==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1999
Commission file number 0-14299
SECOM GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 87-0410875
(State or other jurisdiction of (IRS Employer I.D. Number)
incorporation or organization)
46035 GRAND RIVER AVENUE 48374
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 248-305-9410
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports); and (2) has been subject to such filing
requirement for the past 90 days. Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Title of Class Number of Shares Outstanding
Common Stock 1,060,800 as of August 11, 1999
==============================================================================
SECOM GENERAL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 1999
INDEX
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements ----
Consolidated Balance Sheets............................... 1
Consolidated Statements of Operations..................... 3
Consolidated Statements of Cash Flows..................... 4
Notes to Interim Consolidated Financial Statements........ 5
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations....................... 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings......................................... 16
Item 2. Changes in Securities..................................... 16
Item 3. Defaults in Securities.................................... 16
Item 4. Submission of Matters to a Vote of Security Holders....... 16
Item 5. Other Information......................................... 16
Item 6. Exhibits and Reports on Form 8-K.......................... 16
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS (Unaudited)
Jun. 30 1999 Sept. 30 1998
------------ -------------
Current assets
Cash $ 72,800 $ 104,600
Accounts receivable
Trade 3,230,500 4,139,000
Other 538,100 163,500
Inventories 3,293,100 4,044,800
Prepaid expenses 158,200 286,500
Deferred tax assets 580,400 603,900
Property, plant and equipment
held for sale 1,000,000 1,440,000
Machinery and equipment of
discontinued subsidiary -- 4,200,000
----------- -----------
Total current assets 8,873,100 14,982,300
Property, plant and equipment, net 10,663,400 12,189,200
Intangible assets 110,100 146,700
Other assets 1,675,600 549,500
----------- -----------
Total assets $21,322,200 $27,867,700
=========== ===========
See notes to consolidated financial statements.
1
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
Jun. 30 1999 Sept. 30 1998
------------ -------------
Current liabilities
Current maturities of long-term debt $ 2,968,600 $ 4,724,900
Long-term debt classified as current 5,362,400 6,623,300
Accounts payable 1,529,800 2,925,800
Accrued wages and benefits 673,900 779,000
Accrued restructuring costs -- 416,000
Other accrued expenses 483,300 746,700
Customer deposit against purchase
of machinery (Note 6) 1,000,000 --
Debt secured by assets of
discontinued subsidiary -- 2,349,800
------------ ------------
Total current liabilities 12,018,000 18,565,500
Deferred tax liabilities 960,100 960,100
------------ ------------
Total liabilities 12,978,100 19,525,600
------------ ------------
Commitments and contingencies (Note 6)
Stockholders' equity
Common stock, $.10 par value,
authorized 10,000,000 shares;
outstanding 1,060,800 shares 106,100 533,500
Additional paid-in capital 18,810,000 18,400,800
Accumulated deficit (10,572,000) (10,592,200)
------------ ------------
Total stockholders' equity 8,344,100 8,342,100
------------ ------------
Total liabilities and stockholders' equity $ 21,322,200 $ 27,867,700
============ ============
See notes to consolidated financial statements.
2
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Jun. 30, Nine Months Ended Jun. 30,
--------------------------- --------------------------
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $6,693,200 $ 7,879,100 $21,423,800 $24,778,200
Cost of sales:
Production 5,229,000 7,066,300 17,460,700 22,164,600
Restructuring charges -- -- -- 900,000
---------- ----------- ----------- -----------
Gross profit 1,464,200 812,800 3,963,100 1,713,600
Selling, general and
administrative expenses 1,094,900 1,335,200 3,366,600 4,089,900
Other restructuring charges -- 400,000 -- 2,162,000
---------- ----------- ----------- -----------
Income (loss) from operations 369,300 (922,400) 596,500 (4,538,300)
---------- ----------- ----------- -----------
Other income (expense)
Interest (190,300) (197,600) (612,800) (728,100)
Other, net (7,800) 34,700 60,000 15,600
---------- ----------- ----------- -----------
Other expense - net (198,100) (162,900) (552,800) (712,500)
---------- ----------- ----------- -----------
Income (loss) from continuing
operations before income taxes 171,200 (1,085,300) 43,700 (5,250,800)
Income tax (expense) benefit (34,400) 136,400 (23,500) 541,100
---------- ----------- ----------- -----------
Income (loss) from continuing
operations 136,800 (948,900) 20,200 (4,709,700)
Discontinued operations
Loss from operations of
discontinued subsidiary -- -- -- (1,071,700)
---------- ----------- ----------- -----------
Net income (loss) $ 136,800 $ (948,900) $ 20,200 $(5,781,400)
========== =========== =========== ===========
Income (loss) per common share
(basic and diluted):
Continuing operations $ 0.13 $ (0.89) $ 0.02 $ (4.41)
Discontinued operations -- -- -- (1.00)
---------- ----------- ----------- -----------
Net income (loss) per common share $ 0.13 $ (0.89) $ 0.02 $ (5.41)
========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
3
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended Jun. 30, Nine Months Ended Jun. 30,
--------------------------- --------------------------
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 136,800 $ (948,900) $ 20,200 $(5,781,400)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 584,200 517,300 1,724,300 1,915,300
Deferred income taxes expense (benefit) 34,400 (120,500) 23,500 (526,100)
Provision for doubtful accounts (22,600) 21,400 (4,700) 103,600
Loss (gain) on sale of assets 75,500 (7,700) 74,500 (7,100)
Restructuring charges -- 400,000 -- 3,637,400
Changes in operating assets and liabilities
which provided (used) cash:
Trade and other receivables 122,800 158,300 237,100 1,427,300
Inventories (136,400) 305,600 710,100 470,600
Prepaids 148,800 96,700 128,200 125,600
Other assets -- 100,500 -- 13,300
Trade accounts payable 8,400 (726,800) (1,216,200) (741,600)
Accrued liabilities (107,700) (199,400) (266,400) (203,300)
Net cash (used in) provided by discontinued operations (35,000) (251,300) 284,000 1,865,100
----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities 809,200 (654,800) 1,714,600 2,298,700
----------- ----------- ----------- -----------
Cash flows from investing activities:
Proceeds from disposal of property, plant
and equipment -- -- 2,000 2,503,000
Customer deposit against purchase of equipment 1,000,000 -- 1,000,000
Collections on notes receivable 24,700 57,700 99,500 64,100
Capital expenditures (8,400) (62,300) (21,400) (1,110,200)
Net cash provided by (used in) discontinued operations -- 19,100 2,558,600 (141,500)
----------- ----------- ----------- -----------
Net cash provided by investing activities 1,016,300 14,500 3,638,700 1,315,400
----------- ----------- ----------- -----------
Cash flows from financing activities:
Net change in bank line of credit (1,294,400) 795,000 (1,745,000) (2,144,000)
Proceeds from long-term obligations -- -- -- 395,900
Retirements of common stock (18,200) -- (18,200) (11,900)
Payments on long-term obligations classified as current (508,000) (354,100) (1,272,100) (2,466,300)
Net cash used in discontinued operations -- (125,800) (2,349,800) (189,800)
----------- ----------- ----------- -----------
Net cash (used in) provided by financing activities (1,820,600) 315,100 (5,385,100) (4,416,100)
----------- ----------- ----------- -----------
Net increase (decrease) in cash 4,900 (325,200) (31,800) (802,000)
Cash, beginning of period 67,900 396,500 104,600 873,300
----------- ----------- ----------- -----------
Cash, end of period $ 72,800 $ 71,300 $ 72,800 $ 71,300
=========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
4
SECOM GENERAL CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The consolidated financial statements included herein have been
prepared by Secom General Corporation (the "Company") without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in the consolidated financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations.
In the opinion of management, the financial statements as of June
30, 1999 reflect all adjustments (consisting only of normal
recurring accruals) which are considered necessary to present a
fair statement of the results for the periods then ended. These
financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in the Company's Form 10-K and Annual Report for the
fiscal year ended September 30, 1998.
Consolidation
The accompanying consolidated financial statements include the
accounts of Secom General Corporation and its wholly-owned
subsidiaries: Form Flow, Inc.; L&H Die, Inc.; Micanol, Inc.;
Uniflow Corporation; and MMC Manufacturing Corp. f/k/a Milford
Manufacturing Corporation ("Milford"). All significant
intercompany accounts and transactions have been eliminated.
Nature of Business
Secom General Corporation (the "Company") is a publicly-traded
holding company with five wholly-owned subsidiaries supplying the
automotive, truck and construction markets. The Company currently
operates in two business segments: metal parts forming and
tooling. In March 1998, the Company discontinued its production
machining segment and in October 1998 completed the disposition of
its remaining assets (see Note 2). Accordingly, results of
operations of Milford for the three and nine-month periods ended
June 30, 1998 have been restated as discontinued operations.
Restructuring and Realignment of Business
During the year ended September 30, 1998, management significantly
reduced the size of the Company's consolidated business in order
to stem negative operating cash flows and reduce secured debt
obligations. Those efforts culminated in the sale of various
operating assets, including the discontinued Milford subsidiary
and various machinery and equipment of Uniflow, as well as revised
part pricing or product discontinuation on low margin sales and
production. Management believes that these efforts have
substantially reduced the operational circumstances which created
the significant operating losses and negative cash flows.
Management believes internally generated cash from operations and
amounts available on the line of credit will be sufficient to
cover scheduled debt payments as well as fund continuing working
capital requirements, and restore normal banking relations
including compliance with ongoing debt covenants. While management
is committed to continuing its efforts to improve operating
results in the normal course of business over the long term, it
nevertheless has also engaged an
5
investment banking firm in October 1998 to assist in the
development of other strategic alternatives, such as the possible
sale or merger of all or part of the Company's continuing
business. As such, although the Company would consider any
meaningful offer on favorable terms, continuing as an independent
profitable going concern is considered a viable alternative in
maximizing shareholder value.
Use of Estimates
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of income and expenses during the
reporting period. Significant estimates include fair value of
assets held for sale, realization of tax benefits associated with
net operating losses and tax credit carryforwards, and impairment
of property and goodwill assets.
Reclassifications
Certain reclassifications have been made to the prior period
balances for comparative purposes.
Property, Plant and Equipment
Property, plant and equipment used in conducting the business are
stated at cost. Major improvements and renewals are capitalized
while ordinary maintenance and repairs are expensed. Management
reviews these assets on an ongoing basis to determine whether
carrying values have been impaired.
Property, plant and equipment held for sale are reported at
estimated fair value less estimated costs to sell.
Intangible Assets
Intangible assets consisting of goodwill (cost in excess of net
assets acquired) is currently amortized on a straight-line basis
over 5 years. Accumulated amortization was $545,300 as of June 30,
1999 and $508,600 as of September 30, 1998. Management reviews the
carrying value of goodwill on an ongoing basis to assess its
recoverability.
Earnings (Loss) Per Common Share
At the annual shareholders meeting on April 12, 1999, shareholders
approved a one-for-five reverse stock split effective April 14,
1999. All "shares outstanding" and "per share" amounts have been
restated to reflect the one-for-five reverse stock split.
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during the year and includes a
dual presentation and reconciliation of "basic" and "diluted" per
share amounts. Diluted reflects the potential dilution of all
common stock equivalents. At June 30, 1999 options to purchase
69,200 shares were excluded from the computation of earnings per
share because the options' exercise prices were greater than the
average market price of the common shares. As of June 30, 1998
options to purchase 127,600 shares were excluded from the
computation. A reconciliation of the denominators used in the
basic and diluted share calculation for continuing operations
follows for the three and nine months ended June 30:
6
<TABLE>
<CAPTION>
(Unaudited)
Three Months Nine Months
------------------- -------------------
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
<S> <C> <C> <C> <C>
Denominator:
Weighted average shares
outstanding, basic 1,064,900 1,067,100 1,066,200 1,067,200
Incremental shares from
assumed conversion of options -- -- -- --
--------- --------- --------- ---------
Weighted average shares
Outstanding, diluted 1,064,900 1,067,100 1,066,200 1,069,200
========= ========= ========= =========
</TABLE>
2. DISCONTINUED OPERATIONS - PRODUCTION MACHINING SEGMENT
Effective March 18, 1998, the Company sold all of its assets
relating to Milford's machined brake valve parts business in
transactions with Varity Kelsey-Hayes Corporation ("VKH") and PGK
Acquisition Corp. ("PGK"). VKH was Milford's primary customer and
Secom had acquired the assets and business of Milford from VKH
effective November 1, 1996. Milford sold back to VKH, for $3
million in cash, the machinery, equipment and tooling used in
connection with the manufacture of machined brake valve body parts
along with its industrial facility. In addition to the cash
portion of the purchase price, VKH also assumed any funding
contributions required to be made to the Milford pension plan.
PGK acquired other machined valve related assets in exchange for
the assumption of approximately $1.2 million in accounts payable,
other accruals of approximately $700,000, and the bargaining unit
employee retiree health care obligation, recorded at $3.4 million.
PGK now operates the Milford business and also assumed Milford's
obligations under a supply agreement with VKH. In July 1998, the
Company also received $450,000 for the sale of certain Milford
equipment associated with the machining of various automotive
seating components.
On October 27, 1998, the Company sold the remaining assets and
business of Milford to Delco Remy America, Inc. ("DRA"), for the
purchase price of $4.2 million, receiving $2.7 million in cash and
a $1.5 million promissory note. DRA purchased all of Milford's
machinery, equipment and certain inventories that were used to
produce machined starter motor shafts for DRA. The remaining
inventory was sold to Horizon Technology Group, L.L.C. in a
separate transaction. Accordingly, these assets were recorded at
their net realizable values as of September 30, 1998.
The $2.7 million in cash received from the sale was used to retire
$2.3 million in term debt secured by those assets and the balance
was used to reduce accounts payable and the line of credit. Terms
of the $1.5 million promissory note require four annual
installments of $375,000, plus interest at 8.5%, beginning
September 1, 1999.
7
3. INVENTORIES
Inventories at June 30, 1999 and September 30, 1998 consist of the
following components (in thousands):
(Unaudited)
Jun. 30 1999 Sept. 30, 1998
------------ --------------
Raw materials $ 378 $ 562
Work-in-process 1,176 1,366
Finished goods 1,739 2,117
------ ------
Total $3,293 $4,045
====== ======
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following assets at
June 30, 1999 and September 30, 1998 (in thousands)
(Unaudited)
Jun. 30 1999 Sept. 30, 1998 Life
------------ -------------- ----
Machinery and equipment $14,248 $14,344 2 to 20 years
Building and
improvements 4,707 4,705 3 to 30 years
Land and improvements 448 448
Furniture and fixtures 1,718 1,716 3 to 7 years
Vehicles 125 123 3 years
------- -------
Total 21,246 21,336
Less accumulated
depreciation 10,583 9,147
------- -------
Net book value $10,663 $12,189
======= =======
5. LONG-TERM DEBT
Long-term debt principally consists of a bank line of credit, real
estate mortgages, equipment term notes and industrial revenue
bonds. As of June 30, 1999 the Company had approximately $2
million available on its' line of credit.
During fiscal 1998, the Company violated certain bank debt
covenants. As a result, in November 1998 the Company's primary
lender required the Company to replace its current credit
facilities with an amendment and extension agreement, which
extended continuing credit, up to $3 million at prime plus 1%,
through February 1, 1999. In June 1999 the Company signed another
agreement, with terms similar to the previous agreements, which
extends credit through the period November 1, 1999. Borrowings on
the bank line of credit are collateralized by accounts receivable
and inventory and limited to stated advance rate percentages.
Interest is payable monthly. The agreement prohibits the payment
of cash dividends and requires the Company to maintain specific
financial covenants including a minimum total equity, current
ratio and EBITDA. The Company is working closely with its secured
lenders and has made all scheduled debt payments on a timely
basis, through July 1999. Management believes it can extend
current debt facilities with existing lenders or refinance with
other lenders on a continuing basis.
8
6. COMMITMENTS AND CONTINGENCIES
Customer Deposit Against Purchase of Machinery
In May 1999, the Company received a $1 million "Good Faith
Deposit" towards the purchase of certain machinery and equipment
which the Company purchased in fiscal 1996 for over $3 million.
The Company has been negotiating with an OEM customer of Uniflow
for a substantial period of time and anticipates completing the
negotiations within the next several months. The Company believes
a successful resolution of the negotiations could significantly
improve its financial condition.
Trading of Common Stock
In November 1998, the Company's common stock was scheduled to be
delisted from trading on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) National Market System
as a result of the Company failing to meet certain minimum listing
requirements. The Company appealed the delisting and as a result,
the trading of its' stock has been moved to The Nasdaq SmallCap
Market under the symbol SECM.
7. SUPPLEMENTAL CASH FLOWS INFORMATION
Cash payments for interest and income taxes for the three and
nine-month periods ended June 30, 1999 and 1998, respectively,
were (in thousands):
(Unaudited)
Three Months Nine Months
---------------- -----------------
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
Interest:
Continuing operations 191 213 589 662
Discontinued operations -- 57 27 308
Income taxes:
Continuing operations -- 15 -- 25
Discontinued operations -- -- -- --
During the quarter ended December 31, 1998, the Company received a
$1.5 million note as partial consideration in connection with the
sale of the remaining Milford assets and business (see Note 2).
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS - OVERVIEW
This management's discussion and analysis of financial condition
and results of operations includes a number of forward-looking statements
which reflect the Company's current views with respect to future events and
financial performance. These forward-looking statements are subject to
certain risks and uncertainties, including those discussed below, that may
cause results to differ materially from historical results or those
anticipated. In this report the words "expects", "anticipates", "believes",
and similar expressions identify forward-looking statements, which speak only
as to the date hereof.
The Company operates in two business segments: Metal Parts Forming
and Tooling. The Metal Parts Forming Segment manufactures cold forged and
cold headed parts, while the Tooling Segment provides perishable tooling for
the cold heading industry.
Consolidated net sales from continuing operations decreased by
15.1% for the quarter ended June 30, 1999, compared to the same quarter in
the prior year. Net sales decreased by 26.4% at Uniflow and 11.8% for the
Tooling Group. The decrease in consolidated net sales for the comparative
periods was due to the discontinuance of unprofitable product lines,
primarily certain cold-formed parts suspension ball-joint housings, at
Uniflow and lower sales to the Tooling Group's larger customers. Although
sales declined, the Company recorded income from continuing operations of
$136,800 or $0.13 per share in the current quarter, compared to a loss from
continuing operations of ($948,900) or ($0.89) per share in the prior year
quarter. The improvement in results from continuing operations was due
primarily to Uniflow. Uniflow's results improved for three reasons; (1)
shop-floor cost containment steps instituted as part of its continuing
restructuring; (2) recording of $400,000 of restructuring charges in the
prior year quarter; and (3) continued benefit from the part price increases
implemented in October 1998 as part of its restructuring plan. The Tooling
Group was also able to improve its operating results through continued
shop-floor cost containment steps.
The Company's cash flows from operations and cash generated from
the sales of the Milford production machining line assets enabled it to
substantially reduce its secured debt and fund operations through the end of
the fiscal quarter ended June 30, 1999, including the timely payment of all
scheduled debt obligations. The Company is working closely with its secured
lenders and has made all scheduled debt payments on a timely basis, through
July 1999. During the course of the current fiscal year, the Company has
signed three loan extension agreements with its primary lender. The current
agreement has terms similar to the previous agreements and provides financing
through November 1, 1999. Management believes it can extend current debt
facilities with existing lenders or refinance with other lenders on a
continuing basis.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF CONTINUING OPERATIONS BY SEGMENT
METAL PARTS FORMING SEGMENT
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- -------------- -------------- --------------
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales 2,977 100.0 4,044 100.0 10,482 100.0 13,575 100.0
Gross Profit (Differential) 332 11.2 (341) (8.4) 788 7.5 (1,904) (14.0)
Operating Expenses 196 6.6 729 18.0 698 6.6 3,329 24.5
Operating Profit (Loss)(1) 136 4.6 (1,070) (26.5) 90 0.9 (5,233) (38.5)
<FN>
- ---------
(1) Before interest, bad debt and corporate overhead expense.
</TABLE>
The Metal Parts Forming Segment is comprised of the Company's
Uniflow subsidiary. Uniflow currently manufactures transmission shaft parts,
suspension ball-joint housings, truck wheel fasteners, and a variety of OEM
and aftermarket cold-formed and forged parts. Customers are primarily
automotive and trucking-related original equipment manufacturers ("OEM") and
service part manufacturers ("after-market").
Uniflow's sales decreased 26.4% in the current quarter compared to
the same period last year and 22.8% for the comparative nine-month period.
The sales decrease for the quarter was primarily related to the
discontinuation of various suspension-ball joint housings, due to the price
increases implemented in October 1998, and various cold-formed products which
were discontinued when the National FX cold former machine was sold in March
1998. The sales decrease for the nine-month period was primarily due to the
decline in cold-headed parts, as a result of the sale of the National FX
machine, as well as an overall decline in suspension housings and wheel
fasteners, as a result of the price increases instituted in October 1998.
Management is focusing its efforts on regaining the profitable portions of
the wheel fasteners business that were lost due to the October 1998 price
increases and that fit within its current production capability.
Uniflow's gross profit was 11.2% of sales in the current quarter,
compared to a gross (differential) of (8.4%) of sales in the same prior year
period. For the nine-month comparative periods, the gross profit
(differential), as a percentage of sales, was 7.5% and (14.0%), respectively.
The significant improvement in the current year results was primarily due to
the ability of management to better control its production costs and the
parts repricing instituted by Uniflow in October 1998. The prior year
nine-month period also included $900,000 of restructuring charges.
The Uniflow restructuring is still in process as the Company
continues to try to improve its production efficiencies, reduce labor and
overhead costs, and conclude ongoing negotiations with an automotive OEM
customer to recoup its fiscal year 1996 investment of over $3 million in new
equipment. As a show of good faith towards concluding negotiations, which the
Company believes could be within the next several months, the OEM customer
paid the Company $1 million during the June 1999 quarter. The Company
believes a successful resolution of the negotiations could significantly
improve its financial condition.
Although the full impact of the restructuring is not known,
management believes that the restructuring effort has and will continue to
improve Uniflow's operating results over the long term. Should Uniflow
continue to experience lower sales, the Company believes the above steps
would substantially mitigate the negative impact on its gross profit.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating expenses were 6.6% of sales in the current quarter,
compared to 18% of sales in the prior year period. For the nine-month
comparative periods, operating expenses as a percentage of sales were 6.6%
and 24.5%, respectively. The decrease in operating expenses in the
comparative periods was due primarily to $400,000 and $2.2 million of
restructuring charges in the prior three and nine-month periods,
respectively. Additionally, personnel and front office overhead costs were
lower in the current quarter. Management anticipates future operating
expenses to remain stable or decline slightly as a percentage of sales.
<TABLE>
<CAPTION>
TOOLING SEGMENT
(in thousands)
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales (1) 3,895 100.0 4,415 100.0 11,552 100.0 13,371 100.0
Gross Profit 974 25.0 985 22.3 2,709 23.4 3,075 23.0
Operating Expenses 540 13.9 610 13.8 1,565 13.5 1,783 13.3
Operating Profit (2) 434 11.1 375 8.5 1,144 9.9 1,292 9.7
<FN>
- ---------
(1) Before elimination of intercompany sales.
(2) Before interest, bad debt and corporate overhead expense.
</TABLE>
The Tooling Segment is comprised of the Form Flow, L&H and Micanol
units. The Tooling operations manufacture and sell customized tools and dies
for use in the production of hot and cold-formed metal parts.
Tooling sales decreased by 11.8% in the current quarter compared
to the same quarter last year, while for the nine-month comparative periods,
sales declined by 13.6%. The decrease in sales in the current year is
primarily attributable to lower sales orders from certain of the Tool Group's
larger accounts. These customers have discontinued product lines or have
benefited from longer tooling life. A significant component of the decline
was L&H sales to Uniflow, as Uniflow's tooling requirements were reduced
because of the sale of its National FX 1250 parts former. Management has
added a salesperson and is increasing customer contact by other management
personnel in order to increase sales. Management believes future sales will
remain consistent with or increase slightly over the sales level for the
quarter ended June 30, 1999.
Tooling gross profit improved to 25.0% of sales in the current
quarter, compared to 22.3% of sales in the comparative 1998 quarter. The
gross profit for the nine-month comparative periods, as a percentage of
sales, increased to 23.4% in 1999, from 23.0% in 1998. The increase in the
gross profit percentage for the current year three and nine-month periods was
due to management's ability to reduce material, labor and supply costs to
offset the decline in sales. Management intends to continue focusing on
closely matching its material, direct labor and supply costs to its sales
volumes so as to achieve a higher gross margin.
Operating expenses remained relatively constant at 13.9% of sales
in the current quarter compared to 13.8% in the prior year period. For the
nine-month comparative periods, operating expenses as a percentage of sales
were 13.5% and 13.3%, respectively. Management believes operating expenses
will remain at these levels or decline slightly as a percentage of sales in
the future.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
DISCONTINUED SEGMENT - PRODUCTION MACHINING
During the second fiscal quarter of 1998, the Company discontinued
its Milford operation due to ongoing adverse operating results. Accordingly,
three and nine-month results of operations for 1998 have been restated.
CORPORATE EXPENSES
Unallocated corporate overhead was $376,000 in the current
quarter, compared to $414,000 in 1998. For the nine-month comparative
periods, unallocated corporate overhead was $1,157,000 compared to $1,194,000
in the prior year. The three and nine-month periods are relatively unchanged
as a decrease in personnel, legal and accounting costs was offset by higher
depreciation expense and fees associated with the hiring of an investment
banker and refinancing the line of credit and other secured debt held by the
Company's primary lender.
INTEREST EXPENSE
Interest expense was $190,000 in the current quarter, compared to
$198,000 in the prior year period. For the nine-month comparative periods,
interest expense was $613,000 compared to $728,000, respectively. The
decrease in interest expense resulted from a reduction in secured debt, due
to proceeds from various asset sales and positive cash flows from operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position improved to a negative $3.1
million at June 30, 1999 from a negative $3.6 million at September 30, 1998,
as positive cash flows from operations enabled the Company to significantly
reduce its outstanding secured debt. The negative working capital position
resulted from the reclassification of long-term debt to current when the
Company failed to satisfy certain bank covenants as of June 30, 1999 and
September 30, 1998, respectively. Management believes that it will be able to
refinance this debt on a continuing basis in the coming months.
Management believes that internally generated cash from operations
and the approximately $2 million available on its' bank line of credit, as of
June 30, 1999, will be sufficient to satisfy scheduled debt payments as well
as fund continuing working capital requirements. Additionally, the Company
expects to improve its liquidity and reduce outstanding debt by selling
noncore assets. These noncore assets total $1 million and are classified as
"Property, plant and equipment held for sale" on the balance sheet.
Net cash provided by operating activities, before changes in
working capital items, was $808,000 in the quarter ended June 30, 1999, while
working capital changes and discontinued operations provided $1,000 of cash,
for net cash provided by operating activities of $809,000. The improvement in
income from continuing operations primarily contributed to the improved cash
flow from operations, before discontinued operations. Cash provided by
working capital items was offset by a use of cash by discontinued operations.
In the prior year comparative quarter, net cash used in operating
activities, before changes in working capital items, was $138,000, while
working capital changes and discontinued operations used $517,000 in cash,
for net cash used by operating activities of $655,000. A decrease in
operating assets combined with a decrease in accounts payable and accrued
liabilities used $266,000 of cash. Discontinued operations used $251,000 to
reduce accounts payables and accruals.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the nine months ended June 30, 1999, net cash provided by
operating activities, before changes in working capital items, was $1.84
million, while working capital items used $407,000 in cash and discontinued
operations provided $284,000, for a total of $1.71 million of cash provided
by operations. The improvement in income from continuing operations,
primarily offset by accounts payable and accounts receivable decreases, was
responsible for the cash provided by operating activities. For the nine-month
period, cash provided by discontinued operations of $284,000 resulted from
collection of accounts receivables and was partially reduced by a decline in
accounts payable and accrued liabilities.
For the nine months ended June 30, 1998, net cash used by
operating activities, before changes in working capital items, was $658,000,
while working capital items provided $1.09 million in cash and discontinued
operations provided $1.86 million, for a total of $2.29 million of cash
provided by operations. Cash provided by working capital items was primarily
due to improved accounts receivable collections reduced by an accounts
payable decrease. Cash provided by discontinued operations of $1.86 million
primarily reflects the sale of the Milford fluid brake valve equipment,
facility and business.
Net cash provided by investing activities was $1.02 million in the
current quarter, due primarily to the receipt of a $1 million deposit against
the future sale of certain machinery and equipment which the Company
invested over $3 million, in fiscal year 1996. In the June 30, 1998 quarter,
$14,000 was provided by investing activities.
For the nine months ended June 30, 1999, cash provided by
investing activities was $3.64 million, of which $2.56 million resulted from
the sale of Milford's remaining machinery, equipment and business. The
remaining $1 million was due to the receipt of a deposit against the future
sale of certain machinery and equipment. In the prior year comparative
period, cash provided by investing activities was $1.31 million. The sale of
Uniflow's FX 1250 cold former generated $2.5 million of cash, primarily
offset by capital expenditures which totaled $1.11 million, for expansion of
the L&H Die facility, various production equipment and the corporate wide
computer system. Discontinued operations used $141,000.
Net cash used in financing activities in the quarter ended
June 30, 1999, was $1.82 million. The Company reduced borrowings on its' bank
line of credit by $1.29 million and made scheduled principal payments of
$508,000. In the prior year comparative quarter, financing activities
provided $315,000 of cash. The Company increased its' bank line of credit
borrowings by $795,000 and made principal payments of $354,000. Discontinued
operations used $126,000 for scheduled principal payments.
For the nine months June 30, 1999, cash used in financing
activities was $5.38 million. The Company reduced its' bank line of credit
borrowings by $1.75 million and made scheduled debt payments totaling $1.27
million. Discontinued operations used $2.35 million for extinguishing secured
debt related to the sale of Milford's remaining machinery, equipment and
business. In the prior year comparative period, financing activities used
$4.42 million of cash. The Company reduced its' bank line of credit borrowings
by $2.14 million and made principal payments of $2.47 million, including an
early principal payment of $1.3 million related to the sale of Uniflow's FX
1250 cold former. Discontinued operations used $190,000 for scheduled debt
payments.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
ESULTS OF OPERATIONS (Continued)
YEAR 2000 DATE CONVERSION
The Company utilizes a computer network comprised of both Local
Area Networks ("LAN's") and Wide Area Networks ("WAN's"). The network
hardware and software are approximately 95% Year 2000 compliant and the
Company believes they will be fully compliant within the next few months. All
of the various hardware and software used in the administration of the
network and the Company's manufacturing, engineering and financial processes
are purchased from third party vendors. The manufacturing and engineering
software applications used by the Company are approximately 90% compliant and
are expected to be fully compliant within the next few months. The Company's
financial applications are compliant.
Additionally, the Company has various personal desktop and laptop
computers that run word processing, database and spreedsheet software. The
Company is currently in the process of upgrading all the software run on
these computers with versions that are Year 2000 compliant and estimates
completing these upgrades within the next few months.
Over the last two fiscal years, the Company has expended
approximately $55,000 to make its hardware and software Year 2000 compliant.
In addition, the Company estimates it will spend approximately $25,000 to
complete its Year 2000 compliance program. The additional expenditures are
approximately 40% of the Company's information technology budget for fiscal
year ended September 30, 1999. As amounts are expended for Year 2000
compliance they are paid for by cash flows from continuing operations.
The Company believes that the steps it is and has taken regarding
Year 2000 compliance will allow its' operations to run normally on January 1,
2000 and thereafter. The possibility exists, however, that certain stand
alone computers or software may not be upgraded timely or unforeseen
circumstances may arise that interrupt certain areas of the Company's
business or operations. In the case of any such occurrence, the Company
believes that it can implement a solution within a matter of days and no
material interruption of its business or operations will occur.
The Company is seeking certification of Year 2000 compliance from
its' significant third party vendors. If any of the Company's suppliers or
customers does not successfully and/or timely complete their Year 2000
compliance, the Company's business or operations could be adversely affected.
The Company has not generated and does not intend to generate any disaster
contingency plans regarding the Year 2000 compliance issue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults in Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders
On April 12, 1999, the Company held its 1999 annual meeting of
shareholders at which the following matters were submitted to a vote of
security holders and results of which were as follows:
1. Election of Directors
Nominee Votes For Votes Withheld
------- --------- --------------
Robert A. Clemente 4,463,778 871,622
Gregory Adamczyk 4,463,826 871,574
Rocco Pollifrone 4,463,826 871,574
Richard Thompson 4,463,826 871,574
Martin J. Eidemiller 4,689,428 645,972
2. Proposal to amend the Company's Certificate of Incorporation
to effect a reverse stock split at the rate of one new share
for each five shares previously outstanding.
Votes for: 4,953,608
Votes Against: 54,053
Votes Withheld/Abstentions: 327,739
The amendment became effective April 14, 1999.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
See Exhibit Index on the following page.
16
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
10.1 Second Amendment to Amendment and Extension Agreement 19
between Bank One as Lender and Secom General
Corporation and Subsidiaries as Borrowers.
10.2 Fourth Amended and Restated Term Note, in the amount of 34
$585,378, between Bank One as Lender and Secom General
Corporation and Subsidiaries as Borrowers.
10.3 Fourth Amended and Restated Equipment Term Note, in th 36
amount of $565,053 between Bank One as Lender and Secom
General Corporation and Subsidiaries as Borrowers.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
SECOM GENERAL CORPORATION
(Registrant)
By: /s/ Paul D. Clemente August 13, 1999
--------------------
Paul D. Clemente
Vice President
By: /s/ Scott J. Konieczny August 13, 1999
----------------------
Scott J. Konieczny
Chief Financial Officer
18
SECOND AMENDMENT TO AMENDMENT AND EXTENSION AGREEMENT
Bank One, Michigan, f/k/a NBD Bank ("Bank One" or "Lendee"), Secom
General Corporation ("Secom"), Form Flow, Inc. ("Form Flow"), L & H Die, Inc.
("L&H"), Micanol, Inc. ("Micanol"), Uniflow Corporation ("Uniflow"), MMC
Manufacturing Corp. f/k/a Milford Manufacturing, Corporation ("Milford"),
Tri-Tec Plastics Corporation ("Tri-Tec"), and Triple Tool, Inc. ("Triple
Tool") enter into this Second Amendment to Amendment and Extension Agreement
(this "Second Amendment") on June 29, 1999. For convenience (i) Secom, Form
Flow, L&H, Micanol, Uniflow, and Milford are referred to herein,
collectively, as "Borrowers" and, individually, as a "Borrower" (ii) Secom,
Form Flow, L&H, Micanol, Uniflow, and Milford in their capacity as guarantor
of another Borrower's debt to Bank One, Tri-Tec pursuant to the
Tri-Tec/Uniflow Guaranty, Triple Tool pursuant to the Triple Tool/Uniflow
Guaranty, and any other person or entity who guaranteed the obligations of
one or more of Borrowers to Bank One are referred to herein, collectively, as
"Guarantors", and, individually, as a "Guarantor" and (iii) Borrowers,
Guarantors, Tri-Tec and Triple Tool are referred to herein, collectively, as
the "Parties" and, individually, as a "Party."
RECITALS
A. Secom, Form Flow, L&H. Micanol, Uniflow, Milford, Tri-Tec, Triple
Tool and Bank One are parties to an Amendment and Extension Agreement dated
as of November 25, 1998, as amended by First Amendment to Amendment and
Extension Agreement dated February 2, 1999, but effective as of February 1,
1999 (as so amended, the "Extension Agreement"). Capitalized terms used but
not defined in this Second Amendment have the same meanings as in the
Extension Agreement.
B. On June 10, 1999, there was (i) 727,509.65 in principal owing by the
Borrowers to Bank One under the Line of Credit,, (ii) $585,378.48 in
principal owing by the Borrowers to Bank One under the Term Loan, and (iii)
$565,053.28 in principal owing by the Borrowers to Bank One under the
Equipment Tenn Note, plus accrued but unpaid interest, costs and expenses
(including attorneys' fees) called for by the Loan Documents (all of these
obligations together with all other principal and interest due or bec oming
due to Bank One together with all other sums, indebtedness and liabilities of
any and every kind now or hereafter owing and to become due from Borrowers to
Bank One, however created, however incurred, evidenced, acquired or arising,
and whether direct or indirect, primary, secondary, fixed or contingent,
matured or unrnatmed, joint, several, or joint and several, and whether for
principal, interest, reimbursement obligations, indemnity obligations,
obligations under guaranty agreements, fees, costs, expenses, or otherwise
and all of the Borrowers' obligations under the Extension Agreement and this
Second Amendment, together with all other present and future obligations of
the Borrowers to Bank One, and Tri-Tec's obligations pursuant to the
Tri-Tec/Uniflow Guaranty, and Triple Tool's obligations pursuant to the
Triple Tool/Uniflow Guaranty, are collectively referred to as the
"Obligations").
C. Each Party acknowledges and agrees that (a) the Extension Agreement
is in full force and effect; (b) Bank One has fully performed all of its
obligations under the Loan Documents (including the Extension Agreement);
(e) Bank One has no obligation to continue to lend to the Borrowers, and any
future loans will be made in Bank One's sole discretion; (d) Bank One has no
obligation to forbear from enforcing its rights and remedies beyond May 1,
1999, and (e) Bank One has made no representation or agreem ent that funding
in any amount will continue, or that the Extension Period will be extended
beyond its expiration date.
D. Each Party also acknowledges and agrees that the actions taken by
Bank One to date in furtherance of the Loan Documents (including the
Extension Agreement) are reasonable and appropriate under the circumstances
and are within Bank One's rights under the Loan Documents and applicable law.
E. The Parties have requested that Bank One amend the Extension
Agreement in order to extend the Extension Period to November 1, 1999, to
allow the Parties time to sell all or a portion of the business sufficient to
pay in full all of the Obligations, and Bank One is willing to do so, subject
to the terms and conditions of this Agreement.
F. As set forth in this Second Amendment, Bank One and the Parties have
agreed to amend the Extension Agreement and have reached certain other
agreements.
AGREEMENT
Based on the foregoing Recitals (which are incorporated into this Second
Amendment as agreements, representations, warranties and covenants of the
respective Parties, as the case may be), and for other good and valuable
consideration, the receipt and adequacy of which is mutually acknowledged by
the parties hereto, each of the Parties and Bank One agree as follows:
1. Amendments to the Extension Agreement.
(a) Paragraph I (a) of the Extension Agreement is hereby amended in
its entirety and replaced by the following:
"(a) Subject to the following conditions and those set forth
below, Bank One agrees to waive the Existing Defaults through
November 1, 1999 (the "Extension Period"), at which time, unless
earlier demand is made, all Obligations shall be due and payable in
full without fiuffier notice or demand by Bank One."
(b) Paragraph 2 of the Extension Agreement is hereby amended
in its entirety and replaced by the following:
2
"2. Covenants During Fxtension Period.
(a) Attached to the Second Amendment as Exhibit A is a copy of
projections prepared by Borrowers (the "Proiections') of operating
results and cash flows through December 31, 1999. In accordance with the
Projections, and as an acconunodation to Borrowers, anything to the
contrary in the Loan Documents notwithstanding, through the Extension
Period, the following financial covenants shall be applicable, rather
than the Cash Flow Coverage Ratio, Tangible Capital Funds and Current
Ratio covenants set forth in the Credit Agreement:
(i) Borrowers' Total Equity shall not be less than $8,100,000.
For the purposes of this covenant, "Total Equity" means book net
worth determined in accordance with generally accepted accounting
principles;
(ii) Borrowers' Total Liabilities to Total Equity shall not
exceed 1.80 to I.O. Notwithstanding anything in the Loan Documents
to the contrary, for the purposes of this covenant, "Total
Liabilities" means all liabilities of Borrowers of any nature
whatsoever;
(iii) Borrowers' Current Ratio shall not be less than 0.70 to
1.0, provided, however, that Bank One agrees, in its sole
discretion, to equitably adjust this ratio if Secom is required to
reclassify "Assets Held For Sale" from current to long-term as part
of Secom's year end audit;
(iv) Borrowers' EBITDA shall not be less than (A) $239,309 for
the month of May, 1999, (B) $238,328 for the month of June, 1999,
(C) $212,915 for the month of July, 1999, (D) $231,572 for the
month of August, 1999; and (E) $239,003 for the month of September,
1999 and thereafter."
(b) In addition to any covenants contained in the Loan Documents
and the Extension Agreement, during the Extension Period, the Parties
covenant and agree that they will not change management of any Borrower
without the prior written consent of Bank One.
2. Delco Remy Note Secom acknowledges that it has pledged to Bank One as
additional collateral a promissory note dated October 27, 1998 in the
original principal amount of $1,500,000 payable by Defeo Remy America, Inc.
to the Order of Secom (the "Delco Remy Note"). Secom will immediately
remit.to Bank One all payments received by Secom with respect to such Delco
Remy Note, which payments will be applied by
3
Bank One to pay down the Obligations in any manner Bank One determines in its
sole discretion.
3. Right to Purchase Shares. The Parties have informed Bank One that
Secom's move to the NASDAQ Small Cap Market has been approved, but in order
to continue on the NASDAQ Small Cap Market, Secom must maintain a per share
price of not less than approximately $1.75 per share. In that regard, the
Parties have requested that notwithstanding anything to the contrary in the
Loan Documents, Secom be allowed to purchase $150,000 of Secom stock off the
market as needed to meet the minimum the stock price requi rement and, as an
accommodation to the Parties, Bank One agrees to permit Secom to make such
purchases, subject to the terms and conditions of this Agreement.
4. Fees and Expenses.
(a) In consideration for Bank One agreeing to extend the Extension
Period, simultaneously with the execution of this Second Amendment,
Borrowers shall pay to Bank One a $20,000 fee (the "Extension Fee"),
which shall be deemed fully earned when due. In addition, the Borrowers
must also pay, simultaneously with the execution of this Second
Amendment, $5,587.83, which represents reimbursement for unreimbursed
legal fees and expenses incurred by Bank One through the month of May,
1999.
(b) On the first day of each month commencing on July 1, 1999,
Borrowers shall pay to Bank One a fee equal to .2863% of the average
outstanding borrowings for the previous month on the Line of Credit and
the Amended Tenn Note and the Amended Equipment Term Note.
5. References to Loan Documents. All references (a) to Loan Documents
include the Extension Agreement, the Second Amendment and all security
agreements, pledge agreements, notes, assignments and other documents and
instruments executed by the Borrowers in connection with or in furtherance of
the Extension Agreement and the Second Amendment; (b) to Guarantor Loan
Documents include the Extension Agreement, the Second Amendment, and all
security agreements, guaranties, pledge agreements, notes, assignments and
other documents and instruments executed by the Guarantors, Tri-Tec, or
Triple Tool in connection with or in furtherance of the Extension Agreement
and the Second Amendment; (c) to Obligations include all of each Borrower's,
Tri-Tec's and Triple Tool's obligations to Bank One under the Loan Documents,
Extension Agreement, the Second Amendment, and all documents, instruments and
agreements executed in connection with or in furtherance of these agreements,
including the Obligations as defined hereunder; and (d) to Collateral include
all collateral security granted to Bank One in accordance with the Extension
Agreement, the Second Amendment, and all documents, instruments and
agreements executed in connection with or in furtherance of either or both of
these agreements to secure any of the Obligations or any other
4
obligation of any one or more of the Parties to Bank One, (e) and to
Guaranties includes the Tri-Tec/Uniflow Guaranty and the Triple Tool/Uniflow
Guaranty.
6. Additional Documents. Simultaneously with the execution of this
Agreement, Secom shall execute and deliver to Bank One a Fourth Amended and
Restated Term Note in the original principal amount of $585,378.48 (the
"Amended Term Note") and a Fourth Amended and Restated Equipment Term Note in
the original principal amount of $565,053.28 (the "Amended Equipment Term
Note"), copies of which are attached hereto. All references in any of the
Loan Documents or the guarantor Loan Documents to "Amended Term Note" or
"Amended Equipment Term Note" shall include such Notes as amended by the
Fourth Amended and Restated Term Note and the Fourth Amended and Restated
Equipment Term Note. Each of the Parties also agrees to execute any other
documents reasonably deemed necessary or appropriate by Bank One to carry out
the intent of or implement this Second Amendment or any of the other Loan
Documents.
7. Loan Documents Remain In Force. Except as expressly modified and
amended by the terms of this Second Amendment, all of the other terms and
conditions of the Loan Documents (including the Extension Agreement and the
Guaranties and all documents and agreements referred to or incorporated
therein or executed in connection therewith) remain in full force and effect
and are hereby ratified, confirmed and approved. Each Party, jointly and
severally, reaffirms, ratifies and confirms the liens, mortgages, assignments
and security interests granted to Bank One in the Collateral under the Loan
Documents (including the Extension Agreement and this Second Amendment) or
otherwise and acknowledges and agrees that any and all collateral security
heretofore, simultaneously herewith or hereafter granted to Bank One by any
Party shall secure all of that Party's present and future obligations to Bank
One and all present and future obligations of any one or more of the other
Parties to Bank One. If there is an express conflict between the terms of
this Second Amendment and the terms of the Loan Documents (including the
Extension Agreement), the terms of this Second Amendment shall govern and
control. Furthermore, as of the date hereof, each of the Parties hereby
restates and republishes each representation, warranty, covenant, and
agreement contained in the Loan Documents (including the Extension Agreement)
and each such representation, warranty, covenant and agreement is
incorporated herein by reference. Without limiting the generality of the
immediately preceding sentence, each of the Parties acknowledges and agrees
that each of the Guaranties remain in full force and effect and extends to
cover all of the Obligations, that all subordination agreements given by any
of the Parties in favor of Bank One remain in full force and effect and are
hereby ratified and confirmed. Each of the Parties hereby consents to all of
the terms and conditions of this Second Amendment and of all agreements
referred to or incorporated herein.
5
8. Reservation of Rights.
(a) Notwithstanding anything to the contrary in this Second Amendment,
all of Bank One's rights and remedies against each of the Parties are
expressly reserved. Likewise, nothing herein shall be deemed to constitute a
waiver of any default existing as of the date hereof, a further worsening of
such default, or new Events of Default or defaults, except for the Existing
Defaults, or shall in any way prejudice the rights and remedies of Bank One
under the Loan Documents (including the Extension Agreement and any of the
Guaranties) or applicable law. Further, Bank One shall have the right to
waive any conditions set forth in this Second Amendment or the Loan
Documents, in its sole discretion, and any waiver shall not prejudice, waive
or reduce any other right or remedy which Bank One may have against any of
the Parties. However, the Parties to this Second Amendment and the Loan
Documents agree that no waiver by Bank One of any right or condition of this
Second Amendment or the Loan Documents shall be effective unless contained
in a writing signed by an authorized agent of Bank One.
(b) ANYTHING CONTAINED IN TIRS SECOND AMENDMENT OR IN ANY OTHER
AGREEMENT TO THE CONTRARY NOTWITHSTANDING, NOTHING CONTAINED IN THIS SECOND
AMENDMENT OR IN ANY OTHER AGREEMENT SHALL IN ANY WAY RESTRICT OR PROHIBIT
BANK ONE'S RIGHT TO BLOCK, STOP OR PROHIBIT PAYMENTS TO ANY SUBORDINATED
CREDITOR(S).
9. Entire Agreement, Etc.
(a) This Second Amendment constitutes the entire understanding of the
Parties and Bank One with respect to the subject matter hereof and may only
be modified or amended by a writing signed by the party to be charged. This
Second Amendment shall be governed by the internal laws of the State of
Michigan that are applicable to contracts made and to be performed wholly
within the State of Michigan, without regard to conflict of law principles.
This Second Amendment is binding on each Party and its successors, assigns,
heirs and personal representatives, and shall inure to the benefit of Bank
One, and its successors and assigns. If any of the provisions of this Second
Amendment are in conflict with any applicable statute or rule of law or
otherwise unenforceable, the offending provision shall be null and void to
the extent of such conflict or unenforceability only, and shall be deemed
separate from and shall not invalidate any other provision of this Second
Amendment.
(b) This Second Amendment is being entered into among competent persons,
who are experienced in business and represented by counsel (or who have had
the opportunity to be represented by counsel) and has been reviewed by the
Parties and their counsel, if any. Therefore, any ambiguous language in this
Second Amendment will not necessarily be construed against any particular
party as the drafter of that language.
6
(c) This Second Amendment may be executed in counterparts each of which
shall be deemed an original, but together they shall constitute one and the
same instrument. Facsimile copies of signatures shall be treated as original
signatures for all purposes.
(d) From and after the date of this Second Amendment references in the
Loan Documents and all other documents executed pursuant to or in connection
with the Loan Documents (as each of the foregoing is amended hereby or
pursuant hereto), to the Loan Documents (including the Extension Agreement)
shall be deemed references to the Loan Documents (including the Extension
Agreement) as amended hereby.
(e) The terms "include", "includes", and "including" are to be treated
as if followed by "without limitation" whether or not they are followed by
these words or words with a similar meaning.
(f) All headings are inserted for convenience of reference only and
shall not affect any construction or interpretation of this Second Amendment.
10. Additional Representations. Each Party represents and warrants to
Bank One that:
(a) (i) The execution, delivery and performance of this Second Amendment
by the Parties and all agreements and documents delivered pursuant hereto by
the Parties have been duly authorized by all necessary corporate action and
does not and will not require any consent or approval of their stockholders,
violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to them or of their articles of incorporation or bylaws, or
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Parties are a party or by which any of them or any of their property may be
bound or affected; (ii) no authorization, consent, approval, license,
exemption of or filing a registration with any court or govermnental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary to the valid execution, delivery or
performance by the Parties of this Second Amendment and all agreements and
documents delivered pursuant hereto; and (iii) this Second Amendment and all
agreements and documents delivered pursuant hereto by any one or more of the
Parties are the legal, valid and binding obligations of each Party
enforceable against each Party in accordance with the terms thereof.
(b) After giving effect to the amendments contained herein and effected
pursuant hereto, all of the representations and warranties contained in the
Loan Documents are true and correct on and as of the date hereof with the
same force and effect as if made on and as of the date hereof.
7
(c) Except for the Existing Defaults, each Party has duly and property
performed, complied with and observed each of its covenants, agreements and
obligations contained in the Loan Documents.
(d) The financial statements of the Borrowers for the eight month period
ended May 31, 1999, a copy of which has been furnished to Bank One, presents
fairly the financial condition of the Borrowers at such date and the results
of the operations of the Borrowers for the period indicated, all
substantially in accordance with generally accepted accounting principles
applied on a consistent basis, and since this date there has been no material
adverse change in any Borrower's financial condition.
(e) No one or more of the Parties has assigned any claim, set off or
defense to any individual or entity.
(f) This Second Amendment and all of the written materials delivered by
any one or more of the Parties to Bank One in connection with the
transactions contemplated hereby do not contain any statement that is false
or misleading with respect to any material fact and do not omit to state a
material fact necessary in order to make the statements therein not false or
misleading. There is no additional fact of which any Party is aware that has
not been disclosed in writing to Bank One that materially affects adversely
or, so far as each Party can reasonably foresee, will materially affect
adversely any Party's financial condition or business prospects.
(g) All Parties executing this Second Amendment in a representative
capacity warrant that they have authority to execute this Second Amendment
and legally bind the entity they represent.
8
11. Survival; Reliance. All agreements, representations and warranties
made in this Second Amendment (and all agreements referred to or incorporated
herein) shall survive the execution of this Second Amendment (and all
documents and agreements referred to or incorporated herein). Notwithstanding
anything in this Second Amendment (or any documents or agreements referred to
or incorporated herein) to the contrary, no investigation or inquiry by Bank
One (including by its agents) with respect to any matter which is the subject
of any representation, warranty, covenant or other agreement set forth herein
or therein is intended, nor shall it be interpreted, to limit, diminish or
otherwise affect the full scope and effect of any such representation,
warranty, covenant or other agreement. All terms, covenants, agreements,
representations and warranties of each Party made herein (or in any documents
or agreements referred to or incorporated herein), or in any certificate or
other document delivered or to be delivered pursuant hereto shall be deemed
to be material and to have been relied upon by Bank One, notwithstanding any
investigation heretofore or hereafter made by Bank One or its agents.
12. Impairment of Collateral. The execution and delivery of this Second
Amendment (and all agreements and documents referred to herein) in no manner
shall impair or
8
affect any other security (by endorsement or otherwise) for the Obligations
or any one or more of the Parties' other obligations to Bank One. No security
taken heretofore or hereafter as security for the Obligations shall impair in
any manner or affect this Second Amendment (or any agreement or document
referred to herein). All present and future additional security is cumulative
security.
13. Time Is of the essence. Each of the Parties acknowledges and agrees
that time is of the essence as to each and every term and provision of this
Second Amendment and each of the Loan Documents.
14. Non-Waiver. No failure or delay on the part of Bank One in the
exercise of any power or right, and no course of dealing between any one or
more of the Parties and Bank One, shall operate as a waiver of such power or
right, nor shall any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power
or right. The remedies provided for herein are cumulative and not exclusive
of any remedies which may be available to Bank One at law or in equity. No
notice to or demand on any Party not required hereunder or under the Loan
Documents shall in any event entitle any such Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the right of Bank One to any other or further action in any circumstances
without notice or demand. Any waiver of any provision of this Second
Amendment or the Loan Documents, and any consent to any departure by any one
or more of the Parties from the terms of any provision of this Second
Amendment or the Loan Documents, shall be effective only if in writin g
signed by an authorized officer of Bank One and only in the specific instance
and for the specific purpose for which given.
15. No Other Promises or Inducements. There are no promises or
inducements which have been made to any signatory hereto to cause such
signatory to enter into this Second Amendment other than those which are set
forth in this Second Amendment.
16. STATUTE OF FRAUDS. THIS SECOND AMENDMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMIPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. ALL
PRIOR AND CONTEMPORANEOUS ORAL AGREEMENTS, IF ANY, BETWEEN BANK ONE, ON THE
ONE HAND, AND ANY ONE OR MORE OF THE PARTIES, ON THE OTHER HAND, ARE MERGED
INTO THIS SECOND AMENDMENT AND SHALL NOT SURVIVE THE EXECUTION OF THIS SECOND
AMENDMENT.
17. RELEASE. AS FURTHER CONSIDERATION FOR THE AGREEMENTS AND
UNDERSTANDINGS HEREIN, EACH PARTY INDIVIDUALLY, JOINTLY, SEVERALLY, AND
JOINTLY AND SEVERALLY, IN EVERY CAPACITY, INCLUDING BUT NOT LIMITED TO, AS
SHAREHOLDERS, OFFICERS,
9
PARTNERS, DIRECTORS, INVESTORS OR CREDITORS OF ANY ONE OR MORE OF THE
PARTIES, EACH OF THEIR EMPLOYEES, AGENTS, EXECUTORS, SUCCESSORS AND ASSIGNS,
HEREBY RELEASE BANK ONE, ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS, AFFILIATES, SUBSIDIARIES, SUCCESSORS AND ASSIGNS FROM ANY
LIABILITY, CLAIM, RIGHT OR CAUSE OF ACTION WHICH NOW EXISTS, OR HEREAFTER
ARISES, WHETHER KNOWN OR UNKNOWN, ARISING FROM OR IN ANY WAY RELATED TO FACTS
IN EXISTENCE AS OF THE DATE HEREOF. BY WAY OF EXAMPLE AND NOT LIMITATIONS, THE
FORGOING INCLUDES ANY CLAIMS IN ANY WAY RELATED TO ACTIONS TAKEN OR OMITTED
TO BE TAKEN BY BANK ONE UNDER THE LOAN DOCUMENTS, THE BUSINESS RELATIONSHIP
WITH BANK ONE AND ALL OTHER OBLIGATIONS OF ANY NATURE OR KIND OF ANY ONE OR
MORE OF THE PARTIES, ANY ORAL AGREEMENTS OR UNDERSTANDINGS (ACTUAL OR
ALLEGED), ANY BANKING RELATIONSHIPS THAT ANY ONE OR MORE OF THE PARTIES HAS
OR MAY HAVE HAD WITH BANK ONE AT ANY TIME AND FOR ANY REASON INCLUDING, BUT
NOT LIMITED TO, DEMAND DEPOSIT ACCOUNTS, OR OTHERWISE.
18. WAIVER OF JURY TRIAL AND ACKNOWLEDGMENT.
(a) EACH PARTY ACKNOWLEDGES THAT (1) THEY, HE OR IT HAS FULLY READ ALL
OF THIS SECOND AMENDMENT AND HAVE BEEN GIVEN THE OPPORTUNITY TO CONSULT WITH
COUNSEL AND OTHER ADVISORS OF THEIR CHOICE, AND AFTER CONSULTING WITH SUCH
COUNSEL AND/OR ADVISORS, KNOWINGLY, VOLUNTARILY AND WITHOUT DURESS, COERCION,
UNLAWFUL RESTRAINT, INTIMIDATION OR COMPULSION, ENTER INTO THIS SECOND
AMENDMENT, BASED UPON SUCH ADVICE AND COUNSEL AND IN THE EXERCISE OF THEIR
BUSINESS JUDGMENT, (2) THIS SECOND AMENDMENT HAS BEEN ENTERED INTO IN
EXCHANGE FOR GOOD AND VALUABLE CONSIDERATION, RECEIPT OF WHICH THE PARTIES
HERETO ACKNOWLEDGE, (3) THEY HAVE CAREFULLY AND COMPLETELY READ ALL OF THE
TERMS AND PROVISIONS OF THIS SECOND AMENDMENT AND ARE NOT RELYING ON THE
OPINIONS OR ADVICE OF BANK ONE OR ITS RESPECTRVE AGENTS OR REPRESENTATIVES IN
ENTERING INTO THIS SECOND AMENDMENT.
10
(b) THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED. BANK ONE AND EACH
PARTY EACH HEREBY KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL
RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES ARISING OUT OF OR IN RELATION TO
THIS SECOND AMENDMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENTS BETWEEN ANY
OF THE PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF
THIS WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN
INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
EACH PARTY AND BANK ONE AGREES THAT ANY OF THEM MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THEIR CONSENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
WITNESS BANK ONE, MICHIGAN, F/K/A
NBD BANK
/s/ Scott Konieczny By: /s/ Oliver J. Glenn
- ------------------------------ --------------------------------
Oliver J. Glenn, Vice President
WITNESS SECOM GENERAL CORPORATION
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Vice President
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Signatures continue on page 12]
[Notary Public stamp]
11
[Signatures continued from page 11]
WITNESS FORM FLOW, INC.
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Notary Public stamp]
WITNESS L & H DIE, INC.
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Notary Public stamp]
WITNESS MICANOL, INC.
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Signatures continue on page 13]
[Notary Public stamp]
12
[Signatures continued from page 12]
WITNESS UNIFLOW CORPORATION
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Notary Public stamp]
WITNESS MMC MANUFACTURING CORP., f/k/a
MILFORD MANUFACTURING, CORPORATION
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Paul D. Clemente, Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Signatures continue on page 14]
[Notary Public stamp]
13
[Signatures continued from page 13]
WITNESS TRI-TEC PLASTICS CORPORATION
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Name: Paul D. Clemente
Title: Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Notary Public stamp]
WITNESS TRIPLE TOOL, INC.
/s/ Scott Konieczny By: /s/ Paul D. Clemente
- ------------------------------ --------------------------------
Name: Paul D. Clemente
Title: Director
Subscribed and sworn to before me this 29th day of June, 1999.
/s/ Marlene Baynes
------------------------------------
Notary Public, Oakland County, MI
My Commission Expires: 5-28-2002
[Notary Public stamp]
Exhibit A: Amended Notes
14
FOURTH AMENDED AND RESTATED
TERM NOTE
Amount: $585,378.48 Dated: as of June 10, 1999
Due Date: Demand or November 1, 1999 Made at Detroit, Michigan
FOR VALUE RECEIVED, the undersigned promise to pay to the order of Bank
One, Michigan, f/k/a/ NBD Bank ("Bank"), at its offices in Detroit, Michigan or
at such other place as the holder of this Note may from time to time
designate in writing, the principal sum of FIVE HUNDRED EIGHTY-FIVE THOUSAND,
THREE HUNDRED SEVENTY-EIGHT AND 48/100 Dollars ($585,378.48), together with
interest on the outstanding balance thereof at 1% above the Bank's Prime Rate
(the "Note Rate"), as more fully provided in the Credit Agreement referred
to below, payable as follows: Unless earlier demand for payment is made,
principal is payable in 4 monthly installments in the amount of $5,000 plus
accrued interest on July 6, 1999, August 6, 1999, September 6, 1999, and
October 6, 1999, followed by a balloon payment of all remaining principal and
interest on November 1, 1999. As used herein, the "Prime Rate" shall be the
per annum rate of interest from time to time announced by the Bank (or any
successor thereto) as its prime rate, which pr ime rate may not be the lowest
rate of interest charged by the Bank to any of its customers. Any change in
the Prime Rate shall immediately effect a change in the rate of interest
payable hereunder.
After maturity, or from and after an Event of Default, as described
below, the outstanding principal balance under this Note shall bear
additional interest from and after such maturity date or the occurrence of
the Event of Default, at a rate of three (3%) percentage points per annum
above the Note Rate until the Note is fully paid or the Event of Default is
fully cured (the "Default Rate").
The indebtedness under this Note outstanding from time to time shall
bear interest on the basis of a year of 360 days for the actual number of
days elapsed in each month. Principal of and interest on this Note shall be
payable in lawful money of the United States of America. The undersigned
agrees to pay all costs of collection and enforcement of this Note, including
reasonable attorneys' fees and court costs.
If any payment is not received by Bank within fifteen days after its due
date, the Bank may assess and the undersigned agree to pay a late fee equal
to the lesser of 5% of the past due amount or the Late Fee Cap. The Late Fee
Cap is $200 and is based on the original principal amount of this Note.
The indebtedness under this Note may be prepaid in whole or in part at
any time.
This Note is given pursuant to the terms and conditions of the Amended
and Restated Revolving Credit and Loan Agreement dated as of June 30, 1996,
as amended by First Amendment to Amended and Restated Revolving Credit and
Loan Agreement dated as of August 22, 1997, Second Amendment to Revolving
Credit and Loan Agreement dated as of January 1, 1998, and an Amendment and
Extension Agreement dated as of November 25, 1998, as amended by First
Amendment to Amendment and Extension Agreement, dated as of February
2, 1999, but effective as of February 1, 1999, and by Second Amendment to
Amendment and Extension Agreement dated as of June 29, 1999 (as so amended
and as may be further amended from time to time, the "Extension Agreement")
(collectively, as so amended and as may be further amended from time to time,
the "Credit Agreement"). Capitalized terms not otherwise defined herein shall
have the meanings given them in the Credit Agreement. This Note is secured
by, among other collateral, the collateral granted to Lender under the terms
of the Credit Agreement, including the Extension Agreement, and the Loan
Documents. The occurrence of any Event of Default under the Credit Agreement,
including the Extension Agreement, or any default under any of the Loan
Documents or any document or instrument referred to or incorporated into any
of the foregoing shall be deemed an Event of Default under this Note and
shall entitle the holder of this Note to accelerate the maturity of the debt
evidenced by this Note and to have all rights and remedies afforded by law or
available under the Credit Agreement, including the Extension Agreement, the
Loan Documents and under all other agreements referred to or executed in
connection with any of the foregoing.
This Fourth Amended and Restated Tenn Note, among other things, amends
and restates (but does not discharge) the indebtedness outstanding under that
certain Third Amended and Restated Term Note dated as of February 1, 1999, in
the original principal amount of $610,592.35. Any reference in any other
document or instrument to the foregoing Note shall constitute a reference to
this Fourth Amended and Restated Term Note.
The undersigned, and all endorsers and guarantors, hereby severally
waive valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or such endorsers or guarantors.
This Note, made and executed in the State of Michigan, shall be governed
and construed according to the internal laws of the State of Michigan.
SECOM GENERAL CORPORATION,
a Delaware corporation
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Title: Director
46035 Grand River Ave.
Novi, Michigan 48374
2
FOURTH AMENDED AND RESTATED EOUIPMENT
TERM NOTE
Amount: $565,053.28 Dated: as of June 10, 1999
Due Date: Demand or November 1, 1999 Made at Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to
pay to the order of Bank One, Michigan, f/k/a NBD Bank ("Bank"), at its
offices in Detroit, Michigan or at such other place as the holder of this
note may from time to time designate in writing, the principal sum of FIVE
HUNDRED SIXTY-FIVE THOUSAND, FIFTY-THREE AND 28/100 Dollars ($565,053.28),
together with interest on the outstanding balance thereof as provided below,
payable as follows: Unless earlier demand for payment is made, principal is
payable in 4 equal monthly installments equal to $10,750 of the principal, on
July 1, 1999, August 1, 1999, September 1, 1999 and October 1, 1999, followed
by a balloon payment of all remaining principal and interest on November 1,
1999. Interest is payable in monthly payments of accrued interest commencing
on July 1, 1999, and continuing on the first day of each consecutive month
thereafter until maturity. Accrued interest since the last payment on the
Prior Note (defined below) shall be due on June 1, 1999.
The indebtedness under this Note outstanding from time to time prior to
maturity (whether by acceleration or otherwise) or the occurrence of an Event
of Default shall bear interest on the basis of a year of 360 days for the
actual number of days elapsed in each month, at the rate of 1% per annum over
the rate announced from time to time as Bank's Prime Rate (the "Applicable
Rate"), as more fully described in the Amended and Restated Revolving Credit
and Loan Agreement dated as of June 30, 1996, as amended by First Amendment
to Amended and Restated Revolving Credit and Loan Agreement, dated as of
August 22, 1997, Second Amendment to Amended and Restated Revolving Credit
and Loan Agreement dated as of January 1, 1998, and an Amendment and
Extension Agreement dated as of November 25, 1998, as amended by First
Amendment to Amendment and Extension Agreement, dated February 2, 1999, but
effective as of February 1, 1999, and by Second Amendment to Amended and
Extension Agreement dated as of June 29, 1999 (as so a mended and as may be
further amended from time to time, the "Extension Apreement") (collectively,
as so amended and as may be further amended from time to time, the "Credit
Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings given them in the Credit Agreement.
After maturity, or from and after an Event of Default, the outstanding
principal balance under this Note shall bear additional interest from and
after such maturity date or the occurrence of the Event of Default, at a rate
of three (3%) percentage points per annum above the Applicable Rate until the
Note is fully paid or the Event of Default is fully cured (the "Default
Rate").
If any payment is not received by Bank within fifteen days after its due
date, the Bank may assess and the undersigned agree to pay a late fee equal
to the lesser of 5% of the past due amount or the Late Fee Cap. The Late Fee
Cap is $200 and is based on the original principal amount of this Note.
Principal of and interest on this Note shall be payable in lawful money
of the United States of America. The undersigned agrees to pay all costs of
collection and enforcement of this Note, including reasonable attorneys' fees
and court costs.
The indebtedness under this Note may be prepaid in whole or in part at
any time subject to any applicable indemnity payment under the Credit
Agreement.
This Note is given pursuant to the terms and conditions of the Credit
Agreement, including the Extension Agreement. This Note is secured by, among
other collateral, the collateral granted to Bank under the terms of the
Credit Agreement, including the Extension Agreement, and the Loan Documents.
The occurrence of any default under the Credit Agreement, including the
Extension Agreement, or any of the Loan Documents (as such documents may have
been amended by the Credit Agreement), or any document or instrument
referred to or incorporated into any of the foregoing shall be deemed a
default under this Note and shall entitle the holder of this Note to
accelerate the maturity of the debt evidenced by this Note and to have all
rights and remedies afforded by law or available under the Credit Agreement,
including the Extension Agreement, the Loan Documents and under all other
agreements referred to or executed in connection with any of the foregoing.
Bank is hereby authorized by Borrowers to record on its books and
records, the Loan Period, the applicable interest rate (including any changes
therein), the amount of each payment of principal thereon and such other
information as appropriate, which books and records shall constitute
rebuttable presumptive evidence of the information so recorded, provided,
howeve , that any failure by Bank to record any such information shall not
relieve Borrowers of their obligation to repay the outstanding principal amo
unt of all Equipment Advances made by Bank, all accrued interest thereon and
any amount payable with respect thereto in accordance with the terms of this
Note and the Credit Agreement.
This Note amends and restates (but does not discharge) the Third Amended
and Restated Equipment Term Note dated as of February 1, 1999, in the
original principal amount of $612,430, from the undersigned to Bank (the
"Prior Note"). Any reference in the Credit Agreement or any other agreement
to the Prior Note shall hereafter constitute a reference to this Note.
The undersigned, and all endorsers and guarantors, hereby severally
waive valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or such endorsers or guarantors.
2
This Note, made and executed in the State of Michigan, shall be governed
and construed according to the internal laws of the State of Michigan.
SECOM GENERAL CORPORATION,
a Delaware corporation
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Vice President
46035 Grand River Ave.
Novi, Michigan 48374
UNIFLOW CORPORATION
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Vice President
26600 Heyn Drive
Novi, Michigan 48450
MICANOL
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Director
P.O. Box 881
46001 Grand River Ave.
Novi, Michigan 48376
L & H DIE, INC.
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Director
38200 Ecorse Road
Romulus, Michigan 48174
3
FORM FLOW, INC.
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Director
6901 Cogswell
Romulus, Michigan 48174
MMC MANUFACTURING CORP., f/k/a
MILFORD MANUFACTURING, CORPORATION
By: /s/ Paul D. Clemente
--------------------------------
Name: Paul D. Clemente
Its: Director
101 Oak Stret
Milford, MI 48381
4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> $ 72,800
<SECURITIES> 0
<RECEIVABLES> 3,373,000
<ALLOWANCES> (142,500)
<INVENTORY> 3,293,100
<CURRENT-ASSETS> 8,873,100
<PP&E> 21,245,900
<DEPRECIATION> 10,582,600
<TOTAL-ASSETS> 21,322,200
<CURRENT-LIABILITIES> 12,018,000
<BONDS> 0
<COMMON> 106,100
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,322,200
<SALES> 21,423,800
<TOTAL-REVENUES> 21,423,800
<CGS> 17,460,700
<TOTAL-COSTS> 20,827,300
<OTHER-EXPENSES> (60,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 612,800
<INCOME-TAX> 23,500
<INCOME-PRETAX> 0
<INCOME-CONTINUING> 20,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,200
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
