Note,
the Guaranty and the related documents are collectively referred to as the "LOAN
DOCUMENTS".
Borrower has requested that Lender amend the Loan Agreement in order to,
among other things, (i) reference a certain construction loan being made by
Lender to Borrower and (ii) amend the Borrowing Base. Lender has advised
Borrower that Lender is prepared to make the amendments requested on the
condition that Borrower join with Lender in this Amendment.
In consideration of this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lender, Borrower and Guarantor hereby agree as follows:
<PAGE>
1. Definitions. Capitalized terms used herein shall have the meanings
-----------
given to them in the Loan Agreement.
2. Addendum to the Loan Agreement. The Loan Agreement is amended by
------------------------------
adding Section 1.16 thereto after Section 1.15 of the Loan Agreement as follows:
"1.16 Construction Loan means that certain loan of up to
-----------------
$1,000,000.00 made by the Lender to the Borrower for the construction
of a 20,000 square foot manufacturing facility. The Construction Loan
is evidenced by a note dated July ____, 1995 (the "CONSTRUCTION NOTE")
and is secured, among other things, by a mortgage on certain real
property of the Borrower located at 1790 New Britain Avenue,
Farmington, Connecticut (the "PROPERTY")."
3. Amendment to Section 2.1 of the Loan Agreement. The Loan Agreement is
----------------------------------------------
hereby amended by deleting Section 2.1 in its entirety and substituting the
following in lieu thereof:
2.1 Revolving Loan. The Lender may loan to the Borrower, at its
--------------
discretion, and the Borrower may borrow from the Lender, from time to
time (the "REVOLVING LOAN"), up to that amount (hereinafter referred
to as the "BORROWING BASE") which is the lesser of:
a. The sum of:
(1) EIGHTY PERCENT (80%) of the Borrower's Eligible Receivables;
(2) FIFTY-FIVE PERCENT (55%) of the Borrower's Eligible
Inventory, but in any event not to exceed THREE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($3,500,000.00); AND
(3) FIFTY PERCENT (50%) of the Borrower's Eligible Inventory in
excess of the budgeted level of inventory of Borrower, as
determined by the Lender in its reasonable discretion;
which sum shall be reduced by the aggregate amount committed
under any letter or letters of credit issued by the Lender on
behalf of the Borrower; OR
- 2 -
<PAGE>
b. SEVEN MILLION DOLLARS ($7,000,000.00), reduced by the aggregate
amount committed under any letter or letters of credit issued by
the Lender on behalf of the Borrower.
Nothing herein shall be construed to require the Lender to lend
up to the Borrowing Base, and nothing shall prohibit the Lender
from lending in excess of the Borrowing Base, all loans to be at
the discretion of the Lender.
The Revolving Loan shall be evidenced by the Revolving Promissory
Note annexed hereto and made a part hereof as EXHIBIT "B".
4. Amendment to Exhibit A of the Loan Agreement. The Loan Agreement is
--------------------------------------------
hereby amended by deleting Section 11 of Exhibit A in its entirety and
substituting the following in lieu thereof:
11. Capital Expenditures Limitation. The Borrower will not make in
-------------------------------
any one fiscal year, directly or indirectly, capital expenditures
for the purchase, fabrication, creation or lease of fixed assets,
including rentals on leased items, but excluding the capital
expenditures associated with the construction of the proposed
20,000 square foot building, in excess of an aggregate of TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00) (non-
cumulative) for the 1995 fiscal year and ONE MILLION TWO HUNDRED
THOUSAND DOLLARS ($1,200,000.00) (noncumulative) each fiscal year
thereafter. For purposes of this paragraph, the word
"expenditures" shall refer to:
a. in the event of a purchase, the entire purchase price of the
fixed asset; or
b. in the case of a lease, the entire rental for the term.
5. Amendment to the Loan Documents. The Loan Documents are hereby
-------------------------------
amended to be made consistent with this Amendment.
6. Waiver of Covenant Violation. Lender hereby waives any and all
----------------------------
violations prior to the date hereof of the Capital Expenditures Covenant in
Section 11 of the Loan Agreement.
7. Ratifications, Etc. Except as otherwise expressly set forth herein,
-------------------
all terms and conditions of the Loan Agreement and the Loan Documents are
ratified and shall remain in full force and effect. Nothing herein shall be
construed to be a waiver of any requirements of the Loan Agreement and the Loan
Documents except as expressly set forth herein.
- 3 -
<PAGE>
8. Conditions Precedent. The effectiveness of this Amendment shall be
--------------------
subject to the closing of the Construction Loan and Lender's prior receipt of
each of the following in form and substance satisfactory to Lender and its
counsel:
A. This Amendment, duly executed and delivered by the Borrower.
B. Copies of all corporate action taken by the Borrower, including
resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Loan Documents to which it is a
party and each other document to be delivered pursuant to this
Amendment, certified as of the date of this Amendment by the
Secretary of the Borrower;
C. A certificate, dated as of the date of this Amendment, of the
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign the
Loan Documents to which the Borrower is a party and the other
documents to be delivered by the Borrower under this Amendment;
D. Reaffirmation of Guarantee duly executed by Guarantors; and
E. All fees and expenses, including legal fees and related
disbursements incurred by Lender in connection with the
structuring, negotiation, preparation and closing of this
Amendment and the Construction Loan and the transactions related
hereto.
F. Counterparts. This Amendment may be executed in any number of
------------
counterparts, which together shall constitute one instrument.
G. Governing Law. This Amendment shall be construed and interpreted
-------------
in accordance with the laws of the State of Connecticut.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
instrument under seal.
LENDER:
SHAWMUT BANK CONNECTICUT, N.A.
By____________________________
John Behan
Its Vice President
Duly Authorized
BORROWER:
EDAC TECHNOLOGIES CORPORATION
By_______________________
Glenn L. Purple
Its Vice President
Duly Authorized
- 5 -
<PAGE>
MODIFICATION OF CONSTRUCTION TO
PERMANENT LOAN PROMISSORY NOTE AND
OPEN-END CONSTRUCTION TO PERMANENT MORTGAGE DEED
------------------------------------------------
THIS MODIFICATION OF CONSTRUCTION TO PERMANENT LOAN PROMISSORY NOTE AND OPEN-END
CONSTRUCTION TO PERMANENT MORTGAGE DEED (the "AGREEMENT"), entered into as of
the 31st day of October, 1995, by and between EDAC TECHNOLOGIES CORPORATION, a
Wisconsin corporation having a place of business at 1790 New Britain Avenue,
Farmington, Connecticut 06032 (the "BORROWER"), and FLEET NATIONAL BANK OF
CONNECTICUT F/K/A SHAWMUT BANK CONNECTICUT, N.A. a national banking association,
having an office at 777 Main Street, Hartford, Connecticut 06115 (the "LENDER").
W I T N E S S E T H:
1. The Borrower executed a certain Construction to Permanent Loan
Promissory Note dated July 31, 1995 in the original principal amount of up to
$1,000,000 in favor of the Lender (the "NOTE"), which Note is secured by, among
other things, an Open-End Construction to Permanent Mortgage Deed from the
Borrower in favor of Lender dated August 3, 1995 and recorded in Volume 502 at
Page 1024 of the Farmington Land Records (the "MORTGAGE"), encumbering certain
real property located in the Town of Farmington as more particularly described
in Schedule A to the Mortgage.
----------
2. The Borrower has requested that the Lender (a) extend the Conversion
Date (as defined in the Note) to November 30, 1995, (b) extend the date for
completion of the Improvements (as defined in the Note) to November 30, 1995,
and (c) extend the last date for the making of construction advances under the
Note to November 30, 1995.
3. As a condition to the extension, the Lender requires the Borrower to
enter into this Agreement.
4. In consideration of the foregoing, and for One ($1.00) Dollar and
other valuable consideration received to its satisfaction, the Borrower agrees
to modify the terms and conditions of the Note and Mortgage as more specifically
set forth in this Agreement.
TERMS OF AGREEMENT
------------------
A. Modification of Note.
--------------------
The Borrower and the Lender agree that the terms of the Note are
hereby modified in accordance with the following:
<PAGE>
-2-
1. Subsection (6)(a) under the Section entitled "A. DEFINITIONS." on
---------------
page 2 of the Note is hereby deleted and replaced with the following:
(a) the Borrower shall give the Lender prior notice of its intent to
convert the Loan, which notice shall specify the Conversion Date
(the "CONVERSION NOTICE");
2. The definition of "Conversion Date" on page 3 of the Note is
hereby deleted and replaced with the following:
"Conversion Date" shall mean the date, occurring no later than November 30,
1995, on which the Loan is converted from the Construction Loan to the Permanent
Loan. Provided that the Lender determines that the Borrower has satisfied the
conditions specified in the Note for Conversion, such date shall be the first
day of the month occurring on the first day of the month on or after the
Conversion Notice.
3. The last sentence of the first paragraph under the Section
entitled "B. CONSTRUCTION LOAN TERMS." on page 5 of the Note is hereby deleted
---------------------------
and replaced by the following:
If not sooner paid, the entire outstanding principal sum together with accrued
interest thereon shall be due and payable in full on November 30, 1995, unless
the Construction Loan is converted to the Permanent Loan pursuant to the terms
hereof.
4. Subsection (12) of the section entitled "F. EVENTS OF DEFAULT."on
--------------------
page 8 of the Note is hereby deleted and replaced with the following:
(12) The failure to convert the Loan from the Construction Loan to the Permanent
Loan on or before November 30, 1995.
B. Modification of Mortgage.
------------------------
The Borrower and Lender hereby agree that the terms of the Mortgage
are hereby modified in accordance with the following:
1. Any and all references in the Mortgage to the term "Note" or
words of similar import shall be deemed to mean and refer to the Note as
modified by this Modification Agreement.
2. The form of the Note attached as Schedule D to the Mortgage is
----------
hereby modified in accordance with Section A. above.
<PAGE>
-3-
3. The fourth "WHEREAS" clause on page 2 of the Mortgage is hereby
deleted and replaced with the following:
WHEREAS, the Borrower agrees to complete the erection of the New Improvements to
the satisfaction of the Lender within a reasonable time from the date hereof or
at the latest, on or before November 30, 1995; and
4. Subsection 1.20.A. on page 16 of the Mortgage is hereby deleted
and replaced with the following:
A. Immediately proceed with the construction and erection of the New
Improvements in accordance with the Plans and not substantially cease said
construction and erection for any period of fifteen (15) consecutive days and
complete such construction no later than November 30, 1995.
5. Section 2.1.O on page 19 of the Mortgage is hereby deleted and
replaced with the following:
The failure to complete the construction or repair of the Improvements on the
Property to the satisfaction of the Lender on or before November 30, 1995.
C. Miscellaneous
-------------
1. Except as specifically modified hereby, all of the terms and
conditions of the Note and Mortgage shall remain in full force and effect, and
Borrower hereby ratifies and affirms each of its respect obligations, terms,
conditions, covenants, representations and warranties contained therein, except
to the extent expressly modified hereby. Borrower agrees to be bound by the
terms and conditions of said instruments, as modified by this Agreement.
2. The rights and duties of the parties under this Agreement shall
be governed by the laws of the State of Connecticut.
3. This Agreement shall be binding upon the Borrower, the Lender and
each of their respective successors and assigns.
4. Nothing contained in this Agreement shall constitute a repayment
of the Note, or affect the priority of the lien of the Mortgage.
<PAGE>
-4-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument by their duly authorized representatives as of the date
first above written.
Witnesses: EDAC TECHNOLOGIES CORPORATION
___________________________________
___________________________________ By:___________________________________
Glenn L. Purple
Its: Vice President
___________________________________ FLEET NATIONAL BANK OF
CONNECTICUT f/k/a SHAWMUT
BANK CONNECTICUT, N.A.
___________________________________ By:___________________________________
Its:
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On this ____ day of December, 1995, before me, personally appeared Glenn L.
Purple, known to me to be the Vice President of EDAC TECHNOLOGIES CORPORATION, a
Wisconsin corporation, signer and sealer of the foregoing instrument and
acknowledged the same to be his free act and deed and the free act and deed of
said corporation.
______________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:________________
<PAGE>
-5-
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On this ____ day of December, 1995, before me, personally appeared
___________________, known to me to be the ______________________ of FLEET
NATIONAL BANK OF CONNECTICUT f/k/a SHAWMUT BANK CONNECTICUT, N.A., a national
banking association, signer and sealer of the foregoing instrument and
acknowledged the same to be his free act and deed and the free act and deed of
said banking association.
______________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
<PAGE>
SEVENTH AMENDMENT TO REVOLVING LOAN, TERM LOAN, EQUIPMENT LOAN AND SECURITY
AGREEMENT AND REAFFIRMATION OF GUARANTIES
This SEVENTH AMENDMENT TO REVOLVING LOAN, TERM LOAN, EQUIPMENT LOAN AND
SECURITY AGREEMENT AND REAFFIRMATION OF GUARANTIES, dated as of January ___,
1996 (this "AMENDMENT") is by and between FLEET NATIONAL BANK OF CONNECTICUT
F/K/A SHAWMUT BANK CONNECTICUT, N.A., a national banking association with a
principal place of business at 777 Main Street, Hartford, Connecticut 06115
("LENDER") and, EDAC TECHNOLOGIES CORPORATION, a Wisconsin corporation with a
principal place of business at 1790 New Britain Avenue, Farmington, Connecticut
06032 ("BORROWER").
On October 3, 1985, Lender and Borrower entered into a certain Revolving
Loan and Security Agreement which has been (a) amended and restated in its
entirety by a certain Fifth Amended and Restated Revolving Loan, Term Loan,
Equipment Loan and Security Agreement dated February 28, 1995 and (b) amended by
a certain Sixth Amendment to Revolving Loan, Term Loan, Equipment Loan and
Security Agreement dated July 31, 1995 (as amended and in effect from time to
time, collectively, the "LOAN AGREEMENT").
Pursuant to the Loan Agreement, the Lender has made to the Borrower: (i) a
$7,000,000.00 revolving loan (the "REVOLVING LOAN") as evidenced by a certain
Revolving Promissory Note dated February 28, 1995 (the "REVOLVING NOTE"), (ii) a
$500,000.00 equipment loan (the "FIRST EQUIPMENT LOAN") as evidenced by a
certain Equipment Promissory Note dated March 29, 1994 (the "FIRST EQUIPMENT
NOTE"), (iii) a second $500,000.00 equipment loan (the "SECOND EQUIPMENT LOAN")
as evidenced by a certain Equipment Promissory Note II dated February 28, 1995
(the "SECOND EQUIPMENT NOTE") and (iv) a $4,000,000.00 term loan (the "TERM
LOAN") as evidenced by a certain Term Promissory Note dated March 22, 1993 (the
"TERM NOTE").
On July 30, 1992, Gros-Ite Industries, Inc. and Natural Cool LTD
(collectively, the "GUARANTOR") each executed a separate guaranty (collectively,
the "GUARANTY") of the obligations of the Borrower to the Lender. The Loan
Agreement, Revolving Note, the First Equipment Note, the Second Equipment Note,
the Guaranty and the related documents are collectively referred to as the "LOAN
DOCUMENTS".
Borrower has requested that Lender amend the Loan Agreement in order to,
among other things, extend the termination date of the Revolving Loan. Lender
has advised Borrower that Lender is prepared to make the amendment requested on
the condition that Borrower join with Lender in this Amendment.
<PAGE>
In consideration of this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lender, Borrower and Guarantor hereby agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
-----------
given to them in the Loan Agreement.
2. Amendment to Section 2.9 of the Loan Agreement. The Loan Agreement is
----------------------------------------------
hereby amended by deleting the first sentence of Section 2.9 in its entirety and
substituting the following in lieu thereof:
The Revolving Loan shall terminate on April 30, 1996 and may be
renewed by the Lender, in its sole and absolute discretion, upon
written notification by the Lender prior to April 30, 1996, which
notification will contain the terms and conditions of any renewal.
3. Amendment to the Loan Documents. The Loan Documents are hereby
-------------------------------
amended to be made consistent with this Amendment.
4. Ratifications, Etc. Except as otherwise expressly set forth herein,
-------------------
all terms and conditions of the Loan Agreement and the Loan Documents are
ratified and shall remain in full force and effect. Nothing herein shall be
construed to be a waiver of any requirements of the Loan Agreement and the Loan
Documents except as expressly set forth herein.
5. Reaffirmation of Guaranty. To induce the Lender to enter into this
-------------------------
Amendment, the Guarantor hereby (a) consents to the Agreement and (b) affirms
and ratifies the Guaranty and confirms that (i) it does irrevocably and
unconditionally guarantee to the Lender the payment and performance from the
Borrower of the Obligations (as defined in the Guaranty) from the Borrower to
the Lender, upon the terms and conditions set forth in the Guaranty, (ii) the
term Obligations includes, without limitation, the Amendment, and (iii) the
Guaranty remains in full force and effect.
6. Counterparts. This Amendment may be executed in any number of
------------
counterparts, which together shall constitute one instrument.
7. Governing Law. This Amendment shall be construed and interpreted in
-------------
accordance with the laws of the State of Connecticut.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
instrument under seal.
LENDER:
FLEET NATIONAL BANK OF
CONNECTICUT f/k/a
SHAWMUT BANK CONNECTICUT, N.A.
By:_________________________
John D. Behan
Its Vice President
Duly Authorized
BORROWER:
EDAC TECHNOLOGIES CORPORATION
By:_________________________
Glenn L. Purple
Its Vice President
Duly Authorized
GUARANTORS:
NATURAL COOL LTD.
By:_________________________
Its
GROS-ITE INDUSTRIES, INC.
By:_________________________
Its
- 3 -
<PAGE>
EIGHTH AMENDMENT TO REVOLVING LOAN, TERM LOAN,
EQUIPMENT LOAN AND SECURITY AGREEMENT,
MODIFICATION OF NOTES AND REAFFIRMATION OF GUARANTIES
-----------------------------------------------------
This EIGHTH AMENDMENT TO REVOLVING LOAN, TERM LOAN, EQUIPMENT LOAN,
SECURITY AGREEMENT AND REAFFIRMATION OF GUARANTIES, dated as of April ___, 1996
(this "AMENDMENT") is by and between FLEET NATIONAL BANK F/K/A FLEET NATIONAL
BANK OF CONNECTICUT F/K/A SHAWMUT BANK CONNECTICUT, N.A., a national banking
association with a place of business at 777 Main Street, Hartford, Connecticut
06115 ("LENDER") and EDAC TECHNOLOGIES CORPORATION, a Wisconsin corporation with
a principal place of business at 1790 New Britain Avenue, Farmington,
Connecticut 06032 ("BORROWER").
On October 3, 1985, Lender and Borrower entered into a certain Revolving
Loan and Security Agreement which has been (a) amended and restated in its
entirety by a certain Fifth Amended and Restated Revolving Loan, Term Loan,
Equipment Loan and Security Agreement dated February 28, 1995, (b) amended by a
certain Sixth Amendment to Revolving Loan, Term Loan, Equipment Loan and
Security Agreement dated July 31, 1995 and (c) amended by a certain Seventh
Amendment to Revolving Loan, Term Loan, Equipment Loan and Security Agreement
and Reaffirmation of Guaranties dated as of January 26, 1996 (as amended and in
effect from time to time, collectively, the "LOAN AGREEMENT"). Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Loan Agreement.
Pursuant to the Loan Agreement, the Lender has made: (i) a $7,000,000.00
revolving loan (the "REVOLVING LOAN") as evidenced by a certain Revolving
Promissory Note dated February 28, 1995 (the "REVOLVING NOTE"), (ii) a
$500,000.00 equipment loan (the "FIRST EQUIPMENT LOAN") as evidenced by a
certain Equipment Promissory Note dated March 29, 1994 (the "FIRST EQUIPMENT
NOTE"), (iii) a second $500,000.00 equipment loan (the "SECOND EQUIPMENT LOAN")
as evidenced by a certain Equipment Promissory Note II dated February 28, 1995
(the "SECOND EQUIPMENT NOTE"), (iv) a $4,000,000.00 term loan (the "TERM LOAN")
as evidenced by a certain Term Promissory Note dated March 22, 1993 (the "TERM
NOTE") and (v) a $1,000,000.00 construction to permanent loan (the "CONSTRUCTION
LOAN") as evidenced by a certain Construction to Permanent Loan Promissory Note
dated July 31, 1995 (the "CONSTRUCTION NOTE").
On July 30, 1992, Gros-Ite Industries, Inc. and Natural Cool LTD
(collectively, the "GUARANTORS") each executed a separate guaranty of the
obligations of the Borrower to the Lender, which guaranties have been reaffirmed
from time to time (collectively, the "GUARANTIES"). The Loan Agreement,
Revolving Note, the First Equipment Note, the Second Equipment Note, the
Guaranties and the related documents are collectively referred to as the "LOAN
DOCUMENTS".
<PAGE>
Borrower has requested that Lender amend the Loan Agreement and the Loan
Documents in order to, among other things, (i) extend the termination date of
the Revolving Loan, (ii) amend the Borrowing Base, and (iii) make other
amendments as set forth herein. Lender has advised Borrower that Lender is
prepared to make the amendments requested on the condition that Borrower join
with Lender in this Amendment upon the terms and conditions set forth herein.
In consideration of this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lender, Borrower and Guarantors hereby agree as follows.
I. Acknowledgments, Affirmations and Representations and Warranties.
----------------------------------------------------------------
A. The Borrower and each of the Guarantors acknowledge and affirm that:
1. All of the statements contained herein are true and correct and
that they understand that the Lender is relying on the truth and completeness of
such statements to enter into this Amendment.
2. As of the date hereof and without regard to the financial
accommodations contemplated herein, the Borrower is legally and validly indebted
to the Lender in the principal amount of $__________ with respect to the
Revolving Loan, $251,377.71 with respect to the First Equipment Loan,
$455,772.45 with respect to the Second Equipment Loan and $3,493,294.72 with
respect to the Term Loan, plus interest and fees accrued and accruing thereon
and costs and expenses of collection, including without limitation, attorneys'
fees, and there is no defense, offset or counterclaim with respect to any of the
foregoing or independent claim or action against the Lender.
3. The Guarantors are legally and validly and jointly and severally
indebted to the Lender by virtue of the Guaranties and there is no defense,
offset or counterclaim with respect thereto or claim or independent against the
Lender.
B. The Borrower and each of the Guarantors represent and warrant to the
Lender that:
1. The resolutions previously adopted by the Board of Directors of
the Borrower and the Guarantors and provided to the Lender have not in any way
been rescinded or modified and have been in full force and effect since their
adoption to and including the date hereof and are now in full force and effect,
except to the extent that they have been modified or supplemented to authorize
this Amendment and the documents and transactions described herein.
- 2 -
<PAGE>
2. The Borrower and each of the Guarantors have the corporate power
and authority to enter into, and have taken all necessary corporate action to
authorize, this Amendment and the transactions contemplated hereby.
3. All representations, warranties and covenants contained in, and
schedules and exhibits attached to, the Loan Documents are true and correct on
and as of the date hereof, are incorporated herein by reference and are hereby
remade.
4. Other than the defaults previously waived in writing by the
Lender, the Borrower and the Guarantors are not currently in default under any
of the Loan Documents, and no condition exists which would constitute an event
of default under any of the Loan Documents but for the giving of notice or
passage of time, or both.
5. The consummation of the transactions contemplated hereby is not
prevented or limited by, nor does it conflict with or result in a breach of
terms, conditions or provisions of the Borrower's or Guarantors' respective
Certificates of Incorporation or Bylaws or any evidence of indebtedness,
agreement or instrument of whatever nature to which the Borrower or any of the
Guarantors is a party or by which any of them is bound, does not constitute a
default under any of the foregoing and does not violate any federal, state or
local law, regulation or order or any order of any court or agency which is
binding upon the Borrower or any of the Guarantors.
II. Amendments to Loan Documents.
----------------------------
A. Amendments to the Loan Agreement.
--------------------------------
1. Amendment to Section 2.1 of the Loan Agreement. The Loan
----------------------------------------------
Agreement is hereby amended by deleting Section 2.1 in its entirety and
substituting the following in lieu thereof:
2.1 Revolving Loan. The Lender may loan to the Borrower, at its
--------------
discretion, and the Borrower may borrow from the Lender, from time to
time (the "REVOLVING LOAN"), up to that amount (hereinafter referred
to as the "BORROWING BASE") which is the lesser of:
a. The sum of:
(1) EIGHTY PERCENT (80%) of the Borrower's Eligible Receivables;
(2) FIFTY-FIVE PERCENT (55%) of the Borrower's Eligible
Inventory, but in any event not to exceed FOUR MILLION
DOLLARS ($4,000,000.00);
- 3 -
<PAGE>
which sum shall be reduced by the aggregate amount committed
under any letter or letters of credit issued by the Lender on
behalf of the Borrower; OR
b. SEVEN MILLION DOLLARS ($7,000,000.00), reduced by the
aggregate amount committed under any letter or letters of
credit issued by the Lender on behalf of the Borrower.
Nothing herein shall be construed to require the Lender to
lend up to the Borrowing Base, and nothing shall prohibit
the Lender from lending in excess of the Borrowing Base, all
loans to be at the discretion of the Lender.
The Revolving Loan shall be evidenced by the Revolving
Promissory Note annexed hereto and made a part hereof as
EXHIBIT "B".
2. Amendment to Section 2.9 of the Loan Agreement. The Loan
----------------------------------------------
Agreement is hereby amended by deleting the first sentence of Section 2.9 in its
entirety and substituting the following in lieu thereof:
The Revolving Loan shall terminate on March 31, 1997 and may be
renewed by the Lender, in its sole and absolute discretion, upon
written notification by the Lender prior to March 31, 1997, which
notification will contain the terms and conditions of any
renewal.
3. Amendments to Section 4.1 of the Loan Agreement. Section 4.1 of
-----------------------------------------------
the Loan Agreement is hereby amended by:
a. Deleting Section 4.1.i. in its entirety and substituting the
following in lieu thereof:
The Borrower at all times hereafter shall: maintain a
standard and modern system of accounting in accordance with
generally accepted accounting principles and ledger and
account cards which contain such information as may be
requested by the Lender; permit the Lender or any of its
employees, officers or agents, upon demand during the
Borrower's usual business hours, to have access to and to
examine all of the Borrower's books and records, and in
connection therewith, permit the Lender or any such
employees, officers or agents to copy and make abstracts
therefrom; deliver to the Lender (1) within ninety (90) days
after the end of each of the Borrower's fiscal years, a
reasonably detailed balance sheet and a
- 4 -
<PAGE>
reasonably detailed profit and loss statement covering the
Borrower's operations for such fiscal year audited and
certified by an independent certified public accountant
satisfactory to the Lender, along with a management letter
from such accountant; (2) within forty-five (45) days after
the end of each of the Borrower's fiscal quarters, a
reasonably detailed balance sheet and a reasonably detailed
profit and loss statement covering the Borrower's operations
for such fiscal quarter which financial information may be
internally prepared, and setting forth calculations in
reasonable detail evidencing such compliance along with a
certificate executed and certified as being true, correct
and complete, by the president or chief financial officer of
the Borrower demonstrating that the Borrower is in
compliance with all financial covenants contained in this
Loan Agreement; (3) within thirty (30) days after the end of
each month, a balance sheet and a profit and loss statement
covering the Borrower's operations for that month, which may
be internally prepared; (4) within thirty (30) days after
the end of each month, a backlog report including bookings
and shipments for that month; (5) within twenty (20) days
after the end of each calendar month, for such month, (i) a
detailed aging of Receivables, (ii) a detailed accounts
payable aging, and (iii) inventory reports, each in form and
substance satisfactory to Lender; (6) daily, a borrowing
base certificate and borrowing certificate reconciliations
in form and substance satisfactory to Lender and (7) within
twenty (20) days after demand by the Lender, deliver to the
Lender copies of any interim financial report or statement
prepared by or for the Borrower, any other report requested
by the Lender relating to the Collateral and the financial
condition of the Borrower. Each financial report provided
to the Lender shall be accompanied by a certificate signed
by an authorized officer of the Borrower to the effect that
all reports, statements or documents delivered or caused to
be delivered to the Lender under this subparagraph are
complete, correct and thoroughly present the financial
condition of the Borrower and that there exists on the date
of delivery of said certificate to the Lender no condition
or event which constitutes an Event of Default and that no
events have occurred which, after notice by the Lender or
lapse of time or both, would constitute an Event of Default.
b. Adding Sections 4.1.m., 4.1.n. and 4.1.o. to the Loan
Agreement after Section 4.1.l. as follows:
- 5 -
<PAGE>
4.1.m. The Borrower shall undertake and use its best
efforts to implement the recommendations of the Agreed Upon
Procedures Report (the "PROCEDURES REPORT") to be issued by
Arthur Andersen, which Procedures Report shall include,
without limitation, the following recommendations:
(1) That Arthur Andersen complete an audit of the
Borrower's Inventory as of June 30, 1996 and
provide a valuation of the same;
(2) That the Borrower implement a formal procedure for
estimating the cost of completion and the related
overall margins on a job by job basis.
(3) That Borrower track finished goods.
(4) That Borrower track and bill termination claims.
(5) That Borrower track scrap by job and offset the
cost of sales by scrap so that a true profit
margin is generated.
(6) That Borrower track parts held at subcontractors.
(7) That the Borrower create formal written agreements
and policies for employee loans or advances.
(8) That the Borrower properly record receipts of cash
in advance of shipment from customers (debit cash
and credit the liability account).
(9) That the Borrower officially void the blank first
check on the payroll run.
(10) That the Borrower analyze the costs of storing
spare parts for Zapata and consider charging such
costs to Zapata.
(11) That the Borrower either bill Pratt & Whitney
("PRATT") or obtain purchase orders from Pratt for
parts completed for Pratt and held by the
Borrower.
- 6 -
<PAGE>
(12) That the Borrower dispose of parts owned by Pratt
but held by the Borrower.
4.1.n. The Borrower shall engage Arthur Andersen to review
the Borrower's progress with respect to the matters set
forth in the Procedures Report.
4.1.o. The Borrower shall pay the Lender a fee in the
amount of $20,000.00 if the Lender notifies the Borrower
that the Lender will renew the Revolving Loan. If the
Lender so notifies the Borrower of the Revolving Loan, but
the Borrower for any reason declines to renew the Revolving
Loan, the Borrower shall pay the Lender a fee in the amount
of $30,000.00. Such fee shall be payable in immediately
available funds on the earlier of (i) the effective date of
such renewal or (ii) the day on which the Borrower declines
to renew the Revolving Loan. Nothing contained herein shall
obligate the Lender to renew the Revolving Loan or prevent
the Lender from terminating the Revolving Loan pursuant to
the terms of the Loan Agreement.
4. Amendment Section 4.2 of the Loan Agreement. Section 4.2 of the
-------------------------------------------
Loan Agreement is hereby amended by deleting Section 4.2.o in its entirety and
substituting the following in lieu thereof:
Make any loan, advance, contribution or payment of money or goods
to any subsidiary, affiliated or parent corporation or to any
officer, director or stockholder thereof (except compensation for
personal services rendered) in excess of $250,000 in the
aggregate at any time.
5. Addendum to Section 5.1 of the Loan Agreement. Section 5.1 of
---------------------------------------------
the Loan Agreement is hereby amended by adding Section 5.1.o after Section 5.1.n
as follows:
5.1.o If the Lender, in its sole and absolute discretion, is not
satisfied with the progress of the Borrower in implementing the
recommendations of the Procedures Report.
6. Amendment to Exhibit A of the Loan Agreement. Exhibit A of the
--------------------------------------------
Loan Agreement is hereby amended by:
a. Deleting Section 4 of Exhibit "A" to the Loan Agreement in
its entirety and substituting the following in lieu thereof:
- 7 -
<PAGE>
4. Lender's Audit Fee. The Borrower agrees to pay to the
------------------
Lender, upon demand, an audit fee (the "AUDIT FEE") of FIVE
HUNDRED DOLLARS ($500.00) per man day. So long as no Event
of Default has occurred under this Loan Agreement, the
Borrower shall not be required to pay the Lender more than
ONE THOUSAND DOLLARS ($1,000.00) per audit in Audit Fees.
In addition to the Audit Fee, the Borrower shall reimburse
the Lender, upon demand, for any reasonable travel expenses
incurred by the Lender. So long as no Event of Default has
occurred, Lender shall conduct no more than four on-site
audits of the Borrower per year.
b. Adding Section 5.d after Section 5.c as follows:
UCC-1 Financing Statement naming EDAC Technologies
Corporation as lessee and Summit Machine as lessor, and
filed with the Connecticut Secretary of State.
c. Deleting Section 7 in its entirety and substituting the
following in lieu thereof:
7. LOCATION OF COLLATERAL. The Collateral shall be held at
----------------------
1790, 1798, 1806 and 1838 New Britain Avenue, Farmington,
Connecticut. The Borrower shall immediately furnish written
notification to the Lender of any change or addition of
location of any place of the Borrower's business or location
at which any assets of the Borrower are located or stored.
d. Deleting Section 10 in its entirety and substituting the
following in lieu thereof:
Debt Service Ratio. The Borrower shall maintain as of the
------------------
end of each calendar quarter, for the year to date period, a
ratio of [(earnings before interest, taxes and depreciation
allowance) minus (taxes paid)] to [(payments of Current
----- --
Maturities of Long-Term Debt scheduled to be made during the
period to be tested) plus (interest)] of (a) not less than
----
1.3 to 1.0 as of March 31, 1996, (b) 1.1 to 1.0 as of June
30, 1996, (c) 1.1 to 1.0 as of September 30, 1996. The
Borrower shall maintain as of the fiscal year end, for the
year to date period, a ratio of [(earnings before interest,
taxes and depreciation allowance) minus (taxes paid)] minus
----- -----
(unfunded capital expenditures) to [(payments of Current
Maturities of Long-Term Debt scheduled to be made during the
period to be tested)
- 8 -
<PAGE>
plus (interest)] of 0.8 to 1.0 as of December 31, 1996.
----
"CURRENT MATURITIES OF LONG TERM DEBT" shall mean all
indebtedness of Borrower (excluding the Revolving Loan)
which, in accordance with GAAP may be properly classified as
long term debt, the portion of which is due within one (1)
year from the date of determination thereof.
e. Deleting Section 11 in its entirety and substituting the
following in lieu thereof:
Capital Expenditures Limitation. The Borrower will not make
-------------------------------
in any one fiscal year, directly or indirectly. Capital
Expenditures for the purchase, fabrication, creation or
lease of fixed assets, including rentals on leased items in
excess of an aggregate of FIVE HUNDRED SIXTEEN THOUSAND and
00/100 DOLLARS ($516,000.00) during the 1996 fiscal year.
"CAPITAL EXPENDITURES" shall mean amounts paid or
indebtedness incurred by the Borrower in connection with the
purchase or lease by the Borrower of Capital Assets that
would be required to be capitalized and shown on the balance
sheet of the Borrower in accordance with GAAP. "CAPITAL
ASSETS" shall mean fixed assets, both tangible (such as
land, buildings, fixtures, machinery and equipment) and
intangible (such as patents, copyrights, trademarks,
franchises and good will); provided that Capital Assets
--------
shall not include any item customarily charged directly to
expense or depreciated over a useful life of twelve (12)
months or less in accordance with GAAP.
f. Deleting Section 13 in its entirety and substituting the
following in lieu thereof:
Leverage Ratio. The Borrower shall maintain a ratio of
--------------
Total Liabilities less subordinated debt to Tangible Net
----
Worth plus subordinated debt as of the end of each calendar
quarter of not greater than (a) 2.9 to 1.0 as of March 31,
1996, (b) 3.0 to 1.0 as of June 30, 1996, (c) 3.0 to 1.0 as
of September 30, 1996 and (d) 3.0 to 1.0 as of December 31,
1996. For the purposes of this paragraph, "TOTAL
LIABILITIES" shall mean all debt and other liabilities of
the Borrower which in accordance with GAAP may be properly
classified as liabilities and all other liabilities,
indebtedness or obligation whether or not so classified.
For the purposes of this Section 13 and Section 14 below,
the term "TANGIBLE NET WORTH" shall mean as at any date of
determination
- 9 -
<PAGE>
thereof, (a) the Borrower's "net worth" as defined by and
determined in accordance with GAAP minus (b) amounts at
-----
which good will and any other intangibles including, without
limitation, patents, trademarks, trade names, copyrights and
franchises, and amounts owed by and/or invested in officers
or shareholders of the Borrower would be shown on such
balance sheet minus (c) $162,000 (which amount shall be
-----
deemed to be the amount of loans due from affiliates,
subsidiaries or related entities of the Borrower, whether
such actual amount shall be higher or lower) minus (d)
-----
increases caused by a write-up of assets of the Borrower.
g. Deleting Section 14 in its entirety and substituting the
following in lieu thereof:
Minimum Tangible Net Worth. The Borrower will maintain a
--------------------------
minimum Tangible Net Worth at the end of each calendar
quarter as indicated below:
<TABLE>
<CAPTION>
Calendar Quarter Minimum Tangible Net Worth
---------------- --------------------------
<S> <C>
3/31/96 $5,150,000
6/30/96 $5,100,000
9/30/96 $5,225,000
12/31/96 $5,200,000
</TABLE>
h. Deleting Section 15 in its entirety and substituting the
following in lieu thereof:
Salary Restrictions. The Borrower shall not, without the
-------------------
prior written consent of the Lender, pay salaries, bonuses
or otherwise directly or indirectly compensate F. Moskey, G.
Smith or G. Purple in excess of the yearly compensation paid
for the year ending December 31, 1995. The Borrower shall
not, without the prior written consent of the Lender, pay a
salary or bonus to or otherwise directly or indirectly
compensate R. Whitty in excess of $125,000 for the year
ending December 31, 1996.
B. Amendments to Revolving Note. The Revolving Note is hereby amended
----------------------------
by:
1. Deleting the third full paragraph on page one of the Revolving
Note and the fourth paragraph beginning on page one of the
Revolving Note in their entirety and substituting the following
in lieu thereof:
- 10 -
<PAGE>
Interest shall be charged on the outstanding principal balance
hereunder at a per annum rate equal to the Prime Rate plus one
(1.0%) percent. In the event that the Prime Rate prevailing on
the date hereof is subsequently increased or decreased, then, as
of the date of such change, an increase or decrease will be made
in the rate or rates of interest which will be charged under this
Note, so that the interest rate or rates shall at all times be
equal to the applicable rate or rates set forth above; provided,
however, that at no time shall the interest rate or rates be more
than the rate of interest permitted by law governing this Note.
The "PRIME RATE" is herein defined to mean the interest rate
announced from time to time by the Lender as its prime rate. The
Prime Rate is not necessarily the lowest rate available.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one-half of one (0.5%) percent. Nothing
contained herein shall be deemed to be an express or implied
commitment or intention by or on the part of the Lender to so
reduce the interest rate.
2. Deleting the first and second full paragraphs on page two of the
Revolving Note in their entirety and substituting the following
in lieu thereof:
The Borrower may prepay this Note in whole or in part at any time
without penalty. All such prepayments shall be applied on
account of principal remaining unpaid and shall be accompanied by
payment of unpaid late charges and accrued and unpaid interest,
if any, thereon. All partial prepayments of principal shall be
credited to the unpaid principal of this Note in the inverse
order of maturity and shall not affect the Borrower's obligation
to make the regular installments required hereunder until this
Note is fully paid.
3. Deleting the first full paragraph on page three of the Revolving
Note in its entirety and substituting the following in lieu
thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate or rates per
annum (the "DEFAULT RATE") equal to four (4) points above the
interest rate specified above. The Default Rate shall be
adjusted whenever a change in the Prime Rate occurs so that the
Default Rate shall remain at all times four (4) points above the
interest rate specified above. Any adjustments in the Default
Rate shall be effective simultaneously with a change in the Prime
Rate.
- 11 -
<PAGE>
C. Amendments to the First Equipment Note. The First Equipment Note is
--------------------------------------
hereby amended by:
1. Deleting (a) the third paragraph on page one of the First
Equipment Note in its entirety and (b) the first and second
paragraphs on page two of the First Equipment Note in their
entirety and substituting the following in lieu thereof:
Interest shall accrue on the Note at a per annum rate equal to
the Prime Rate plus one and one-half (1.5) points (the "VARIABLE
RATE"). In the event the Prime Rate prevailing on the date
hereof is subsequently increased or decreased, then, as of the
date of change, an increase or decrease will be made in the
Variable Rate so that the Variable Rate shall at all times be one
and one-half (1.5) points in excess of the Prime Rate; provided,
however, that at no time shall the Variable Rate be more than the
rate of interest permitted by the law governing this Note. The
"PRIME RATE" is herein defined to mean the interest rate
announced from time to time by the Lender as its prime rate. The
Prime Rate is not necessarily the lowest rate available.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one (1.0) point. Nothing contained herein
shall be deemed to be an express or implied commitment or
intention by or on the part of the Lender to so reduce the
interest rate.
All advances under this Note are made pursuant to the terms and
conditions of that certain Fourth Amended and Restated Revolving
Loan, Term Loan, Equipment Loan and Security Agreement dated
March 29, 1994 between the Borrower and the Lender as amended and
restated by a certain Fifth Amended and Restated Revolving Loan,
Term Loan, Equipment Loan and Security Agreement dated February
28, 1995, and as further amended from time to time and now in
effect (the "LOAN AGREEMENT"). No further advances under this
Note will be made after January 31, 1995.
2. Deleting the first full paragraph on page three (3) of the First
Equipment Note in its entirety and substituting the following in
lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above. Any change in the Variable
- 12 -
<PAGE>
Rate shall automatically cause a corresponding change in the
Default Rate so that the Default Rate shall at all times be four
(4) points above the Variable Rate.
D. Amendments to Second Equipment Note. The Second Equipment Note is
-----------------------------------
hereby amended by:
1. Deleting (a) the third paragraph beginning on page one of the
Second Equipment Note in its entirety, (b) the first, second and
third full paragraphs on page two of the Second Equipment Note in
their entirety and (c) the first and second full paragraphs on
page three of the Second Equipment Note in their entirety, and
substituting the following in lieu thereof:
Accrued interest shall be payable monthly, in arrears, on the
first day of each month and on the first day of each successive
month thereafter until the Note is paid in full at a per annum
rate equal to the Prime Rate plus one and one-half (1.5) points
(the "VARIABLE RATE"). In the event the Prime Rate prevailing on
the date hereof is subsequently increased or decreased, then, as
of the date of change, an increase or decrease will be made in
the Variable Rate so that the Variable Rate shall at all times be
one and one-half (1.5) points in excess of the Prime Rate;
provided, however, that at no time shall the Variable Rate be
more than the rate of interest permitted by the law governing
this Note. The "PRIME RATE" is herein defined to mean the
interest rate announced from time to time by the Lender as its
prime rate. The Prime Rate is not necessarily the lowest rate
available.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one (1.0) point. Nothing contained herein
shall be deemed to be an express or implied commitment or
intention by or on the part of the Lender to so reduce the
interest rate.
All advances under this Note are made pursuant to the terms and
conditions of that certain Fifth Amended and Restated Revolving
Loan, Term Loan, Equipment Loan and Security Agreement dated
February 1, 1995 between the Borrower and the Lender as amended
from time to time and now in effect (the "LOAN AGREEMENT"). No
further advances under this Note will be made after January 31,
1996.
2. Deleting the third paragraph on page four of the Second Equipment
Note in its entirety and substituting the following in lieu
thereof:
- 13 -
<PAGE>
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above. Any change in the Variable Rate shall
automatically cause a corresponding change in the Default Rate so
that the Default Rate shall at all times be four (4) points above
the Variable Rate.
3. Deleting the fourth full paragraph on page two of the Second
Equipment Note in its entirety.
E. Amendment to the Term Note. The Term Note is hereby amended by:
--------------------------
1. Adding the following paragraph after the fourth paragraph on page
one of the Term Note:
The Borrower shall also pay on the first day of each month,
together with the regularly scheduled payment of principal and
interest, accrued interest in an amount equal to one (1%) percent
per annum of the outstanding principal balance of the Note (the
"Additional Interest"). The Lender may, in its sole and absolute
discretion, reduce the Additional Interest payable monthly under
this Note to an amount equal to one-half of one percent (0.5%)
per annum of the outstanding principal balance of this Note.
Nothing contained herein shall be deemed to be an express or
implied commitment or intention by or on the part of the Lender
to so reduce the interest rate.
2. Deleting the first full paragraph on page two of the Term Note in
its entirety and substituting the following in lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above.
F. Amendment to the Loan Documents. The Loan Documents, including
-------------------------------
without limitation Exhibits B, C-I, C-II and D of the Loan Agreement, are hereby
amended to be made consistent with this Amendment.
- 14 -
<PAGE>
III. Reaffirmation of Guaranty.
-------------------------
To induce the Lender to enter into this Amendment, the Guarantors hereby
(a) consent to this Amendment and (b) affirm and ratify their respective
Guaranties and confirm that (i) each of the Guarantors does irrevocably and
unconditionally guarantee to the Lender the payment and performance from the
Borrower of the Obligations (as defined in the Guaranties) from the Borrower to
the Lender, upon the terms and conditions set forth in the Guaranties, (ii) the
term Obligations includes, without limitation, this Amendment and a certain
Second Modification of Construction to Permanent Loan Promissory Note and Open-
End Construction to Permanent Mortgage Deed of even date herewith in connection
with the Construction Loan (the "MODIFICATION"), and (iii) the Guaranties remain
in full force and effect.
IV. Miscellaneous.
-------------
A. Ratifications, Etc. Except as otherwise expressly set forth herein,
-------------------
all terms and conditions of the Loan Agreement, the Revolving Loan, the First
Equipment Note, the Second Equipment Note, the Term Note, the Guaranties and the
Loan Documents are ratified and shall remain in full force and effect. Nothing
herein shall be construed to be a waiver of any requirements of the Loan
Agreement and the Loan Documents except as expressly set forth herein.
B. Conditions Precedent. The effectiveness of this Amendment shall be
--------------------
subject to the Lender's prior receipt of each of the following in form and
substance satisfactory to Lender and its counsel:
1. This Amendment, duly executed and delivered by the Borrower.
2. Copies of all corporate action taken by the Borrower, including
resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Loan Documents to which it is a
party and each other document to be delivered pursuant to this
Amendment, certified as of the date of this Amendment by the
Secretary of the Borrower;
3. A certificate, dated as of the date of this Amendment, of the
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign the
Loan Documents to which the Borrower is a party and the other
documents to be delivered by the Borrower under this Amendment;
and
4. All fees and expenses, including legal fees and related
disbursements incurred by Lender in connection with the
structuring, negotiation, preparation and closing of this
Amendment and the transactions related hereto.
- 15 -
<PAGE>
5. Execution and recording of the Modification and the issuance of
an endorsement to the title policy insuring the original mortgage
modified by such Modification.
6. Execution and recording of a certain Modification of Open-End
Mortgage of even date herewith and the issuance of an endorsement
to the title policy insuring the original mortgage modified by
said Modification of Open-End Mortgage Deed.
C. Counterparts. This Amendment may be executed in any number of
------------
counterparts, which together shall constitute one instrument.
D. Governing Law. This Amendment shall be construed and interpreted in
-------------
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
instrument under seal.
LENDER:
FLEET NATIONAL BANK f/k/a
FLEET NATIONAL BANK OF
CONNECTICUT f/k/a Shawmut
Bank Connecticut, N.A.
By_______________________
Edgar Ezerins
Its Vice President
Duly Authorized
BORROWER:
EDAC TECHNOLOGIES CORPORATION
By_______________________
Glenn L. Purple
Its Vice President
Duly Authorized
- 16 -
<PAGE>
GUARANTORS:
NATURAL COOL LTD.
By_______________________
Its
GROS-ITE INDUSTRIES, INC.
By_______________________
Its
- 17 -
<PAGE>
SEVENTH MODIFICATION AGREEMENT
------------------------------
TO OPEN-END MORTGAGE DEED
-------------------------
THIS AGREEMENT made this ____ day of April, 1996, by and between EDAC
TECHNOLOGIES CORPORATION, a Wisconsin corporation with its principal place of
business at 1790 New Britain Avenue, Farmington, Connecticut 06032 (hereinafter
referred to as the "BORROWER") and FLEET NATIONAL BANK F/K/A FLEET NATIONAL BANK
OF CONNECTICUT F/K/A SHAWMUT BANK CONNECTICUT, N.A. F/K/A THE CONNECTICUT
NATIONAL BANK, a national banking association with an office at 777 Main Street,
MSN 240, Hartford, Connecticut 06115 (hereinafter referred to as the "LENDER").
W I T N E S E T H:
WHEREAS, on May 12, 1989, the Borrower granted to the Lender a mortgage on
certain premises located at 1790 New Britain Avenue, Farmington, Connecticut,
which mortgage was recorded in the Farmington Land Records on May 15, 1989 in
Volume 394 at Page 521, and which mortgage was modified by that certain Mortgage
Modification Agreement dated November 10, 1989 and recorded in the Farmington
Land Records on November 21, 1989 in Volume 403 at Page 644 (collectively, the
"MORTGAGE");
WHEREAS, on July 30, 1992, the parties modified the Mortgage by entering
into that certain Second Modification Agreement to Open-End Mortgage Deed
recorded in the Farmington Land Records on August 6, 1992 in Volume 446 at Page
002;
WHEREAS, on December 23, 1992, the parties modified the Mortgage by
entering into that certain Third Modification Agreement to Open-End Mortgage
Deed recorded in the Farmington Land Records on February 25, 1993 in Volume 458
at Page 738;
WHEREAS, on March 22, 1993, the parties modified the Mortgage by entering
into that certain Fourth Modification Agreement to Open-End Mortgage Deed
recorded in the Farmington Land Records on March 31, 1993 in Volume 458 at Page
738;
WHEREAS, on March 29, 1994, the parties modified the Mortgage by entering
into that certain Fifth Modification Agreement to Open-End Mortgage Deed
recorded in the Farmington Land Records on April 19, 1994 in Volume 480 at Page
855;
WHEREAS, on February 28, 1995, the parties modified the Mortgage by
entering into that certain Sixth Modification Agreement to Open-End Mortgage
Deed recorded in the Farmington Land Records on March 3, 1995 in Volume 496 at
Page 1 (the "SIXTH MODIFICATION");
<PAGE>
WHEREAS, the Sixth Modification mistakenly labeled the Equipment Promissory
Note II as Schedule "M" to the Mortgage instead of Schedule "N";
WHEREAS, the Term Note is Schedule "M" to the Mortgage; and
WHEREAS, the parties desire to further modify the Mortgage to (a) modify
the interest rates set forth in the notes attached to the Mortgage and (b) amend
the Mortgage to reflect that Schedule M to the Mortgage is the Term Note and
Schedule N to the Mortgage is the Equipment Promissory Note II;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, it is hereby agreed by and between the parties that the
Mortgage be modified as follows:
1. The first "WHEREAS" clause on Page 2 of the Mortgage is hereby amended
in its entirety to read as follows:
"WHEREAS, the Lender and the Borrower have entered into a Fifth
Amended and Restated Revolving Loan, Term Loan and Security Agreement,
dated February 28, 1995, as amended from time to time and now in effect,
(such Fifth Amended and Restated Revolving Loan, Term Loan, Equipment Loan
and Security Agreement, as amended from time to time and now in effect, is
hereinafter referred to as the "EDAC LOAN AGREEMENT"), pursuant to which
the full amount of the revolving loan therein authorized (the "EDAC
REVOLVING LOAN") is SEVEN MILLION DOLLARS ($7,000,000.00). Pursuant to the
EDAC Loan Agreement, all or part of the Revolving Loan proceeds are
permitted to be advanced from time to time (the "EDAC REVOLVING LOAN
ADVANCES") and shall be secured by this Mortgage. The EDAC Revolving Loan
shall be evidenced by the promissory note annexed hereto and made a part
hereof as SCHEDULE K (the "REVOLVING PROMISSORY NOTE"). The initial EDAC
Revolving Loan Advance and future EDAC Revolving Loan Advances, if any, may
be either evidenced by additional notes or recorded in an account on the
books of the Lender as specified in SECTION 4.1 hereof. The EDAC Loan
Agreement provides for repayment of all or a portion of the outstanding
balance of the EDAC Revolving Loan proceeds, together with interest
thereon, from time to time. The entire principal balance of the EDAC
Revolving Loan, together with accrued interest, shall be due and payable ON
DEMAND; and"
2. The Mortgage is hereby modified by deleting the following "WHEREAS"
clause:
"WHEREAS, the Borrower is justly indebted to the Lender pursuant to a
certain Equipment Promissory Note II dated February 28, 1995, in the
maximum principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
(the "EQUIPMENT LINE OF CREDIT II"), a copy of which note is attached
hereto and made a part hereof as SCHEDULE M (the "EQUIPMENT PROMISSORY NOTE
II")"
- 2 -
<PAGE>
and inserting the following in lieu thereof:
"WHEREAS, the Borrower is justly indebted to the Lender pursuant to a
certain Equipment Promissory Note II dated February 28, 1995, in the
maximum principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
(the "EQUIPMENT LINE OF CREDIT II"), a copy of which note is attached
hereto and made a part hereof as SCHEDULE N (the "EQUIPMENT PROMISSORY NOTE
II") and inserting the following in lieu thereof; and
3. The last "WHEREAS" clause of the Mortgage (which collectively defines
all of the obligations of the Borrower to the Lender as the "LOAN") is hereby
amended in its entirety to read as follows:
"WHEREAS, the obligations of the Borrower to repay principal under the
Term Note, the ESOT Guaranty, the Equipment Promissory Note, the Equipment
Promissory Note II, the EDAC Revolving Loan, the Revolving Promissory Note
and the EDAC Loan Agreement (hereinafter collectively referred to as the
"LOAN") shall not exceed in the aggregate $11,900,444.88;"
4. SCHEDULE K to the Mortgage as amended, is hereby amended by:
a. Deleting the third full paragraph on page one of Schedule K and
the fourth paragraph beginning on page one of the Schedule K in
their entirety and substituting the following in lieu thereof:
Interest shall be charged on the outstanding principal balance
hereunder at a per annum rate equal to the Prime Rate plus one
(1.0%) percent. In the event that the Prime Rate prevailing on
the date hereof is subsequently increased or decreased, then, as
of the date of such change, an increase or decrease will be made
in the rate or rates of interest which will be charged under this
Note, so that the interest rate or rates shall at all times be
equal to the applicable rate or rates set forth above; provided,
however, that at no time shall the interest rate or rates be more
than the rate of interest permitted by law governing this Note.
The "PRIME RATE" is herein defined to mean the interest rate
announced from time to time by the Lender as its prime rate. The
Prime Rate is not necessarily the lowest rate available.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one-half of one (0.5%) percent. Nothing
contained in this Amendment shall be deemed to be an express or
implied commitment or intention by or on the part of the Lender
to so reduce the interest rate.
- 3 -
<PAGE>
b. Deleting the first and second full paragraphs on page two of the
Schedule K in their entirety and substituting the following in
lieu thereof:
The Borrower may prepay this Note in whole or in part at any time
without penalty. All such prepayments shall be applied on
account of principal remaining unpaid and shall be accompanied by
payment of unpaid late charges and accrued and unpaid interest,
if any, thereon. All partial prepayments of principal shall be
credited to the unpaid principal of this Note in the inverse
order of maturity and shall not affect the Borrower's obligation
to make the regular installments required hereunder until this
Note is fully paid.
c. Deleting the first full paragraph on page three of Schedule K in
its entirety and substituting the following in lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate or rates per
annum (the "DEFAULT RATE") equal to four (4) points above the
interest rate specified above. The Default Rate shall be
adjusted whenever a change in the Prime Rate occurs so that the
Default Rate shall remain at all times four (4) points above the
interest rate specified above. Any adjustments in the Default
Rate shall be effective simultaneously with a change in the Prime
Rate.
5. SCHEDULE L to the Mortgage is hereby amended by:
a. Deleting (a) the third paragraph on page one of Schedule L in its
entirety and (b) the first and second paragraphs on page two of
the First Equipment Note in their entirety and substituting the
following in lieu thereof:
Interest shall accrue on the Note at a per annum rate equal to
the Prime Rate plus one and one-half (1.5) points (the "VARIABLE
RATE"). In the event the Prime Rate prevailing on the date
hereof is subsequently increased or decreased, then, as of the
date of change, an increase or decrease will be made in the
Variable Rate so that the Variable Rate shall at all times be one
and one-half (1.5) points in excess of the Prime Rate; provided,
however, that at no time shall the Variable Rate be more than the
rate of interest permitted by the law governing this Note. The
"PRIME RATE" is herein defined to mean the interest rate
announced from time to time by the Lender as its prime rate. The
Prime Rate is not necessarily the lowest rate available.
- 4 -
<PAGE>
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one (1.0) point. Nothing contained herein
shall be deemed to be an express or implied commitment or
intention by or on the part of the Lender to so reduce the
interest rate.
All advances under this Note are made pursuant to the terms and
conditions of that certain Fourth Amended and Restated Revolving
Loan, Term Loan, Equipment Loan and Security Agreement dated
March 29, 1994 between the Borrower and the Lender as amended and
restated by a certain Fifth Amended and Restated Revolving Loan,
Term Loan, Equipment Loan and Security Agreement dated February
28, 1995, and as further amended from time to time and now in
effect (the "LOAN AGREEMENT"). No further advances under this
Note will be made after January 31, 1995.
b. Deleting the first full paragraph on page three of Schedule L in
its entirety and substituting the following in lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above. Any change in the Variable Rate shall
automatically cause a corresponding change in the Default Rate so
that the Default Rate shall at all times be four (4) points above
the Variable Rate.
6. SCHEDULE M to the Mortgage (which is the Term Note) is hereby amended
by:
a. Adding the following paragraph after the fourth paragraph on page
one of Schedule M:
The Borrower shall also pay on the first day of each month,
together with the regularly scheduled payment of principal and
interest, accrued interest in an amount equal to one (1%) percent
per annum of the outstanding principal balance of the Note. The
Lender may, in its sole and absolute discretion, reduce the
Additional Interest payable monthly under this Note to an amount
equal to one-half of one percent (0.5%) per annum of the
outstanding principal balance of this Note. Nothing contained
herein shall be deemed to be an express or implied commitment or
intention by or on the part of the Lender to so reduce the
interest rate.
- 5 -
<PAGE>
b. Deleting the first full paragraph on page two of Schedule M in
its entirety and substituting the following in lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above.
7. SCHEDULE N to the Mortgage (which is the Equipment Promissory Note II)
is hereby amended by:
a. Deleting (a) the third paragraph beginning on page one of
Schedule N in its entirety, (b) the first, second and third full
paragraphs on page two of the Schedule N in their entirety and
(c) the first and second full paragraphs on page three of
Schedule N in their entirety, and substituting the following in
lieu thereof:
Accrued interest shall be payable monthly, in arrears, on the
first day of each month and on the first day of each successive
month thereafter until the Note is paid in full at a per annum
rate equal to the Prime Rate plus one and one-half (1.5) points
(the "VARIABLE RATE"). In the event the Prime Rate prevailing on
the date hereof is subsequently increased or decreased, then, as
of the date of change, an increase or decrease will be made in
the Variable Rate so that the Variable Rate shall at all times be
one and one-half (1.5) points in excess of the Prime Rate;
provided, however, that at no time shall the Variable Rate be
more than the rate of interest permitted by the law governing
this Note. The "PRIME RATE" is herein defined to mean the
interest rate announced from time to time by the Lender as its
prime rate. The Prime Rate is not necessarily the lowest rate
available.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Prime Rate plus one (1.0) point. Nothing contained herein
shall be deemed to be an express or implied commitment or
intention by or on the part of the Lender to so reduce the
interest rate.
All advances under this Note are made pursuant to the terms and
conditions of that certain Fifth Amended and Restated Revolving
Loan, Term Loan, Equipment Loan and Security Agreement dated
February 1, 1995 between the Borrower and the Lender as amended
from time to time and now in effect (the "LOAN AGREEMENT"). No
further advances under this Note will be made after January 31,
1996.
- 6 -
<PAGE>
b. Deleting the third paragraph on page four of Schedule N in its
entirety and substituting the following in lieu thereof:
To the extent allowed by applicable law, after the occurrence of
an Event of Default, all outstanding principal and unpaid
interest shall bear, until paid, interest at a rate per annum
(the "DEFAULT RATE") equal to four (4) points above the interest
rate specified above. Any change in the Variable Rate shall
automatically cause a corresponding change in the Default Rate
so that the Default Rate shall at all times be four (4) points
above the Variable Rate.
8. All capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Mortgage.
9. Except as modified by this Agreement and any previous modifications,
the rights, privileges, duties and obligations of the parties hereto under the
Mortgage shall remain unchanged, in full force and effect and binding upon the
parties thereto. Nothing herein contained shall operate to release the
Mortgagor from its liability to pay the obligations, and to keep and perform all
of the terms, conditions, obligations and agreements, contained in the Mortgage,
as hereinbefore modified.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and their respective seals to be affixed hereto as of the date set
forth on the first page hereof.
WITNESS: BORROWER:
____________________________ EDAC TECHNOLOGIES CORPORATION
____________________________ By:____________________________________
Glenn L. Purple
Its Vice President
Duly Authorized
- 7 -
<PAGE>
LENDER:
____________________________ FLEET NATIONAL BANK f/k/a FLEET
NATIONAL BANK OF CONNECTICUT f/k/a
SHAWMUT BANK CONNECTICUT, N.A.
____________________________ By: _________________________________
Edgar Ezerins
Its Vice President
Duly Authorized
STATE OF CONNECTICUT )
) ss.: Hartford
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this ____ day of April,
1996, by Glenn L. Purple, the Vice President of EDAC TECHNOLOGIES CORPORATION, a
Wisconsin corporation, on behalf of the corporation.
_____________________________________
Commissioner of Superior Court
Notary Public
My Commission Expires:
STATE OF CONNECTICUT )
) ss.: Hartford
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this ____ day of April,
1996, by Edgar Ezerins, the Vice President of Fleet National Bank f/k/a Fleet
National Bank of Connecticut f/k/a SHAWMUT BANK CONNECTICUT, N.A., a national
banking association, on behalf of the banking association.
_____________________________________
Commissioner of Superior Court
Notary Public
My Commission Expires:
- 8 -
<PAGE>
SECOND MODIFICATION OF CONSTRUCTION TO
PERMANENT LOAN PROMISSORY NOTE AND
OPEN-END CONSTRUCTION TO PERMANENT MORTGAGE DEED
------------------------------------------------
THIS SECOND MODIFICATION OF CONSTRUCTION TO PERMANENT LOAN PROMISSORY NOTE AND
OPEN-END CONSTRUCTION TO PERMANENT MORTGAGE DEED (the "AGREEMENT"), entered into
as of the ____ day of April, 1996, by and between EDAC TECHNOLOGIES CORPORATION,
a Wisconsin corporation having a place of business at 1790 New Britain Avenue,
Farmington, Connecticut 06032 (the "BORROWER"), and FLEET NATIONAL BANK F/K/A
FLEET NATIONAL BANK OF CONNECTICUT F/K/A SHAWMUT BANK CONNECTICUT, N.A. a
national banking association, having an office at 777 Main Street, Hartford,
Connecticut 06115 (the "LENDER").
W I T N E S S E T H:
1. On October 3, 1985, the Lender and the Borrower entered into a certain
Revolving Loan and Security Agreement which has been (a) amended and restated in
its entirety by a certain Fifth Amended and Restated Revolving Loan, Term Loan,
Equipment Loan and Security Agreement dated February 28, 1995, (b) amended by a
certain Sixth Amendment to Revolving Loan, Term Loan, Equipment Loan and
Security Agreement dated July 31, 1995 and (c) amended by a certain Seventh
Amendment to Revolving Loan, Term Loan, Equipment Loan and Security Agreement
and Reaffirmation of Guaranties dated as of January 26, 1996 (as amended and in
effect from time to time, collectively, the "LOAN AGREEMENT"). Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Loan Agreement.
2. Pursuant to the Loan Agreement, the Borrower executed a certain
Construction to Permanent Loan Promissory Note dated July 31, 1995 in the
original principal amount of up to $1,000,000 in favor of the Lender, which was
amended pursuant to a certain Modification of Construction to Permanent Loan
Promissory Note and Open-End Construction to Permanent Mortgage Deed (the
"MODIFICATION") (as modified, the "NOTE"). The Note is secured by, among other
things, an Open-End Construction to Permanent Mortgage Deed from the Borrower in
favor of Lender dated August 3, 1995 and recorded in Volume 502 at Page 1024 of
the Farmington Land Records, which was modified pursuant to the Modification (as
modified, the "MORTGAGE"), encumbering certain real property located in the Town
of Farmington as more particularly described in Schedule A to the Mortgage. The
----------
Loan Agreement, Note, Mortgage and related documents are collectively referred
to as the "LOAN DOCUMENTS".
3. The Borrower has requested that the Lender extend certain other loans
from the Lender to the Borrower.
1
<PAGE>
4. As a condition to the extension, the Lender requires the Borrower to
enter into this Agreement.
5. In consideration of the foregoing, and for One ($1.00) Dollar and
other valuable consideration received to its satisfaction, the Borrower agrees
to modify the terms and conditions of the Note and Mortgage as more specifically
set forth in this Agreement.
TERMS OF AGREEMENT
------------------
A. Acknowledgments, Affirmations and Representations and Warranties.
----------------------------------------------------------------
1. The Borrower acknowledges and affirms that:
a. All of the statements contained herein are true and correct
and that they understand that the Lender is relying on the truth and
completeness of such statements to enter into this Agreement.
b. As of the date hereof and without regard to the financial
accommodations contemplated herein, the Borrower is legally and validly indebted
to the Lender in the principal amount of $977,777.76 with respect to the Note,
plus interest and fees accrued and accruing thereon and costs and expenses of
collection, including without limitation, attorneys' fees, and there is no
defense, offset or counterclaim with respect to any of the foregoing or
independent claim or action against the Lender.
2. The Borrower represents and warrants to the Lender that:
a. The resolutions previously adopted by the Board of Directors
of the Borrower and provided to the Lender have not in any way been rescinded or
modified and have been in full force and effect since their adoption to and
including the date hereof and are now in full force and effect, except to the
extent that they have been modified or supplemented to authorize this Agreement
and the documents and transactions described herein.
b. The Borrower has the corporate power and authority to enter
into, and have taken all necessary corporate action to authorize, this Agreement
and the transactions contemplated hereby.
c. All representations, warranties and covenants contained in,
and schedules and exhibits attached to, the Loan Documents are true and correct
on and as of the date hereof, are incorporated herein by reference and are
hereby remade.
2
<PAGE>
d. Other than the defaults previously waived in writing by the
Lender, the Borrower is not currently in default under any of the Loan
Documents, and no condition exists which would constitute an event of default
under any of the Loan Documents but for the giving of notice or passage of time,
or both.
e. The consummation of the transactions contemplated hereby is
not prevented or limited by, nor does it conflict with or result in a breach of
terms, conditions or provisions of the Borrower's Certificate of Incorporation
or Bylaws or any evidence of indebtedness, agreement or instrument of whatever
nature to which the Borrower is a party or by which it is bound, does not
constitute a default under any of the foregoing and does not violate any
federal, state or local law, regulation or order or any order of any court or
agency which is binding upon the Borrower.
B. Modification of Note.
--------------------
The Borrower and the Lender agree that the terms of the Note are
hereby modified in accordance with the following:
1. Paragraph (1) entitled "Adjustment Date" on page two of the Note
is hereby deleted in its entirety.
2. Paragraph (15) entitled "Permanent Interest Rate" on page four of
the Note is hereby deleted in its entirety and the following is substituted in
lieu thereof:
(15) "PERMANENT INTEREST RATE" shall mean a variable rate equal
to the Base Rate plus one (1%) percent.
The Lender may, in its sole and absolute discretion, reduce the
interest rate payable under this Note to a per annum rate equal
to the Base Rate plus one-half of one (0.5%) percent. Nothing
contained herein shall be deemed to be an express or implied
commitment or intention by or on the part of the Lender to so
reduce the interest rate.
3. Section D entitled "D. PERMANENT LOAN TERMS." on page six of the
------------------------
Note is hereby deleted and replaced with the following:
From the Conversion Date, the Permanent Interest Rate shall be
payable upon the principal amount of the Permanent Loan at the
Permanent Interest Rate. The Permanent Interest Rate shall
continue to be payable until the imposition of the Permanent
Default Rate (hereinafter defined), or until the Permanent Loan
is paid in full, whichever is applicable.
3
<PAGE>
Commencing on the first day of the month following the Conversion
Date, (a) payments of principal in the amount of $5,555.56 and
(b) payments of accrued interest at the Permanent Interest Rate
shall be paid on the first day of each month. Each installment
shall be applied first to the payment of late charges, then to
accrued and unpaid interest and the balance on account of the
principal of the Permanent Loan. If not sooner paid, the entire
unpaid principal balance of the Permanent Loan, with interest,
shall be due and payable on the Maturity Date.
Upon the occurrence of an Event of Default, or after the Maturity
Date, interest shall accrue at four percent (4%) per annum above
the Permanent Interest Rate in effect (the "PERMANENT DEFAULT
RATE"). The Permanent Default Rate shall be adjusted whenever a
change in the Base Rate occurs, so that the Permanent Default
Rate shall remain at all times four (4%) percent per annum above
the Permanent Interest Rate. Any such adjustment in the
Permanent Default Rate shall be effective simultaneously with a
change in the Base Rate.
4. Section G. entitled "G. PREPAYMENT OF LOAN." on page eight of the
------------------------
Note is hereby deleted in its entirety and the following is substituted in lieu
thereof:
The Borrower may prepay this Note in whole or in part at any time
without penalty. All such prepayments shall be applied on
account of principal remaining unpaid and shall be accompanied by
payment of unpaid late charges and accrued and unpaid interest,
if any, thereon. All partial prepayments of principal shall be
credited to the unpaid principal of this Note in the inverse
order of maturity and shall not affect the Borrower's obligation
to make the regular installments required hereunder until this
Note is fully paid.
C. Modification of Mortgage.
------------------------
The Borrower and Lender hereby agree that the terms of the Mortgage
are hereby modified in accordance with the following:
1. Any and all references in the Mortgage to the term "Note" or
words of similar import shall be deemed to mean and refer to the Note as
modified by this Agreement.
2. The form of the Note attached as Schedule D to the Mortgage is
----------
hereby modified in accordance with Section B. above.
4
<PAGE>
D. Miscellaneous
-------------
1. Except as specifically modified hereby, all of the terms and
conditions of the Note and Mortgage shall remain in full force and effect, and
Borrower hereby ratifies and affirms each of its respect obligations, terms,
conditions, covenants, representations and warranties contained therein, except
to the extent expressly modified hereby. Borrower agrees to be bound by the
terms and conditions of said instruments, as modified by this Agreement.
2. The rights and duties of the parties under this Agreement shall
be governed by the laws of the State of Connecticut.
3. This Agreement shall be binding upon the Borrower, the Lender and
each of their respective successors and assigns.
4. Nothing contained in this Agreement shall constitute a repayment
of the Note, or affect the priority of the lien of the Mortgage.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as a sealed instrument by their duly authorized representatives as of the date
first above written.
Witnesses: EDAC TECHNOLOGIES CORPORATION
________________________________
________________________________ By:____________________________
Glenn L. Purple
Its: Vice President
________________________________ FLEET NATIONAL BANK f/k/a
FLEET NATIONAL BANK OF
CONNECTICUT f/k/a SHAWMUT
BANK CONNECTICUT, N.A.
________________________________ By:____________________________
Edgar Ezerins
Its: Vice President
5
<PAGE>
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On this ____ day of April, 1996, before me, personally appeared Glenn L.
Purple, known to me to be the Vice President of EDAC TECHNOLOGIES CORPORATION, a
Wisconsin corporation, signer and sealer of the foregoing instrument and
acknowledged the same to be his free act and deed and the free act and deed of
said corporation.
______________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires: ________________
STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On this ____ day of April, 1996, before me, personally appeared Edgar
Ezerins, known to me to be the Vice President of FLEET NATIONAL BANK f/k/a FLEET
NATIONAL BANK OF CONNECTICUT f/k/a SHAWMUT BANK CONNECTICUT, N.A., a national
banking association, signer and sealer of the foregoing instrument and
acknowledged the same to be his free act and deed and the free act and deed of
said banking association.
_____________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
6
<PAGE>
EXHIBIT 11.1 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average
shares outstanding 3,628,151 3,571,872 3,560,593
Net effect of dilutive stock
options based on the treasury
stock method using average
market price -- 152,146 141,318
--------- --------- ---------
TOTAL 3,628,151 3,724,018 3,701,911
========= ========= =========
Net income (loss) $(1,083,219) $ 71,515 $ 741,237
Net income (loss) per share $ (.29) $ .02 $ .20
========== ========= =========
Fully diluted:
Weighted average
shares outstanding 3,628,151 3,571,872 3,560,593
Net effect of dilutive stock
options based on the treasury
stock method using the year-end
market price if higher than
average market price -- 122,650 122,447
--------- --------- ---------
TOTAL 3,628,151 3,694,522 3,683,040
========= ========= =========
Net income (loss) $(1,083,219) $ 71,515 $ 741,237
Net income (loss) per share $ (.29) $ .02 $ .20
========== ========= =========
</TABLE>
11
<PAGE>
EXHIBIT 13
EDAC TECHNOLOGIES CORPORATION
GROS-ITE INDUSTRIES 1995
GROS-ITE SPINDLE ANNUAL
AMERICAN RESEARCH REPORT
NATURAL COOL, LTD.
<PAGE>
Edac Technologies Corporation, also known as Gros-Ite Industries, is a
diversified company. It primarily offers design and manufacturing services for
the aerospace industry in areas such as jet engine parts, special tooling,
equipment and gauges, and components used in the manufacture, assembly and
inspection of jet engines. Edac also offers design and manufacturing services
for the medical instruments industry in such areas as components used in the
manufacture of surgical instruments and special tooling. Edac also designs and
manufactures specialized machines for a variety of other applications.
Gros-Ite Spindle specializes in the design, manufacture and repair of
precision spindles. Spindles are an integral part of numerous machine tools
which are found in virtually any type of manufacturing environment. For 14
years Gros-Ite Spindle has been servicing the industry with high quality
standard and custom spindles.
American Research, a 40 year old company acquired by Edac in 1986, offers
custom designed environmental test chambers which duplicate hostile conditions
such as high altitude, wind and dust, compression, humidity, decompression,
temperature and explosions. This equipment is sold to customers in the
aerospace, automotive and electronics industries, among others.
Edac maintains manufacturing and design facilities with computerized
numerically controlled machining centers, and grinding, welding, and sheet
metal fabrication, painting and assembly capabilities. Items manufactured by
Edac include precision rings, and other components for jet engines, components
for medical instruments, as well as industrial spindles, environmental test
chambers and specialized machinery designed by Edac or others and other
assemblies requiring close tolerances.
Marketing and Competition
- -------------------------
Edac has numerous competitors both in design and manufacturing. Many of
the independent firms with which it competes are smaller than Edac and do not
provide the variety of high quality services that Edac provides. Edac also
competes with its customers' in-house manufacturing and technical services
capabilities. Edac believes that it is able to compete effectively with
independent firms and customers' in-house capabilities because of Edac's
emphasis on customer service, its experience and its competitive pricing of its
services.
For its fiscal year ended December 31, 1995, approximately 69% and 10% of
Edac's net sales were derived from sales to United Technologies Corporation and
Zapata Technologies Inc., respectively.
<PAGE>
MARKET INFORMATION
The Company's Common Stock is traded on the over-the-counter market
(NASDAQ).
High and low stock bid prices for the last two years were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 1 2/16 12/16 1 6/16 1 2/16
Second Quarter 1 12/16 1 1 6/16 1
Third Quarter 1 10/16 14/16 1 2/16 15/16
Fourth Quarter 1 10/16 15/16 1 13/16
</TABLE>
The approximate number of record holders of the Company's Common Stock at
April 11, 1996 was 311.
The Company has never paid cash dividends. The Company is prohibited from
paying cash dividends by certain loan agreements with its bank (see Note C
to the Company's consolidated financial statements included elsewhere in
this report).
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991
--------------------------------------------
(In thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA
Sales $24,564 $22,239 $29,331 $38,252 $26,830
Income (loss) before
extraordinary item (1,083) 72 741 1,476 183
Net income (loss) (1,083) 72 741 1,476 320
Net income (loss)
per share (.29) .02 .20 .40 .09
SELECTED BALANCE SHEET DATA
Current assets $14,215 $12,170 $12,179 $14,970 $14,171
Total assets 20,352 16,326 16,634 19,785 19,163
Current liabilities 9,166 5,323 5,669 9,799 10,538
Working capital 5,049 6,847 6,510 5,171 3,633
Long-term obligations 5,854 4,831 4,959 4,724 4,940
Shareholders' equity 5,332 6,172 6,006 5,262 3,685
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Indications are present that the aerospace industry is getting healthier.
Airframe manufacturers have booked significant orders in the past year. The
Company believes that there are sales opportunities in providing larger
machining capabilities to the aerospace engine industry, as airframe
manufacturers are demanding larger engines. The Company believes that it is
well positioned to respond to a healthier aerospace market. In 1995, the
Company constructed a 20,000 square foot manufacturing facility adjacent to its
existing buildings and purchased several large used machines capable of
producing parts for the larger engines. With an additional plant and large
machines acquired over the past two years, the Company has pursued the larger
aerospace machining work. Sales in the large machining area should increase in
1996, better utilizing the capacity that was added in 1995.
RESULTS OF OPERATIONS
Revenues from the Company's principal markets are as follows:
<TABLE>
<CAPTION>
In Thousands of Dollars 1995 1994 1993
----------------------- ---- ---- ----
<S> <C> <C> <C>
Aerospace customers.......... $ 17,376 $ 15,810 $ 16,576
Medical customers............ --- 1,161 6,819
Other........................ 7,188 5,268 5,936
</TABLE>
Net sales increased 10% in 1995 from 1994. Aerospace sales increased
$1,566,000 or 10% from 1994 representing stronger sales to the Company's
principal aerospace customer and increasing sales in the larger machining area.
During 1995, the Company's principal aerospace customer continued to reduce its
vendor base as it has in prior years. The Company remains an approved supplier
and has been selected as a "going forward supplier" of this customer. Sales to
other markets increased $1,920,000 or 36% representing very strong growth of
spindle sales. The Company's medical customer ceased doing business with the
Company in 1994.
Net sales decreased $7,092,000 or 24% in 1994 from 1993. Aerospace sales
decreased $766,000 or 5% from 1993 while sales to medical customers declined by
$5,658,000 or 83%. During 1994, the Company's principal aerospace customer
continued to implement cost savings initiatives including personnel reductions,
vendor consolidations and facility closings to respond to the decline in
military and commercial aviation markets. While this negatively impacted the
Company's revenues, the Company remained an approved supplier of this customer.
The Company's principal medical customer consolidated its vendor base resulting
in the Company receiving a few orders in 1994. Sales to other customers
decreased $668,000 or 11% reflecting a decrease in specialized machine sales
offset slightly by increased spindle sales.
<PAGE>
Cost of sales as a percentage of sales increased in 1995 to 92% from 86% in
1994. This is due to additional costs incurred in 1995 associated with the
occupation and utilization of the Company's new manufacturing facility. Large
machines were moved from the existing facilities to the new facility to
consolidate all large turning operations. Also, the Company incurred
substantial costs in training the design department employees to enable them to
work on the new graphic and computer-aided design systems. These systems
replace traditional designing on drawing boards. Although there will be some
recurring costs in training new design employees and staying current with system
updates, the above projects were completed in 1995 and should not incur any
substantial costs in 1996. Additionally, the Company accrued for projected
losses on several large customer orders.
Cost of sales as a percentage of sales increased in 1994 to 86% from 85% in
1993 due primarily to the effect of spreading fixed overhead over lower
production levels. Additionally, the Company incurred expense in moving certain
machines and departments within the Company to better utilize its existing
facilities. The American Research department was moved to newly leased
facilities.
Selling, general and administrative costs decreased $274,000 in 1995 from
1994 primarily due to reduced bonus and travel costs offset slightly by costs
associated with additional sales personnel.
In 1994, selling, general and administrative costs increased $14,000 from
1993 due to additional sales personnel and increased travel and telephone
expense, offset by reduced compensation expense.
INTEREST AND OTHER
Interest expense for 1995 was $618,000, an increase of $185,000 from 1994.
This increase reflects borrowings of $4,300,000 primarily to construct a new
20,000 square foot building and borrowings to purchase machinery. The effect of
increased borrowings was partially offset by generally lower interest rates
throughout 1995 compared to 1994.
Interest expense in 1994 was $433,000, a decrease of $90,000 from 1993.
This decrease reflects a reduction in overall borrowing levels throughout the
year offset slightly by an increasing interest rate on the Company's revolving
line of credit.
Other income for 1995 was $45,000 consisting primarily of interest income
on a trade receivable. Other income for 1994 was $72,000 consisting primarily
of insurance proceeds received.
Other expense for 1993 was $11,000 reflecting a loss on an investment.
<PAGE>
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes" in 1992. There was no cumulative effect of
adopting this change as of January 1, 1992 because of the Company's net
operating loss position at time of adoption. Under SFAS No. 109, deferred tax
expenses or credits are based on the changes in deferred tax assets and
liabilities from period to period.
The effective rate of 0% for 1995 reflects providing a valuation allowance
equal to the deferred tax benefit which might be received by the Company. A
valuation allowance was provided as it is possible that these benefits will not
be realized through future profitable operations. The effective rates of 0% for
1994 and 37.5% for 1993 reflect the utilization of the Company's net operating
loss carryforward, limited to $181,000 per year (See note F). The Company
expects to recognize the benefit from its remaining net operating loss carryover
only to the extent such amounts are realized for tax purposes and are not
required to offset required deferred tax liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company assesses its liquidity in terms of its ability to generate cash
to fund its operating and investing activities. Of particular importance to the
Company's liquidity are cash flows generated from operating activities, capital
expenditures levels and available bank lines of credit.
The following is selected cash flow data from the Statements of Cash Flows:
<TABLE>
<CAPTION>
In Thousands of Dollars 1995 1994 1993
----------------------- ---- ---- ----
<S> <C> <C> <C>
Net cash flow from
operating activities........ $ (1,336) $ 1,104 $ 3,326
Net cash flow from
investing activities........ (2,918) (621) (494)
Net cash flow from
financing activities........ 4,236 (509) (2,918)
</TABLE>
Net cash flow from operating activities in 1995 and 1994 primarily reflect
net income (loss) and non-cash charges against income. Net cash flow from
operating activities in 1993 results primarily from reductions in inventories.
Net cash flow from investing activities for 1995 reflects the Company's
investment in new building construction and the purchase of machinery and
equipment and other working capital needs. Net cash flow from investing
activities for 1994 and 1993 primarily reflects purchases of fixed assets
consisting mainly of machinery and equipment. Expenditures have been necessary
to add capacity and to increase productivity. Capital expenditures for 1996 are
projected to be $500,000.
<PAGE>
The following is selected capitalization data from the Balance Sheets:
<TABLE>
<CAPTION>
In Thousands of Dollars 12/31/95 12/31/94 12/31/93
----------------------- -------- -------- --------
<S> <C> <C> <C>
Revolving line of credit..... $ 4,651 $ 1,595 $ 1,875
Current portion
long-term debt............. 387 245 247
Long-term debt............... 4,919 3,824 4,069
Shareholders' equity......... 5,332 6,172 6,006
Debt to total
capitalization............. 65% 48% 51%
Unused revolving line
of credit.................. 1,275 4,731 4,915
</TABLE>
The Company has a revolving line of credit with its bank which provides for
borrowings of up to $7,000,000 ($4,003,597 outstanding at December 31, 1995)
limited by a formula based on percentages of the Company's receivable and
inventory. Availability under that line of credit was $1,274,829 on December
31, 1995. The credit agreement, as amended on April 10, 1996, matures on March
31, 1997. Included in the amended agreement is an increase in interest rates
(see Note C). The amended agreement, includes additional covenants including a
subjective covenant clause which requires that the Company make improvements in
its inventory management.
Management believes that the funds generated from operations, as well as
funds available from existing financing agreements, will be sufficient to meet
the Company's cash flow needs throughout 1996.
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors of
Edac Technologies Corporation:
We have audited the accompanying consolidated balance sheets of Edac
Technologies Corporation (a Wisconsin corporation) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Edac Technologies Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
March 1, 1996 (except with
respect to the matter discussed in
Note C, as to which the date is
April 10, 1996)
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
---------------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Sales:
Services $ 1,197,656 $ 2,185,968 $ 3,231,581
Products 23,366,278 20,052,882 26,099,157
------------- ------------- -------------
24,563,934 22,238,850 29,330,738
Cost of Sales 22,656,651 19,114,373 24,934,728
------------- ------------- -------------
Gross Profit 1,907,283 3,124,477 4,396,010
Selling, general and administrative expenses 2,417,136 2,691,447 2,677,647
------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (509,853) 433,030 1,718,363
Non-operating income (expense):
Interest expense (618,156) (433,173) (522,599)
Other 44,790 71,658 (10,527)
------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (1,083,219) 71,515 1,185,237
Provision for income taxes - - 444,000
------------- ------------- -------------
NET INCOME (LOSS) $ (1,083,219) $ 71,515 $ 741,237
============= ============= =============
Weighted average number of shares of
common stock outstanding 3,760,789 3,724,018 3,701,911
============= ============= =============
Earnings (Loss) Per Share $(.29) $.02 $.20
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
----------------------------
DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 158,077 $ 86,260
Trade accounts receivable (net of
allowance for doubtful accounts of
$40,000 in 1995 and 1994) 1,650,840 1,487,150
Refundable income taxes 106,000 ---
Inventories:
Finished goods 935,825 1,114,575
Work in process and raw materials 10,344,212 8,709,074
Prepaid expenses and other current
assets 103,197 102,317
Deferred income taxes 917,000 671,000
------------- -------------
TOTAL CURRENT ASSETS 14,215,151 12,170,376
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 394,821 314,091
Buildings 3,656,191 2,512,217
Machinery and equipment 8,682,242 7,250,472
------------- -------------
12,733,254 10,076,780
Less-accumulated depreciation 6,850,794 6,306,302
------------- -------------
5,882,460 3,770,478
------------- -------------
OTHER ASSETS 254,519 384,946
------------- -------------
$ 20,352,130 $ 16,325,800
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
------------------------------
DECEMBER 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 4,651,484 $ 1,595,367
Current portion of long-term debt 387,366 245,383
Trade accounts payable 2,730,256 2,083,701
Employee compensation and amounts
withheld 613,815 638,068
Accrued expenses 783,561 760,533
------------- -------------
TOTAL CURRENT LIABILITIES 9,166,482 5,323,052
------------- -------------
LONG-TERM DEBT, less current portion 4,919,019 3,824,061
------------- -------------
OTHER LIABILITIES 18,000 296,840
------------- -------------
DEFERRED INCOME TAXES 917,000 710,000
------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTE G)
SHAREHOLDERS' EQUITY:
Common stock, par value $.0025 per
share; 10,000,000 shares authorized;
issued and outstanding--3,653,540
in 1995 and 3,595,539 in 1994 9,134 8,989
Additional paid-in capital 8,593,152 8,560,672
Accumulated deficit (2,998,435) (1,915,216)
------------- -------------
5,603,851 6,654,445
Less guaranty of Employee Stock
Ownership Plan debt (272,222) (350,000)
Less Unfunded accrued pension costs --- (132,598)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 5,331,629 6,171,847
------------- -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 20,352,130 $ 16,325,800
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
---------------------------------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ (1,083,219) $ 71,515 $ 741,237
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Deferred income taxes (39,000) (114,000) (82,000)
Depreciation and amortization 1,047,000 985,588 931,269
(Gain) loss on sale of property
and equipment (32,780) 11,915 1,039
Changes in operating assets and
liabilities:
Trade accounts receivable (163,690) 343,913 (511,392)
Refundable income taxes (106,000) --- ---
Inventories (1,456,388) (150,965) 3,097,671
Prepaid expenses and other
current assets (880) (10,658) 27,624
Trade accounts payable 646,555 (50,662) (781,504)
Other current liabilities 131,373 (14,765) (141,882)
Other liabilities (278,840) 32,586 44,411
------------- ------------ ------------
Net cash (used in) provided by
operating activities (1,335,869) 1,104,467 3,326,473
------------- ------------ ------------
Investing Activities:
Additions to property, plant and
equipment (3,241,937) (696,359) (394,709)
Proceeds from sales of property,
plant and equipment 196,655 231,532 37,746
Decrease (increase) in other assets 127,285 (155,885) (136,930)
------------- ------------ ------------
Net cash used in
investing activities $ (2,917,997) $ (620,712) $ (493,893)
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
------------ ------------ -------------
<S> <C> <C> <C>
Financing Activities:
Increase (decrease) in revolving
line of credit, net $ 3,056,117 $ (279,198) $ (2,760,281)
Payments of long-term debt (247,499) (246,550) (4,215,509)
Issuance of long-term debt 1,484,440 --- 4,000,000
------------ ------------ -------------
Proceeds from exercise of options
for common stock, including
related income tax benefit 32,625 16,499 57,438
------------ ------------ -------------
Net cash provided by (used in)
financing activities 4,325,683 (509,249) (2,918,352)
------------ ------------ -------------
Increase (decrease) in cash 71,817 (25,494) (85,772)
Cash at beginning of year 86,260 111,754 197,526
------------ ------------ -------------
Cash at end of year $ 158,077 $ 86,260 $ 111,754
============ ============ =============
Supplemental Disclosure of
Cash Flow Information:
Interest Paid $ 594,488 $ 427,763 $ 578,014
Income taxes paid 139,000 130,000 285,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
EDAC TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
------------------------------- -------------- --------------
Common Stock Additional Accumulated
------------------------------- Pain-In Deficit
Shares Amount Capital
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balances at January 1, 1993 3,519,207 $ 8,798 $8,486,926 $(2,727,968)
Exercise of stock options,
including related income
tax benefit 46,998 118 57,320 --
Net income -- -- -- 741,237
Balances at December 31, 1993 3,566,205 8,916 8,544,246 (1,986,731)
-------------- -------------- -------------- --------------
Exercise of stock options,
including related income
tax benefit 29,334 73 16,426 --
Net income -- -- -- 71,515
-------------- -------------- -------------- --------------
Balances at December 31, 1994 3,595,539 8,989 8,560,672 (1,915,216)
Exercise of stock options,
including related income
tax benefit 58,001 145 32,480 ---
Net loss -- -- -- (1,083,219)
-------------- -------------- -------------- --------------
Balances at December 31, 1995 3,653,540 $ 9,134 $8,593,152 $(2,998,435)
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EDAC TECHNOLOGIES CORPORATION
DECEMBER 31, 1995
NOTE A -- ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Until May 12, 1989, Edac Technologies Corporation (the Company) was a subsidiary
of Cade Industries, Inc. (Cade) which owned approximately 57% of the Company's
outstanding Common Stock. Effective May 12, 1989, Cade sold its investment in
the Company's Common Stock to a partnership comprised of certain members of the
Company's management and the Edac Technologies Corporation Employee Stock
Ownership Plan (ESOP). The Partnership owns 27.0% and the ESOP owns 26.6% of
the Company's outstanding Common Stock as of December 31, 1995.
The Company and its subsidiaries design and manufacture tools, fixtures, special
machines, jet engine components, medical instrument components and spindles.
Although the Company and its subsidiaries offer both design and manufacturing
services to the aerospace and medical instruments industries, the design and
manufacturing are interrelated and have essentially the same capabilities and,
in the opinion of management, the Company operates in one business segment.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its subsidiaries, Gros-Ite Industries, Inc. and
Natural Cool, Ltd. Intercompany transactions have been eliminated from the
consolidated financial statements.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Provisions for depreciation and amortization are computed using the
straight-line method over 3 to 12 years for machinery and equipment and 25 years
for buildings for financial reporting purposes. For income tax reporting
purposes, straight-line and accelerated methods are used.
Earnings Per Share: Earnings per share is based on the weighted average number
of shares of common stock outstanding during the year, plus the dilutive effect,
if any, of outstanding stock options.
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain of the amounts reflected in the financial
statements. Actual results could differ from those estimates.
NOTE B -- COMMON STOCK AND STOCK OPTIONS
On December 5, 1991, the Board of Directors adopted the 1991 Stock Option Plan
(the Plan). The Plan is non-qualified and provides for the granting of up to
325,000 options to purchase shares of the Company's Common Stock. The option
price is the fair market value of the shares on the date of the grant. Options
may be exercised at the rate of 33 1/3% six months after the grant date, another
33 1/3% one year after the grant date and the remaining 33 1/3% two years after
the grant date. Options may be granted under the Plan through December 5, 2001.
During 1991 and 1995, options to purchase 282,000 shares at $.5625 per share and
30,000 shares at $1.25 per share, respectively, of the Company's Common Stock
were granted under the Plan.
<PAGE>
On January 1, 1994, options to purchase 100,000 restricted shares were granted
to an officer at an exercise price of $.5625 per share. At December 31, 1995,
50,000 of these options were exercisable. An additional 25,000 become
exercisable each January 1 thereafter through January 1, 1997.
During 1995, 1994, and 1993, options for 58,001, 29,334, and 46,998 shares,
respectively, were exercised at $.5625 per share. At December 31, 1995, there
were options outstanding for the purchase of 237,003 shares, which consisted of
207,003 at $.5625 per share of which 157,003 were exercisable, and 30,000 at
$1.25 per share, of which 10,000 were exercisable.
NOTE C -- NOTES PAYABLE AND LONG TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31
---------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Note payable to bank in 60 monthly installments of $37,516,
including interest at 7.65% (8.65% as of April 10, 1996)
per annum commencing April 1, 1993, with a balloon
payment of $3,089,220 due on April 30, 1998. $3,551,838 $3,719,444
Note payable to bank in 56 monthly principal installments of $5,556 1,000,000 ---
commencing December 1, 1995 with a balloon payment of
$688,864 due on August 1, 2000. Interest at 7.83% (8.83%
as of April 10, 1996).
Note payable to bank by Edac Technologies
Corporation Employee Stock Ownership Plan
(guaranteed by the Company). Principal is
due in 108 monthly installments of $6,481
commencing July 1, 1990. Interest at 95%
of the bank's base rate is due monthly. 272,222 350,000
Installment equipment note payable in quarterly
installments of $12,500 and monthly installments
based on 50% of the Company's profit, as defined,
on jobs performed by the equipment, commencing
November 28, 1995 and due March 31, 1998.
Interest imputed at 9%. Note collateralized by
the equipment. 482,325 ---
--------------- ---------------
5,306,385 4,069,444
Less amounts due within one year 387,366 245,383
--------------- ---------------
$4,919,019 $3,824,061
=============== ===============
</TABLE>
The Company also has a Revolving Loan and Security Agreement (The Agreement)
which provides for a revolving line of credit with a borrowing base limited to
an amount which is the lesser of $7,000,000 or an amount determined by a formula
based on percentages of the Company's receivables and inventory. The revolving
line of credit bears interest at the bank's base rate of interest (8.5% at
December 31, 1995). Effective April 10, 1996, the Agreement was amended to
extend the maturity of the Agreement from April 30, 1996 to March 31, 1997 and
to increase the interest rates on all loans and lines of credit provided by the
Agreement. The interest rate on the revolving line of credit increased to the
bank's base rate plus 1%. At December 31, 1995, the Company had $4,003,597
outstanding under the revolving line of credit.
The Agreement also provides for an equipment line of credit which provides loan
advances of 75% of equipment purchases up to an aggregate amount of $500,000,
with interest payable monthly. The principal outstanding on the equipment line
of credit as of February 1, 1996 will be paid in 60 equal payments commencing
February 1, 1996. Interest will be charged monthly after February 1, 1996 at
the bank's base rate plus 0.5% (base rate plus 1.5% as of April 10, 1996). At
December 31, 1995, the Company had borrowed $367,587 on the equipment line. The
Agreement also provides for an equipment line in the original amount of $433,837
($280,300 outstanding at
<PAGE>
December 31, 1995). Principal payments are $7,231 per month with interest
charged at the bank's base rate plus 0.5% (base rate plus 1.5% as of April 10,
1996).
At December 31, 1995 and 1994, borrowings outstanding under the revolving line
of credit and the equipment lines amounted to $4,651,484 and $1,595,367,
respectively. The unused portion of the line of credit was approximately
$1,274,829 as of December 31, 1995 (based on a borrowing base determined by the
formula).
The Agreement also provides for a five-year term note in the original amount of
$1,000,000. Effective April 10, 1996, the interest rate on the term note
increased from 7.83% to 8.83%. In addition, the Agreement provides for a five-
year term note in the amount of $4,000,000 ($3,551,838 outstanding at December
31, 1995). Effective April 10, 1996, the interest rate on the term note
increased from 7.65% to 8.65%.
To secure all obligations of the Company under the Agreement, the bank has a
first priority security interest in the Company's accounts receivable,
inventories, equipment, real estate and other assets. The Agreement requires,
among other things, minimum levels of net worth, no material adverse changes in
the financial condition of the Company and the maintenance of certain financial
ratios including debt to net worth, interest coverage, current and debt service
ratios. The Agreement also prohibits payment of dividends, issuance, redemption
or sale of common stock, and creation of certain other encumbrances and
contingent liabilities without the consent of the bank and limits the amount of
annual capital expenditures. The Company was in compliance with or received
waivers for all loan covenants, as amended, at December 31, 1995.
Aggregate annual maturities of long-term debt for the five year period
subsequent to December 31, 1995 are as follows: 1996--$387,366; 1997--$402,267;
1998--$3,683,418; 1999--$105,556; and 2000--$727,778.
NOTE D -- PENSION PLAN
The Company maintains a noncontributory defined benefit pension plan covering
substantially all employees meeting certain minimum age and service
requirements. The benefits are generally based on years of service and
employees' compensation during the last five years of employment. The Company's
policy is to contribute annually the amount necessary to satisfy the
requirements of the Employee Retirement Income Security Act of 1974.
In March 1993, the Board of Directors approved a curtailment to the plan which
resulted in the freezing of all future benefits under the plan as of April 1,
1993. As a result, the Company recognized a gain of $361,929 in 1993.
The following table sets forth the plan's funded status and amounts recognized
in the Company's financial statements:
<TABLE>
<CAPTION>
December 31
-----------------------------------
1995 1994
---------------- ---------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$3,970,402 and $4,042,220
in 1995 and 1994, respectively..................... $4,106,298 $4,210,450
=============== ===============
Projected benefit obligation......................... $4,106,298 $4,210,450
Plan assets at fair value............................ 4,468,558 4,153,134
----------- -----------
Plan assets in excess of (less than) projected
benefit obligation.................................. 362,260 (57,316)
Unrecognized net gain................................ (156,460) ---
----------- -----------
Prepaid (accrued) pension cost included
in accrued employee compensation.................... $ 205,800 $ (57,316)
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
Net pension cost included the
following components:
<S> <C> <C> <C>
Service cost-benefits earned
during the period...................... $ -- $ -- $ 103,606
Interest cost on projected
benefit obligation..................... 319,122 317,914 352,159
Actual return on plan assets............ (512,481) 8,683 (367,950)
Net amortization and deferral........... 228,315 (300,633) 331,764
Curtailment gain........................ -- -- (361,929)
----------- ---------- ---------
$ 34,956 $ 25,964 $ 57,650
=========== ========== =========
</TABLE>
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.5% for 1995, 8.0% for 1994, and
7.5% for 1993. The expected long-term rate of return on plan assets was 7%.
In accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 87, "Employers' Accounting for Pensions," during 1994 the Company
recorded an additional liability with a corresponding reduction in stockholders'
equity of $132,598 relating to the change in the discount rate from 8.0% to 7.5%
subsequent to the curtailment of the plan. In 1995, this additional liability
was no longer required.
In July 1991, the Company established a 401(k) defined contribution plan. The
Company matches 10% (20% commencing November 1, 1995) of employee contributions
up to 4% of compensation. Employer contributions and expense related to this
plan were $24,596, $10,508, and $17,891 in 1995, 1994 and 1993, respectively.
NOTE E -- EMPLOYEE STOCK OWNERSHIP PLAN
Effective May 4, 1989, the Company established the Edac Technologies Corporation
Employee Stock Ownership Plan (the ESOP). Employees of the Company are eligible
to participate in the ESOP beginning six months following their hire date. The
Company's contributions to the ESOP are determined annually by the Board of
Directors. The Company records the expense in the amount of contributions made
to the ESOP. The Company contributed $105,000, $104,500, and $105,000, to the
ESOP for the years ended December 31, 1995, 1994 and 1993, respectively.
At December 31, 1995, the ESOP owned 970,520 shares of the Company's Common
Stock. These shares were purchased using the proceeds of a $700,000 note payable
to a bank for which repayment has been guaranteed by the Company. Interest
expense incurred on the debt was $26,174, $26,357, and $26,772, for the years
ended December 31, 1995, 1994 and 1993, respectively.
In the accompanying financial statements, the outstanding debt of the ESOP has
been included in the Company's long-term debt, and shareholders' equity has been
decreased by a corresponding amount. As the principal amount of the loan is
repaid, the liability and the amount offset against shareholders' equity will be
reduced in equal amounts.
NOTE F -- INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes." Under SFAS No. 109,
deferred tax assets or liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using
the enacted marginal tax rate. Deferred income tax expenses or benefits are
based on the changes in the deferred tax assets and liabilities from period to
period.
<PAGE>
Income tax expense (benefit) are included in the financial statements as follows
(in 000's):
<TABLE>
<CAPTION>
1995 1994 1993
------ ---- ------
<S> <C> <C> <C>
Current $ 39 $ 114 $ 526
Deferred (39) (114) (82)
---- --- -----
$ -- $ -- $ 444
===== ===== =====
</TABLE>
The effective tax rate on income before income taxes is different from the
prevailing Federal and state income tax rate as follows (in 000's):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes $ (1,083) $ 72 $ 1,185
---------- -------- ---------
Income tax at Federal statutory rate $ (368) $ 24 $ 403
State income taxes-net of Federal benefit (80) 5 90
Meals, Entertainment and Other 68 41 21
Change in valuation allowance on
deferred income tax assets 380 (70) (70)
------- -------- ---------
$ -- $ -- $ 444
======= ======== =========
</TABLE>
For the year ended December 31, 1995, the Company increased its recorded
valuation allowance to reserve against assets for which it is considered
possible that a benefit will not be realized. For the years ended December 31,
1994 and 1993, the change in the valuation allowance is due to realization of
net operating loss carryforwards, subject to limitations.
The tax effect of temporary differences giving rise to the Company's deferred
tax asset and liability at December 31, 1995 and 1994 are as follows (in 000's):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 856 $ 959
Capital leases 58 58
Other 57 90
------ ------
971 1,107
------ ------
Deferred tax assets:
Allowance for uncollectible
accounts receivable 17 17
Employee compensation and amounts withheld 58 125
Accrued expenses 66 55
Unicap and inventory reserves 776 466
Tax effect of net operating loss carryforwards 464 464
Alternative minimum tax credit carryforwards 285 268
Other 17 5
Valuation allowance (712) (332)
------ ------
971 1,068
------ ------
Net deferred tax liability $ -- $ 39
------ ------
Reflected in balance sheet as:
Net current deferred tax asset $ 917 $ 671
Net long term deferred tax liability 917 710
------ ------
$ -- $ 39
====== ======
</TABLE>
<PAGE>
Due to the change in ownership during 1989 (see Note A), provisions of the
Internal Revenue Code restrict the utilization of net operating loss
carryforwards (NOLs) attributed to the period prior to the change in ownership.
As of December 31, 1995, the Company has pre-change NOLs of approximately
$1,200,000 available to offset future federal taxable income of which the
Company is limited to annual utilization of approximately $181,000. These NOLs
expire in the year 2003. The Company has alternative minimum tax credits of
approximately $285,000 which carry forward indefinitely for Federal income tax
purposes. These credits can be used in the future to the extent that the
Company's regular tax liability exceeds amounts calculated under the alternative
minimum tax method.
NOTE G -- COMMITMENTS AND CONTINGENCIES
Lease expense under operating leases was $60,074, $16,710 and $7,917, for the
years ended December 31, 1995, 1994 and 1993, respectively. Minimum rental
commitments as of December 31, 1995 for noncancelable operating leases with
initial or remaining terms of one year or more are as follows: 1996--$45,716;
1997--$10,841; 1998--$5,872; 1999--$3,300; 2000--$3,300; 2001 and thereafter--
$42,725.
NOTE H -- BUSINESS SEGMENT INFORMATION AND MAJOR CUSTOMERS
For the year ended December 31, 1995, sales to United Technologies Corporation
and Zapata Technologies, Inc. amounted to 69% and 10%, respectively, of
consolidated sales. These customers operate in the aerospace and packaging
fields, respectively. For the year ended December 31, 1994, sales to United
Technologies Corporation amounted to 69% of consolidated sales. For the year
ended December 31, 1993, sales to United Technologies Corporation and United
States Surgical Corporation amounted to 55% and 21%, respectively, of
consolidated sales. United States Surgical Corporation is in the medical
instruments field.
At December 31, 1995, the Company had $484,861 of trade receivables due from
United Technologies Corporation, and $473,299 due from Zapata Technologies,
Inc.
NOTE I -- RECENT ACCOUNTING PRONOUNCEMENT
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of," was issued. This statement requires a company to review long
lived assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company is
required to adopt the new standard on or before January 1, 1996. Management
does not believe the adoption of the new standard will have a significant impact
on the Company's results of operations or financial position.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument. However, it also
allows an entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the accounting in Opinion 25 must make pro forma disclosures of net income, as
if the fair value based method of accounting defined in the statement had been
applied. The Company has not yet determined which method of accounting it will
elect. The Company is required to adopt the new standard on January 1, 1996.
<PAGE>
OFFICERS
Robert T. Whitty Chief Executive Officer
Francis W. Moskey President and Chief Operating Officer
Gerald C. Smith Executive Vice President
Glenn L. Purple Vice President-Finance and Secretary
BOARD OF DIRECTORS
John Di Francesco Chairman
William J. Gallagher President, William J. Gallagher Company
Francis W. Moskey President, Chief Operating Officer
Gerald C. Smith Executive Vice President
Stephen G.W. Walk Business Consultant
Robert T. Whitty Chief Executive Officer
CORPORATE OFFICES
1790 New Britain Avenue
Farmington, CT 06032
GENERAL COUNSEL
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
1000 North Water Street
Milwaukee, WI 53202
CORPORATE AUDITORS
Arthur Andersen LLP
One Financial Plaza
Hartford, CT 06103
TRANSFER AGENT
Firstar Trust Company
615 East Michigan Street
Milwaukee, WI 53202
10-K INFORMATION
Shareowners may obtain a copy of the 1995 Edac Technologies 10-K report filed
with the Securities and Exchange Commission by writing to: Glenn Purple,
Secretary, Edac Technologies Corporation, 1790 New Britain Avenue, Farmington,
CT 06032.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 158,077
<SECURITIES> 0
<RECEIVABLES> 1,650,840
<ALLOWANCES> 40,000
<INVENTORY> 11,280,037
<CURRENT-ASSETS> 14,215,151
<PP&E> 12,733,254
<DEPRECIATION> 6,850,794
<TOTAL-ASSETS> 20,352,130
<CURRENT-LIABILITIES> 9,166,482
<BONDS> 4,919,019
9,134
0
<COMMON> 0
<OTHER-SE> 5,322,495
<TOTAL-LIABILITY-AND-EQUITY> 20,352,130
<SALES> 23,366,278
<TOTAL-REVENUES> 24,563,934
<CGS> 22,656,651
<TOTAL-COSTS> 22,656,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 618,156
<INCOME-PRETAX> (1,083,219)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,083,219)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,083,219)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
