<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 7, 1995
--------------------------
(October 23, 1995)
------------------
DeVlieg-Bullard, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-18198 62-1270573
------------- ------------- ----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Gorham Island, Westport, CT 06880
------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 221-8201
--------------
<PAGE> 2
ITEM 2. ACQUISITION OF ASSETS AND REFINANCING OF DEBT
On October 23, 1995, DeVlieg-Bullard, Inc. (the "Company"), in accordance with
the terms of the Stock Purchase Agreement among Acme-Cleveland Corporation, AC
Intermediate Company and DeVlieg-Bullard, Inc., consummated the acquisition
(the "Acquisition") of all of the outstanding stock of The National Acme
Company, an Ohio corporation ("National Acme"). Immediately following the
consummation of the Acquisition, National Acme was merged with and into the
Company with the Company as the surviving corporation.
The consideration for the Acquisition consisted of $8.1 million for the
outstanding stock of National Acme and $900,000 in consideration for a
noncompetition agreement. The purchase price is subject to adjustment based on
the net worth (as defined) of National Acme at the closing based on an audited
balance sheet of National Acme on that date.
In conjunction with the Acquisition, the Company refinanced (the "Refinancing")
its senior credit facility pursuant to a Financing and Security Agreement dated
October 23, 1995, between the Company and The CIT Group/Business Credit, Inc.
(the "Agreement") in the amount of $30 million. The Agreement is secured by
all of the Company's assets. Under the terms of the Agreement, the Company is
required to comply with various operational and financial covenants, as
defined, including (i) minimum net worth, (ii) interest coverage ratio, (iii)
liabilities to net worth ratio, (iv) current ratio, (v) fixed charge coverage
ratio and (vi) minimum earnings levels, as defined. In addition, the Agreement
places limitations on the Company's ability to make capital expenditures and to
pay dividends.
The Agreement consists of a $25 million Revolving Credit Agreement and a $5
million Term Loan. The Revolving Credit Agreement matures on October 23,
1998, subject to renewal by agreement of the parties. Amounts available under
the Revolving Credit Agreement are based upon a formula related to the
Company's eligible accounts receivable and inventories. Interest on
outstanding balances is payable monthly in arrears. Interest rates are based
on the prime rate or alternative rates based on LIBOR. A line of credit fee of
0.25% per annum is payable monthly on the difference between the Revolving Line
of Credit and the average Revolving Loan balance. The Agreement also provides
for a $300,000 loan facility fee paid at closing and a collateral management
fee of $50,000 per year, payable at the date of closing and annually
thereafter. There are early termination fees should the Company terminate the
Agreement prior to its third anniversary.
The Term Loan is payable in 35 equal installments of $85,714.30, with a payment
in the 36th month of $2 million. Interest on the Term Loan is payable monthly.
Interest rates are based on the prime rate or alternative rates based on LIBOR.
Borrowings of $23.9 million under the Agreement were incurred at the closing to
retire the existing senior credit facility and to finance the Acquisition. The
Company anticipates approximately $1 million in financing costs will be incurred
related to the Refinancing, legal and other related acquisition costs. Costs
related to the Refinancing will be capitalized and amortized over the life of
the related debt.
2
<PAGE> 3
Consummation of the Acquisition and the Refinancing required the consent of the
holders of the Company's $12 million principal amount of subordinated debt (the
"Subordinated Debt"), pursuant to the terms of the Investment Agreement dated
May 25, 1994, (the "Investment Agreement") among Allied Investment Corporation,
Allied Investment Corporation II, Allied Capital Corporation II (collectively
"Allied"), PNC Capital Corp. ("PNC"), and Banc One Capital Partners Corporation
("Banc One"). Due to the inability of the Company to obtain the consent of
Allied on mutually agreeable terms, Charles E. Bradley and John G. Poole,
directors and significant shareholders of the Company, loaned the Company $2.5
million and $1.5 million, respectively, pursuant to the terms of Junior
Subordinated Debentures (the "Junior Subordinated Debt"), to repay the
principal owed to Allied. Interest on the Junior Subordinated Debt accrues at
a rate of 14.5% per annum, with interest payable at 11% per annum on a
quarterly basis. The Junior Subordinated Debt matures on June 30, 2001, or 30
days after the Subordinated Debt is paid in full. The Junior Subordinated Debt
is subject to the terms and provisions of the Investment Agreement between the
Company and certain other parties dated May 25, 1994, as amended by the First
Amendment to Investment Agreement dated October 23, 1995 (the "First
Amendment").
In connection with the repayment of Allied, Allied returned to the Company
Class A Warrants representing the right to acquire 83,333 shares of the
Company's Common Stock. In connection with the issuance of the Junior
Subordinated Debt, the Company issued Class A Warrants to Messrs. Bradley and
Poole on the same terms as those returned by Allied representing the right to
purchase 52,083 and 31,250 shares of the Company's Common Stock, respectively.
In connection with the Refinancing, the holders of the Subordinated Debt
agreed to release their security interest in the Company's assets. CPS
Holdings, Inc., a Delaware corporation, pledged 600,000 shares of the common
stock of Consumer Portfolio Services, Inc., a Delaware corporation, to secure
the Subordinated Debt. Mr. Bradley is the President and a director and
beneficially owns approximately 34% of the outstanding common stock of CPS
Holdings, Inc. and is the Chairman of the Board and beneficially owns
approximately 5% of the outstanding common stock of Consumer Portfolio
Services, Inc. Mr. Poole is a director, Vice President and Secretary of CPS
Holdings, Inc. Pursuant to the terms of a Credit Support Agreement dated
October 23, 1995, between the Company and CPS Holdings, Inc., the Company
agreed to pay CPS Holdings, Inc., $90,000 annually for so long as the pledge is
in effect, payable in monthly installments of $7,500.
Pursuant to the terms of the First Amendment, the Company issued Class A Stock
Purchase Warrants to acquire 500,000 shares of the Company's Common Stock
("Class A Warrants") and Class C Stock Purchase Warrants to acquire 750,000
shares of the Company's Common Stock, subject to adjustment in certain
circumstances ("Class C Warrants") to PNC, Banc One, Bradley and Poole, pro
rata based on the principal amount of the Subordinated Debt and Junior
Subordinated Debt held by such parties. The exercise price of the Class A and
Class C Warrants is $0.01 per share. The Class A Warrants may be exercised at
any time in whole or in part from and after October 23, 1997, and shall expire
the later of three years from the date of final payment on the Subordinated
Debt or May 25, 2004. The Class C Warrants may be exercised at any time after
October 31, 1998, subject to earlier exercise upon a sale of the Company, and
expire on the later of three years after the payment of the Subordinated Debt
or October 31, 2005. The number of shares of the Company's Common Stock which
the holders of the Class C Warrants have the right to acquire may be reduced
based on the Company attaining earnings levels, as defined in the First
Amendment.
In accordance with the Company's policy on transactions with affiliated
parties, the foregoing transactions with Messrs. Bradley and Poole and their
affiliates were approved by the disinterested members of the Company's Board of
Directors and were deemed to be fair to the Company and on terms no less
favorable than those which would be obtained from an unaffiliated party.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED:
Report of Independent Auditors
Consolidated Balance Sheets of The National Acme Company and
Subsidiary as of July 31, 1995 and September 30, 1994.
Statements of Consolidated Operations and Accumulated Deficit of The
National Acme Company and Subsidiary for the ten months ended July 31,
1995 and the years ended Septemer 30, 1994 and 1993.
Statements of Consolidated Cash Flows of The National Acme Company and
Subsidiary for the ten months ended July 31, 1995 and the years ended
Septemer 30, 1994 and 1993.
Notes to Consolidated Financial Statements.
(B) PRO FORMA FINANCIAL INFORMATION:
Pro Forma consolidated balance sheet giving effect to the acquisition
of The National Acme Company as of July 31, 1995 (unaudited).
Pro Forma consolidated statements of operations giving effect to the
acquisition of The National Acme Company for the year ended July 31,
1995 (unaudited) and for the three months ended October 31, 1995
(unaudited)
The foregoing pro forma financial information is not being filed at this time.
The Company anticipates filing this information under cover of the Quarterly
Report on Form 10-Q for the three months ended October 31, 1995 on or before
December 15, 1995.
4
<PAGE> 5
(C) EXHIBITS:
2.1 Stock Purchase Agreement among Acme-Cleveland Corporation, AC
Intermediate Company and DeVlieg-Bullard, Inc., dated September 7,
1995 (Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to
this agreement are omitted, but will be provided supplementally to the
Commission upon request.) Incorporated by reference to Exhibit 10.44
of the Company's Annual Report on Form 10-K for the year ended July
31, 1995.
10.1 Financing and Security Agreement dated October 23, 1995, between the
CIT Group/Business Credit, Inc. and DeVlieg-Bullard, Inc.
10.2 Revolving Loan Promissory Note dated October 23, 1995, in the
principal amount of $25,000,000 between the CIT Group/Business Credit,
Inc., and DeVlieg-Bullard, Inc.
10.3 Term Loan Promissory Note dated October 23, 1995, in the principal
amount of $5,000,000 between the CIT Group/Business Credit, Inc., and
DeVlieg-Bullard, Inc.
10.4 First Amendment to Investment Agreement dated October 23, 1995, among
Banc One Capital Partners Corporation, PNC Capital Corp., Allied
Investment Corporation, Allied Investment Corporation II, Allied
Capital Corporation II, Charles E. Bradley, Sr., John G. Poole and
DeVlieg-Bullard, Inc.
10.5 Debenture in the original principal amount of $2,500,000 issued
October 23, 1995, by DeVlieg-Bullard, Inc., to Charles E. Bradley, Sr.
10.6 Debenture in the original principal amount of $1,500,000 issued
October 23, 1995, by DeVlieg-Bullard, Inc., to John G. Poole.
10.7 Class A Stock Purchase Warrant issued by DeVlieg-Bullard, Inc.
on October 23, 1995, to Charles E. Bradley, Sr. (the "Bradley
Class A Warrant") for the right to purchase 52,083 shares of
the Company's common stock. In addition, the Company issued
the following additional Class A Stock Purchase Warrants,
which were substantially identical to the Bradley Class A
Warrant, except as to the holder and number of shares subject
to the warrant:
<TABLE>
<CAPTION>
Number of Shares
Holder Subject to Warrant
------ ------------------
<S> <C>
John G. Poole 31,250
Charles E. Bradley, Sr. 104,166
John G. Poole 62,500
Banc One Capital Partners Corporation 166,667
PNC Capital Corp. 166,667
Allied Capital Corporation II 21,250
Allied Investment Corporation II 81,250
Allied Investment Corporation 147,501
</TABLE>
5
<PAGE> 6
10.8 Class B Stock Purchase Warrant issued by DeVlieg-Bullard, Inc. dated
October 23, 1995, to PNC Capital Corp. (The "PNC Class B Warrant")
for the right to purchase a presently indeterminable number of shares
of the Company's common stock. In addition, the Company issued
substantially identical Class B Stock Purchase Warrants to each of
Banc One Capital Partners Corporation, Allied Investment Corporation,
Allied Investment Corporation II and Allied Capital Corporation II.
10.9 Class C Stock Purchase Warrant issued by DeVlieg-Bullard, Inc., dated
October 23, 1995, to PNC Capital Corp. (the"PNC Class C Warrant") for
the right to purchase 250,000 shares of the Company's common stock.
In addition, the Company issued the following additional Class C Stock
Purchase Warrants, which are substantially identical to the PNC Class
C Warrant, except as to the holder and number of shares subject to the
warrant:
<TABLE>
<CAPTION>
Number of Shares
Holder Subject to Warrant
------ ------------------
<S> <C>
Banc One Capital Partners Corporation 250,000
Charles E. Bradley, Sr. 156,250
John G. Poole 93,750
</TABLE>
10.10 Credit Support Agreement dated October 23, 1995, between
DeVlieg-Bullard, Inc., and CPS Holdings, Inc.
10.11 First Amendment to Registration Rights Agreement dated October 23,
1995, among Allied Investment Corporation, Allied Investment
Corporation II, Allied Capital Corporation II, Banc One Capital
Partners Corporation, PNC Capital Corp., Charles E. Bradley, Sr., John
G. Poole and DeVlieg-Bullard, Inc.
6
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DEVLIEG-BULLARD, INC.
Date: November 7, 1995 By: /s/ Lawrence M. Murray
----------------------
Lawrence M. Murray
Vice President and Chief Financial Officer
7
<PAGE> 8
Item 7(A)
Consolidated Financial Statements
THE NATIONAL ACME COMPANY
AND SUBSIDIARY
July 31, 1995
(LOGO ERNST & YOUNG LLP)
<PAGE> 9
(LETTERHEAD ERNST & YOUNG LLP) 1300 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1405
Report of Independent Auditors
To the Board of Directors
The National Acme Company
We have audited the accompanying consolidated balance sheets of The National
Acme Company (a second tier subsidiary of Acme-Cleveland Corporation) and
Subsidiary as of July 31, 1995 and September 30, 1994, and the related
statements of consolidated operations and accumulated deficit, and cash flows
for the ten months ended July 31, 1995 and the years ended September 30, 1994
and 1993. 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 consolidated financial position of The National Acme
Company and Subsidiary at July 31, 1995 and September 30, 1994, and the results
of their operations and their cash flows for the ten months ended July 31, 1995
and the years ended September 30, 1994 and 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes C and F to the consolidated financial statements,
effective October 1, 1993, the Company changed its method of accounting for
income taxes, postemployment benefits, and postretirement benefits other than
pensions.
/s/ ERNST & YOUNG LLP
August 25, 1995
1
<PAGE> 10
The National Acme Company and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JULY 31 SEPTEMBER 30
1995 1994
---------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,663 $ 8,232
Trade receivables less allowances of $51 and $50,
respectively 4,993 4,976
Inventories:
Finished goods 3,107 2,009
Work-in-process 2,252 1,046
Raw materials 138 86
---------------------------------
Total inventories 5,497 3,141
Receivable (payable) from affiliates 4,099 (652)
Other current assets 77 26
---------------------------------
Total current assets 17,329 15,723
Property, plant and equipment--at cost:
Land 301 301
Buildings 6,603 6,584
Machinery and equipment 14,789 14,659
---------------------------------
21,693 21,544
Less accumulated depreciation 19,376 19,076
---------------------------------
Net property, plant and equipment 2,317 2,468
Deferred income taxes 45 0
Other assets 788 838
---------------------------------
TOTAL ASSETS $ 20,479 $ 19,029
=================================
</TABLE>
2
<PAGE> 11
<TABLE>
<CAPTION>
JULY 31 SEPTEMBER 30
1995 1994
-----------------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 340 $ 340
Accounts payable 2,099 1,418
Other accrued expenses 1,943 1,783
Accrued compensation and hospitalization 3,482 3,005
Postemployment benefits other than pensions 2,145 3,036
Other accrued taxes 941 657
Advance payments 1,007 1,393
Income taxes payable 45 0
-----------------------------------
Total current liabilities 12,002 11,632
Long-term debt 365 365
Postemployment benefits other than pensions 24,510 24,867
Unfunded pension costs and other long-term liabilities 6,757 7,346
Shareholder's equity:
Common stock, par value $1 per share,
750 shares authorized, 100 shares issued and
outstanding 0 0
Other capital 65,552 65,552
Pension adjustment (6,058) (6,283)
Accumulated deficit (82,649) (84,450)
-----------------------------------
Total shareholder's equity (23,155) (25,181)
-----------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 20,479 $ 19,029
===================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 12
The National Acme Company and Subsidiary
Statements of Consolidated Operations and Accumulated Deficit
<TABLE>
<CAPTION>
10 MONTHS YEAR ENDED YEAR ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
JULY 31, 1995 1994 1993
-------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net sales $ 30,675 $ 30,668 $ 27,289
Cost of products sold (22,185) (23,825) (22,155)
-------------------------------------------------------
Gross profit 8,490 6,843 5,134
Selling, general and administrative expense (6,288) (6,741) (6,449)
-------------------------------------------------------
Earnings (loss) from operations 2,202 102 (1,315)
Other income (expense):
Interest income 413 365 495
Interest expense (42) (79) (95)
Other income 220 221 89
Other expense (92) (9) (431)
-------------------------------------------------------
Earnings (loss) before income taxes and cumulative
effect of accounting changes 2,701 600 (1,257)
Income taxes 0 0 0
-------------------------------------------------------
Earnings (loss) before cumulative effect of
accounting changes 2,701 600 (1,257)
Cumulative effect of accounting changes 0 (24,462) 0
-------------------------------------------------------
Net earnings (loss) 2,701 (23,862) (1,257)
Accumulated deficit, beginning of period (84,450) (59,772) (57,699)
Dividends paid/declared to parent (900) (816) (816)
-------------------------------------------------------
ACCUMULATED DEFICIT, END OF PERIOD $ (82,649) $ (84,450) $ (59,772)
=======================================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 13
The National Acme Company and Subsidiary
Statements of Consolidated Cash Flows
<TABLE>
<CAPTION>
10 MONTHS YEAR ENDED YEAR ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
JULY 31, 1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) before cumulative effect
of accounting changes $ 2,701 $ 600 $ (1,257)
Adjustments to reconcile net earnings (loss)
to cash provided by operating activities for
non-cash items:
Depreciation 300 365 471
Deferred income tax credits (45) 0 0
Gain on sale of property, plant and equipment 0 1 11
-----------------------------------------------------
Cash provided (used) by earnings and non-cash
items 2,956 966 (775)
Changes in assets and liabilities:
Increase in trade receivables (17) (143) (1,007)
Increase in inventories (2,356) (867) (61)
Increase in accounts payable 681 159 287
Increase in accrued compensation and
hospitalization 477 78 582
Increase (decrease) in other accrued taxes 284 24 (76)
Increase in income taxes payable 45 0 0
Increase (decrease) in postemployment
benefits other than pensions (1,248) 140 0
Decrease in unfunded pension costs (322) (294) (46)
(Increase) decrease in receivable from
affiliates (4,976) 1,010 9,142
Other, net (269) 594 (1,862)
-----------------------------------------------------
Cash (used) provided by operating activities (4,745) 1,667 6,184
INVESTING ACTIVITY
Capital expenditures (149) (226) (100)
FINANCING ACTIVITIES
Principal payment on long-term debt 0 (315) (295)
Dividends paid to parent (675) (816) (816)
-----------------------------------------------------
Cash used by financing activities (675) (1,131) (1,111)
-----------------------------------------------------
(Decrease) increase in cash and cash equivalents (5,569) 310 4,973
Cash and cash equivalents at beginning of period 8,232 7,922 2,949
-----------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,663 $ 8,232 $ 7,922
=====================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 14
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements
Ten Months Ended July 31, 1995 and
Years Ended September 30, 1994 and 1993
(Dollars in Thousands)
A. ACCOUNTING POLICIES AND PRACTICES
The National Acme Company (Company) is a second tier subsidiary of
Acme-Cleveland Corporation (Acme-Cleveland). The Company's accounting and
reporting policies conform to generally accepted accounting principles and to
industry practices. Significant accounting policies and practices are
described below:
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and National Acme Trading Company, its wholly-owned subsidiary. Upon
consolidation, all significant intercompany items are eliminated.
CASH FLOW INFORMATION
Payments for interest were $25, $78 and $94 in 1995, 1994 and 1993,
respectively.
CASH EQUIVALENTS
The Company considers all highly liquid investments with an initial maturity
of three months or less to be cash equivalents. The Company invests excess
funds in short-term, interest bearing obligations.
INVENTORIES
Finished goods inventory represents component parts and machines available
for sale. Inventories are priced at the lower of cost or market. Cost
includes material, labor and manufacturing overhead. Supplies and tooling
used in production are expensed at the time of purchase and are considered
in the inventory burden rate. Inventories valued using the last-in,
first-out (LIFO) method comprised 95% and 96% of consolidated inventories at
July 31, 1995 and September 30, 1994, respectively. If the cost of all
inventories had been determined by the FIFO method, which approximates
current cost, inventories at July 31, 1995 and September 30, 1994 would have
been greater by $11,553 and $11,311, respectively.
6
<PAGE> 15
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements -- Continued
A. ACCOUNTING POLICIES AND PRACTICES--CONTINUED
During 1994 and 1993, inventory quantities were reduced at certain
locations. These reductions resulted in liquidations of LIFO inventory
quantities carried at lower costs prevailing in prior years as compared with
the cost of current purchases, the effect of which increased net earnings by
$78 in 1994, and $61 in 1993. There was no LIFO liquidation in 1995.
Other accrued expenses include the following:
<TABLE>
<CAPTION>
JULY 31, SEPT. 30,
1995 1994
-----------------------
<S> <C> <C>
Product liability $ 700 $ 700
Warranty reserve 300 300
Accrued workers' compensation 425 425
Other 518 358
-----------------------
Totals $ 1,943 $ 1,783
=======================
</TABLE>
PROVISION FOR WARRANTY CLAIMS
Estimated warranty costs are provided at the time of sale of the warranted
products.
ACCRUED COMPENSATION
Accrued compensation included accruals for the current portion of unfunded
pension costs of $877 and $507 in 1995 and 1994, respectively.
OTHER INCOME
Other income included royalty income of $189, $83 and $44 in 1995, 1994 and
1993, respectively.
7
<PAGE> 16
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements -- Continued
A. ACCOUNTING POLICIES AND PRACTICES--CONTINUED
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is computed by the
straight-line method over the estimated useful lives of assets.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expenditures are expensed as incurred and were
$182, $234 and $74 in 1995, 1994 and 1993, respectively.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," effective October 1, 1993. This
accounting statement requires the use of the liability method for income
taxes rather than the previously used deferred method. Under the liability
method, deferred tax assets and liabilities are determined by the
differences between the financial statement amounts of existing assets and
liabilities and their respective tax basis. These differences are measured
using the tax rate that is presently in effect when the differences reverse.
Under the deferred method, deferred income taxes are provided on items
recognized in different periods for financial reporting purposes than for
income tax purposes. These differences were measured at the effective tax
rate in the year of origination.
In adopting SFAS No. 109, as permitted under the new rules, the Company has
elected not to restate the financial statements of any prior years.
Adoption of this statement did not effect operations for 1994. See Note C
for further discussion.
DIVIDENDS AND EARNINGS PER SHARE
Dividends per share and earnings per share information is not provided
because the Company was a second tier subsidiary of Acme-Cleveland, and,
accordingly, such information is not applicable.
8
<PAGE> 17
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
A. ACCOUNTING POLICIES AND PRACTICES--CONTINUED
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Remediation costs that relate to an existing
condition caused by past operations are accrued when it is probable that
these costs will be incurred and can be reasonably estimated.
B. TRANSACTIONS WITH AFFILIATES
The Company paid Acme-Cleveland's subsidiaries $770, $840 and $831 in 1995,
1994 and 1993, respectively for human resource administration, investment
management, tax and legal services provided in those years which costs are
included in selling, general, and administrative expense.
Interest income of $86, $29 and $223 in 1995, 1994 and 1993, respectively was
recorded pursuant to an intercompany agreement with Acme-Cleveland.
C. INCOME TAXES
As discussed in Note A, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," as of October 1, 1993. The cumulative effect from the adoption
of this standard had no effect on net earnings. A valuation allowance of
$16,441, equal to the net deferred tax asset, was recorded due to recent tax
losses and the uncertainty of realizing temporary differences, the benefit of
net operating loss carryforwards, capital loss carryforwards and foreign tax
credit carryforwards. The Company is included in the consolidated tax return
of Acme-Cleveland. Acme-Cleveland's policy, under its tax-sharing agreement,
is to allocate income taxes to its subsidiaries on a separate-return basis.
9
<PAGE> 18
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
C. INCOME TAXES--CONTINUED
Income taxes included in the statements of consolidated operations and retained
earnings are as follows:
<TABLE>
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
------------------------------- --------
1995 1994 1993
------------------------------- --------
<S> <C> <C> <C>
Federal:
Current $ 40 $ 0 $ 0
Deferred (40) 0 0
------------------------------- --------
0 0 0
State and local:
Current 5 0 0
Deferred (5) 0 0
------------------------------- --------
TOTAL $ 0 $ 0 $ 0
=============================== ========
</TABLE>
At July 31, 1995, the Company had available for federal income tax purposes,
net operating loss carryforwards of $1,549 which expires in 2009, and a capital
loss carryforward of $669 which expires in 1996. The Company also has a $1,500
alternative minimum tax net operating loss carryforward which expires in 2009
and a $40 alternative minimum tax credit carryforward which can be carried
forward indefinitely.
A reconciliation of the statutory federal income tax rate and the effective
rate follows:
<TABLE>
<CAPTION>
DEFERRED
LIABILITY METHOD METHOD
-------------------- -----------
1995 1994 1993
-------------------- -----------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% (34.0)%
Effect of:
Decrease in valuation allowance (33.6) (29.6) 0
Loss for which no current benefit is available 0 0 34.8
Other items (.4) (4.4) (.8)
-------------------- -----------
0% 0% 0%
==================== ===========
</TABLE>
10
<PAGE> 19
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
C. INCOME TAXES--CONTINUED
For 1993, the provision for deferred income taxes was based on the tax effects
of the differences in the timing of income and expense recognition between
financial reporting purposes and tax reporting purposes. The components of
deferred income taxes are summarized as follows:
<TABLE>
<CAPTION>
Deferred
Method
----------
<S> <C>
Health care $ 344
Inventory, depreciation, other employee benefits, and reserves
deducted for tax returns in periods different than for financial
reporting purposes (373)
Elimination of deferred items due to loss carryforwards 29
--------
$ 0
========
</TABLE>
Components of the Company's deferred tax assets and liabilities as of July 31,
1995 and September 30, 1994 are as follows:
<TABLE>
<CAPTION>
JULY 31, SEPT. 30,
1995 1994
--------------------------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits $ 9,063 $ 9,487
Pensions 2,442 2,287
Inventory 698 734
Compensation and other related accounts 386 329
Product liability 238 238
Workers' compensation 145 145
State and local property taxes 233 196
State and local temporary differences and loss
carryforwards, net of federal taxes 1,959 2,045
Federal net operating loss carryforward 527 1,170
Foreign tax credit carryforward 0 75
</TABLE>
11
<PAGE> 20
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
C. INCOME TAXES--CONTINUED
<TABLE>
<CAPTION>
JULY 31, SEPT. 30,
1995 1994
---------------------------
<S> <C> <C>
Alternate minimum tax credit carryforward 40 0
Capital loss carryforwards 227 312
Other 420 314
----------------------
Total deferred tax assets 16,378 17,332
Deferred tax liabilities:
Tax over book depreciation 175 186
Prepaid insurance 21 5
----------------------
Total deferred tax liabilities 196 191
Valuation allowance (16,137) (17,141)
----------------------
NET DEFERRED TAX ASSET $ 45 $ 0
======================
</TABLE>
During 1994, the valuation allowance increased by $700 since the adoption of
SFAS No. 109 on October 1, 1993. During 1995, the valuation allowance
decreased by $1,004 due primarily to the utilization of net operating loss
carryforwards and the expiration of capital loss and foreign tax credit
carryforwards.
D. CREDIT AGREEMENTS AND BORROWINGS
The Company financed the construction of the Fremont facility with proceeds
received from the sale of Industrial Development First Mortgage Revenue Bonds
issued by state and local municipalities. In connection with this bond, the
Company entered into a lease agreement under which ownership of the facility
transferred to the state and municipalities. Since the Company has the right
to reacquire the facility for a nominal amount at the expiration of the lease
term, the transaction has been recorded as a capitalized lease obligation by
recording the facility and indebtedness as assets and liabilities of the
Company. Long-term debt represents the industrial revenue bonds with interest
rates ranging from 2.7% to 7.1% maturing in annual installments of $340 in 1995
and $365 in 1996.
12
<PAGE> 21
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
D. CREDIT AGREEMENTS AND BORROWINGS--CONTINUED
LONG-TERM CREDIT FACILITY
Acme-Cleveland has a credit agreement with certain banking institutions which
permit borrowings up to $12,000 (no amounts were outstanding at either July 31,
1995 or September 30, 1994). Related to this agreement, the banking
institutions have a first security interest in all domestic accounts
receivable, inventory and equipment of the Company.
E. PENSION AND PROFIT SHARING
The Company has non-contributory defined benefit plans covering most employees.
Plans sponsored by Acme-Cleveland for most salaried employees of the Company
provide pay-related benefits based on years of service. Plans for hourly and
certain salaried employees provide benefits based on flat-dollar amounts and
years of service. The Company complies with federal funding requirements.
Plan assets include marketable equity securities, money market funds, and other
fixed income securities.
A summary of the components of net periodic pension cost is as follows:
<TABLE>
<CAPTION>
JULY 31, SEPTEMBER 30,
1995 1994 1993
------------------------------------
<S> <C> <C> <C>
Service cost benefits earned during the period $ 373 $ 398 $ 374
Interest cost on projected benefit obligation 2,203 2,583 2,672
Actual return on plan assets (1,850) (120) (3,201)
Net amortization and deferral 344 (2,208) 787
------------------------------------
NET PENSION COST OF DEFINED BENEFIT PLANS $ 1,070 $ 653 $ 632
====================================
</TABLE>
13
<PAGE> 22
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
E. PENSION AND PROFIT SHARING--CONTINUED
The following table sets forth the funded status and amounts recognized in the
Company's balance sheet for its defined benefit plans:
<TABLE>
<CAPTION>
JULY 31, SEPTEMBER 30,
1995 1994
----------------------------
<S> <C> <C>
ACTUARIAL PRESENT VALUE
Vested accumulated benefit obligation $ 33,689 $ 33,081
===========================
Nonvested accumulated benefit obligation $ 1,039 $ 914
===========================
Projected benefit obligation $ 35,077 $ 34,078
Fair value of plan assets 27,201 26,116
---------------------------
EXCESS OF PROJECTED BENEFIT OBLIGATION
OVER FAIR VALUE OF PLAN ASSETS 7,876 7,962
Unrecognized net asset at transition to
SFAS No. 87, net of amortization 150 156
Unrecognized net loss (6,564) (6,763)
Unrecognized prior service cost (166) (191)
Additional minimum liability 6,231 6,498
---------------------------
ACCRUED PENSION COST $ 7,527 $ 7,662
===========================
</TABLE>
The following table sets forth the assumptions used to determine the projected
benefit obligation at July 31, 1995 and September 30, 1994:
<TABLE>
<S> <C>
Discount rate 7.75%
Rate of increase in future compensation levels 4.50%
Long-term rate of return on plan assets 9.00%
</TABLE>
The Company's minimum additional pension liability of $6,231 and $6,498
consists of intangible assets of $173 and $215 and reductions of shareholder's
equity of $6,058 and $6,283 at July 31, 1995 and at September 30, 1994,
respectively.
14
<PAGE> 23
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements--Continued
E. PENSION AND PROFIT SHARING--CONTINUED
The Company has defined contribution retirement plans that cover its eligible
employees. The purpose of these defined contribution plans is generally to
provide additional financial security during retirement by providing employees
with an incentive to make regular savings. The Company's matching
contributions to the plans were $98, $98 and $79 in 1995, 1994 and 1993,
respectively.
F. NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
In addition to providing pension benefits, the Company provides health care
insurance benefits for certain of its retired employees.
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." Under SFAS No.
106, the Company is required to accrue the estimated cost of retiree benefit
payments, other than pensions, during employees' active service period. The
Company previously expensed the cost of these benefits as claims were paid.
These costs were $2,362 in 1993.
The Company elected to recognize this change in accounting on the immediate
recognition basis. The cumulative effect of adopting SFAS No. 106 was an
increase in accrued postemployment benefits and a decrease in 1994 net earnings
of $24,343. Certain plan amendments to benefits and revisions to actuarial
assumptions made in 1994 reduced the actuarial present value of accumulated
plan benefits from $26,948 at September 30, 1994 to $18,999 at July 31, 1995.
15
<PAGE> 24
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
F. NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS--CONTINUED
In addition to the cumulative effect, the Company's 1995 and 1994
postretirement health care costs under the new method consisted of the
following components:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Service cost benefits earned during the period $ 29 $ 42
Interest cost on accumulated postretirement benefit
obligations 1,196 2,040
Net amortization of items other than transition
obligation (661) 0
------------------------
NET PERIODIC POSTRETIREMENT BENEFIT COSTS $ 564 $ 2,082
========================
</TABLE>
The Company continues to fund these benefit costs on a pay-as-you-go basis,
with the retiree, in most instances, paying a portion of the costs.
Summary information for the Company's plans is as follows:
<TABLE>
<CAPTION>
JULY 31, SEPT. 30,
1995 1994
---------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 17,361 $ 25,164
Active participants eligible to receive benefits 397 514
Other active plan participants 1,241 1,270
---------------------------
18,999 26,948
Unamortized gain 7,565 836
---------------------------
TOTAL ACCRUED COST $ 26,564 $ 27,784
===========================
CURRENT PORTION OF ACCRUED COST $ 2,123 $ 2,917
===========================
</TABLE>
16
<PAGE> 25
The National Acme Company and Subsidiary
Notes to Consolidated Financial Statements - Continued
F. NONPENSION POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS--CONTINUED
The discount rate used in determining the APBO was 7.75% in 1995 and 1994. The
assumed health care cost trend rate used in measuring the APBO was an average
of 12.25% in 1995 and 1994, declining to an ultimate rate of 6% in 2004 and
thereafter.
If the health care cost trend rate assumptions were increased by 1%, the APBO
as of July 31, 1995 would increase by 5%. The effect of this change on service
and interest cost for 1995 would be an increase of 4%, or approximately $50.
Effective October 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This statement establishes financial
accounting and reporting for the cost of benefits provided to former or
inactive employees after employment but before retirement. Prior to 1994, the
cost of such benefits was recorded at the time of the event giving use to the
benefit. The adoption resulted in a $119 cumulative effect charge to net
earnings.
G. LEASES
The Company leases certain machinery and equipment used in manufacturing and
warehousing operations.
Future minimum lease payments and non-cancelable operating leases with initial
or remaining terms of one year or more consisted of the following at July 31,
1995:
<TABLE>
<S> <C>
1996 $ 6
1997 1
-----
TOTAL MINIMUM LEASE PAYMENTS $ 7
=====
</TABLE>
The total rental expense for all operating leases charged to operations was
$101, $131 and $141 in 1995, 1994, and 1993, respectively.
17
<PAGE> 1
Exhibit 10.1
[EXECUTION COPY]
FINANCING AND SECURITY AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER)
AND
DEVLIEG-BULLARD, INC.,
(BORROWER)
DATED: OCTOBER 23, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 9. Interest, Fees, Expenses and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 11. Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 14. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
EXHIBITS
Exhibit A1 - Form of Term Loan Promissory Note
Exhibit A2 - Form of Revolving Loans Promissory Note
Exhibit B - Form of opinion of Bass Berry & Sims
Exhibit C - Form of Local counsel opinions
Exhibit D - Form of Mortgage
Exhibit E - Assignment of Key Man Life Insurance
Exhibit F - Form of Weekly Availability Report
i
<PAGE> 3
SCHEDULES
Schedule 1(a) - Real Estate
Schedule 1(b) - Permitted Encumbrances
Schedule 1(c) - Shawmut Letters of Credit
Schedule 3.5 - Bank Accounts
Schedule 7.1 - Corporate Existence
Schedule 7.4 - Required Consents
Schedule 7.6 - Litigation
Schedule 7.10 - Subordinated Debt
Schedule 7.14 - Possession of Patents
Schedule 7.15 - Broker's or Finder's Commissions
Schedule 7.18 - ERISA
ii
<PAGE> 4
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation
(hereinafter "CITBC") with offices located at 1211 Avenue of the Americas, New
York, New York 10036, is pleased to confirm the terms and conditions under
which CITBC shall make a term loan and revolving loans, advances and other
financial accommodations to DeVlieg-Bullard, Inc., a Delaware corporation (as
successor of a merger of The National Acme Company with and into
DeVlieg-Bullard, Inc.) (herein the "Borrower").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Borrower's now existing and
future: (a) accounts receivable (whether or not specifically listed on
schedules furnished to CITBC), and any and all instruments, documents, contract
rights, chattel paper, general intangibles relating to such accounts
receivable, including, without limitation, all accounts created by or arising
from all of the Borrower's sales of goods or rendition of services to its
customers, and all accounts arising from sales or rendition of services made
under any of the Borrower's trade names or styles, or through any of the
Borrower's divisions; (b) unpaid seller's rights (including rescission,
replevin, reclamation and stoppage in transit) relating to the foregoing or
arising therefrom; (c) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (d) reserves and credit
balances arising thereunder; (e) guarantees or collateral for any of the
foregoing; (f) insurance policies or rights relating to any of the foregoing;
and (g) cash and non-cash proceeds of any and all the foregoing.
ACQUISITION shall mean the acquisition by DeVlieg of all of
the issued and outstanding capital stock of National Acme from Seller under or
pursuant to the Stock Purchase Agreement.
ASSIGNMENT OF CLAIMS ACT shall mean 31 United States Code
Annotated Section 3727 and all amendments and supplements thereto and all rules
and regulations promulgated thereunder.
ASSIGNMENT OF KEY MAN LIFE INSURANCE POLICY shall mean the
assignment of Key Man Life Insurance Policy delivered pursuant to Section 11,
paragraph i of this Financing Agreement as the same may be amended or modified
from time to time.
AVAILABILITY shall mean at any time the excess, as determined
by CITBC based upon the most recently delivered
<PAGE> 5
Weekly Availability Report of (A) the sum of a) Eligible Accounts Receivable
multiplied by the percentage provided for in clause (b)(i) of the third
sentence of Section 3(1)(a) of this Financing Agreement plus b) Eligible
Inventory multiplied by the percentage provided for in clause (b)(ii) of the
third sentence of Section 3(1)(a) of this Financing Agreement but not to exceed
the limitation set forth therein, over (B) the sum of y) the outstanding
aggregate amount of all Revolving Loans of the Borrower plus z) the maximum
amount drawable under the Letters of Credit of the Borrower.
BALANCE SHEET shall mean a balance sheet for the Borrower
prepared in accordance with GAAP.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate
of all expenditures of the Borrower and its Subsidiaries during such period
that in conformity with GAAP are required to be included in or reflected by the
property, plant or equipment or similar fixed asset account reflected in the
balance sheet of the Borrower and its Subsidiaries.
CAPITAL LEASE shall mean any lease of property (whether real,
personal or mixed) which, in conformity with GAAP, is accounted for as a
capital lease or a Capital Expenditure on the balance sheet of the Borrower.
CHEMICAL BANK RATE shall mean the rate of interest per annum
announced by Chemical Bank from time to time as its prime rate in effect at its
principal office in the City of New York. (The prime rate is not intended to
be the lowest rate of interest charged by Chemical Bank to its borrowers).
CLOSING DATE shall mean October 23, 1995.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COLLATERAL shall mean all present and future Accounts,
Equipment, Inventory, Documents of Title, General Intangibles, Real Estate and
all other personal property of the Borrower and any other collateral delivered
to CITBC pursuant to any collateral agreement, including, without limitation,
this Financing Agreement, the Assignment of Key Man Life Insurance Policy, the
Patent Security Agreement, the Trademark Security Agreement, and the copyright
security agreement, if any, requested pursuant to Section 8 paragraph 1 of this
Financing Agreement.
COLLATERAL MANAGEMENT FEE shall mean the sum of $50,000 per
year for each year this Financing Agreement is in effect which shall be paid to
CITBC in accordance with
2
<PAGE> 6
Section 9, paragraph 13 hereof to offset the expenses and costs of CITBC in
connection with record keeping, periodic examinations, analyzing and evaluating
the Collateral.
COLLECTION ACCOUNTS shall mean the Collection Accounts
described in Section 3, paragraph 5 of this Financing Agreement.
COLLECTION BANK(S) shall mean the Collection Bank(s) described
in Section 3, paragraph 5 of this Financing Agreement.
CONSOLIDATED CURRENT ASSETS shall mean those assets of the
Borrower and its Consolidated Subsidiaries, on a consolidated basis, which in
accordance with GAAP, are classified as "current".
CONSOLIDATED CURRENT LIABILITIES shall mean those liabilities
of the Borrower and its Consolidated Subsidiaries, on a consolidated basis,
which in accordance with GAAP, are classified as "current"; provided, however,
that notwithstanding GAAP, the Revolving Loans and the current portion of
Permitted Indebtedness shall be considered "current liabilities".
CONSOLIDATED EBITDA shall mean, in any period, all earnings of
the Borrower and its Consolidated Subsidiaries, on a consolidated basis, before
all interest, tax obligations, depreciation and amortization of intangibles, of
the Borrower and its Consolidated Subsidiaries, on a consolidated basis, for
said period, determined in accordance with GAAP.
CONSOLIDATED FIXED CHARGE COVERAGE RATIO shall mean, for any
period, a ratio determined as of the relevant calculation date by dividing (a)
Consolidated EBITDA by (b) the sum for such period of (i) Consolidated Interest
Expense, plus (ii) payments made on the Term Loan pursuant to Section 4 of this
Financing Agreement, plus (iii) Capital Expenditures, plus (iv) income taxes of
the Borrower and its Consolidated Subsidiaries determined in accordance with
GAAP.
CONSOLIDATED INTEREST COVERAGE RATIO shall mean a ratio
determined as of the relevant calculation date by dividing Consolidated EBITDA
by Consolidated Interest Expense for the relevant period.
CONSOLIDATED INTEREST EXPENSE shall mean total consolidated
interest obligations of the Borrower and its Consolidated Subsidiaries, on a
consolidated basis, determined in accordance with GAAP and in a manner
3
<PAGE> 7
consistent with the latest audited statements of the Borrower but exclusive of
amortization of debt discount.
CONSOLIDATED NET WORTH shall mean, with respect to the
Borrower and its Consolidated Subsidiaries, assets in excess of liabilities,
and determined in accordance with GAAP, in a manner consistent with the latest
audited financial statements of the Borrower and its Consolidated Subsidiaries.
CONSOLIDATED SUBSIDIARIES shall mean all subsidiaries of the
Borrower that should be included in the Borrower's consolidated financial
statements, all as determined in accordance with GAAP.
CONSOLIDATED TOTAL LIABILITIES shall mean total liabilities of
the Borrower and its Consolidated Subsidiaries, on a consolidated basis, all as
determined in accordance with GAAP.
CUSTOMARILY PERMITTED LIENS shall mean:
(a) liens of local or state authorities for franchise or
other like taxes provided the aggregate amounts of such liens shall
not exceed $500,000 in the aggregate at any one time;
(b) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other like liens imposed by
law, created in the ordinary course of business and for amounts not
yet due (or which are being contested in good faith by appropriate
proceedings or other appropriate actions which are sufficient to
prevent imminent foreclosure of such liens) and with respect to which
adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary
course of business (including, without limitation, security deposits
for leases, surety bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids
contracts (other than for the repayment or guarantee of borrowed money
or purchase money obligations), statutory obligations and other
similar obligations arising as a result of progress payments under
government contracts; and
(d) easements (including, without limitation, reciprocal
easement agreements and utility agreements), encroachments, minor
defects or irregularities in
4
<PAGE> 8
title, variation and other restrictions, charges or encumbrances
(whether or not recorded) affecting the Real Estate and which are
listed in Schedule B of the title insurance policy delivered to CITBC
herewith and previously approved by CITBC or its special counsel.
DEFAULT shall mean any event specified in Section 11 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per
annum equal to the sum of: a) four percent (4%) and b) the Chemical Bank Rate,
which CITBC shall be entitled to charge the Borrower on all Obligations due
CITBC by the Borrower to the extent provided in Section 9, paragraph 2 of this
Financing Agreement.
DEVLIEG means DeVlieg-Bullard, Inc., a Delaware corporation.
DOCUMENTS OF TITLE shall mean all present and future warehouse
receipts, bills of lading, shipping documents, chattel paper, instruments and
similar documents, all whether negotiable or not and all goods and inventory
relating thereto and all cash and non-cash proceeds of the foregoing.
DOLLAR(S) and the sign "$" means lawful money of the United
States of America.
EARLY TERMINATION DATE shall mean the date on which the
Borrower terminates this Financing Agreement or the Revolving Line of Credit if
such date is prior to the ninetieth day preceding the Initial Term Date.
EARLY TERMINATION FEE shall: i) mean the fee CITBC is
entitled to charge the Borrower in the event the Borrower terminates the
Revolving Line of Credit or this Financing Agreement on a date prior to the
Initial Term Date; and ii) be an amount equal to (x) $450,000 if the Early
Termination Date is a date after the Closing Date but prior to the first
anniversary of the Closing Date; (y) $350,000 if the Early Termination Date is
a date on or after the first anniversary of the Closing Date but prior to the
second anniversary of the Closing Date; and (z) $250,000 if the Early
Termination Date is a date on or after the second anniversary of the Closing
Date.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean the gross amount of
the Borrower's accounts receivable that conform to the warranties contained
herein and at all times continue to be acceptable to CITBC in the exercise of
its reasonable
5
<PAGE> 9
business judgment, less, without duplication, the sum of a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and b) reserves for: i) sales to the United States of
America or to any agency, department or division thereof except where
assignment of all resulting accounts receivable or to become due under a
particular contract is made by the Borrower to CITBC and CITBC is satisfied
that all requirements for compliance with the Assignment of Claims Act and/or
other applicable statutes, rules or regulations have been fulfilled, provided
that the aggregate amount of accounts receivable described in this exception
which shall be permitted to constitute Eligible Accounts Receivable shall not
exceed at any one time $1,000,000; ii) foreign sales other than sales x)
secured by stand-by letters of credit (in form and substance satisfactory to
CITBC) issued or confirmed by, and payable at, banks having a place of business
in the United States of America and payable in United States currency, or y) to
customers residing in Canada provided such sales otherwise comply with all of
the other criteria for eligibility hereunder, are payable in United States
currency and such sales do not exceed $2,000,000 in the aggregate at any one
time; iii) accounts that remain unpaid more than ninety (90) days from invoice
date; iv) contras; v) sales to any subsidiary, or to any company affiliated
with the Borrower in any way; vi) bill and hold (deferred shipment) or
consignment sales; vii) sales to any customer which is a) insolvent, b) the
debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceedings under any federal or state law, c) negotiating, or has
called a meeting of its creditors for purposes of negotiating, a compromise of
its debts or d) financially unacceptable to CITBC or has a credit rating
unacceptable to CITBC; viii) all sales to any customer if fifty percent (50%)
or more of either x) all outstanding invoices or y) the aggregate dollar amount
of all outstanding invoices, are unpaid more than ninety (90) days from invoice
date; ix) any other reasons deemed necessary by CITBC in its reasonable
business judgment and which are customary either in the commercial finance
industry or in the lending practices of CITBC; and x) an amount representing,
historically, returns, discounts, claims, credits and allowances.
ELIGIBLE INVENTORY shall mean the gross amount of the
Borrower's inventory that conforms to the warranties contained herein and which
at all times continue to be acceptable to CITBC in the exercise of its
reasonable business judgment less any work-in-process, supplies (other than raw
material), goods not present in the United States of America, goods returned or
rejected by the Borrower's customers other than goods that are undamaged and
resalable in the normal course of business, goods to be returned to
6
<PAGE> 10
the Borrower's suppliers, goods in transit to third parties (other than the
Borrower's agents or warehouses) and less any reserves required by CITBC in its
reasonable discretion for special order goods, market value declines and bill
and hold (deferred shipment) or consignment sales. Notwithstanding the
foregoing, until one year after the Closing Date, Eligible Inventory shall
include work-in-process to the extent of the lesser of (1) ten percent (10%) of
work-in-process, and (2) $1,000,000. Eligible Inventory shall be valued at
the lower of cost or market on a first in first out basis.
EMPLOYEE BENEFIT PLAN shall mean any plan, agreement,
arrangement or commitment which is an employee benefit plan, as defined in
section 3(3) of ERISA, maintained by the Borrower or any ERISA Affiliate with
respect to which the Borrower or any ERISA Affiliate at any relevant time has
any liability or obligation to contribute.
EQUIPMENT shall mean all present and hereafter acquired
machinery, equipment, furnishings and fixtures owned by the Borrower, and all
additions, substitutions and replacements thereof, wherever located, together
with all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto and all proceeds of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act
or 1974, as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
ERISA AFFILIATE shall mean, with respect to the Borrower, any
entity required to be aggregated with the Borrower under Section 414(b), (c),
(m) or (o) of the Code.
EUROCURRENCY RESERVE REQUIREMENTS shall mean, for any day as
applied to a Revolving Loan or Term Loan, the aggregate (without duplication)
of the rates (expressed as a decimal) of reserve requirements in effect with
respect to Chemical Bank on such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto), dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by
Chemical Bank.
EUROCURRENCY BASE RATE shall mean, with respect to the LIBOR
Rate Period, the rate per annum at which Chemical Bank is offered Dollar
deposits two business days prior to the beginning of such LIBOR Rate Period in
the interbank
7
<PAGE> 11
eurodollar market where the eurodollar and foreign currency and exchange
operations of Chemical Bank are customarily conducted at or about 10:00 A.M.,
New York City time, for delivery on the first day of such LIBOR Rate Period for
the number of days comprised therein and in an amount comparable to the amount
of the Revolving Loan or Term Loan to which such LIBOR Rate Period applies.
EVENT(S) OF DEFAULT shall have the meaning provided for in
Section 11 of this Financing Agreement.
EXECUTIVE OFFICERS shall mean the Chairman, President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive
Vice President(s), Senior Vice President(s), Treasurer, Controller and
Secretary of the Borrower.
FINANCING AGREEMENT shall mean this Financing and Security
Agreement as amended supplemented or modified from time to time.
GAAP shall mean generally accepted accounting principles in
the United States of America as in effect from time to time and for the period
as to which such accounting principles are to apply.
GENERAL INTANGIBLES shall mean the Borrower's general
intangibles with such term having the meaning set forth in the Uniform
Commercial Code as in effect in the State of New York and shall include,
without limitation, all present and future right, title and interest in and to
all tradenames, trademarks (together with the goodwill associated therewith),
patents, licenses, engineers' drawings, customer lists, distribution
agreements, supply agreements and tax refunds, together with all monies and
claims for monies now or hereafter due and payable in connection with any of
the foregoing or otherwise, and all cash and non-cash proceeds thereof.
HAZARDOUS SUBSTANCES shall have the meaning set forth in
Section 7, paragraph 19(b) of this Financing Agreement.
INDEBTEDNESS shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of money (borrowed or otherwise) or for the deferred purchase price of
property, services or assets, other than Inventory, (b) lease obligations
which, in accordance with GAAP, have been, or which should be capitalized, (c)
obligations as guarantor or in any like capacity under any arrangement with
respect to liabilities for borrowed money or pursuant to take or pay contracts,
or (d) any other obligations (other than deferred
8
<PAGE> 12
taxes) which are required by generally accepted accounting principles to be
shown as liabilities on a balance sheet and which are payable or remain unpaid
more than one year from the date of determination thereof.
INITIAL TERM DATE shall mean the date occurring three (3)
years from the Closing Date hereof.
INSOLVENCY shall mean, at any particular time, a Multiemployer
Plan which is insolvent within the meaning of section 4245 of ERISA.
INTERCREDITOR AGREEMENT shall mean the intercreditor agreement
dated October 23, 1995, among the Borrower, the Subordinating Creditors and
CITBC pursuant to which the Subordinated Debt is subordinated to the prior
payment and satisfaction of the Borrower's Obligations to CITBC, as the same
may be amended or modified from time to time.
INVENTORY shall mean all of the Borrower's present and
hereafter acquired merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods and materials used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through
work-in-process to finished goods -- and all proceeds thereof of whatever sort.
ISSUING BANK shall mean any Bank issuing a Letter of Credit
for the Borrower.
KEY MAN LIFE INSURANCE POLICY shall mean an insurance policy
maintained by the Borrower insuring the life of Mr. William O. Thomas and
providing for a payment of at least Two Million Dollars ($2,000,000) upon Mr.
Thomas' death.
LENDER shall mean CITBC and any Transferee hereunder.
LETTER OF CREDIT OR LETTERS OF CREDIT shall mean all letters
of credit issued with the assistance of CITBC by any Issuing Bank for or on
behalf of the Borrower.
LETTER OF CREDIT GUARANTIES shall mean the guaranties
delivered by CITBC to any Issuing Bank, providing the guaranty of the
obligations of the Borrower to such Issuing Bank under the related
reimbursement agreement (or other similar document) between such Issuing Bank
and the Borrower.
9
<PAGE> 13
LETTER OF CREDIT GUARANTY FEE shall mean the fee CITBC may
charge the Borrower under Section 9, paragraph 15 of this Financing Agreement
for i) issuing the Letter of Credit Guaranty, or ii) otherwise aiding the
Borrower in obtaining Letters of Credit.
LIBOR RATE shall mean, with respect to any LIBOR Rate Period
pertaining to the Revolving Loans or Term Loan, the rate per annum (rounded
upwards to the next higher 1/16th of one percent) equal to the following:
Eurocurrency Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
LIBOR RATE PERIOD shall mean with respect to each Revolving
Loan or Term Loan whereby the Borrower has elected a LIBOR Rate:
(a) initially, the period commencing on the Closing Date or
the date as selected by the Borrower pursuant to the Notice of
Revolving Borrowing or pursuant to Section 9, paragraphs 1, 2, or 3 of
this Financing Agreement, as the case may be, and ending one, two,
three or six months thereafter, as selected by the Borrower in its
irrevocable Notice of Revolving Borrowing as provided herein; and
(b) thereafter, each period commencing on the last day of the
next preceding LIBOR Rate Period applicable to such LIBOR loan or
advance and ending one, two, three or six months thereafter, as
selected by the Borrower;
provided, however, that all of the foregoing provisions relating to LIBOR Rate
Periods are subject to the following:
(i) if any LIBOR Rate Period pertaining to a LIBOR
loan or advance would otherwise end on a day which is not a business
day, such LIBOR Rate Period shall be extended to the next succeeding
business day unless the result of such extension would be to carry
such LIBOR Rate Period into another calendar month, in which event
such LIBOR Rate Period shall end on the immediately preceding business
day;
(ii) any LIBOR Rate Period pertaining to a LIBOR
loan or advance that begins on the last business day of a calendar
month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Rate Period) shall end
on the last business day of the calendar month at the end of such
LIBOR Rate Period;
10
<PAGE> 14
(iii) no LIBOR Rate Period selected in respect of
any loan or advance shall end after the Initial Term Date;
(iv) the Borrower shall select LIBOR Rate Periods so
as not to have more than ten (10) different LIBOR Rate Periods
outstanding at any one time; and
(v) the Borrower shall select LIBOR Rate Periods
such that, on each date that a mandatory scheduled principal payment
is required to be made pursuant to this Financing Agreement, the
outstanding principal amount of the portion of the Term Loan bearing
interest at the Chemical Bank Rate, when added to the aggregate
principal amount of the portion of the Term Loan bearing interest at a
LIBOR Rate the applicable LIBOR Rate Period of which shall end on such
date, shall equal or exceed the aggregate principal amount of the Term
Loan required to be paid on such date pursuant to Section 4, paragraph
3 of this Financing Agreement.
LINE OF CREDIT FEE shall: (i) mean the fee due CITBC at the
end of each month for the Revolving Line of Credit, and (ii) be determined by
multiplying the difference between (A) the Revolving Line of Credit and (B) the
average daily Revolving Loans of the Borrower for said month, by one-quarter of
one percent (0.25%) per annum for the number of days in said month.
LIBOR RATE ELECTION FEE shall mean the fee payable to CITBC in
accordance with, and pursuant to, the provisions of Section 9, paragraph 14 of
this Financing Agreement.
LOAN DOCUMENTS shall mean each of this Financing Agreement,
the Revolving Loans Promissory Note, the Term Loan Promissory Note, the
Mortgages, the Intercreditor Agreement, the Letters of Credit, the Trademark
Security Agreement, the Patent Security Agreement, and the copyright security
agreement, if any, requested pursuant to Section 8 paragraph 1 of this
Financing Agreement.
MANDATORY PREPAYMENT shall mean the amount by which the
Borrower must prepay the Revolving Loans immediately upon demand as provided in
Section 3, paragraph 1(b) or (d) of this Financing Agreement.
MONTHLY DATE means the last business day of each month.
MORTGAGE shall mean each of the mortgages, or deeds of trust,
deeds to secure debt or other similar documents, as the case may be,
substantially in the form of
11
<PAGE> 15
Exhibit D (with any changes to such form as may be necessary to obtain first
(or other contemplated priority) liens on the Real Estate described on Schedule
1(a) and comply with applicable state law requirements) to be executed by the
Borrower or any subsidiary of the foregoing, as the case may be, to CITBC, at
any time and in connection with this Financing Agreement, as the same may be
amended, supplemented or otherwise modified from time to time; collectively,
"Mortgages."
MULTIEMPLOYER PLAN shall mean a plan which is a multiemployer
plan as defined in Section 3(37) of ERISA.
NATIONAL ACME means The National Acme Company, an Ohio
corporation.
NOTICE OF REVOLVING BORROWING shall mean the notice described
in Section 3, paragraph 1(b) of this Financing Agreement.
OBLIGATIONS shall mean all loans and advances made or to be
made by CITBC to the Borrower or to others for the Borrower's account; any and
all indebtedness and obligations which may at any time be owing by the Borrower
to CITBC howsoever arising, whether now in existence or incurred by the
Borrower from time to time hereafter; whether secured by pledge, lien upon or
security interest in any of the Borrower's assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Borrower is liable to CITBC for such
indebtedness as principal, surety, endorser, guarantor or otherwise.
Obligations shall also include indebtedness owing to CITBC by the Borrower
under this Financing Agreement or under any other agreement or arrangement now
or hereafter entered into between the Borrower and CITBC; indebtedness or
obligations incurred by, or imposed on, CITBC as a result of environmental
claims (other than as a result of actions of CITBC) arising out of the
Borrower's operation, premises or waste disposal practices or sites; the
Borrower's liability to CITBC as maker or endorser on any promissory note or
other instrument for the payment of money; the Borrower's liability to CITBC
under any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which CITBC may make or issue to others for the
Borrower's account, including any accommodation extended with respect to
applications for Letters of Credit entered into in connection with this
Financing Agreement, CITBC's acceptance of drafts or CITBC's endorsement of
notes or other instruments for the Borrower's account and benefit.
12
<PAGE> 16
OFFICER'S CERTIFICATE shall mean a certificate signed in the
name of the Borrower by one of its Executive Officers.
OPERATING LEASES shall mean all leases of property (whether
real, personal or mixed) other than Capital Leases.
OUT-OF-POCKET EXPENSES shall mean all of CITBC's present and
future expenses incurred in connection with the preparation and execution of
and closing under this Financing Agreement and amendments, supplements and
modifications of or waivers of any condition of, this Financing Agreement, the
enforcement of any rights of CITBC under this Financing Agreement and all other
documents entered into in connection with this Financing Agreement, the
perfection and maintenance of liens and security interests in favor of CITBC
pursuant to this Financing Agreement, the cost of record searches, all costs
and expenses incurred by CITBC in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges imposed on CITBC due to
"insufficient funds" of deposited checks and CITBC's standard fee relating
thereto, any amounts paid by CITBC incurred by or charged to CITBC by the
Issuing Bank under any Letter of Credit Guaranty or any of the Borrower's
reimbursement agreements, application for letter of credit or other like
document which pertain either directly or indirectly to such Letter of Credit,
special counsel fees, local counsel fees, title insurance premiums, real estate
survey costs, fees and taxes relative to the filing of financing statements,
costs of preparing and recording mortgages/deeds of trust against the Real
Estate and all expenses, costs and fees set forth in Section 9, paragraph 3, of
this Financing Agreement.
PATENT SECURITY AGREEMENT shall mean the patent security
agreement delivered pursuant to Section 2, paragraph i of this Financing
Agreement as the same may be amended or modified from time to time.
PBGC shall mean Pension Benefit Guaranty Corporation.
PENSION PLAN shall mean any Employee Benefit Plan which is a
"pension plan" within the meaning of Section 3(2) of ERISA.
PERMITTED ENCUMBRANCES shall mean: (i) liens described on
Schedule 1(b) hereto existing on the Closing Date, and liens expressly
permitted, or consented to, by CITBC in writing; (ii) Purchase Money Liens;
(iii) Customarily Permitted Liens; iv) liens granted CITBC by the Borrower; (v)
liens of judgment creditors provided such liens do not exceed, in the aggregate
for the Borrower,
13
<PAGE> 17
at any time, $100,000 (other than liens bonded or insured to the reasonable
satisfaction of CITBC); and (vi) liens for taxes not yet due and payable or
which are being diligently contested in good faith by the Borrower by
appropriate proceedings and which liens are not (x) senior to the liens of
CITBC or (y) for taxes due the United States of America.
PERMITTED INDEBTEDNESS shall mean: (i) Indebtedness maturing
in less than one year and incurred in the ordinary course of business for raw
materials, supplies, equipment, services, taxes or labor; (ii) Indebtedness
secured by the Purchase Money Liens; (iii) Indebtedness of the Borrower which
is subordinated to the prior payment and satisfaction of the Borrower's
Obligations to CITBC by means of the Intercreditor Agreement; (iv) Indebtedness
arising under this Financing Agreement; (v) deferred taxes and other expenses
incurred in the ordinary course of business; (vi) other Indebtedness existing
on the date of execution of this Financing Agreement and listed in the most
recent financial statement delivered to CITBC or otherwise disclosed to CITBC
in writing; and (vii) Capital Leases, provided the amount thereof shall not
exceed $5,000,000 in the aggregate outstanding at any one time.
PERSON shall mean and include an individual, a corporation, an
association, a partnership, a trust estate, a government or any department or
agency thereof.
PROCEEDS shall mean "proceeds", as such term is defined in
the UCC and, to the extent not included in such definition, shall include,
without limitation, (a) any and all proceeds of any insurance, indemnity,
warranty, guaranty or letter of credit payable to the Borrower, from time to
time with respect to any of the Collateral, (b) all payments (in any form
whatsoever) paid or payable to the Borrower from time to time in connection
with any taking of all or any part of the Collateral by any governmental
authority or any Person acting under color of governmental authority, (c) all
judgments in favor of the Borrower in respect of the Collateral and (d) all
other amounts from time to time paid or payable or received or receivable
under or in connection with any of the Collateral.
PURCHASE MONEY LIENS shall mean liens on any item of equipment
acquired after the date of this Financing Agreement; provided, however, that
(i) each such lien shall attach only to the property to be acquired, (ii) a
description of the property so acquired is furnished to CITBC, and (iii) the
debt incurred in connection with such acquisitions shall not exceed in the
aggregate $500,000 in any fiscal year.
14
<PAGE> 18
REAL ESTATE shall mean all of the Borrower's fee and/or
leasehold interests in the real property which has been, or will be,
encumbered, mortgaged, pledged or assigned to CITBC or its designee.
REMAINING LIBOR RATE PERIOD shall mean: (i) in the event that
the Borrower shall fail for any reason to borrow after they shall have notified
CITBC of their intent to do so pursuant to Section 3, paragraph 1, of this
Financing Agreement, whereby it shall have requested a loan or advance governed
by the LIBOR Rate pursuant to the terms hereof, a period equal to the LIBOR
Rate Period that the Borrower elected in respect of such loan or advance, or
(ii) in the event that a loan or advance governed by the LIBOR Rate shall
terminate for any reason prior to the last day of the LIBOR Rate Period
applicable thereto, a period equal to the remaining portion of such LIBOR Rate
Period if such LIBOR Rate Period had not been so terminated; and (iii) in the
event that the Borrower shall prepay or repay all or any part of the principal
amount of a loan or advance governed by the LIBOR Rate prior to the last day of
the LIBOR Rate Period applicable thereto, a period equal to the period from and
including the date of such prepayment or repayment to but excluding the last
day of such LIBOR Rate Period.
REORGANIZATION shall mean with respect to any Multiemployer
Plan, the condition that such plan is in reorganization under section 4241 of
ERISA.
REPORTABLE EVENT shall mean an event described in section 4043
of ERISA or in the regulations thereunder.
REVOLVING LINE OF CREDIT shall mean the commitment of CITBC to
make loans and advances pursuant to Section 3 of this Financing Agreement, to
the Borrower in a maximum outstanding principal amount of $25,000,000.
REVOLVING LOANS shall mean the loans and advances made, from
time to time, to or for the account of the Borrower by CITBC pursuant to
Section 3 of this Financing Agreement, plus any amounts drawn on the Letter of
Credit Guaranties.
REVOLVING LOANS PROMISSORY NOTE shall mean the note, in the
form of Exhibit A2 attached hereto, delivered by the Borrower to CITBC to
evidence the Revolving Loans pursuant to, and repayable in accordance with, the
provisions of Section 3 of this Financing Agreement.
ROLLING PERIOD shall mean (a) with respect to any fiscal
quarter ending on or prior to October 31, 1996, the period commencing with
first fiscal quarter commencing
15
<PAGE> 19
November 1, 1995 and ending on the last day of such fiscal quarter, and (b)
with respect to a fiscal quarter ending after October 31, 1996, such fiscal
quarter and the preceding three fiscal quarters.
SELLER shall mean each of Acme-Cleveland Corporation, an Ohio
corporation and AC Intermediate Company, an Ohio corporation.
SHAWMUT LETTERS OF CREDIT shall mean the letters of credit
issued by Shawmut Bank N.A. as set forth on Schedule 1(c) to this Financing
Agreement.
SOLVENT shall mean, when used with respect to any Person, that
(1) the fair value of the property of such Person, on a going concern basis, is
greater than the total amount of liabilities (including, without limitation,
contingent liabilities) of such Person, (2) the present fair salable value of
the assets of such Person, on a going concern basis, is not less than the
amount that will be required to pay the probable liabilities of such Person on
its debts as they become absolute and matured, (3) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (4) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. Contingent
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
STOCK PURCHASE AGREEMENT shall mean the stock purchase
agreement dated September 7, 1995 between DeVlieg and Seller.
SUBORDINATED DEBT shall mean (1) the debt of the Borrower due
the Subordinating Creditors (and the debentures evidencing such debt) pursuant
to the Investment Agreement dated May 25, 1994 among Allied Investment
Corporation, Allied Investment Corporation II, Allied Capital Corporation II,
Banc One Capital Partners Corporation, and PNC Capital Corp., as amended by a
First Amendment to Investment Agreement dated as of October 23, 1995 which has
been subordinated pursuant to the Intercreditor Agreement, to the prior payment
and satisfaction of the Obligations of the Borrower to CITBC, (2) such
Investment Agreement, as so amended by such First Amendment to Investment
Agreement dated as of October 23, 1995, and (3) the Credit Support
16
<PAGE> 20
Agreement dated as of October 23, 1995, between the Borrower and CPS Holdings,
Inc.
SUBORDINATING CREDITORS shall mean Banc One Capital, PNC
Capital Corp., John G. Poole and Charles E. Bradley.
SUBSIDIARY shall mean, as to any Person, a corporation of
which shares of stock having ordinary voting power (other than stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation are at
the time owned, or the management of which is otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person.
TERM LOAN shall mean the term loan in the principal amount of
$5,000,000 made by CITBC pursuant to, and repayable in accordance with, the
provisions of Section 4 of this Financing Agreement.
TERM LOAN PROMISSORY NOTE shall mean the note, in the form of
Exhibit A1 attached hereto, delivered by the Borrower to CITBC to evidence the
Term Loan pursuant to, and repayable in accordance with, the provisions of
Section 4 of this Financing Agreement.
TRADEMARK SECURITY AGREEMENT shall mean the trademark security
agreement delivered pursuant to Section 2, paragraph (z) of this Financing
Agreement, as the same may be amended or modified from time to time.
TRANSFEREE shall have the meaning set forth in Section 9,
paragraph 17(b) to this Financing Agreement.
UCC shall mean the Uniform Commercial Code as in effect from
time to time in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
WEEKLY AVAILABILITY REPORT shall mean the report in the form
of Exhibit F hereto, to be (i) delivered by the Borrower to CITBC on or before
the fifth (5th) day of each week, or if such day is not a business day, then
the next succeeding business day and (ii) delivered in connection with the
delivery of any Notice of Revolving Borrowing and from time to time.
17
<PAGE> 21
SECTION 2. CONDITIONS PRECEDENT
1. CONDITIONS PRECEDENT TO LOANS ON THE CLOSING DATE. The
obligation of CITBC to make loans hereunder on the Closing Date is subject to
the satisfaction of, or waiver of, immediately prior to or concurrently with
the making of such loans, the following conditions precedent:
(a) LIEN SEARCHES - CITBC shall have received tax, judgment
and Uniform Commercial Code searches satisfactory to CITBC for all locations
presently occupied or used by the Borrower.
(b) CASUALTY INSURANCE - The Borrower shall have delivered to
CITBC evidence satisfactory to CITBC that casualty insurance policies listing
CITBC as loss payee or mortgagee, as the case may be, are in full force and
effect, all as set forth in Section 8, paragraph 5 of this Financing Agreement.
(c) MORTGAGES/DEEDS OF TRUST - The Borrower shall have
executed and delivered to either CITBC or an agent of CITBC or of a title
insurance company acceptable in form and substance satisfactory to CITBC such
Mortgages as CITBC may reasonably require and such Mortgages shall have been
recorded in each jurisdiction where it is necessary or appropriate to secure
the interest of CITBC.
(d) UCC FILINGS - Any documents (including without
limitation, financing statements) required to be filed in order to create, in
favor of CITBC, a first and exclusive perfected security interest in the
Collateral with respect to which a security interest may be perfected by a
filing under the Uniform Commercial Code shall have been properly filed in each
office in each jurisdiction required in order to create in favor of CITBC a
perfected lien on the Collateral. CITBC shall have received acknowledgement
copies of all such filings (or, in lieu thereof, CITBC shall have received
other evidence satisfactory to CITBC that all such filings have been made); and
CITBC shall have received evidence that all necessary filing fees and all taxes
or other expenses related to such filings have been paid in full.
(e) TITLE INSURANCE POLICIES - CITBC shall have received, in
respect of each Mortgage, a mortgagee's title policy or marked-up unconditional
binder for such insurance. Each such policy shall (i) be in an amount
satisfactory to CITBC; (ii) insure that the Mortgage insured thereby creates a
valid first lien on the property covered by such Mortgage, free and clear of
all defects and encumbrances except those acceptable to CITBC; (iii) name CITBC
as the insured
18
<PAGE> 22
thereunder; and (iv) contain such endorsements and effective coverage as CITBC
may reasonably request, including without limitation, a revolving line of
credit endorsement. CITBC shall also have received evidence that all premiums
in respect of such policies have been paid and that all charges for mortgage
recording taxes, if any, shall have been paid.
(f) SURVEYS - CITBC and the title insurance company issuing
each policy referred to in the immediately preceding paragraph (each, a "Title
Insurance Company") shall have received maps or plats of a perimeter or
boundary of the site of each of the properties covered by the mortgages or
deeds of trust, dated a date satisfactory to CITBC and the relevant Title
Insurance Company, prepared by an independent professional licensed land
surveyor satisfactory to CITBC and the relevant Title Insurance Company, which
maps or plats and the surveys on which they are based shall be made in
accordance with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping; and, without limiting the
generality of the foregoing, there shall be surveyed and shown on the maps or
plats or surveys the following: (i) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines insofar as the foregoing affect the perimeter or boundary of such
property; (ii) the lines of streets abutting the sites and width thereof; (iii)
all access and other easements appurtenant to the sites or necessary or
desirable to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances affecting
the sites, whether recorded, apparent from a physical inspection of the sites
or otherwise known to the surveyor; (v) any encroachments on any adjoining
property by the building structures and improvements on the sites; and (vi) if
the site is designated as being on a filed map, a legend relating the survey to
said map. Further, the survey shall x) be certified to CITBC and the Title
Insurance Company and y) contain a legend reciting as to whether or not the
site is located in a flood zone.
(g) EXAMINATION & VERIFICATION- CITBC shall have completed to
the satisfaction of CITBC an examination and verification of the Accounts,
Inventory, books and records of the Borrower.
(h) OPINIONS - (1) the Borrower shall have delivered to
CITBC a favorable opinion of Bass Berry & Sims satisfactory to CITBC and their
special counsel dated the Closing date substantially in the form and to the
effect set forth in Exhibit B hereto.
19
<PAGE> 23
(2) CITBC shall have received opinions of local counsel set
forth on Exhibit C, in form and substance satisfactory to CITBC and its special
counsel.
(i) PATENT SECURITY AGREEMENT - The Borrower shall have
executed and delivered to CITBC the Patent Security Agreement.
(j) ACQUISITION - CITBC shall be satisfied with the terms and
the structure of the Acquisition and the opinions of counsel delivered in
connection therewith (as to which appropriate reliance letters shall have been
furnished to CITBC), and the Acquisition shall have been consummated.
(k) SOLVENCY CERTIFICATE - Receipt of solvency opinion from
Houlihan, Lokey, Howard & Zukin, Inc., dated the Closing Date, indicating that
after giving effect to the Acquisition and all of the other transactions
contemplated by the loan documents, the Borrower is Solvent.
(l) ADDITIONAL DOCUMENTS - The Borrower shall have executed
and delivered to CITBC all loan documents necessary to consummate the lending
arrangement contemplated between the Borrower and CITBC.
(m) INTERCREDITOR AGREEMENT - The Subordinating Creditors
shall have executed and delivered to CITBC the Intercreditor Agreement.
(n) SUBORDINATED DEBT - The $12,000,000 of Subordinated Debt
owed by the Borrower to the Subordinating Creditors shall not be secured by any
assets of the Borrower and the other terms and conditions of such Subordinated
Debt shall be satisfactory to CITBC.
(o) ENVIRONMENTAL REPORT - CITBC shall have received,
environmental audit reports on (i) all of the Borrower's leasehold and fee
interests, and (ii) the Borrower's waste disposal practices. The reports must
(x) be satisfactory to CITBC and (y) not disclose or indicate any material
liability (real or potential) stemming from the Borrower's premises, its
operations, its waste disposal practices or waste disposal sites used by the
Borrower. If the reports described above disclose or indicate the presence of
Hazardous Substances violating any local, state or federal laws or regulations,
or any material liability (real or potential) stemming from the Borrower's
premises, its operations, its waste disposal practices or waste disposal sites
used by the Borrower, then CITBC shall have the option to (i) decline to
execute this Financing Agreement and to consummate any transactions
contemplated hereby, or (ii) make their obligations hereunder subject to
20
<PAGE> 24
such additional conditions as CITBC may deem necessary. The Borrower shall
bear the cost of the environmental reports.
(p) BOARD RESOLUTION - CITBC shall have received a copy of
the resolutions of the Boards of Directors of the Borrower authorizing the
execution, delivery and performance of (i) this Financing Agreement and (ii)
any related agreements, in each case certified by the Secretary or Assistant
Secretary of such Person as of the date hereof, together with a certificate of
the Secretary or Assistant Secretary of such Person as to the incumbency and
signature of the officers of such Person executing this Financing Agreement and
any certificate or other documents to be delivered by it pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
(q) CORPORATE ORGANIZATION - CITBC shall have received (i) a
copy of the Certificate of Incorporation of the Borrower certified by the
Secretary of State of its incorporation, and (ii) a copy of the By-Laws (as
amended through the date hereof) of the Borrower certified by the Secretary or
Assistant Secretary of the Borrower.
(r) OFFICER'S CERTIFICATE - CITBC shall have received an
executed Officer's Certificate of the Borrower, satisfactory in form and
substance to CITBC, certifying that (i) the representations and warranties
contained herein are true and correct on and as of the Closing Date; (ii) the
Borrower is in compliance with all of the terms and provisions set forth
herein; and (iii) no Default has occurred.
(s) NO MATERIAL ADVERSE CHANGE - No material adverse change
in the financial condition, business, prospects, profits, operations or assets
of the Borrower shall have occurred since July 31, 1995.
(t) APPRAISALS - CITBC shall have received an appraisal on
the Borrower's (i) Equipment indicating an orderly liquidation value in a
minimum aggregate amount of $5,000,000 and (ii) Real Estate described on
Schedule 1(a) hereto indicating a liquidation value in a minimum aggregate
amount of $2,700,000 which appraisals shall be by an appraiser(s) mutually
agreed upon by CITBC and the Borrower. The Borrower shall bear the cost of
such appraisals.
(u) DISBURSEMENT AUTHORIZATION - The Borrower shall have
delivered to CITBC all information necessary for CITBC to issue wire transfer
instructions on behalf of the Borrower for the initial and subsequent loans
and/or advances to be made under this Financing Agreement including, but not
limited to, disbursement authorizations in form acceptable to CITBC.
21
<PAGE> 25
(v) FEES AND EXPENSES - On the Closing Date, subject to the
credit presently available to the Borrower, the Borrower shall have reimbursed
CITBC for all Out-of-Pocket Expenses for which a request for payment shall have
been made at or prior to the Closing Date and shall have paid the Collateral
Management Fee due at Closing and the Loan Facility Fee.
(w) AVAILABILITY - (A) CITBC will have completed to its
satisfaction an examination of Eligible Accounts Receivable and Inventory for a
calculation of Availability.
(B) The Availability on the Closing Date, after giving
effect to any Revolving Loans, the Term Loan, and the Letters of Credit made by
CITBC at Closing, shall be at least $3,000,000, as evidenced by a Notice of
Revolving Borrowing delivered by the Borrower to CITBC on the Closing Date.
(x) THE NOTES - CITBC shall have received Revolving Loans
Promissory Notes and Term Loan Promissory Notes, payable to it and each duly
executed and delivered by the Borrower with all blanks appropriately filled in.
(y) CITBC shall have received financial projections from
the Borrower in form and substance satisfactory to CITBC.
(z) TRADEMARK SECURITY AGREEMENT - The Borrower shall
have executed and delivered to CITBC the Trademark Security Agreement.
(aa) ERISA SIDE LETTER. The Borrower shall have delivered
a side letter from Acme-Cleveland Corporation regarding the "controlling
groups" pension plans.
(ab) PROCEEDINGS - On or prior to the Closing Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to CITBC, and CITBC shall have received all
such counterpart originals or certified or other copies of such documents as it
may reasonably request.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Borrower and CITBC shall otherwise agree herein or in a
separate writing.
2. CONDITIONS PRECEDENT TO EACH REVOLVING LOAN. The
obligations of CITBC to make each Revolving Loan hereunder shall be subject to
the satisfaction of, or waiver
22
<PAGE> 26
of, immediately prior to or concurrently with the making of such Revolving
Loan, the following further conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. All the representations
and warranties contained in this Financing Agreement and in each other
agreement entered into in connection herewith shall be true and correct in all
material respects on and as of the date of providing such Revolving Loan as
though made on and as of such date, except representations and warranties made
with respect to a specified earlier date in which case such representation and
warranty shall be correct on and as of such specified earlier date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing, or could result from providing such Revolving Loan.
(c) ADDITIONAL DOCUMENTS. Upon the request of CITBC, the
Borrower shall have executed and delivered to CITBC an Officer's Certificate of
the Borrower stating that the conditions set forth in this Section 2,
paragraphs 2(a) and 2(b) hereof have been satisfied as of the date of the
requested Revolving Loan.
(d) DEEMED REPRESENTATION. Each delivery of a Notice of
Revolving Borrowing by the Borrower requesting a Revolving Loan shall
constitute a representation and warranty that the statements contained in this
Section 2, paragraph 2(a) hereof are true and correct both on the date of such
delivery of the Notice of Revolving Borrowing and, unless the Borrower
otherwise notifies CITBC prior to the receipt of such Revolving Loan, as of the
date of the providing of such Revolving Loan.
SECTION 3. REVOLVING LOANS
1. (a) CITBC agrees, subject to the terms and conditions of
this Financing Agreement from time to time, and within x) the Availability and
y) the Revolving Line of Credit to make loans and advances to the Borrower on a
revolving basis (i.e., subject to the limitations set forth herein, the
Borrower may borrow, repay and re-borrow Revolving Loans). The Borrower hereby
agrees to execute and deliver to CITBC a Revolving Loans Promissory Note, in
the form of Exhibit A2 hereto, to evidence the Revolving Loans to be extended
by CITBC. Such loans and advances shall be in amounts up to the lesser of (a)
$25,000,000 or (b) the sum of (i) eighty-five percent (85%) of the outstanding
Eligible Accounts Receivable of the Borrower, plus (ii) fifty percent (50%) of
the aggregate value of Eligible
23
<PAGE> 27
Inventory of the Borrower; provided, however, that the amount calculated
pursuant to clause (ii) shall not exceed $15,000,000 at any time.
(b) All requests for loans and advances must be made pursuant
to a Notice of Revolving Borrowing delivered by the Borrower and received by an
officer of CITBC no later than 1:00 p.m., New York time, of the day on which
such loans and advances are required; provided, however, CITBC shall have the
right to request and receive from the Borrower a Weekly Availability Report at
any time, including, without limitation, upon receipt from the Borrower of a
Notice of Revolving Borrowing. The Notice of Revolving Borrowing shall
specify: (1) the proposed date of funding (which shall be a business day); (2)
the amount of Revolving Loans requested; (3) the interest rate to be applied,
and if the Borrower shall have elected the LIBOR Rate for all or any portion of
such Revolving Loan (such Revolving Loan or portion to be in a minimum amount
of $1,000,000), the LIBOR Rate Periods; (4) whether or not a Default has
occurred and is continuing; and (5) that no Event of Default has occurred and
is continuing. In lieu of delivering the above described Notice of Revolving
Borrowing, the Borrower may give CITBC telephonic notice by the required time
of the proposed borrowing; provided, however, that such notice shall be
promptly, and in any event within one business day, confirmed in writing by
delivery of a Notice of Borrowing to CITBC; and provided, further, however,
that at such time CITBC may request and receive from the Borrower a Weekly
Availability Report. At any time CITBC requests a Weekly Availability Report
from Borrower, CITBC shall not be required to make any loan or advance
hereunder until after receipt by CITBC of such Weekly Availability Report.
CITBC shall not incur any liability to the Borrower for acting upon any
telephonic notice that CITBC believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of the
Borrower or for otherwise acting in good faith under this paragraph 1(b). The
making of an advance pursuant to telephonic notice shall constitute a Revolving
Loan under this Financing Agreement. Each advance to the Borrower of a
Revolving Loan shall, on the date of funding, be deposited, in immediately
available funds, in such account as the Borrower may from time to time
designate to CITBC in writing. Each repayment of a Revolving Loan shall be
deemed a repayment of the oldest then outstanding advances hereunder.
(c) The Borrower shall make Mandatory Prepayments on the
Revolving Loans if at any time the Revolving Loans exceed the limitations set
forth in paragraph 1(a) above. Such Mandatory Prepayments shall be due in an
amount equal to the amount that the outstanding balance of the Revolving
24
<PAGE> 28
Loans exceeds such limitations and shall be payable immediately upon demand by
CITBC.
(d) The proceeds of the Key Man Life Insurance Policy shall
be applied by CITBC to such of the Obligations hereunder, and in such amounts,
as CITBC may determine in its sole discretion.
2. In furtherance of the continuing assignment and security
interest in the Borrower's Accounts, the Borrower will, upon the creation of
Accounts, execute and deliver to CITBC in such form and manner as CITBC may
reasonably require, solely for CITBC's convenience in maintaining records of
collateral, such confirmatory schedules of Accounts as CITBC may reasonably
request, and such other appropriate reports designating, identifying and
describing the Accounts as CITBC may reasonably require. In addition, upon
CITBC's request the Borrower shall provide CITBC with copies of agreements
with, or purchase orders from, the Borrower's customers, and copies of invoices
to customers, proof of shipment or delivery and such other documentation and
information relating to said Accounts and other collateral as CITBC may
reasonably require. Failure to provide CITBC with any of the foregoing shall
in no way affect, diminish, modify or otherwise limit the security interests
granted herein. The Borrower hereby authorizes CITBC to regard the Borrower's
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of the Borrower's authorized
officers or agents.
3. The Borrower hereby represents and warrants as to itself
that: each Account is based on an actual and bona fide sale and delivery of
goods or rendition of services to customers, made by the Borrower in the
ordinary course of its business; the goods and inventory being sold and the
Accounts created are the exclusive property of the Borrower and are not and
shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Accounts are in the name of the
Borrower; and the customers of the Borrower have accepted the goods or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
contra, except for disputes and other matters arising in the ordinary course of
business of which the Borrower has advised CITBC pursuant to paragraph 4 of
this Section 3. The Borrower confirms to CITBC that any and all taxes or fees
relating to its business, its sales, the Accounts or goods relating thereto,
are its sole responsibility and that same will be paid by the Borrower when due
and that none of said taxes or fees represent a lien on or claim against the
25
<PAGE> 29
Accounts. The Borrower also warrants and represents that it is a duly and
validly existing corporation and is qualified in all states where the failure
to so qualify would have a adverse effect on the business of the Borrower or
the ability of the Borrower to enforce collection of Accounts due from
customers residing in that state. The Borrower agrees to maintain such books
and records regarding Accounts as CITBC may reasonably require and agrees that
the books and records of the Borrower will reflect CITBC's interest in the
Accounts. All of the books and records of the Borrower will be available to
CITBC at normal business hours, including any records handled or maintained for
the Borrower by any other company or entity.
4. The Borrower agrees to notify CITBC promptly of any
matters materially affecting the value, enforceability or collectability of any
Account or Accounts in excess of $250,000 in the aggregate outstanding at any
time and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. The
Borrower agrees to issue credit memoranda promptly (with duplicates to CITBC
upon request after the occurrence of an Event of Default) upon accepting
returns or granting allowances, and may continue to do so until CITBC has
notified the Borrower that an Event of Default has occurred and that all future
credits or allowances are to be made only after CITBC's prior written approval.
Upon the occurrence and during the continuance of an Event of Default and on
notice from CITBC, the Borrower agrees that all returned, reclaimed or
repossessed merchandise or goods shall be set aside by the Borrower, marked
with CITBC's name and held by the Borrower for CITBC's account as owner and
assignee.
5. The Borrower shall maintain the bank accounts listed on
Schedule 3.5 hereto in the name of the Borrower for the purpose of, inter alia,
receiving proceeds relating to the Accounts with the banks specified therein
(the "Collection Bank(s)") hereby designated as the "Collection Accounts." The
Borrower agrees that it will not designate any other bank account as a
Collection Account without the prior written consent of CITBC. Any checks,
cash, notes or other instruments or property received by the Borrower with
respect to any Accounts shall be held by the Borrower in trust for CITBC
separate from the Borrower's own property and funds and immediately turned over
to CITBC with proper assignments or endorsements by deposit to the Collection
Account. All amounts received by CITBC in payment of Accounts will be credited
to the Borrower's accounts upon CITBC's receipt of "collected funds" at CITBC'S
bank account on the business day of receipt if received no later than 1:00 p.m.
or on the next succeeding business day if received after 1:00 p.m. No checks,
drafts or other instrument
26
<PAGE> 30
received by CITBC shall constitute final payment to CITBC unless and until such
instruments have actually been collected. Until CITBC has advised the Borrower
to the contrary after the occurrence of an Event of Default, the Borrower may
and will enforce, collect and receive all amounts owing on the Accounts for
CITBC's benefit and on CITBC's behalf, but at the Borrower's expense; such
privilege shall terminate automatically upon the institution by or against the
Borrower of any proceeding under any bankruptcy or insolvency law or, at the
election of CITBC, upon the occurrence and during the continuance of any Event
of Default.
6. CITBC shall maintain a separate account on its books in
the name of the Borrower in which the Borrower will be charged with loans and
advances made by CITBC to it or for its account, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which CITBC may incur in connection with the exercise by or for CITBC of
any of the rights or powers herein conferred upon CITBC, or in the prosecution
or defense of any action or proceeding to enforce or protect any rights of
CITBC in connection with this Financing Agreement or the Collateral assigned
hereunder, or any Obligations owing to CITBC by the Borrower. The Borrower
will be credited with all amounts received by CITBC from the Borrower or from
others for the Borrower's account, including, as above set forth, all amounts
received by CITBC in payment of assigned Accounts and such amounts will be
applied to payment of the Obligations. In no event shall prior recourse to any
Accounts or other security granted to or by the Borrower be a prerequisite to
CITBC's right to demand payment of any Obligation. Further, it is understood
that CITBC shall have no obligation whatsoever to perform in any respect any of
the Borrower's contracts or obligations relating to the Accounts.
7. After the end of each month, CITBC shall promptly send the
Borrower a statement showing the accounting for the charges, loans, advances
and other transactions occurring between CITBC and the Borrower during that
month. The monthly statements shall be deemed correct and binding upon the
Borrower and shall constitute an account stated between the Borrower and CITBC
unless CITBC receives a written statement of the exceptions within thirty (30)
days of the date of the monthly statement.
8. In the event this Financing Agreement or the Revolving
Line of Credit is terminated by CITBC in accordance with the provisions hereof
or the Borrower for any reason whatsoever, the Revolving Loans shall become
due and payable on the effective date of such termination,
27
<PAGE> 31
notwithstanding any provision to the contrary in the Revolving Loans Promissory
Note or this Financing Agreement.
SECTION 4. TERM LOAN
1. The Borrower hereby agrees to execute and deliver to CITBC
the Term Loan Promissory Note, in the form of Exhibit A1 attached hereto, to
evidence the Term Loan to be extended by CITBC.
2. Upon receipt of such Term Loan Promissory Note, CITBC
hereby agrees to extend to the Borrower the Term Loan in the principal amount
of $5,000,000.
3. The principal amount of the Term Loan shall be repaid to
CITBC by the Borrower:
(i) in thirty-five (35) consecutive, monthly
installments each in the amount of $85,714.30 with the first installment
due on November 30, 1995, and with subsequent installments due on each
Monthly Date thereafter to and including September 30, 1998; and
(ii) in one (1) final installment of the remaining
principal amount outstanding, plus all other amounts having accrued and
become outstanding payable on October 23, 1998.
4. The Borrower may prepay the Term Loan in whole or in part
at any time, at their option; provided, however, that on each such prepayment,
the Borrower shall pay accrued interest on the principal so prepaid to the date
of such prepayment. Each optional prepayment made pursuant to this paragraph 4
shall be applied to the last maturing installment(s) of principal on the Term
Loan.
5. In the event this Financing Agreement and the Revolving
Line of Credit are terminated by either CITBC or the Borrower for any reason
whatsoever, the Term Loan shall become due and payable on the effective date of
such termination notwithstanding any provision to the contrary in the Term Loan
Promissory Note or this Financing Agreement.
6. The Borrower hereby authorizes CITBC to charge its
Revolving Loan account with the amount of all amounts due under this Section 4
as such amounts become due. The Borrower confirms that any charges which CITBC
may so make to its account as herein provided will be made as an accommodation
to the Borrower and solely at CITBC's discretion.
28
<PAGE> 32
SECTION 5. Letters of Credit
In order to assist the Borrower in continuing the Shawmut
Letters of Credit, on the Closing Date, and in establishing or opening Letters
of Credit with an Issuing Bank to cover the purchase of inventory, equipment or
otherwise, the Borrower has requested CITBC to join in the applications for
such Letters of Credit, and/or guarantee payment or performance of such Letters
of Credit and any drafts or acceptances thereunder through the issuance of the
Letters of Credit Guaranty, thereby lending CITBC's credit to the Borrower and
CITBC has agreed to do so. These arrangements shall be handled by CITBC
subject to the terms and conditions set forth below.
1. (a) The amount, purpose and extent of the Letters of
Credit and changes or modifications thereof by the Borrower and/or the Issuing
Bank of the terms and conditions thereof shall in all respects be subject to
the prior approval of CITBC in the exercise of its reasonable discretion
provided however, that: a) in no event may the aggregate amount of all such
outstanding Letters of Credit exceed, in the aggregate, at any one time
$1,500,000, and b) the Letters of Credit and all documentation in connection
therewith shall be in form and substance satisfactory to the Borrower, CITBC
and the Issuing Bank.
(b) The Borrower and CITBC hereto agree that the
documentation in connection with the Shawmut Letters of Credit is satisfactory
in form and substance and such documentation shall not be amended without the
prior written consent of CITBC.
2. CITBC shall have the right, without notice to the
Borrower, to charge the Borrower's account on CITBC's books with the amount of
any and all indebtedness, liability or obligation of any kind incurred by CITBC
under the Letter of Credit Guaranties at the earlier of a) payment by CITBC
under the Letter of Credit Guaranties, or b) the occurrence of an Event of
Default. Any amount charged to Borrower's loan account shall be deemed a
Revolving Loan hereunder and shall incur interest at the rate provided in
Section 9, paragraph 1 of this Financing Agreement.
3. The Borrower unconditionally indemnifies CITBC and
holds CITBC harmless from any and all loss, claim or liability incurred by
CITBC arising from any transactions or occurrences relating to Letters of
Credit established or opened for the Borrower's account, the collateral
relating thereto and any drafts or acceptances thereunder, and all Obligations
thereunder, including any such loss or claim due to any action taken by any
Issuing Bank, other than for any such loss, claim or liability arising out of
the gross
29
<PAGE> 33
negligence or willful misconduct by CITBC under the Letter of Credit
Guaranties. The Borrower further agrees to hold CITBC harmless from any errors
or omission, negligence or misconduct by the Issuing Bank. The Borrower's
unconditional obligation to CITBC hereunder shall not be modified or diminished
for any reason or in any manner whatsoever, other than as a result of CITBC's
gross negligence or willful misconduct. The Borrower agrees that any charges
incurred by CITBC for the Borrower account by the Issuing Bank shall be
conclusive on CITBC and may be charged to the Borrower's account.
4. CITBC shall not be responsible for: the existence,
character, quality, quantity, condition, packing, value or delivery of the
goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that (expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged; the time, place, manner or order
in which shipment is made; partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of Credit
or documents; any deviation from instructions; delay, default, or fraud by the
shipper and/or anyone else in connection with the Collateral or the shipping
thereof; or any breach of contract between the shipper or vendors and the
Borrower. Furthermore, without being limited by the foregoing, CITBC shall not
be responsible for any act or omission with respect to or in connection with
any Collateral.
5. The Borrower agrees that any action taken by CITBC,
if taken in good faith, or any action taken by any Issuing Bank, under or in
connection with the Letters of Credit, the Letter of Credit Guaranties, the
drafts or acceptances, or the Collateral, shall be binding on the Borrower and
shall not put CITBC in any resulting liability to the Borrower. In furtherance
thereof, CITBC shall have the full right and authority to clear and resolve any
questions of non-compliance of documents; to give any instructions as to
acceptance or rejection of any documents or goods; to execute any and all
steamship or airways guaranties (and applications therefore), indemnities or
delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CITBC's sole name, and the
Issuing Bank shall be entitled to comply with and honor any and all such
documents
30
<PAGE> 34
or instruments executed by or received solely from CITBC, all without any
notice to or any consent from the Borrower.
6. Without CITBC's express consent and endorsement in
writing, the Borrower agrees: a) not to execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or
acceptances; and b) after the occurrence of an Event of Default which is not
cured within any applicable grace period, if any, or waived by CITBC, not to i)
clear and resolve any questions of non-compliance of documents, or ii) give any
instructions as to acceptance or rejection of any documents or goods.
7. The Borrower agrees that any necessary import, export
or other licenses or certificates for the import or handling of the Collateral
will have been promptly procured; all foreign and domestic governmental laws
and regulations in regard to the shipment and importation of the Collateral, or
the financing thereof will have been promptly and full complied with; and any
certificates in that regard that CITBC may at any time request will be promptly
furnished. In this connection, the Borrower warrants and represents that all
shipments made under any such Letters of Credit are in accordance with the laws
and regulations of the countries in which the shipments originate and
terminate, and are not prohibited by any such laws and regulations. The
Borrower assumes all risk, liability and responsibility for, and agrees to pay
and discharge, all present and future local, state, federal or foreign taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of
any country, state, city, or other political subdivision, where the Collateral
is or may be located, or wherein payments are to be made, or wherein drafts may
be drawn, negotiated, accepted, or paid, shall be solely the Borrower's risk,
liability and responsibility.
8. Upon any payments made to the Issuing Bank under a
Letter of Credit Guaranty, CITBC shall acquire by subrogation, any rights,
remedies, duties or obligations granted or undertaken by the Borrower to the
Issuing Bank in any application for Letters of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to
have been granted to CITBC and apply in all respects to CITBC and shall be in
addition to any rights, remedies, duties or obligations contained herein.
31
<PAGE> 35
SECTION 6. COLLATERAL
1. As security for the prompt payment in full of all loans
and advances made and to be made to the Borrower from time to time by CITBC
pursuant hereto, as well as to secure the payment in full of the other
Obligations, the Borrower hereby pledges and grants to CITBC a continuing a
first prior general lien upon and security interest in all of its Collateral
subject to Permitted Encumbrances.
2. The security interests granted hereunder shall extend and
attach to:
(a) All Collateral, whether presently in existence or
hereafter acquired or created, however acquired or created, and which
is owned by the Borrower or in which the Borrower has any interest,
whether held by the Borrower or others for its account, and, if any
Collateral is Equipment, whether the Borrower's interest in such
Equipment is as owner or lessee or conditional vendee;
(b) All Equipment whether the same constitutes personal
property or fixtures, including, but without limiting the generality
of the foregoing, all dies, jigs, tools, benches, tables, accretions,
component parts thereof and additions thereto, as well as all
accessories, motors, engines and auxiliary parts used in connection
with or attached to the Equipment;
(c) All Inventory and any portion thereof which may be
returned, rejected, reclaimed or repossessed by either CITBC or the
Borrower from the Borrower's customers, as well as to all supplies,
goods, incidentals, packaging materials, labels and any other items
which contribute to the finished goods or products manufactured or
processed by the Borrower, or to the sale, promotion or shipment
thereof; and
(d) all proceeds and products of the Collateral.
3. The Borrower agrees to safeguard, protect and hold all
Inventory for CITBC's account and make no disposition thereof except in the
ordinary course of business of the Borrower. Until CITBC has given the
Borrower's notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Borrower to its customers in the ordinary course of the
Borrower's business, on open account and on terms currently being extended by
the Borrower to its customers; provided, however, that all proceeds of all
sales (including cash, accounts receivable, checks, notes, instruments for the
payment of money and similar proceeds) are forthwith transferred, endorsed, and
32
<PAGE> 36
turned over and delivered to CITBC in accordance with this paragraph 3. CITBC
shall have the right to withdraw this permission at any time upon the
occurrence and during the continuance of an Event of Default, in which event no
further disposition shall be made of the Inventory by the Borrower without
CITBC's prior written approval. Sales of Inventory in which a lien upon, or
security interest in, Inventory is retained by the Borrower shall be made by
the Borrower only with the approval of CITBC, and the proceeds of such sales of
Inventory shall not be commingled with the Borrower's other property, but shall
be segregated, held by the Borrower in trust for CITBC as CITBC's exclusive
property, and shall be delivered immediately by the Borrower to CITBC in the
identical form received by the Borrower by deposit to the Collection Accounts.
Upon the sale, exchange, or other disposition of Inventory, as herein provided,
the security interest in the Borrowers' Inventory provided for herein shall,
without break in continuity and without further formality or act, continue in,
and attach to, all proceeds, including any instruments for the payment of
money, accounts receivable, contract rights, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition,
CITBC shall have all of the rights of an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation.
4. The Borrower will, at its own cost and expense, keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. Except as provided herein, the Borrower also agrees
to make no disposition thereof whether by sale, exchange or otherwise, unless
the Borrower first obtains the prior written approval of CITBC and the proceeds
of any such disposition shall be deposited in the Collection Accounts. Upon
the sale, exchange, or other disposition of the Equipment, as herein provided,
the security interest provided for herein shall, without break in continuity
and without further formality or act, continue in, and attach to, all proceeds,
including any instruments for the payment of money, accounts receivable,
contract rights, documents of title, shipping documents, chattel paper and all
other cash and non-cash proceeds of such sales, exchange or disposition. As to
any such sale, exchange or other disposition, CITBC shall have all of the
rights of an unpaid seller, including stoppage in transit, replevin, rescission
and reclamation. Notwithstanding anything hereinabove contained to the
contrary, upon written notice from the Borrower prior to any disposition of
Equipment, the Borrower may sell, exchange or otherwise dispose of obsolete
33
<PAGE> 37
Equipment or Equipment no longer needed in the Borrower's operations; provided,
however, that (a) then book value of the Equipment so disposed of by the
Borrower does not exceed $50,000 in any consecutive twelve-month period; and
provided, further, that no such prior notice shall be required in respect of
sales, exchanges, and other depositions of Equipment unless the book value of
such Equipment disposed of without such prior notice has exceeded, or would
upon such disposition, exceed $50,000 in the aggregate for the Borrower in any
consecutive twelve-month period, and (b) the proceeds of such sales or
dispositions are delivered to CITBC in accordance with the foregoing provisions
of this paragraph, except that the Borrower may retain and use such proceeds to
purchase forthwith replacement Equipment which the Borrower determines in its
reasonable business judgment to have a collateral value at least equal to the
Equipment so disposed of or sold; provided, however, that the aforesaid right
shall automatically cease upon the occurrence and during the continuance of an
Event of Default which is not waived.
5. The rights and security interests granted to CITBC
hereunder are to continue in full force and effect, notwithstanding the
termination of this Financing Agreement or the fact that the account maintained
in the Borrower's name on the books of CITBC may from time to time be
temporarily in a credit position, until the final payment in full to CITBC of
all Obligations and the termination of this Financing Agreement. Any delay, or
omission by CITBC to exercise any right hereunder, shall not be deemed a waiver
thereof, or be deemed a waiver of any other right, unless such waiver be in
writing and signed by CITBC. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
6. The Borrower will, at its sole cost and expense, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as CITBC shall from time to time reasonably require, for the better
assuring, conveying, assigning, transferring and confirming unto CITBC the
property and rights hereby conveyed or assigned or intended now or hereafter so
to be, or which the Borrower may be or may hereafter become bound to convey or
assign to CITBC, or for carrying out the intention or facilitating the
performance of the terms of each mortgage granted pursuant to the terms hereof,
or for filing, registering or recording such mortgage and, on demand, will
execute and deliver, and hereby authorizes CITBC to execute and file in the
Borrower's name in the event Borrower fails to promptly do so or if there has
occurred a Default or Event of Default, to the extent it may lawfully do so,
one or more financing statements, chattel
34
<PAGE> 38
mortgages or comparable security instruments, to evidence or perfect more
effectively CITBC's security interest in and the lien hereof upon the
Collateral.
7. The rights and security interests granted to CITBC
hereunder and under the Mortgages are to continue in full force and effect
until the final payment in full to CITBC of all Obligations and the termination
of this Financing Agreement.
8. To the extent that the Obligations are now or hereafter
secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other person, then CITBC
shall have the right in its sole discretion to determine which rights,
security, liens, security interests or remedies CITBC shall at any time pursue,
foreclose upon, relinquish, subordinate, modify or take any other action with
respect to, without in any way modifying or affecting any of them, or any of
CITBC's rights hereunder.
9. Any reserves or balances to the credit of the Borrower
and any other property or assets of the Borrower in the possession of CITBC
may be held by CITBC as security for any Obligations and applied in whole or
partial satisfaction of such Obligations when due. The liens and security
interests granted herein and any other lien or security interest CITBC may have
in any other assets of the Borrower, shall secure payment and performance of
all now existing and future Obligations. CITBC may in its discretion charge
any or all of the Obligations to the account of the Borrower when due.
10. This Financing Agreement and the obligation of the
Borrower to perform all of its covenants and obligations hereunder are further
secured by certain Mortgages.
11. The Borrower shall give to CITBC from time to time
such mortgage, deed of trust or assignment on the Real Estate or real estate
acquired after the date hereof as CITBC shall require to obtain a valid first
lien thereon subject only to Permitted Encumbrances.
12. The Borrower shall (i) give to CITBC, and/or shall cause
each subsequently acquired Subsidiary of the Borrower to give to CITBC, from
time to time such pledge or security agreements with respect to subsequently
acquired Collateral of the Borrower, and such guaranty of the Obligations, as
CITBC shall require to obtain an enforceable guaranty of the Obligations and
valid first liens on such Collateral subject to Permitted Encumbrances and (ii)
cause the Borrower or any Subsidiary of the Borrower as the direct
35
<PAGE> 39
parent of any subsequently acquired Subsidiary to become a party to a guaranty
of the Obligations and to a pledge agreement and deliver to CITBC, as
collateral thereunder, all capital stock owned by the Borrower or such
Subsidiary in such subsequently acquired Subsidiary, together with duly
executed stock powers in blank.
SECTION 7. REPRESENTATIONS AND WARRANTIES
The Borrower represents, covenants and warrants as follows:
1. CORPORATE EXISTENCE. (a) The Borrower has the corporate
power to own its property and to carry on its business as now being conducted.
The Borrower has delivered to CITBC true, complete and correct copies of its
respective Certificate of Incorporation and By-laws, as amended and in full
force and effect on the date hereof and a list of all jurisdictions in which
it is qualified or licensed to do business.
(b) The Borrower has all requisite power and authority to
enter into and perform all its obligations under this Financing Agreement.
(c) The Borrower has identified on Schedule 7.1 the name and
jurisdiction of incorporation or organization of the Borrower and the number of
shares of capital stock and other equity securities issued and outstanding as
of the date hereof and the percentage of the issued and outstanding capital
stock of each subsidiary owned by the Borrower as of the date hereof. All such
shares of capital stock and other equity securities have been validly issued
and are fully paid and nonassessable and are owned by the Borrower beneficially
and of record, free and clear of any lien, except for the Permitted
Encumbrances.
Except as set forth on Schedule 7.1 hereto, the Borrower does
not have outstanding stock or securities convertible into or exchangeable or
exercisable for any shares of its capital stock, nor does it have outstanding
any rights to subscribe for or to purchase, or any options for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, any shares of
its capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock. The Borrower has reserved
such number of shares of common stock for issuance pursuant to such instruments
or agreements as are set forth in Schedule 7.1 hereto. As of the date hereof,
no Person holds of record or beneficially owns 5% or more of the outstanding
shares of
36
<PAGE> 40
any class of the capital stock of the Borrower, except as set forth in Schedule
7.1 hereto.
2. AUTHORIZATION OF FINANCING AGREEMENT AND OTHER DOCUMENTS.
The Borrower has taken all actions necessary to authorize it to enter into and
perform its obligations under this Financing Agreement and the other Loan
Documents, and to consummate the transactions contemplated hereby and thereby.
Each Loan Document when executed and delivered by the Borrower to the extent a
party thereto as provided in this Financing Agreement, will be, legal, valid
and binding obligations of the Borrower to the extent a party thereto,
enforceable in accordance with their respective terms, subject as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the rights of
creditors generally and limitations imposed by federal or state law or
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions of this Financing Agreement or any other Loan
Document, and upon the availability of injunctive relief or other equitable
remedies.
3. FINANCIAL STATEMENTS. DeVlieg has furnished CITBC with
the Balance Sheet of DeVlieg as at July 31, 1995 and the related statements of
earnings, stockholders' equity and cash flows of DeVlieg for the fiscal year
ended July 31, 1995, all certified by Price Waterhouse LLP, including in each
case the related schedules and notes.
National Acme has furnished CITBC with the Consolidated
Balance Sheet of National Acme and National Acme Trading Company for each
twelve month period ended October 30, 1993 and October 30, 1994 and for the ten
month period ended July 31, 1995 and the related statements of earnings,
stockholders' equity and cash flows of National Acme for the periods then
ended, all certified by Ernst & Young, including in each case the related
schedules and notes.
All such financial statements (including any related schedules
and/or notes) have been prepared in accordance with generally accepted
accounting principles consistently applied, except to the extent set forth in
the notes to such financial statements, throughout the periods involved and to
the extent required by such principles show all liabilities, direct and
contingent, of DeVlieg, National Acme and National Acme Trading Company,
respectively. The balance sheets and the related schedules and notes fairly
present the financial condition of DeVlieg, National Acme and National Acme
Trading Company, respectively, as at the respective dates thereof; and the net
income and stockholders' equity statements and the related schedules
37
<PAGE> 41
and notes fairly present the results of the operations of DeVlieg, National
Acme and National Acme Trading Company, respectively, for the respective
periods indicated.
There have been no material adverse changes in the condition,
financial or other, of DeVlieg, since July 31, 1995.
There have been no material adverse changes in the condition,
financial or other, of National Acme and National Acme Trading Company, since
July 31, 1995.
4. NO VIOLATION. Neither the execution or delivery of this
Financing Agreement or any other Loan Document, nor the performance by the
Borrower to the extent a party thereto, of its obligations hereunder or
thereunder, nor the consummation of the transactions contemplated hereby and
thereby, will:
(a) violate any provision of the charter or by-laws
of the Borrower;
(b) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental
authority to which the Borrower or any of its respective properties
may be subject;
(c) cause the acceleration of the maturity of any
debt or obligation of the Borrower;
(d) violate, or be in conflict with, or constitute a
default under, or permit the termination of, or require the consent of
any Person under, or result in the creation of any lien upon any
property of the Borrower under, any agreement to which the Borrower is
a party or by which the Borrower (or its respective properties) may be
bound other than as would not have a material adverse effect on the
Borrower and its Subsidiaries, taken as a whole; or
(e) except for the consents required and set forth
on Schedule 7.4 to this Financing Agreement, require any consent,
approval or other action by any court or administrative or
governmental body or any other Person pursuant to, the charter or
by-laws of the Borrower, any award of any arbitrator or any agreement
(including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the
Borrower is subject.
The Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of the Borrower,
any agreement
38
<PAGE> 42
relating thereto or any other contract or agreement (including its charter)
which, except to the extent complied with by the Borrower or consented to in
connection with the execution of this Financing Agreement, the Term Loan
Promissory Note and the Revolving Loans Promissory Note, restricts or otherwise
limits the incurring of the Indebtedness evidenced by this Financing Agreement,
the Term Loan Promissory Note or the Revolving Loans Promissory Note.
The Borrower is not in default (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold.
5. FULL DISCLOSURE. Neither this Financing Agreement nor any
other Loan Document, nor any of the other documents, certificates or statements
furnished to CITBC in writing by or on behalf of the Borrower in connection
herewith or therewith contains any untrue statement of a material fact or, when
read together, omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to the Borrower which the
Borrower has not disclosed to CITBC which materially adversely affects, or
insofar as the Borrower can reasonably foresee will materially adversely
affect, the properties, business, prospects, operations, earnings, assets,
liabilities or condition (financial or otherwise) of the Borrower or the
ability of the Borrower to perform its obligations under this Financing
Agreement, the Term Loan Promissory Note and the Revolving Loans Promissory
Note, or any other Loan Document contemplated hereby or thereby.
The financial projections delivered in connection with Section
2.1(y) of this Financing Agreement are based on the good faith estimates and
assumptions of the Executive Officers of the Borrower, who have no reason to
believe that such projections are not reasonable based upon current general
economic conditions.
6. LITIGATION. Except as disclosed on Schedule 7.6 hereto,
there is no action, proceeding or investigation pending, or to the best
knowledge of the Executive Officers of the Borrower after due inquiry,
threatened, against or affecting the Borrower in any court or before any
governmental authority or arbitration board or tribunal, foreign or domestic,
except for such actions which, if adversely determined, singly and in the
aggregate, would not have a material adverse effect on the Borrower, and there
is no such action seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge this Financing Agreement or any other Loan Document or any
of the other
39
<PAGE> 43
documents or the transactions contemplated hereby or thereby.
The Borrower is not subject to any judgment, order, decree,
rule or regulation of any court, governmental authority or arbitration board or
tribunal which has materially adversely affected or which can reasonably be
expected to have a material adverse effect on the Borrower's business.
7. PROPERTIES. Schedule 1(a) lists all Real Estate owned by
the Borrower. The Borrower has good and marketable fee title to all such Real
Estate and such other Real Estate fee title to which it may acquire after the
Closing Date. All material leases and other material agreements to which the
Borrower is a party are valid and binding and in full force and effect, no
default has occurred or is continuing thereunder which would have a material
adverse effect on the Borrower and its subsidiaries taken as a whole and no
consent need be obtained (other than consents, if any, which have been or will
be obtained prior to the Closing Date, are identified on a schedule previously
delivered to CITBC and copies of which will be delivered to CITBC prior to the
Closing Date) from any Person in respect of any such lease or agreement in
connection with the transactions contemplated hereby. The Borrower enjoys
peaceful and undisturbed possession of all leases necessary in any material
respect for the operation of its respective properties and assets, none of
which contains any unusual or burdensome provisions which materially or
adversely affects or impairs the operation of such properties or assets.
8. COMPLIANCE WITH LAWS. The Borrower is in not violation of
any statutes, laws, ordinances, governmental rules or regulations or any
judgment, order, writ, injunction, decree, rule or regulation (federal, state,
local or foreign) to which it is subject or has failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to the
ownership or operation of its properties or the conduct of its business, except
for such violations and failures to obtain those which would not have a
material adverse effect on the property, prospects, operations, earnings,
assets, liabilities, or condition (financial or otherwise) of the Borrower.
9. GOVERNMENTAL REGULATIONS. The Borrower is not subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money.
40
<PAGE> 44
10. OUTSTANDING DEBT; NO DEFAULT. The Borrower does not have
outstanding Indebtedness except as set forth in the Balance Sheet of DeVlieg as
at July 31, 1995. The Borrower does not have outstanding subordinated
indebtedness other than the subordinated indebtedness set forth on Schedule
7.10 hereto. No event has occurred or failed to occur which would constitute
a Default or Event of Default under this Financing Agreement.
11. SECURITY INTEREST AND LIENS. The Borrower further
warrants and represents that, except for the Permitted Encumbrances, the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral; that, except for the Permitted
Encumbrances, the Borrower is the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest
therein, free and clear of any and all claims or liens in favor of others; and
that the Equipment does not comprise a part of the Inventory of the Borrower
and that the Equipment is and will only be used by the Borrower in its
business and will not be held for sale or lease, or removed from its premises,
or otherwise disposed of by the Borrower without the prior written approval of
CITBC.
12. TITLE, LIENS. The Borrower has good and marketable title
to its properties and assets reflected in the Balance Sheet of DeVlieg as at
July 31, 1995 (other than properties and assets disposed of in the ordinary
course of business).
13. TAXES. The Borrower has filed all federal, State and
other income tax returns that, to the knowledge of the Borrower, are required
to be filed, and have paid all taxes as shown on said returns and on all
assessments received by it to the extent that such taxes have become due.
Federal income tax returns of the Borrower have been examined and reported on
by the taxing authorities or closed by applicable statutes and satisfied for
all fiscal years prior to and including the fiscal year ended July 31, 1988.
14. POSSESSION OF PATENTS, ETC. The Borrower possesses or
has the right to the use of all the patents, trademarks, trade names, service
marks, copyrights, licenses and other rights free from burdensome restrictions
that are currently used by it or are necessary in any material respect for the
ownership, maintenance and operation of its respective businesses, properties
and assets. All of the foregoing are listed in Schedule 7.14 hereto. Except
as set forth in Schedule 7.14 hereto, the Borrower is not in violation of any
thereof in any material respect and has neither received notice from nor has
knowledge of any
41
<PAGE> 45
material claim by any Person that it is now infringing any of the foregoing.
15. BROKER'S OR FINDER'S COMMISSIONS. Except as set forth on
Schedule 7.15 hereto, no broker's or finder's or placement fee or commission
will be payable with respect to this Financing Agreement, the Term Loan
Promissory Note or the Revolving Loans Promissory Note or any other Loan
Document or the transactions contemplated thereby, and the Borrower will hold
CITBC harmless from any claim, demand or liability for broker's or finder's or
placement fees or commissions alleged to have been incurred in connection with
this Financing Agreement, the Term Loan Promissory Notes, the Revolving Loans
Promissory Note, any other Loan Document or such transactions.
16. APPLICATION OF PROCEEDS. The Borrower does not own any
"margin security" within the meaning of Regulation G (12 CFR Part 207) of the
Board of Governors of the Federal Reserve System (herein called a "margin
security"). The proceeds of the Revolving Loans and Term Loan will be used to
(i) refinance all Indebtedness owed by DeVlieg to Shawmut Bank N.A., (ii) make
loans or advances to the Borrower to enable the Borrower to finance the
Acquisition and (iii) for working capital and other general corporate purposes.
Neither the Borrower nor any agent acting on its behalf has taken or will take
any action which might cause this Financing Agreement, the Term Loan Promissory
Note, the Revolving Loans Promissory Note or any other Loan Document to violate
Regulation G, Regulation T, Regulation U, Regulation X or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Exchange Act, in each case as in effect now or as the same hereafter may be in
effect.
17. GOVERNMENTAL CONSENT. Neither the nature of the Borrower,
nor any of its respective businesses or properties, nor any relationship
between the Borrower and any other Person, nor any circumstance in connection
with the transactions contemplated by this Financing Agreement is such as to
require any consent, approval or authorization of, or any notice to, or filing,
registration or qualification with, any court or administrative or
governmental body in connection with the execution and delivery of this
Financing Agreement, the Term Loan Promissory Note or the Revolving Loans
Promissory Note or any other Loan Document, or fulfillment of, or compliance
with, the terms and provisions of this Financing Agreement, the Term Loan
Promissory Note or the Revolving Loans Promissory Note or any other Loan
Document, other than the filings, registrations or qualifications under the
state securities laws or blue sky laws of any state of the United States of
America that may be required to be made or
42
<PAGE> 46
obtained which either shall have been made and obtained on the Closing Date
(and copies of which delivered to CITBC) or shall have no bearing on the
validity and enforceability of this Financing Agreement, the Term Loan
Promissory Note or the Revolving Loans Promissory Note or any other Loan
Document.
18. ERISA. Neither the Borrower nor any other Person,
including any fiduciary, has engaged in any prohibited transaction (as defined
in section 4975 of the Code or section 406 of ERISA) which could subject the
Borrower, or any entity which the Borrower has an obligation to indemnify, to
any tax or penalty imposed under section 4975 of the Code or section 502 of
ERISA. Each Employee Benefit Plan intended to be qualified under section
401(a) or 401(k) of the Code is so qualified. The Borrower has received a
letter from the Internal Revenue Service stating that each such plan is so
qualified and the Borrower has no knowledge of any operational defects that
have occurred since the date of such determination letter that could adversely
affect such qualification. Each Employee Benefit Plan is administered in
accordance with its terms and in compliance with all applicable law. With
respect to any Employee Benefit Plan, neither the Borrower nor any ERISA
Affiliate has failed to make any contribution due under the terms of such plan
or as required by law. There is no lien outstanding or security interest given
in connection with a Pension Plan. Neither the Borrower nor any ERISA
Affiliate has incurred an accumulated funding deficiency (as defined in section
302 of ERISA or section 412 of the Code) whether or not waived. With respect
to any terminated Pension Plan, the assets have been distributed in full
satisfaction of all benefit liabilities thereunder, and any such plan has been
terminated in compliance with section 4041 of ERISA and the PBGC has not issued
a notice of noncompliance with respect to any such termination. Neither the
Borrower nor any ERISA Affiliate has incurred or expects to incur any liability
under Title IV or ERISA, including any withdrawal liability. Neither the
Borrower nor any ERISA Affiliate maintains or contributes to any Employee
Benefit Plan subject to Title IV of ERISA, section 412 of the Code or section
302 of ERISA other than those defined benefit pension plans set forth on
Schedule 7.18.
Neither the Borrower nor any ERISA Affiliate has ever
sponsored or maintained, has ever contributed to, or has ever incurred any
withdrawal liability under, a Multiemployer Plan, and neither the Borrower nor
any ERISA Affiliate has any written or verbal commitment to establish, maintain
or contribute to any Multiemployer Plan. Neither the Borrower nor any
43
<PAGE> 47
ERISA Affiliate has received notice that any Multiemployer Plan is in
Reorganization, is Insolvent or is terminating. Neither the Borrower nor any
ERISA Affiliate has liability for retiree medical, life insurance or other
death benefits (contingent or otherwise) which provide for continuing benefits
or coverage after termination of employment or retirement other than as a
result of a continuation of medical coverage required under section 4980B of
the Code and except as set forth on Schedule 7.18.
The unfunded benefit liabilities as of the date of the most
recent actuarial valuation for each pension plan is set forth on Schedule 7.18
and to the best knowledge of the Borrower, there has been no material adverse
change in such liabilities.
19. ENVIRONMENTAL COMPLIANCE. (a) Except as disclosed in a
written report to CITBC prior to the Closing Date, the Borrower is not in
violation, or alleged to be in violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including,
without limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or any federal, state or local
statute, regulation, ordinance, order or decree relating to health, safety or
the environment (hereinafter "Environmental Laws"), which violation would have
a material adverse effect on the business, assets or financial condition of the
Borrower.
(b) The Borrower has not received written notice from any
third party, including, without limitation, any federal, state or local
governmental authority, (i) that the Borrower has been identified by the United
States Environmental Protection Agency ("EPA") as a potentially responsible
party under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as
defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by
42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42
U.S.C. Section 9601(33), any medical waste and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been released at any site at which a
federal, state or local agency has conducted or has ordered that the Borrower
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law or have named the Borrower as a Potentially Responsible
Party or are seeking contributions from the Borrower; or (iii) that it is or
shall be a name
44
<PAGE> 48
party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out
of any third party's incurrence of costs, expenses, losses or damages of any
kind whatsoever in connection with the release of Hazardous Substances.
(c) To the knowledge of the Borrower and except as disclosed
in a written report to CITBC prior to the Closing Date, to the extent such
activity would have a material adverse effect on the business, assets or
financial condition of the Borrower: (i) no portion of the property of the
Borrower has been used for the handling, processing, storage or disposal of
Hazardous Substances, except in accordance with applicable Environmental Laws;
and except as disclosed in a written report to CITBC prior to the Closing Date,
no underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the property; (ii) in the course of any
activities conducted by the Borrower or operators of its properties, no
Hazardous Substances have been generated or are being used on the property
except in accordance with applicable Environmental Laws; (iii) there have been
no releases (i.e., any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Substances on, upon, into or from
the property of the Borrower, which releases would have a material adverse
effect on the value of any of the property or adjacent properties or the
environment; and (iv) in addition, any Hazardous Wastes as defined by 42 U.S.C.
Section 6903(5), if any, that have been generated on any of the property have
been transported offsite only by carriers having an identification number
issued by the EPA, treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best of the
Borrower's knowledge operating in material compliance with such permits and
applicable Environmental Laws.
20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements contained in any certificate or other document delivered to CITBC by
or on behalf of the Borrower pursuant to or in connection with this Financing
Agreement shall be deemed to constitute representations and warranties under
this Financing Agreement with the same force and effect as the representations
and warranties expressly set forth herein. All the Borrower's representations
and warranties thereunder and hereunder shall survive the execution and
delivery of the same and any investigation by CITBC.
45
<PAGE> 49
SECTION 8. CERTAIN COVENANTS
1. ADDITIONAL COLLATERAL. The Borrower hereby covenants
that, except for the Permitted Encumbrances, the Borrower will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or liens in favor of
others; that the Borrower will at any time CITBC requests, execute and deliver
to CITBC a copyright security agreement in such form as CITBC may reasonably
request in order to more effectively create and perfect in favor of CITBC a
first priority security interest in any copyrights of the Borrower or its
Subsidiaries; that the Borrower will at its expense forever warrant and, at
CITBC's request, defend the same from any and all claims and demands of any
other Person other than the Permitted Encumbrances; and that the Borrower will
not grant, create or permit to exist, any lien upon or security interest in the
Collateral, or any Proceeds thereof, in favor of any other person other than
the holders of the Permitted Encumbrances.
2. INSPECTION RIGHTS. The Borrower will maintain books and
records pertaining to the Collateral in such detail, form and scope as CITBC
shall reasonably require. The Borrower agrees that CITBC or its agents may
enter upon the Borrower's premises at any time during normal business hours,
and from time to time, for the purpose of inspecting the Collateral, and any
and all records pertaining thereto. The Borrower agrees to afford CITBC prior
written notice of any change in the location of any Collateral, including but
not limited to the location of all engineers' drawings, other than to
locations, that as of the date hereof, are known to CITBC and at which CITBC
has filed financing statements and otherwise fully perfected its liens thereon.
The Borrower also agrees to advise CITBC promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to CITBC therein.
3. COLLATERAL REPORTS. The Borrower will execute and deliver
to CITBC, from time to time, solely for CITBC's convenience in maintaining a
record of the Collateral, such written statements and schedules as CITBC may
reasonably require, designating, identifying or describing the Collateral
pledged to CITBC hereunder. The Borrower's failure, however, to promptly give
CITBC such statements, or schedules shall not affect, diminish, modify or
otherwise limit CITBC's security interests in the Collateral.
4. PERFECTION OF SECURITY INTERESTS. The Borrower will
comply with the requirements of all state and
46
<PAGE> 50
federal laws in order to grant to CITBC valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CITBC
is hereby authorized by the Borrower to file any financing statements covering
the Collateral whether or not the Borrower's signature appears thereon. The
Borrower will do whatever CITBC may reasonably request, from time to time, by
way of: filing notices of liens, financing statements, amendments, renewals
and continuations thereof; cooperating with CITBC's custodians; keeping stock
records; transferring proceeds of Collateral to CITBC's possession; and
performing such further acts as CITBC may reasonably require in order to effect
the purposes of this Financing Agreement.
5. INSURANCE. (a) The Borrower will maintain insurance on
the Real Estate, Equipment and Inventory under such policies of insurance, with
such insurance companies, in such reasonable amounts and covering such
insurable risks as are at all times reasonably satisfactory to CITBC. All
policies covering the Real Estate, Equipment and Inventory are, subject to the
rights of any holders of Permitted Encumbrances holding claims senior to CITBC,
to be made payable to CITBC, in case of loss, under a standard non-contributory
"mortgage", "lender" or "secured party" clause and are to contain such other
provisions as CITBC may require to fully protect CITBC's interest in the Real
Estate, Inventory and Equipment and to any payments to be made under such
policies. True copies thereof are to be delivered to CITBC, premium prepaid,
with the loss payable endorsement in CITBC's favor, and shall provide for not
less than thirty (30) days' prior written notice to CITBC of the exercise of
any right of cancellation. At the Borrower's request or if the Borrower fails
to maintain such insurance, CITBC may arrange for such insurance, but at the
Borrower's expense and without any responsibility on CITBC's part for:
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Upon the occurrence and during
the continuation of an Event of Default, CITBC shall, subject to the rights of
any holders of Permitted Encumbrances holding claims senior to CITBC, have the
sole right, in the name of CITBC or the Borrower, to file claims under any
insurance policies, to receive, receipt and give acquittance for any payments
that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims
under any such insurance policies.
(b) (i) In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to Inventory shall first reduce the
Borrower's Revolving Loan, and then the Term Loan;
47
<PAGE> 51
(ii) In the event any part of the Borrower's Real Estate
or Equipment is damaged by fire or other casualty and the Proceeds from
insurance for such damage or other casualty is less than or equal to $100,000,
CITBC shall promptly apply such Proceeds to reduce the Borrower's outstanding
balances under the Revolving Loan account.
(iii) As long as no Event of Default has occurred and is
continuing, the Borrower has sufficient business interruption insurance to
replace the lost profits of any of the Borrower's facilities, and the Proceeds
are in excess of $100,000, the Borrower may elect (by the Borrower delivering
written notice to CITBC) to replace, repair or restore such Real Estate or
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Borrower does not, or cannot, elect to
use the Proceeds as set forth above, CITBC may, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to CITBC, apply the
Proceeds to the payment of the Obligations in such manner and in such order as
CITBC may reasonably elect.
(iv) If the Borrower elects to use the Proceeds for the
repair, replacement or restoration of any Real Estate or Equipment, and there
is then no Event of Default, i) proceeds of insurance on Equipment and Real
Estate in excess of $100,000 will be applied to the reduction of the Revolving
Loans of the Borrower and ii) CITBC may set up a reserve against Availability
for an amount equal to the proceeds referred to in clause i) hereof. The
reserve will be reduced dollar-for-dollar upon receipt of non-cancelable
executed purchase orders, delivery receipts or contracts for the replacement,
repair or restoration of Equipment or the Real Estate and disbursements in
connection therewith. Prior to the commencement of any restoration, repair or
replacement of Real Estate, the Borrower shall provide CITBC with a restoration
plan and a total budget certified by an independent third party experienced in
construction costing. If there are insufficient Proceeds to cover the cost of
restoration as so determined, the Borrower shall be responsible for the amount
of any such insufficiency prior to the commencement of restoration and shall
demonstrate evidence of such before the reserve will be reduced. Completion of
restoration shall be evidenced by a final, unqualified certification of the
design architect employed, if any; an unconditional certificate of occupancy,
if applicable; such other certification as may be required by law; or if none
of the above is applicable, a written good faith determination of completion by
the Borrower (herein collectively the "Completion"). Upon Completion, any
remaining reserve as established hereunder will be automatically released.
48
<PAGE> 52
(v) The Borrower will pay any reasonable costs, fees or
expenses which CITBC may reasonably incur in connection herewith.
6. TAXES. The Borrower will pay, prior to their becoming
delinquent, all taxes, assessments, claims and other charges (herein "taxes")
lawfully levied or assessed upon the Borrower or the Collateral and if such
taxes remain unpaid after the date fixed for the payment thereof, unless such
taxes are being diligently contested in good faith by the Borrower by
appropriate proceedings, or if any lien shall be claimed thereunder x) for
taxes due the United States of America or y) which in the opinion of CITBC
might create a valid obligation having priority over the rights granted to
CITBC herein, CITBC may, on the Borrower's behalf, pay such taxes, and the
amount thereof shall be an Obligation secured hereby and due to CITBC on
demand.
7. COMPLIANCE WITH LAWS. The Borrower: (a) will comply with
all acts, rules, regulations and orders of any legislative, administrative or
judicial body or official, which the failure to comply with would have a
material and adverse impact on the Collateral, or any part thereof, or on the
operation of the Borrower's business; provided, however, that the Borrower may
contest any acts, rules, regulations, orders and directions of such bodies or
officials in any reasonable manner which will not, in CITBC's reasonable
opinion, materially and adversely affect the operation of the business of the
Borrower or CITBC's rights or priority in the Collateral; (b) will comply with
all environmental statutes, acts, rules, regulations or orders as presently
existing or as adopted or amended in the future, applicable to the ownership
and/or use of its real property and operation of its business, which the
failure to comply with would have a material and adverse impact on the
Collateral, or any part thereof, or on the operation of the business of the
Borrower. The Borrower hereby indemnifies CITBC and agrees to defend and hold
CITBC harmless from and against any and all loss, damage, claim, liability,
injury or expense which CITBC may sustain or incur (other than as a result of
actions of CITBC) in connection with: any claim or expense asserted against
CITBC as a result of any environmental pollution, hazardous material or
environmental clean-up of the Borrower's real property; or any claim or expense
which results from the Borrower's operations (including, but not limited to,
the Borrower's off-site disposal practices) and the Borrower further agrees
that this indemnification shall survive termination of this Financing Agreement
as well as the payment of all Obligations or amounts payable hereunder.
8. FINANCIAL STATEMENTS. Until termination of the Financing
Agreement and payment and satisfaction of all
49
<PAGE> 53
Obligations due hereunder, the Borrower agrees that, unless CITBC shall have
otherwise consented in writing, the Borrower will furnish to CITBC, within
ninety (90) days after the end of each fiscal year of the Borrower, an audited
Consolidated Balance Sheet as at the close of such year, and statements of
consolidated earnings, cash flow and reconciliation of surplus of the Borrower
and its Consolidated Subsidiaries, audited by Price Waterhouse LLP, LLP, or
such other independent public accountants selected by the Borrower, and
satisfactory to CITBC; within forty-five (45) days after the end of each fiscal
quarter a Balance Sheet as at the end of such period and statements of
earnings, cash flow and surplus of the Borrower, certified by an authorized
financial or accounting officer of the Borrower; and within thirty (30) days
after the end of each month monthly interim financial statements, certified by
an authorized financial or accounting officer of the Borrower; and from time to
time, such further information regarding the business affairs and financial
condition of the Borrower as CITBC may reasonably request. The Borrower shall
deliver to CITBC no later than (30) days prior to each fiscal year end of the
Borrower a preliminary budget for the following fiscal year. The Borrower
shall deliver to CITBC no later than sixty (60) days from the start of each
fiscal year of the Borrower, annual cash flow projections for such fiscal year,
including a projected consolidated balance sheet and consolidated statements of
earnings, cash flow and surplus (and such consolidating statements as CITBC may
request). All such financial statements shall be prepared in accordance with
generally accepted accounting principles consistently applied, subject to year
end adjustments. Each financial statement which the Borrower is required to
submit hereunder must be accompanied by an Officer's Certificate certifying
that: (i) the financial statement(s) fairly and accurately represent(s) the
Borrower's and Consolidated Subsidiaries' financial condition at the end of the
particular accounting period, as well as the Borrower's and Consolidated
Subsidiaries' operating results during such accounting period, subject to
year-end audit adjustments; (ii) during the particular accounting period: (x)
there has been no default or condition which, with the passage of time or
notice, or both, would constitute a Default or Event of Default under this
Financing Agreement; provided, however, that if any Executive Officer has
knowledge that any such Default or Event of Default has occurred during such
period, the existence of and a detailed description of same shall be set forth
in the Officer's Certificate; and (y) the Borrower has not received any notice
of cancellation with respect to its property insurance policies; and (iii) the
exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
50
<PAGE> 54
The Borrower shall furnish to CITBC promptly upon receipt
thereof, copies of any reports submitted to the Borrower by independent
certified accountants in connection with the examination of the financial
statements and financial, accounting and auditing controls (including, without
limitation, management letters) of the Borrower and its Consolidated
Subsidiaries made by such accountants.
9. CERTAIN RESTRICTIONS. Until termination of the Financing
Agreement and payment and satisfaction of all Obligations due hereunder, the
Borrower will not, without the prior written consent of CITBC, except as
otherwise herein provided:
A. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment (whether as a
result of a purchase money or title retention transaction, or other
security interest, or otherwise) to exist on any of its assets or
goods, whether real, personal or mixed, whether now owned or hereafter
acquired, except for the Permitted Encumbrances;
B. Incur or create any Indebtedness other than the Permitted Indebtedness
or increase the principal amount of any Permitted Indebtedness;
C. Borrow any money on the security of the Collateral from sources other
than CITBC;
D. Sell, lease, assign, transfer or otherwise dispose of i) Collateral,
except as otherwise specifically permitted by this Financing
Agreement, or ii) either all or substantially all of the Borrower's
assets, which do not constitute Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate name,
principal place of business, structure, status or existence, or enter
into or engage in any operation or activity materially different from
that presently being conducted by the Borrower;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of any
class whatsoever, whether now or hereafter outstanding;
H. Make any advance or loan to, or any investment in, any firm, entity,
person or corporation;
I. Change its fiscal year; or
J. Amend the terms of any stock warrant of the Borrower outstanding on
October 23, 1995 or any registration agreement in effect on such date
relating to the
51
<PAGE> 55
registration of its securities under the Securities Act of 1933, as
amended.
10. MINIMUM CONSOLIDATED NET WORTH. The Borrower and its
Consolidated Subsidiaries shall maintain at the end of each Rolling Period, a
Consolidated Net Worth of not less than the following:
<TABLE>
<CAPTION>
Rolling Period Amount
-------------- ------
<S> <C>
January 31, 1996 $20,000,000
April 30, 1996 $20,000,000
July 31, 1996 $20,000,000
October 31, 1996 $20,000,000
January 31, 1997 $20,000,000
April 30, 1997 $20,000,000
July 31, 1997 $25,000,000
October 31, 1997 $25,000,000
January 31, 1998 $25,000,000
April 30, 1998 $25,000,000
July 31, 1998 $30,000,000
and thereafter
</TABLE>
11. CONSOLIDATED INTEREST COVERAGE RATIO. The Borrower and
its Consolidated Subsidiaries shall maintain at the end of each Rolling Period,
a Consolidated Interest Coverage Ratio of not less than the following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C>
January 30, 1996 1.90 to 1.00
April 30, 1996 2.50 to 1.00
July 31, 1996 2.75 to 1.00
October 31, 1996 2.75 to 1.00
January 30, 1997 2.75 to 1.00
April 30, 1997 2.75 to 1.00
July 31, 1997 3.25 to 1.00
October 31, 1997 3.25 to 1.00
January 30, 1995 3.25 to 1.00
April 30, 1998 3.25 to 1.00
July 31, 1998 4.00 to 1.00
and thereafter
</TABLE>
12. CONSOLIDATED TOTAL LIABILITIES TO CONSOLIDATED NET WORTH.
The Borrower and its Consolidated Subsidiaries will not at the end of each
Rolling Period, permit the ratio of Consolidated Current Liabilities to
Consolidated Net Worth to be greater than the following:
52
<PAGE> 56
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C>
January 31, 1996 5.00 to 1.00
April 30, 1996 4.90 to 1.00
July 31, 1996 4.60 to 1.00
October 31, 1996 4.60 to 1.00
January 31, 1997 4.60 to 1.00
April 30, 197 4.60 to 1.00
July 31, 1997 3.80 to 1.00
October 31, 1997 3.80 to 1.00
January 31, 1998 3.80 to 1.00
April 30, 1998 3.80 to 1.00
July 31, 1998 3.00 to 1.00
and thereafter
</TABLE>
13. CONSOLIDATED CURRENT RATIO. The Borrower and its
Consolidated Subsidiaries shall have at the end of each Rolling Period a ratio
of Consolidated Current Assets to Consolidated Current Liabilities of not less
than the following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C>
January 31, 1996 1.00 to 1.00
April 30, 1996 1.00 to 1.00
July 31, 1996 1.05 to 1.00
October 31, 1996 1.05 to 1.00
January 31, 1997 1.05 to 1.00
April 30, 1997 1.05 to 1.00
July 31, 1997 1.20 to 1.00
October 31,1997 1.20 to 1.00
January 31, 1998 1.20 to 1.00
April 30, 1998 1.20 to 1.00
July 31, 1998 1.40 to 1.00
and thereafter
</TABLE>
14. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower
and its Consolidated Subsidiaries shall maintain at the end of each Rolling
Period a Consolidated Fixed Charge Coverage Ratio of not less than the
following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C>
January 31, 1996 0.60 to 1.00
April 30, 1996 0.85 to 1.00
July 31, 1996 1.00 to 1.00
October 31, 1996 1.00 to 1.00
January 31, 1997 1.00 to 1.00
April 30, 1997 1.00 to 1.00
July 31, 1997 1.50 to 1.00
October 31, 1997 1.50 to 1.00
January 31, 1998 1.50 to 1.00
April 30, 1998 1.50 to 1.00
</TABLE>
53
<PAGE> 57
<TABLE>
<S> <C>
July 31, 1998 1.60 to 1.00
and thereafter
</TABLE>
15. CONSOLIDATED EDITDA. The Borrower and its Consolidated
Subsidiaries shall have as of the end of each Rolling Period an amount of
Consolidated EDITDA of not less than the following:
<TABLE>
<CAPTION>
Rolling Period Amount
-------------- ------
<S> <C>
January 31, 1996 $ 1,900,000
April 30, 1996 $ 5,000,000
July 31, 1996 $ 7,500,000
October 31, 1996 $ 7,500,000
January 31, 1997 $ 7,500,000
April 30, 1997 $ 7,500,000
July 31, 1997 $13,500,000
October 31, 1997 $13,500,000
January 31, 1998 $13,500,000
April 30, 1998 $13,500,000
July 31, 1998 $16,500,000
and thereafter
</TABLE>
16. CERTAIN ADJUSTMENTS. Notwithstanding the foregoing
financial covenants set forth in paragraphs 10 through 15 of this Section 8, to
the extent the Borrower is obligated to pay any amounts in settlement of the
litigation entitled Kochenash v. Stanwich Oil & Gas, Inc. et al, and such
obligation or payment results in noncompliance by the Borrower and its
Consolidated Subsidiaries for any period with any or all of such financial
covenants, then for the relevant period and for the purpose of determining such
compliance, Consolidated EBITDA (in the case of the financial covenants in
paragraphs 11, 14 and 15) will be increased, and Consolidated Current
Liabilities in the case of the financial covenants in paragraphs 10, 12 and 13)
will be decreased, by the lesser of (i) $2,000,000, or (ii) such amount as may
be necessary to effect the minimum level of compliance with the relevant
financial covenant.
17. CAPITAL EXPENDITURES. The aggregate amount of all
Capital Expenditures of Borrower and its Subsidiaries will not exceed
$1,500,000 for the period from October 23, 1995 through July 31, 1996 or
$1,500,000 in any fiscal year thereafter. In any fiscal year the Borrower and
its Subsidiaries shall be entitled to add to the $1,500,000 ceiling for such
fiscal year Capital Expenditures equal to Capital Expenditures which were made
in the preceding fiscal year, provided that for the fiscal year commencing
August 1, 1996 the applicable addition shall be one-half of the excess of the
$1,500,000 over the amount of one-half of the amount, if any, by which
$1,500,000 exceeds the amount of Capital Expenditures which were made in the
preceding fiscal year, providedthat for the fiscal year commencing August 1,
1996 the applicable addition shall be one-half of the excess of $1,500,000 over
the amount of
54
<PAGE> 58
Capital Expenditures made in the period from October 23, 1995 through July 31,
1996.
18. ENVIRONMENTAL COMPLIANCE. The Borrower will advise CITBC
in writing of: a) all expenditures (actual or anticipated) in excess of
$150,000 for x) environmental clean-up, y) environmental compliance or z)
environmental testing and the impact of said expenses on the Borrower's working
capital; and b) any notices the Borrower receives from any local, state or
federal authority advising the Borrower of any environmental liability (real or
potential) stemming from the Borrower's operations, its premises, its waste
disposal practices, or waste disposal sites used by the Borrower and to provide
CITBC with copies of all such notices if so required.
19. TRANSACTIONS WITH AFFILIATES. Without the prior written
consent of CITBC, the Borrower will not enter into any transaction, including,
without limitation, any purchase, sale, lease, loan or exchange of property
with any Subsidiary or affiliate of the Borrower unless such transaction shall
be on an arm's-length basis on terms no less favorable to the Borrower than a
transaction with a third party.
20. ERISA NOTICES. The Borrower will deliver to CITBC, if
and when (but in no case less than ten (10) days from the date of such event)
(i) the Borrower or any ERISA Affiliate gives or is required to give notice to
the PBGC of any Reportable Event with respect to any Pension Plan, a copy of
the notice of such Reportable Event; (ii) the Borrower or any ERISA Affiliate
becomes obligated to contribute to a Multiemployer Plan to which such entity
was not obligated to contribute on the Closing Date, a letter of a financial
officer describing such event and estimating the future contingent withdrawal
liability with respect thereto; (iii) the Borrower or any ERISA Affiliate
receives notice of complete or partial withdrawal liability with respect to a
Multiemployer Plan or receives notice that a Multiemployer Plan may be or has
been terminated, in Reorganization or Insolvency, or receives notice from the
administrator of a Multiemployer Plan that indicates the existence of potential
withdrawal liability under a Multiemployer Plan, a copy of such notice; (iv)
the Borrower or any ERISA Affiliate receives notice from the PBGC of an intent
to terminate or appoint a trustee to administer any Pension Plan or
Multiemployer Plan, a copy of such notice; (v) the Borrower or any ERISA
Affiliate fails to make a timely contribution to a Pension Plan which may give
rise or has given rise to an accumulated funding deficiency or a lien, a letter
of a financial officer describing such event; (vi) the Borrower or any ERISA
Affiliate adopts or proposes to adopt an amendment which may require or
requires the granting of a
55
<PAGE> 59
security interest, a letter of a financial officer describing such event; (vii)
the Borrower or any ERISA Affiliate fails to make a contribution required under
the terms of an Employee Benefit Plan or Pension Plan or as required by law,
which failure has a material adverse effect on such Employee Benefit Plan or
Pension Plan, a letter of a financial officer describing such event; (ix) if
any Pension Plan intending to qualify under section 401(a) or 401(k) of the
Code fails to so qualify, a letter of a financial officer describing such
event; (x) a transaction prohibited under section 4975 of the Code or section
406 of ERISA occurs resulting in liability to the Borrower or any entity which
the Borrower has an obligation to indemnify, a letter of a financial officer
describing such event. Upon the request of CITBC made from time to time, the
Borrower will deliver a copy of the most recent actuarial report and annual
report completed with respect to any Employee Benefit Plan or any other
financial information the Borrower or any ERISA Affiliate has with respect to
any Employee Benefit Plan.
21. ERISA COVENANT. The Borrower will, and will cause
each of its ERISA Affiliates to, maintain all Employee Benefit Plans and
Pension Plans in material compliance with all applicable law, including any
reporting requirements, and make all contributions due under the terms of each
Pension Plan and Employee Benefit Plan or as required by law.
22. CERTAIN NOTICES. The Borrower will notify CITBC of
litigation involving the Borrower or its Subsidiaries to the same extent and in
the same manner in which it notifies the Subordinated Creditors of such
litigation pursuant to the Investment Agreement, as amended by the First
Amendment to the Investment Agreement, referred to in the definition of
"Subordinated Debt" set forth in Section 1 hereof.
SECTION 9. INTEREST, FEES, EXPENSES AND ASSIGNMENTS.
1. INTEREST ON REVOLVING LOANS. Interest on the Revolving
Loans shall be payable monthly on each Monthly Date commencing October 31,
1995, and shall be an amount equal to (a) the Chemical Bank Rate plus one
percent (1.0%) per annum or (b) the LIBOR Rate for the applicable LIBOR Rate
Period(s) elected by the Borrower plus three percent (3.0%) per annum on the
average of the net balances owing by the Borrower to CITBC in the Borrower's
account at the close of each day during such month, but in no event in excess
of the maximum amount of interest permitted by law, as the Borrower may elect
with respect to all or any portion of the outstanding Revolving Loans, such
election to be set forth
56
<PAGE> 60
in the Notice of Revolving Borrowing delivered pursuant to Section 3, paragraph
1(b) of this Financing Agreement or in a notice delivered pursuant to Section
9, paragraph 3 of this Financing Agreement. In the event of any change in said
Chemical Bank Rate, the rate applicable to the Revolving Loans under clause (a)
above shall change, as of the first day of the month following any change, so
as to remain one percent (1.00%) above the Chemical Bank Rate. All rates
hereunder shall be calculated based on a 360-day year for the actual number of
days elapsed. CITBC shall be entitled to charge the Borrower's account at the
rate provided for herein when due until all Obligations have been paid in full.
2. INTEREST ON TERM LOAN. Interest on the Term Loan shall be
payable monthly on each Monthly Date, commencing October 31, 1995, on the
unpaid balance or on payment in full prior to maturity in an amount equal to
(a) the Chemical Bank Rate plus one and one-quarter of one percent (1.25%) per
annum or, (b) the LIBOR Rate for the applicable LIBOR Rate Period(s) elected by
the Borrower plus three and one-quarter of one percent (3.25%) per annum. In
the event of any change in said Chemical Bank Rate, the rate applicable to the
Term Loan under clause (a) above shall change, as of the first day of the month
following any change, so as to remain one and one-quarter percent (1.25%) above
the Chemical Bank Rate. All rates applicable to the Term Loan under clause (a)
above shall be calculated based on a 360-day year for the actual number of days
elapsed. CITBC shall be entitled to charge the Borrower's account at the rate
provided for herein when due until all Obligations have been paid in full.
3. SUBSTITUTED INTEREST RATE AT OPTION OF BORROWER. (a) If
the Borrower has elected to base all or a portion of the interest payments due
pursuant to paragraphs 1 or 2 above on the Chemical Bank Rate plus the
appropriate percentage, then at any time during the term of this Financing
Agreement and upon three (3) days' prior written notice to CITBC, the Borrower
may elect to substitute in whole or in part for such rate a LIBOR Rate for the
applicable LIBOR Rate Period(s) elected by the Borrower plus three percent (3%)
or three and one-quarter of one percent (3.25%), as applicable. Alternatively,
if the Borrower has elected to base all or a portion of the interest payments
due pursuant to paragraphs 1 or 2 above on a LIBOR Rate plus the appropriate
percentage, then upon written notice from the Borrower received by CITBC, at
least three (3) days prior to the expiration of then current LIBOR Rate Period
with respect to such loan, the Borrower may elect to substitute in whole or in
part for such LIBOR Rate the Chemical Bank Rate plus one percent (1.0%) or one
and one-quarter of one percent (1.25%), as applicable.
57
<PAGE> 61
(b) If the Borrower has elected to base all or a portion of
the interest payments due pursuant to paragraphs 1 or 2 above on the LIBOR Rate
plus the appropriate percentage, or have elected to substitute in whole or in
part for a Chemical Base Rate a LIBOR Rate for the applicable LIBOR Rate
Period(s) elected by the Borrower pursuant to paragraph 3(a) above, then at any
time during the term of this Financing Agreement the Borrower may elect to
substitute in whole or in part for the LIBOR Rate Period(s) then in effect with
respect to any loan one or more new LIBOR Rate Period(s); provided, however,
that CITBC shall receive written notice from Borrower of such election at least
three (3) days prior to the expiration of then current LIBOR Rate Period with
respect to such loan(s); provided, further, however, that such substitution may
be made only upon the expiration of then current LIBOR Rate Period with respect
to such loan(s). Unless the Borrower shall elect to substitute for a LIBOR
Rate Period then in effect one or more new LIBOR Rate Periods, upon the
expiration of such LIBOR Rate Period, the Borrower shall be deemed to have
elected a new LIBOR Rate Period of the same duration.
(c) At any time a Default or Event of Default shall have
occurred and be continuing under this Financing Agreement, the Borrower shall
not have the option to elect a LIBOR Rate for any loan or advance pursuant to
paragraphs 1 or 2, or this paragraph 3, and (i) any requested loan or advance,
if made, shall be made at the Chemical Bank Rate plus one percent (1.0%) or one
and one-quarter of one percent (1.25%), as applicable, and (ii) any loan or
advance that was to have been converted to the LIBOR Rate pursuant to this
paragraph 3 shall be converted to or continue at the Chemical Bank Rate plus
one percent (1.0%) or one and one-quarter of one percent (1.25%), as
applicable, and (iii) any outstanding loan or advance accruing interest at a
LIBOR Rate shall be converted, on the last day of the then current LIBOR Rate
Period with respect thereto, to a loan at the Chemical Bank Rate plus one
percent (1.0%) or one and one-quarter of one percent (1.25%), as applicable.
During the continuation of any such Default or Event of Default, no further
LIBOR loans and advances shall be made hereunder by CITBC nor shall CITBC have
the right to convert any loan or advance to the LIBOR Rate.
4. SUBSTITUTED INTEREST RATE AT OPTION OF CITBC. In the
event that (a) CITBC shall have determined (which determination shall be
conclusive and binding upon the Borrower) that by reason of circumstances
affecting the interbank LIBOR market adequate and reasonable means do not exist
for ascertaining the LIBOR Rate applicable pursuant to the Borrower's election
as provided herein or (b) CITBC
58
<PAGE> 62
determines (which determination shall be conclusive and binding on the
Borrower) that the applicable LIBOR Rate will not adequately and fairly reflect
the cost to it of maintaining or funding loans bearing interest based on such
LIBOR Rate, with respect to a proposed loan or advance that the Borrower has
requested be made at the LIBOR Rate, or a loan or advance that will result from
the requested conversion of the Chemical Bank Rate into the LIBOR Rate (any
such loan or advance being herein called an "Affected Loan"), CITBC shall
promptly notify the Borrower (by telephone or otherwise) of such determination,
confirmed in writing, to the Borrower on or prior to the requested borrowing
date for such Affected Loan or the requested conversion date of such loan or
advance. If CITBC shall give such notice, (i) any requested Affected Loan
shall be made at the Chemical Bank Rate plus the appropriate percentage, (ii)
any loan that was to have been converted to an Affected Loan shall be converted
to or continued at the Chemical Bank Rate plus the appropriate percentage and
(iii) any outstanding Affected Loan shall be converted, on the last day of the
then current LIBOR Rate Period with respect thereto, to a loan at the Chemical
Bank Rate plus the appropriate percentage. Until any such notice under clause
(a) of this paragraph 4 has been withdrawn by CITBC (by notice to the Borrower
promptly upon CITBC's having determined that such circumstances affecting the
interbank LIBOR market and that adequate and reasonable means do exist for
determining the LIBOR Rate) no further LIBOR loans and advances shall be made
by CITBC nor shall the Borrower have the right to convert any loans or advances
to the LIBOR Rate. Until any such notice under clause (b) of this paragraph 4
has been withdrawn by CITBC (by notice to the Borrower promptly upon CITBC's
determination that circumstances no longer render any loan or advance an
Affected Loan), no further LIBOR loans or advances shall be required to be made
by CITBC nor shall the Borrower have the right to convert any loan or advance
of CITBC to the LIBOR Rate.
The Borrower shall pay CITBC a processing fee in amount equal
to $500 upon the effective date of each election by the Borrower of the LIBOR
Rate (the "LIBOR Rate Election Fee").
5. ILLEGALITY. Notwithstanding any other provisions herein,
if any law, regulation, treaty or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for CITBC to make
or maintain any LIBOR loans or advances as contemplated by this Financing
Agreement, (a) the commitment of CITBC hereunder to make or continue LIBOR
loans and advances, shall forthwith be suspended and (b) CITBC's loans and
advances, then outstanding at the LIBOR Rate affected
59
<PAGE> 63
hereby, if any, shall be converted automatically to the Chemical Bank Rate plus
the applicable percentage on the last day of then current LIBOR Rate Period
applicable thereto or within such earlier period as required by law. If the
commitment of CITBC with respect to any LIBOR loans or advances is suspended
pursuant to this paragraph and CITBC shall notify the Borrower that it is once
again legal for CITBC to make or maintain LIBOR loans and advances, CITBC's
commitment to make or maintain such LIBOR loans and advances shall be
reinstated.
6. INCREASED COSTS. In the event that any law, regulation,
treaty or directive hereafter enacted, promulgated, approved or issued or any
change in any presently existing law, regulation, treaty or directive therein
or in the interpretation or application thereof by any governmental authority
charged with the administration thereof or compliance by CITBC (or any
corporation directly or indirectly owning or controlling CITBC) with any
request or directive from any central bank or other governmental authority,
agency or instrumentality:
(a) does or shall subject CITBC to any tax of any kind
whatsoever with respect to any loans or advances or its obligations under this
Financing Agreement to make loans or advances, or changes the basis of taxation
of payments to CITBC of principal, interest or any other amount payable
hereunder in respect of its loans or advances (except for imposition of, or
change in the rate of, tax on the overall net income of CITBC, other than a tax
imposed solely or primarily on United States branches or subsidiaries of
foreign corporations); or
(b) does or shall impose, modify or make applicable any
reserve, special deposit, compulsory loan, assessment, increased cost or
similar requirement against assets held by, or deposits of, or advances or
loans by, or other credit extended by, or any other acquisitions of funds by,
any office of CITBC in respect of its loans or advances which is not otherwise
included in the determination of the applicable rate or rates of interest
hereunder;
and the result of any of the foregoing is to increase the cost to CITBC of
making, renewing, converting or maintaining its loans or advances hereunder or
its commitment to make such loans or advances, or to reduce any amount
receivable hereunder in respect of its loans and advances, then, in any such
case, the Borrower shall promptly pay CITBC, upon its demand, any additional
amounts necessary to compensate CITBC for such additional cost or reduction in
such amount receivable which CITBC deems to be material as determined by CITBC.
No failure by CITBC to demand compensation for any increased cost shall
constitute a waiver of CITBC's right to
60
<PAGE> 64
demand such compensation at any time; provided, however, that CITBC shall
notify the Borrower of any such increased cost within ninety (90) days after
the officer of CITBC having primary responsibility for this Financing Agreement
has obtained knowledge of such increased cost. A statement setting forth the
calculations of any additional amounts payable pursuant to the foregoing
sentence submitted by CITBC to the Borrower shall be conclusive absent manifest
error.
7. INDEMNIFICATION FOR LOSS. Notwithstanding anything
contained herein to the contrary, if the Borrower shall fail to borrow on a
borrowing date after it shall have given notice to do so in which it shall have
requested the LIBOR Rate pursuant to the terms hereof, or if a LIBOR loan or
advance shall be terminated for any reason prior to the last day of the LIBOR
Rate Period applicable thereto, or if, while a LIBOR loan or advance is
outstanding, any repayment or prepayment of such LIBOR loan or advance is made
for any reason (including, without limitation, as a result of acceleration or
illegality) on a date which is prior to the last day of the LIBOR Rate Period
applicable thereto, the Borrower agrees to indemnify any Lender against, and to
pay on demand directly to such Lender, any loss or expense suffered by CITBC as
a result of such failure to borrow, termination or repayment, including,
without limitation, an amount, if greater than zero, equal to:
A x (B-C) x D
---
360
where:
"A" equals such Lender's pro rata share of the Affected Principal Amount;
"B" equals the LIBOR Rate (expressed as a decimal), applicable to such Loan;
"C" equals the applicable LIBOR Rate (expressed as a decimal), in effect on or
about the first day of the applicable Remaining LIBOR Rate Period, based on the
applicable rates offered or bid, as the case may be, on or about such date, for
deposits in an amount equal approximately to such Lender's pro rata share of
the Affected Principal Amount with an LIBOR Rate Period equal approximately to
the applicable Remaining LIBOR Rate Period, as determined by such Lender;
"D" equals the number of days from and including the first day of the
applicable Remaining LIBOR Rate Period to but excluding the last day of such
Remaining LIBOR Rate Period;
61
<PAGE> 65
and any other out-of-pocket loss or expense (including any internal processing
charge customarily charged by such Lender) suffered by such Lender in
liquidating deposits prior to maturity in amounts which correspond to such
Lender's pro rata share of such proposed borrowing, terminated LIBOR loan or
advance or repayment.
8. OPTION TO FUND. CITBC has indicated that, if the Borrower
elects to borrow or convert to the LIBOR Rate, CITBC may wish to purchase one
or more deposits in order to fund or maintain its funding of such LIBOR loans
or advances during the LIBOR Rate Period in question; it being understood that
the provisions of this Financing Agreement relating to such funding are
included only for the purpose of determining the rate of interest to be paid in
respect of such LIBOR Loan and any amounts owing under this Section 9,
paragraphs 1, 2, 3, 6, and 7. CITBC shall be entitled to fund and maintain its
fundings of all or any part of each LIBOR loan or advance made by it in any
manner it sees fit, but all determinations under this Section 9, paragraphs 1,
2, 3, 6, and 7 shall be made as if CITBC had actually funded and maintained
such LIBOR Rate during the applicable LIBOR Rate Period through the purchase of
deposits in an amount equal to such LIBOR Rate and having a maturity
corresponding to such LIBOR Rate Period. The obligations of the Borrower under
this Section 9, paragraphs 1, 2, 3, 6 and 7 shall survive the termination of
the Revolving Line of Credit and the payment of the Obligations hereunder.
9. CAPITAL ADEQUACY. (a) If either (i) the introduction of,
the adoption or effectiveness of or any change or phasing in of any law or
regulation or in the interpretation thereof by any United States or foreign
governmental authority charged with the administration thereto, (ii) compliance
with any directive, guideline, decision or request from any central bank or
United States or foreign governmental authority (whether or not having the
force of law) promulgated or made after the Closing Date, or (iii) compliance
with the Risk-Based Capital Guidelines of the Federal Reserve System as set
forth in 12 C.F.R., Parts 208 and 225, or of the Comptroller of the Currency,
Department of Treasury, as set forth in 12 C.F.R., Part 3 or similar
legislation, rules, guidelines, directives or regulations issued by any United
States or foreign governmental authority affects or would affect the amount of
capital required or expected to be maintained by CITBC (or any lending office
of CITBC) or any corporation directly or indirectly owning or controlling
CITBC, and CITBC shall have determined that such introduction, change or
compliance has or would have the effect of reducing the rate of return on
CITBC's capital or the asset value to CITBC of any loan or advance made by
CITBC as a consequence, directly or indirectly, of its obligations to make and
maintain the
62
<PAGE> 66
funding of loans and advances hereunder to a level below that which CITBC could
have achieved but for such introduction, change or compliance (after taking
into account CITBC's policies regarding capital adequacy) by an amount deemed
by CITBC to be material, then, upon demand by CITBC, the Borrower shall
promptly pay to CITBC such additional amount or amounts as shall be sufficient
to compensate CITBC for such reduction in the rate of return. A certificate as
to such amounts submitted to the Borrower and CITBC setting forth the
determination of such amounts that will compensate CITBC for such reductions
shall be presumed correct absent manifest error.
(b) If CITBC requests compensation pursuant to paragraph
6(a), the Borrower may require that CITBC transfer all of its right, title and
interest under this Financing Agreement to any commercial bank (having
undivided capital and surplus of no less than $1,000,000,000) identified by the
Borrower, pursuant to an assignment and acceptance agreement, if such bank (a
"Proposed Lender") agrees to assume all of the obligations of CITBC hereunder
and under any other documents entered into by CITBC in connection with this
Financing Agreement for consideration equal to the sum of (i) the outstanding
principal amount of CITBC's pro rata share of loans and advances hereunder,
(ii) accrued interest on such loans and advances to the date of such transfer,
and (iii) all other amounts payable hereunder to CITBC on or prior to the date
of such transfer (including any fees accrued hereunder and any amounts which
would be payable under paragraph 6(a) as if all of CITBC's loans and advances
were being prepaid in full on such date). Subject to the approval of such
Proposed Lender in the reasonable discretion of CITBC, and such assignment and
acceptance agreement, such Proposed Lender be a "Lender" for all purposes
hereunder.
10. OUT-OF-POCKET EXPENSES. The Borrower shall reimburse
or pay CITBC, as the case may be, for all Out-of- Pocket Expenses of CITBC on
the Closing Date.
11. LINE OF CREDIT FEE. Upon each Monthly Date, commencing
with the month in which the Closing Date occurs, the Borrower shall pay CITBC
the Line of Credit Fee.
12. LOAN FACILITY FEE. To induce CITBC to enter into this
Financing Agreement and to extend to the Borrower the Revolving Loan and the
Term Loan, the Borrower shall pay to CITBC a Loan Facility Fee in the amount
of $300,000 payable on the Closing Date.
13. COLLATERAL MANAGEMENT FEE. The Borrower shall pay the
Collateral Management Fee to CITBC in full for the first year on the Closing
Date, and for each year
63
<PAGE> 67
thereafter, commencing on the first anniversary of the Closing Date, such
payment shall be made on the anniversary of the Closing Date.
14. LIBOR RATE ELECTION FEE. In connection with paragraph 4
of this Section 9, the Borrower shall pay CITBC the LIBOR Rate Election Fee.
15. LETTER OF CREDIT GUARANTY FEE. The Borrower shall pay
CITBC the Letter of Credit Guaranty Fee which shall be an amount equal to
two percent (2%) per annum, payable monthly in arrears, on the maximum amount
drawable from time to time under Letters of Credit.
16. MISCELLANEOUS FEES. The Borrower shall pay CITBC's
standard charges for, and the fees and expenses of, the CITBC personnel used by
CITBC for reviewing the books and records of the Borrower and for verifying,
testing protecting, safeguarding, preserving or disposing of all or any part of
the Collateral; provided, however, that the foregoing shall not be payable
until the occurrence of and during the continuance of an Event of Default.
17. CHARGE TO BORROWER'S ACCOUNT. The Borrower hereby
authorize CITBC to charge the Borrower's accounts with CITBC with the amount of
all payments due hereunder as such payments become due. The Borrower confirms
that any charges which CITBC may so make to the Borrower's account as herein
provided will be made as an accommodation to the Borrower and solely at CITBC's
discretion.
18. ASSIGNMENTS AND PARTICIPATIONS. (a) CITBC may assign
its rights and delegate its obligations under this Financing Agreement and
further may assign, or sell participations in, all or any part of the
Obligations, the Revolving Line of Credit, the Term Loan, and any other
interest herein or therein to any affiliate or to one or more other Persons.
The Borrower acknowledges that in assigning or selling participations of any of
its interests under this Financing Agreement, CITBC may grant to such
participant certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Financing Agreement.
(b) The Borrower authorizes CITBC to disclose to any
participant or purchasing lender (each, a "Transferee") and any bona fide
prospective Transferee any and all financial information in CITBC's possession
concerning the Borrower and its affiliates which has been delivered to CITBC by
or on behalf of the Borrower pursuant to this Financing Agreement or which has
been delivered to CITBC by or on behalf of the Borrower in connection with
CITBC's
64
<PAGE> 68
credit evaluation of the Borrower and its affiliates prior to entering into
this Financing Agreement.
(c) In the case of an assignment authorized under this
paragraph 17, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as it would if it were a party hereunder
and the assigning party shall be relieved of its obligations hereunder with
respect to its Revolving Line of Credit, or Term Loan commitment or assigned a
portion thereof on and after the date of such assignment. The Borrower hereby
acknowledges and agrees that any assignment permitted hereunder will give rise
to a direct obligation of Borrower to the assignee and that the assignee shall
be considered to be a Lender under this Financing Agreement.
SECTION 10. POWERS
The Borrower hereby authorizes CITBC or any person or agent
CITBC may designate as its attorney-in-fact, at the Borrower's cost and
expense, to exercise all of the following powers, which being coupled with an
interest, shall be irrevocable until all of the Borrower's Obligations to CITBC
have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver,
all in the name of CITBC or the Borrower, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to
the Borrower and to notify postal authorities to change the address
for delivery thereof to such address as CITBC may designate;
(c) To request from customers indebted on Accounts at any
time, in the name of CITBC or the Borrower or that of CITBC's
designee, information concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of
CITBC's interest therein and to notify customers indebted on Accounts
to make payment directly to CITBC for the Borrower's account; and
(e) To take or bring, in the name of CITBC or the Borrower,
all steps, actions, suits or proceedings deemed by CITBC necessary or
desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the
contrary, the powers set forth in (b), (d) and (e) above
65
<PAGE> 69
may only be exercised after the occurrence of and during the continuance of an
Event of Default.
SECTION 11. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary,
CITBC may terminate this Financing Agreement immediately upon the occurrence of
any of the following (herein "Events of Default"):
(a) cessation of the business of the Borrower or the calling
of a meeting of the creditors of the Borrower for purposes of
compromising the debts and obligations of the Borrower;
(b) the Borrower shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or
the Borrower shall commence any case, proceeding or other action
seeking to have an order for relief entered on its behalf as debtor
or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors or seeking appointment
of a receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its property or shall file an
answer or other pleading in any such case, proceeding or other action
admitting the material allegations of any petition, complaint or
similar pleading filed;
(c) any involuntary case, proceeding or other action against
the Borrower shall be commenced seeking to have an order for relief
entered against it as debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or relief of
debtors or seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of
its property, and such case, proceeding or other action (i) results in
the entry of any order for relief against it or (ii) shall remain
undismissed for a period of sixty (60) days;
(d) any representation or warranty contained herein shall
prove to have been false in any material respect when made (other than
those referred to in sub-paragraph (f) below) or in any other written
agreement including, without limitation, any Loan
66
<PAGE> 70
Document or any document delivered by the Borrower to CITBC in
connection herewith or therewith or the transactions contemplated
hereby or thereby;
(e) breach by the Borrower of any covenant in this Financing
Agreement (other than those referred to in sub-paragraph (f) below)
or in any other written agreement between the Borrower and CITBC
including, without limitation, any Loan Document, or any other
document delivered by the Borrower to CITBC in connection herewith or
therewith or the transactions contemplated hereby or thereby, if such
breach shall not have been remedied within thirty (30) days after such
breach;
(f) breach by the Borrower of any warranty, representation or
covenant of Section 3, paragraphs 3 (other than the third sentence of
paragraph 3); Section 6, Paragraphs 3 or 4; Section 8, Paragraphs 1,
5(a) or (b), 6, or 9 through 16;
(g) failure of the Borrower to pay when due i) any of the
principal of the Revolving Credit Loans, or ii) to pay any of the
interest on the Revolving Credit Loans within five (5) business days
of the due date thereof; provided, however, that nothing contained
herein shall prohibit CITBC from charging such amounts to the
Borrower's account on the due date thereof;
(h) (i) a default by the Borrower shall have occurred and
be continuing in any payment of principal of or interest on any other
obligation for borrowed money (or any obligation or obligations under
a conditional sale or other title retention agreement or any
obligation or obligations issued or assumed as full or partial payment
for property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect
thereto in each case involving any individual obligation or one or
more obligations in an aggregate principal amount of $250,000 or more
or (ii) a default by the Borrower shall have occurred and be
continuing in the performance of any other agreement, term or
condition contained in any agreement under which any such obligation
referred to in clause (i) is created (or if any other default under
any such agreement shall occur and be continuing) if the effect of
such default is to cause, or permit the holder or holders of such
obligation or obligations (or a trustee on behalf of such holder or
holders) to cause, such obligation or obligations to become due prior
to its or their stated maturity in each case involving any
67
<PAGE> 71
individual obligation or one or more obligations in an aggregate
principal amount of $250,000 or more;
(i) The Borrower or any other person engages in a transaction
in connection with which the Borrower or any entity which the
Borrower has an obligation to indemnify, could be subject to
liability for either a civil penalty assessed pursuant to section 502
of ERISA or a tax imposed by section 4975 of the Code; an accumulated
funding deficiency (as defined in section 302 of ERISA or section 412
of the Code), whether or not waived, exists with respect to any
Pension Plan; a lien arises or security interest is granted with
respect to any Pension Plan; a Pension Plan is terminated; a
Reportable Event occurs or proceedings commence to terminate or to
have a trustee appointed to terminate any Pension Plan which
Reportable Event or commencement of proceedings or appointment is, in
the reasonable opinion of CITBC, likely to result in the termination
of any such Pension Plan; the Borrower or any ERISA Affiliate incurs
or is likely to incur any liability in connection with a withdrawal
from or the Insolvency, Reorganization or termination of a
Multiemployer Plan or with respect to section 515 of ERISA; or any
other similar event or condition shall occur or exist with respect to
any Employee Benefit Plan;
(j) without the prior written consent of CITBC, the Borrower
shall x) amend or modify the Subordinated Debt or y) make any
payment on account of the Subordinated Debt except as permitted
herein;
(k) the Borrower shall not have executed and delivered to
CITBC an Assignment of Key Man Life Insurance Policy in the form of
Exhibit E hereto within thirty (30) days from the Closing Date;
(l) if the Borrower fails to pay all amounts required to be
paid in connection with the Bonds, as defined in the Indenture of
Mortgage between the County of Sandusky, Ohio (the "County") and the
Cleveland Trust Company dated November 1, 1976 and recorded in Book
291, page 18, not later than August 1, 1996;
(m) if the Borrower fails to cause the County, promptly upon
the payment to the County described in paragraph (l) above, to convey
directly to the Borrower the fee interest in the Fremont Property, as
hereinafter defined;
(n) if the Borrower fails to perform any one or more of the
following actions, simultaneously with the
68
<PAGE> 72
transfer of the Fremont Property, as hereinafter defined, from the
County to the Borrower:
(i) execute, deliver and cause to be filed in the
appropriate recorder's office a confirmatory spreader agreement as
contemplated by Section 1.10(c) of that certain leasehold mortgage
between the Borrower and CITBC dated as of the date hereof with
respect to the real property located in Fremont, Ohio (the "Fremont
Property"); or
(ii) deliver to CITBC an ALTA Lender's Fee Title Policy 1992
containing exceptions and requirements satisfactory to CITBC in its
sole discretion; or
(iii) deliver to CITBC an opinion from Ohio counsel, in form
and substance satisfactory to CITBC in its sole discretion, opining
that the confirmatory spreader agreement referenced in clause (i)
above has been duly authorized, executed and delivered and that such
confirmatory spreader agreement is enforceable in accordance with its
terms.
2. Upon the occurrence and continuation of a Default and/or
an Event of Default, at the option of CITBC, all loans and advances provided
for in Section 3, paragraph 1 of this Financing Agreement shall be thereafter
in CITBC's sole discretion and the obligation of CITBC to make Revolving Loans
and/or assist in opening Letters of Credit shall cease, and at the option of
CITBC upon the occurrence and continuation of an Event of Default: i) all
Obligations shall become immediately due and payable; provided, however, that
CITBC has given the Borrower written notice of the Event of Default; provided,
further, however, that no notice is required if the Event of Default is an
Event of Default listed in paragraph 1(b) or 1(c) of this Section 11; ii)
CITBC may charge the Borrower the Default Rate of Interest on all then
outstanding or thereafter incurred Obligations in lieu of the interest
provided for in Section 9, paragraphs 1, 2, 3 and 4 of this Financing
Agreement; and iii) CITBC may immediately terminate this Financing Agreement
upon notice to the Borrower; provided, however, that no notice of termination
is required if the Event of Default is the Event listed in paragraph 1(b) or
1(c) of this Section 11. The exercise of any option is not exclusive of any
other option which may be exercised at any time by CITBC.
3. Immediately upon the occurrence of any Event of Default
and as long as such Event of Default is continuing, CITBC may to the extent
permitted by law: (a) remove from any premises where same may be located any
and all documents, instruments, files and records, and any
69
<PAGE> 73
receptacles or cabinets containing same, relating to the Accounts, or CITBC may
use, at the Borrower's expense, such of the Borrower's personnel, supplies or
space at the Borrower's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Borrower or CITBC, and
generally shall have all other rights respecting said Accounts, including,
without limitation, the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Borrower or CITBC; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement to the extent permitted by
applicable law, at public or private sale, for cash, on credit or otherwise, at
CITBC's sole option and discretion, and CITBC may bid or become a purchaser at
any such sale, free from any right of redemption, which right is hereby
expressly waived by the Borrower to the extent permitted by law; (d) foreclose
the security interests created herein by any available judicial procedure, or
to take possession of any or all of the Inventory and Equipment without
judicial process, and to enter any premises where any Inventory and Equipment
may be located for the purpose of taking possession of or removing the same and
(e) exercise any other rights and remedies provided in law, in equity, by
contract or otherwise. CITBC shall have the right, without notice or
advertisement, to sell, lease, or otherwise dispose of all or any part of the
Collateral whether in its then condition or after further preparation or
processing, in the name of the Borrower or CITBC, or in the name of such other
party as CITBC may designate, either at public or private sale or at any
broker's board, in lots or in bulk, for cash or for credit, with or without
warranties or representations, and upon such other terms and conditions as
CITBC in its sole discretion may deem advisable, and CITBC shall have the right
to purchase at any such sale. If any Inventory and Equipment shall require
rebuilding, repairing, maintenance or preparation, CITBC shall have the right,
at its option, to do such of the aforesaid as is necessary, for the purpose of
putting the Inventory and Equipment in such saleable form as CITBC shall deem
appropriate. The Borrower agrees, at the request of CITBC, to assemble the
Inventory and Equipment and to make it available to CITBC at premises of the
Borrower or elsewhere and to make available to CITBC the premises and
facilities of the Borrower for the purpose of CITBC's taking possession of,
removing or putting the Inventory and Equipment in saleable form. However, if
notice of intended disposition of any Collateral is required by law, it is
agreed that ten (10) days' notice shall constitute reasonable notification and
full compliance with the law. The net cash proceeds resulting from CITBC's
70
<PAGE> 74
exercise of any of the foregoing rights, (after deducting all charges, costs
and expenses, including reasonable attorneys' fees) shall be applied by CITBC
to the payment of the Obligations, whether due or to become due, in such order
as CITBC may elect, and the Borrower shall remain liable to CITBC for any
deficiencies, and CITBC in turn agrees to remit to the Borrower or its
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative. The Mortgages shall govern the rights and remedies of CITBC
thereto.
SECTION 12. TERMINATION
Except as otherwise permitted herein, the Borrower or CITBC
may terminate this Financing Agreement and the Revolving Line of Credit only as
of the Initial Term Date or any anniversary date of the Initial Term Date and
then only by giving the other at least sixty (60) days' prior written notice of
termination. Notwithstanding the foregoing, CITBC may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default; provided,
however, that if the Event of Default is an event listed in Section 11,
paragraph 1(b) or 1(c) of this Financing Agreement, CITBC may regard the
Financing Agreement as terminated and notice to that effect is not required.
This Financing Agreement, unless terminated as herein provided, shall
automatically continue from year to year after the Initial Term Date.
Notwithstanding the foregoing, the Borrower may terminate this Financing
Agreement and the Revolving Line of Credit at any time upon sixty (60) days'
prior written notice to CITBC; provided, however, that the Borrower pay to
CITBC immediately on demand, an Early Termination Fee, if applicable. All
Obligations shall become due and payable as of any termination hereunder or
under Section 11 hereof and, pending a final accounting, CITBC may withhold any
balances in the Borrower's account (unless supplied with an indemnity
satisfactory to CITBC) to cover all of the Borrower's Obligations, whether
absolute or contingent. All of CITBC's rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 13. INDEMNIFICATION
In addition to the payment of expenses pursuant to Section 9
of this Financing Agreement, whether or not the transactions contemplated
hereby shall be consummated, the Borrower agrees to indemnify, pay and hold
CITBC and the
71
<PAGE> 75
officers, directors, partners, employees, agents, affiliates and attorneys of
CITBC (collectively called the "Indemnitees") harmless from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of attorneys and
accountants for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by the Borrower
or by any other Person as against CITBC or any other Person, whether or not
such Indemnitee shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of a Default or Event of Default under this Financing Agreement or
(except to the extent provided for or limited elsewhere in this Financing
Agreement) the consummation of the transactions contemplated hereby, the use or
intended use of the proceeds of the Revolving Loans and the Term Loans or the
exercise of any right or remedy hereunder, including, without limitation, any
obligations which may become due and payable after the termination of this
Financing Agreement (the "Indemnified Liabilities"); provided, however, that
the Borrower shall not have any obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities to the extent arising from the gross
negligence or willful misconduct of any Indemnitee as determined by a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower will
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by the Indemnitees or any of them.
SECTION 14. MISCELLANEOUS
1. The Borrower hereby waives diligence, demand,
presentment and protest and any notices thereof as well as notice of
nonpayment. No delay or omission of CITBC or the Borrower to exercise any
right or remedy hereunder, whether before or after the happening of any Event
of Default, shall impair any such right or shall operate as a waiver thereof or
as a waiver of any such Event of Default. No single or partial exercise by
CITBC of any right or remedy precludes any other or further exercise thereof,
or precludes any other right or remedy.
2. This Financing Agreement and the documents executed
and delivered in connection therewith constitute the entire agreement between
the Borrower and CITBC;
72
<PAGE> 76
supersede any prior agreements; can be amended, modified or supplemented only
by a writing signed by the Borrower and CITBC; and shall bind and benefit the
Borrower and CITBC and their respective successors and assigns.
3. In no event shall the Borrower, upon demand by CITBC
for payment of any indebtedness relating hereto, by acceleration of the
maturity thereof, or otherwise, be obligated to pay interest and fees in excess
of the amount permitted by law. Regardless of any provision herein or in any
agreement made in connection herewith, CITBC shall never be entitled to
receive, charge or apply, as interest on any indebtedness relating hereto, any
amount in excess of the maximum amount of interest permissible under applicable
law. If CITBC ever receives, collects or applies any such excess, it shall be
deemed a partial repayment of principal and treated as such; and if principal
is paid in full, any remaining excess shall be refunded to the Borrower. This
paragraph shall control every other provision hereof and of any other agreement
made in connection herewith.
4. If any provision hereof or of any other agreement made
in connection herewith is held to be illegal or unenforceable, such provision
shall be fully severable, and the remaining provisions of the applicable
agreement shall remain in full force and effect and shall not be affected by
such provision's severance. Furthermore, in lieu of any such provision, there
shall be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
5. (a) THE BORROWER AND CITBC HEREBY IRREVOCABLY SUBMIT TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS FINANCING
AGREEMENT, OR ANY OF THE OTHER DOCUMENTS ENTERED INTO IN CONNECTION WITH THIS
FINANCING AGREEMENT, TO WHICH THE BORROWER IS A PARTY, AND THE BORROWER AND
CITBC HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR IN SUCH
FEDERAL COURT. THE BORROWER AND CITBC HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT THEY MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. THE BORROWER AND CITBC
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW.
(b) THE BORROWER AND CITBC EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING
AGREEMENT. THE BORROWER AND CITBC
73
<PAGE> 77
HEREBY IRREVOCABLY WAIVE PERSONAL SERVICE OF PROCESS AND CONSENT TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO
THE BORROWER, AND CITBC, AS THE CASE MAY BE, AT THE ADDRESS PROVIDED HEREIN FOR
NOTICES.
6. (a) The obligations of the Borrower hereunder and
under the other loan documents shall be construed as continuing, absolute and
unconditional without regard to (and the Borrower hereby waives any right or
claim it may have with respect to) (a) the validity or enforceability of this
Financing Agreement, or any other loan document at any time or from time to
time held by CITBC, as against or with respect to the Borrower, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower against CITBC, or (c) any other circumstances whatsoever which
constitute, or might be construed to constitute, an equitable or legal
discharge of the Borrower hereunder, in bankruptcy or in any other instance.
When CITBC is pursuing rights and remedies hereunder against the Borrower,
CITBC may, but shall be under no obligation to, pursue such rights and remedies
as it may have against another Borrower or person or against any collateral
security or guaranty or any right of offset with respect thereto, and any
failure by CITBC to pursue such other rights or remedies or to collect any
payments from such other Borrower or person or to realize upon any such
collateral security or guaranty or to exercise any such right of offset, or any
release of such other Borrower or any such other person or of any such
collateral security, guaranty or right of offset, shall not relieve the
Borrower of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of
CITBC against the Borrower.
(b) The obligations of the Borrower hereunder shall continue
to be effective, or be reinstated, as the case may be, if at any time any
payment of, by or for the Borrower is rescinded or must otherwise be restored
or returned by CITBC upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Borrower or upon or as a result of the appointment of
a receiver, intervenor or conservator of, or trustee or similar officer for,
the Borrower or any substantial part of its property, or otherwise, all as
though such payments had not been made.
7. The Borrower authorizes and CITBC shall have the right,
upon five (5) business days' prior written notice, upon any amount becoming
due and payable hereunder, to set-off and apply against any and all property
held by, or in the possession of CITBC or the Collateral the Obligations due
and payable CITBC; provided, however, that
74
<PAGE> 78
if an Event of Default has occurred and is continuing, CITBC shall not be
required to give notice prior to the exercise of their rights set forth in this
paragraph 7.
8. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered or sent by
telegram or telex, or three days after deposit in the United State mails, with
proper first class postage prepaid and addressed to the party to be notified as
follows:
(A) if to CITBC, at:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
21st Floor
New York, New York 10036
Telecopy Number: (212) 536-1293
Attn: Charles Abrams
(B) if to the Borrower, at:
DeVlieg-Bullard, Inc.
One Gorham Island
Westport, Connecticut
Attn: Mr. Lawrence Murray
Telecopy: (203) 221-0780
with a copy to:
Bass, Berry & Sims
First American Center
Nashville, TN 37238
Attn: J. Page Davidson
Telecopy: (615) 742-6293
or to such other address as any party may designate for itself by like notice.
9. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
10. All representations, warranties and indemnities
contained herein or made in writing by the Borrower in connection herewith
shall survive the execution and delivery of this Financing Agreement, for so
long as any Obligations remain outstanding, unless otherwise stated herein,
regardless of any investigation made by CITBC or on CITBC's behalf.
75
<PAGE> 79
11. All covenants and agreements contained in this Financing
Agreement by or on behalf of any party hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
12. If any agreement, certificate or other writing, or any
action taken or to be taken, is by the terms of this Financing Agreement
required to be satisfactory to CITBC, the determination of such satisfaction
shall be made by CITBC in its sole and exclusive judgment exercised in good
faith.
13. The descriptive headings of the several paragraphs of
this Financing Agreement and the table of contents are inserted for convenience
only and do not constitute a part of this Financing Agreement.
14. This Financing Agreement may be executed in two or more
counterparts, all of which shall be deemed but one and the same instrument
and each of which shall be deemed an original, and it shall not be necessary in
making proof of this Financing Agreement to produce or account for more than
one such counterpart.
15. If the date for making any payment or the last date for
performance of any or the exercising of any right, as provided in this
Financing Agreement (other than in connection with the Term Loan or any
Revolving Loan for which a LIBOR Rate Period is selected), shall not be a
business day, such payment may be made or act performed or right exercised on
the next succeeding business day, with the same force and effect as if done on
the nominal date provided in this Financing Agreement, except that interest
shall accrue and be payable for the period after such nominal date.
16. The Borrower will hold CITBC harmless from any claim,
demand or liability for broker's or finder's or placement fees or commissions
alleged to have been incurred in connection with this Financing Agreement, the
Revolving Loans Promissory Note or the transactions contemplated hereby or
thereby.
17. Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Financing Agreement and the consummation of
the transactions contemplated hereby.
76
<PAGE> 80
18. All of the obligations of the Borrower hereunder shall
survive the repayment of principal and interest under any loans or advances
made or issued hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Financing Agreement to be executed and delivered by their proper and duly
authorized officers as of the date set forth above. This Financing Agreement
shall take effect as of the date set forth above after being accepted below by
an officer of CITBC after which, CITBC shall forward to the Borrower a fully
executed original for its files.
Lender:
THE CIT GROUP/BUSINESS CREDIT, INC.
By /s/ Terence P. Keegan
--------------------------------
Name: Terence P. Keegan
Title: Vice President
Borrower:
DEVLIEG-BULLARD, INC.
By /s/ W. O. Thomas
---------------------------------
Name: William O. Thomas
Title: President and Chief
Executive Officer
77
<PAGE> 1
Exhibit 10.2
REVOLVING LOAN PROMISSORY NOTE
Amount not to Exceed New York, New York
$25,000,000 October 23, 1995
FOR VALUE RECEIVED, the undersigned, DeVlieg-Bullard, Inc., a
Delaware corporation (herein the "Borrower"), promises to pay to the order of
The CIT Group/Business Credit, Inc. ("CITBC"), at CITBC's offices located at
1211 Avenue of the Americas, New York, NY 10036, in lawful money of the United
States of America and in immediately available funds, in accordance with the
Financing Agreement (as hereinafter defined), the lesser of Twenty-Five Million
Dollars ($25,000,000) or the aggregate unpaid principal amount of all Revolving
Loans made by CITBC to the Borrower pursuant to the Financing and Security
Agreement, dated October 23, 1995, between the Borrower and CITBC (the
"Financing Agreement"). Terms defined in the Financing Agreement are used
herein with their defined meanings unless otherwise defined herein.
The Borrower further agrees to pay interest at said office, in
like money, on the unpaid principal amount owing hereunder from time to time
from the date hereof on the last business day of each month commencing October
31, 1995 and at the interest rates specified in a Notice of Borrowing or a
notice delivered to CITBC pursuant to the Financing Agreement. Any amount of
principal hereof which is not paid when due, whether at stated maturity, by
acceleration, or otherwise, shall bear interest from the date when due until
said principal amount is paid in full, payable on demand at a rate per annum
equal at all times to the Default Rate.
CITBC who is the holder of this Revolving Loan Promissory Note
(the "Note") is authorized to endorse on the schedule annexed hereto and made a
part hereof, or on continuations or conversions thereof which shall be attached
hereto and made a part hereof, the date, the type and the amount of each
Revolving Loan made by the holder hereof, and each Continuation, Conversion,
payment and prepayment of principal thereof and whether a specific Initial Term
Date has been established and, if so, the specific date so established which
endorsements shall, in the absence of manifest error, be conclusive as to the
outstanding balance of the Revolving Loans made by CITBC to the Borrower and
the accuracy of the other information endorsed; provided, however, that any
failure to endorse such information on such schedule or continuation thereof
shall not in any
<PAGE> 2
manner affect the obligation of the undersigned to make payments of principal
and interest in accordance with the terms of this Note.
If any payment on this Note becomes due and payable on a day
other than a business day, the maturity thereof shall be extended to the next
succeeding business day, and with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
This Note is the Revolving Loans Promissory Note referred to
in the Financing Agreement and is subject to, and entitled to, all provisions
and benefits thereof and is subject to optional and mandatory prepayment, in
whole or in part, as provided therein. This Note is secured by certain Loan
Documents, including the Financing Agreement, and is guaranteed as provided in
the Financing Agreement, reference to which is hereby made for a description of
the Collateral and guarantees provided for under such Loan Documents and the
rights of CITBCs with respect to such Collateral and guarantees.
Upon the occurrence of any one or more of the Events of
Default specified in the Financing Agreement or upon termination of the
Financing Agreement, all amounts then remaining unpaid on this Note may become,
or be declared to be, immediately due and payable, all as provided in the
Financing Agreement. The Borrower hereby waives presentment, notice of
dishonor, protest and any other notice or formality with respect to this
Revolving Loan Promissory Note.
THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
DEVLIEG-BULLARD, INC.
By /s/ W. O. Thomas
-----------------------------
Name: William O. Thomas
Title: President and Chief
Executive Officer
2
<PAGE> 3
Schedule to
Promissory Note Revolving Loans
REVOLVING LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Date Loan Made,
Continued, Unpaid
Converted or Amount of Amount of Principal Notation
Paid Type of Loan Loan Principal Paid Balance Made By
------------------ ----------------- ----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
</TABLE>
3
<PAGE> 1
Exhibit 10.3
TERM LOAN PROMISSORY NOTE
$5,000,000 New York, New York
October 23, 1995
FOR VALUE RECEIVED, the undersigned, DeVlieg-Bullard, Inc., a
Delaware corporation (herein the "Borrower"), promises to pay to the order of
The CIT Group/Business Credit, Inc. ("CITBC"), at CITBC's offices located at
1211 Avenue of the Americas, New York, NY 10036, in lawful money of the United
States of America and in immediately available funds, the principal amount of
Five Million Dollars ($5,000,000) in thirty-five (35) equal principal
installments of Eighty-Five Thousand Seven Hundred Fourteen Dollars and Thirty
Cents ($85,714.30) each payable monthly on the last business day of each month
commencing November 30, 1995 and one (1) final installment of the remaining
principal amount outstanding, plus all other amounts having accrued and
outstanding, payable on October 23, 1998.
The Borrower further agrees to pay interest at said office, in
like money, on the unpaid principal amount owing hereunder from time to time
from the date hereof on the date and at the rate specified in the Financing and
Security Agreement referred to below (the "Financing Agreement"). Any amount
of principal hereof which is not paid when due, whether at stated maturity, by
acceleration, or otherwise, shall bear interest from the date when due until
said principal amount is paid in full, payable on demand at a rate per annum
equal at all times to the Default Rate.
If any payment on this Term Loan Promissory Note (the "Note")
becomes due and payable on a day other than a business day, the maturity
thereof shall be extended to the next succeeding business day, and with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
This Note is one of the Term Loan Promissory Notes referred to
in the Financing and Security Agreement, dated October 23, 1995, between the
Borrower and CITBC and is subject to, and entitled to, all provisions and
benefits thereof and is subject to optional and mandatory prepayment, in whole
or in part, as provided therein. Terms defined in the Financing Agreement are
used herein with their defined meanings unless otherwise defined herein.
<PAGE> 2
Upon the occurrence of any one or more of the Events of
Default specified in the Financing Agreement or upon termination of the
Financing Agreement, all amounts then remaining unpaid on this Note may become,
or be declared to be immediately due and payable, all as provided in the
Financing Agreement.
This Note is secured by certain Loan Documents, including the
Financing Agreement, and is guaranteed as provided in the Financing Agreement,
reference to which is hereby made for a description of the Collateral and
guarantees provided for under such Loan Documents and the rights of CITBC with
respect to such Collateral and guarantees.
The Borrower hereby waives presentment, notice of dishonor,
protest and any other notice or formality with respect to this Term Loan
Promissory Note.
THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
DEVLIEG-BULLARD, INC.
By /s/ W. O. Thomas
-----------------------------
Name: William O. Thomas
Title: President and Chief
Executive Officer
2
<PAGE> 1
Exhibit 10.4
FIRST AMENDMENT TO INVESTMENT AGREEMENT
THIS FIRST AMENDMENT TO INVESTMENT AGREEMENT (this "Amendment"), dated
as of October 23, 1995, is made by and among (i) DeVLIEG-BULLARD, INC., a
Delaware corporation (the "Company"), (ii) ALLIED INVESTMENT CORPORATION
("AIC"), ALLIED INVESTMENT CORPORATION II ("AIC II"), ALLIED CAPITAL
CORPORATION II ("ACC II"), all Maryland corporations (collectively "Allied"),
BANC ONE CAPITAL PARTNERS CORPORATION, a Texas corporation ("Banc-One"), and
PNC CAPITAL CORP, a Delaware corporation ("PNC") (Allied, Banc-One and PNC are
sometimes collectively referred to as the "Original Holders" or individually as
an "Original Holder") (Banc-One and PNC are sometimes collectively referred to
as the "Senior Holders" or individually as a "Senior Holder"), (iii) CHARLES E.
BRADLEY, SR. an individual residing in Connecticut ("Bradley") and (iv) JOHN G.
POOLE, an individual residing in Connecticut ("Poole")(Bradley and Poole are
sometimes collectively referred to as the "Junior Holders", or individually as
a "Junior Holder". The Senior Holders and the Junior Holders are sometimes
collectively referred to as the "Holders").
WITNESSETH:
WHEREAS, the Original Holders and the Company entered into an
Investment Agreement dated as of May 25, 1994 ("Agreement") pursuant to which
the Original Holders agreed to purchase $12 million of subordinated debentures
(the "Senior Debentures") in accordance with, and as provided in, the
Agreement;
WHEREAS, the Company has requested the Senior Holders to and the
Senior Holders have agreed to consent to the Company's purchase of the stock of
The National Acme Company (the "Acquisition", as further defined below) and to
amend certain financial maintenance and other covenants set forth in the
Agreement, to approve borrowings in excess of amounts currently permitted under
the Agreement, and other matters and the Company and the Original Holders have
agreed therefore to amend certain provisions of the Agreement as set forth
below;
WHEREAS, the Company also has requested the Original Holders to
release their existing lien on any and all assets of the Company, and Bradley
and Poole, as principal shareholders of the Company, have agreed to provide the
Holders with substitute collateral for such assets, all on terms and conditions
as set forth below;
WHEREAS, Bradley and Poole have agreed to invest an additional $4
million in the Company by purchasing $4 million of debentures which will be
junior to the Senior Debentures, the proceeds of which will be used to pay off
and satisfy the Senior Debentures held by Allied;
WHEREAS, in connection with the payoff of the Debentures held by
Allied, Allied
<PAGE> 2
has agreed to relinquish Class A Warrants representing the right to purchase an
aggregate of 83,333 shares of the Company's common stock;
WHEREAS, the Agreement provides that such Agreement may be amended
from time to time by an instrument signed by the parties thereto.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained therein and herein, intending to be legally bound hereby,
the parties agree as follows:
Section 1. Interpretation and Definitions.
All terms used in this Amendment and not otherwise defined
shall have the meanings ascribed to them in the Agreement. The Agreement and
this Amendment are to be treated as one Agreement and are together referred to
hereafter as the "Agreement". This Agreement, the Pledge Agreement, the
Registration Agreement, the CPS Registration Agreement, the Senior Debentures,
the Junior Debentures, the Class A, B, and C Warrants (all as hereinafter
defined) and all documents to be delivered in connection herewith are defined
as the "Loan Documents."
Section 2. Amendment of Section 1. Loan.
Section 1 of the Agreement is hereby amended in the following
respects:
(a) Paragraph 1.01 of the Agreement is hereby amended by
adding to the end thereof the following new paragraph:
On or about October 23, 1995, the Company will borrow
Two Million Five Hundred Thousand Dollars
($2,500,000) from Bradley and One Million Five
Hundred Thousand Dollars ($1,500,000) from Poole,
such indebtedness to be evidenced by, and to be
repaid according to the terms of, the debentures
attached hereto as Exhibit 1.01(i) hereof (the
"Junior Debentures", and together with the Senior
Debentures, the "Debentures").
(b) Paragraph 1.02 of the Agreement is deleted in its
entirety and replaced with the following new paragraph:
1.02 Collateral. The Debentures and the Holders'
rights herein shall be secured by a pledge of and
security interest in 600,000 shares of the common
stock of Consumer Portfolio Services, Inc. ("CPS")
(the "Collateral") which is held by CPS Holdings,
Inc. ("Holdings"), a corporation in which Messrs.
Bradley and Poole are principal shareholders.
Holdings is a principal shareholder of CPS.
Certificates evidencing the Collateral with properly
executed stock powers and all additional shares or
documents as shall be necessary or required by the
2
<PAGE> 3
Pledge Agreement (as defined below) shall be
delivered to PNC as Agent for the Holders. Bradley
and Poole will cause Holdings to grant to the (i)
Senior Holders a continuing first priority security
interest in all such Collateral, and (ii) Junior
Holders a continuing second priority security
interest in all of such Collateral, subject to an
Intercreditor Agreement between the Senior Holders
and the Junior Holders in the form attached hereto as
Exhibit 1.02(i) (the "Holders' Intercreditor
Agreement"). Holdings shall execute and deliver to
the Holders a Pledge Agreement in the form attached
hereto as Exhibit 1.02(ii) (the "Pledge Agreement").
In addition, Bradley and Poole will cause CPS to
execute and deliver to Holders a CPS Registration
Agreement in the form attached hereto as Exhibit
1.02(iii) (the "CPS Registration Agreement").
(c) Paragraph 1.03 of the Agreement is amended by
deleting the reference in the third line to "Twenty Million Dollars
($20,000,000)" and substituting therefor "Thirty Two Million Dollars
($32,000,000)".
(d) Paragraph 1.04 is deleted in its entirety.
(e) Paragraph 1.05 of the Agreement is amended by
deleting "Allied Capital Corporation" in the first sentence and substituting
"PNC Capital Corp".
Section 3. Amendment of Section 2. Equity.
Section 2 of the Agreement is hereby amended in the following
respects:
(a) Paragraph 2.01 of the Agreement is amended by
denoting the existing paragraph as sub-paragraph A. and adding the following
sub-paragraphs B and C. as follows:
B. On or about October 23, 1995, the
Company will issue and sell to the Junior Holders
certain Stock Purchase Class A Warrants (the "Junior
Holders Class A Warrants"), copies of which are
attached hereto as Exhibit 2.01A(i), to acquire in
the aggregate eighty-three thousand three hundred
thirty three (83,333) shares (subject to the
anti-dilution provisions of Section 2.03 below) of
the Company's authorized but unissued common stock.
Upon exercise of the Junior Holders Class A Warrants,
the common stock issuable thereunder shall have all
of the rights and privileges accorded the Company's
other holders thereof pursuant to the Delaware
General Corporation Law (except as to the special
registration and other rights which are governed by
the Registration Agreement attached hereto). The
aggregate purchase price for the Junior Holders Class
A Warrants is Ten Dollars ($10), payable ratably by
the holders at the time of issuance thereof and the
per share value thereof, for purposes of Section 1273
of the Internal Revenue code of 1986, as amended, is
that amount which is equal to eighty
3
<PAGE> 4
percent (80%) of the fair market value of a share of
the Company's common stock on the date hereof,
determined as the closing sales price of common stock
on the NASDAQ National Market on such date. The per
share exercise price for the Junior Holders Class A
Warrants shall be One Cent ($0.01). The Junior
Holders Class A Warrants may not be exercised prior
to May 25, 1996, unless the Company proposes to
effect a registered public offering of its shares
other than a registration relating solely to employee
benefit plans or a Rule 145 transaction (at which
time this restriction will not be applicable), and
will expire upon the later of (i) three (3) years
from the date of the final payment of the Junior
Debentures or (ii) May 25, 2004.
C. Simultaneous with the closing of the
Acquisition, the Company will issue and sell to the
Holders (other than Allied) certain additional Stock
Purchase Class A Warrants (the "New Class A
Warrants"), copies of which are attached hereto as
Exhibit 2.01B, to acquire in the aggregate five
hundred thousand (500,000) shares (subject to the
anti-dilution provisions of Section 2.03 below) of
the Company's authorized but unissued common stock.
Upon exercise of the New Class A Warrants, the common
stock issuable thereunder shall have all of the
rights and privileges accorded the Company's other
holders thereof pursuant to the Delaware General
Corporation Law (except as to the special
registration and other rights which are governed by
the Registration Agreement attached hereto as Exhibit
3). The aggregate purchase price for the New Class A
Warrants is Ten Dollars ($10), payable ratably by the
Holders, (other than Allied) upon the execution of
this Amendment and the per share value thereof, for
purposes of Section 1273 of the Internal Revenue Code
of 1986, as amended, is that amount which is equal to
eighty percent (80%) of the fair market value of a
share of the Company's common stock on the date
hereof, determined as the closing sales price of
common stock on the NASDAQ National Market on such
date. The per share exercise price for the New Class
A Warrants shall be One Cent ($0.01). The New Class
A Warrants may not be exercised during the first two
(2) years following the date of this Amendment,
unless the Company proposes to effect a registered
public offering of its shares other than a
registration relating solely to employee benefit
plans or Rule 145 transaction (at which time this
restriction will not be applicable), and will expire
upon the later of (i) three (3) years from the date
of the final payment on the Senior Debentures or (ii)
May 25, 2004.
(b) Section 2.02(B) of the Agreement is modified by (i)
deleting the words "on a" from line 3, (ii) inserting "based on the aggregate
number of shares of the Company's common stock issuable upon the exercise of
the New Class A Warrants, the Junior Holders Class A Warrants and the Class A
Warrants held by such Holder" after the word "pro rata" in line 3, (iii)
deleting the word "basis" in line 3, and (iv) replacing the word "product" with
4
<PAGE> 5
"quotient" in line 4.
(c) Section 2.03(B)(i) of the Agreement is modified by
(i) inserting "(i)" after the word "excluding" in line 4, (ii) replacing the
words "or a" in line 4 with "(ii) issuance of the Junior Holders Class A
Warrants, New Class A Warrants and Class C Warrants and shares issued pursuant
to the exercise thereof, and (iii) options and shares issued pursuant to
exercises of options issued pursuant to", (iii) replacing the word "Closing" in
line 7 with "the date of the Amendment", and (iv) replacing "four hundred
seventy-two" with "five-hundred ninety-seven" in lines 7 and 8, (v) replacing
"(1,472,222)" with "(1,597,222)" in line 8.
(d) Paragraph 2.04 of the Agreement is added as follows:
2.04 Class C Warrants.
A. Generally. Simultaneous with the
closing of the Acquisition, the Company will issue
and sell to the Holders (other than Allied) certain
Stock Purchase Class C warrants (the "Class C
Warrants"), (copies of which are attached hereto as
Exhibit 2.04) to acquire in the aggregate seven
hundred fifty thousand (750,000) shares (subject to
the anti-dilution provisions of Section 2.03 above)
of the Company's authorized but unissued common
stock. Upon exercise of the Class C Warrants, the
common stock issuable thereunder (the "C Warrant
Shares") shall have all of the rights and privileges
accorded the Company's other holders thereof pursuant
to the Delaware General Corporation Law (except as to
the special registration and other rights which are
governed by the Registration Agreement attached
hereto as Exhibit 3). The aggregate purchase price
for the Class C Warrants is Ten Dollars ($10),
payable ratably by the Holders (other than Allied) at
the time of execution of this Amendment and the per
share value thereof, for purposes of Section 1273 of
the Internal Revenue Code of 1986, as amended, is
that amount which is equal to eighty percent (80%) of
the fair market value of a share of the Company's
common stock on the date hereof, determined as the
closing sales price of common stock on the NASDAQ
National Market on such date. The per share exercise
price for the Class C Warrants shall be One Cent
($0.01). The Class C Warrants may not be exercised
by the Holders prior to October 31, 1998, unless (x)
the Company proposes to effect a registered public
offering of its shares other than a registration
relating solely to employee benefit plans or a Rule
145 transaction (at which time this restriction will
not be applicable), and/or (y) a Valuation Event
shall have occurred, and will expire upon the later
of (i) three (3) years from the date of the final
payment on the Debentures or (ii) May 25, 2004. The
Class A Warrants, the New Class A Warrants, the
Junior Holders Class A Warrants, the Class B Warrants
and the Class C Warrants are sometimes together
called the "Warrants" in this
5
<PAGE> 6
Agreement.
B. Reduction of Class C Warrants in Certain
Circumstances. The Holders agree that,
notwithstanding the issuance of the Class C Warrants
to them pursuant to the terms hereof, the number of C
Warrant Shares which they have the right to acquire
upon the exercise thereof (the "Exercise Number") may
be reduced in accordance with the following:
(a) As used in this Section the following
terms shall have the following meanings:
"Cumulative EBITDA" shall mean EBITDA
from August 1, 1995 through the Valuation Date.
"Cumulative Lower EBITDA Target" shall
mean, in respect of any Valuation Date, the amount
set forth opposite such Valuation Date below.
"Cumulative Upper EBITDA Target" shall
mean, in respect of any Valuation Date, the amount
set forth opposite such Valuation Date below.
<TABLE>
<CAPTION>
Cumulative Cumulative
Lower EBITDA Upper EBITDA
Target(1) Target(1)
--------- ---------
<S> <C> <C>
8/1/95 though 7/31/96 $10,798,000 $12,528,000
8/1/95 though 7/31/97 22,593,000 29,532,000
8/1/95 though 7/31/98 35,437,000 50,139,000
8/1/95 though 7/31/99 49,386,000 72,515,000
8/1/95 though 7/31/00 63,893,000 96,155,000
</TABLE>
"Valuation Date" shall mean the last
day of the fiscal year immediately prior to the date
of the first Valuation Event to occur in the event of
a Valuation Event described in subpart (iii) of the
definition of "Valuation Event" below, and the last
day of the fiscal quarter immediately prior to the
date of the first Valuation Event to occur in the
event of a Valuation Event described in subparts (i)
or (ii) below.
In the event the Valuation Date is to
be measured upon the last day of a fiscal quarter,
the Cumulative Lower EBITDA Target shall be equal to
the sum of: (a) the product of (i) the difference
between the Cumulative Lower EBITDA Target for the
last day of the fiscal year immediately preceding
such Valuation Date and the
6
<PAGE> 7
Cumulative Lower EBITDA Target for the last day of
the fiscal year immediately following such Valuation
Date and (ii) the percentage (the "Completed Fiscal
Quarter Factor") of fiscal quarters actually
completed during the fiscal year of such Valuation
Date; and (b) the Cumulative Lower EBITDA Target for
the last day of the fiscal year immediately preceding
the Valuation Date. The Cumulative Upper EBITDA
Target shall be calculated on the same basis.
For example: If substantially all of
the assets of the Company are sold on November 15,
1998, then:
1. The Cumulative EBITDA would be
equal to EBITDA from August 1, 1995 through the
fiscal quarter immediately preceding such Valuation
Event, i.e., October 31, 1995.
2. The Cumulative Lower EBITDA
Target and Cumulative Upper EBITDA Target would be
adjusted as follows:
<TABLE>
<CAPTION>
Cumulative Cumulative
Lower EBITDA Upper EBITDA
Target Target
------------ ------------
<S> <C> <C>
8/1/95 through 7/31/98 $35,437,000 $50,139,000
8/1/95 through 7/31/99 $49,386,000 $72,515,000
----------- -----------
Difference $13,949,000 $22,376,000
Completed Fiscal Quarter Factor 25% 25%
----------- -----------
$ 3,487,250 $ 5,594,000
Prior Fiscal Year End Target $35,437,000 $50,139,000
----------- -----------
Adjusted Cumulative
EBITDA Target $38,924,250 $55,733,000
</TABLE>
In the event of the occurrence of a Valuation
Event described in (i) or (ii) below, at the option
of either the Senior Holders or the Company, an audit
of the Company's financial statements will be
performed at the Company's expense.
"Valuation Event" shall mean the
earlier of (i) a sale of all or substantially all of
the Company's assets, (ii) a merger or consolidation
of the Company with or into any other corporation
(other than a merger to reincorporate the Company in
a different jurisdiction, or a consolidation or
merger in which the outstanding voting stock
immediately prior to such consolidation or merger
constitutes a majority of the voting stock of the
surviving entity), or (iii) the election by any
7
<PAGE> 8
Holder to sell any C Warrant Shares, which
election(s) may not be made prior to October 31,
1998. If no Valuation Event shall have occurred on
or prior to October 31, 2000, then a Valuation Event
shall be deemed to have occurred on such date.
(b) If, on the Valuation Date,
Cumulative EBITDA shall equal or exceed the Upper
EBITDA Target, then the Holder(s) shall surrender and
transfer to the Company all of the Class C Warrants.
(c) If, on the Valuation Date,
Cumulative EBITDA shall be less than or equal to the
Lower EBITDA Target, then no Class C Warrants will be
transferred to the Company.
(d) If, on the Valuation Date,
Cumulative EBITDA shall be greater than the Lower
EBITDA Target but less than the Upper EBITDA Target,
then the Exercise Number (expressed as a percentage
of the C Warrant Shares Deemed Outstanding on the
Valuation Date) shall be reduced pursuant to the
following formula:
(actual Cumulative EBITDA-Lower EBITDA Target) x C Warrant
(--------------------------------------------) Shares
(Upper EBITDA Target - Lower EBITDA Target )
For Example: If the Valuation Date is October 31,
1998 and Cumulative EBITDA as of 7/31/98 is
$42,788,000, then the Exercise Number (expressed as a
percentage of the C Warrant Shares) would be reduced
by 375,000 in accordance with the following
calculation:
($42.788 mil. - $35.437 mil.) x (750,000) = 375,000
(---------------------------)
($50.139 mil. - $35.437 mil.)
(e) Cumulative EBITDA shall be
determined using the financial statements to be
delivered to the Holders under Section 6.03 hereof.
If such most recent financial statements have not
been prepared and delivered to the Holders as of the
date when a Valuation Event occurs, then Cumulative
EBITDA shall not be calculated until such delivery
occurs. The Company shall make such calculation and
shall deliver the same to the Holders together with
such additional information regarding how such
calculation was made as the Holders may reasonably
require. The Holders shall have 20 days after their
receipt of such calculation and information to review
the same. If the Holders shall dispute such
calculation, they shall give notice to the Company
within such 20-day period, whereupon the Company and
the Holders shall proceed to negotiate in good faith
regarding the resolution of such dispute. If such
dispute is not resolved within 20 days after the
Holder's notice, then the dispute shall be submitted
to an independent
8
<PAGE> 9
certified public accountant of recognized national
standing mutually agreed upon by the Holders and the
Company whose determination shall be binding on the
parties absent manifest error. Failure of the
Holders to respond within such 20-day period shall
mean that the Holders have accepted such calculation.
(f) Promptly after any reduction in the
Exercise Number pursuant to this Section, the Holders
shall surrender the Class C Warrants to the Company
and the Company shall issue to the Holders new
Warrants reflecting such reduced Exercise Number. If
the Warrant has already been exercised, then the
Holders shall surrender to the Company the
appropriate number of Warrant Shares upon the refund
to it of the Exercise Price for such shares.
(g) For the purposes of this Section,
"EBITDA" shall mean, as for any fiscal period, the
Company's (i) Net Income (as defined below) for such
period, plus (ii) all income taxes included as an
expense of the Company in determining Net Income for
such period, plus (iii) interest deducted as an
expense of the Company in the determination of Net
Income for such period, plus (iv) depreciation,
amortization and other non-cash expenses deducted in
determining Net Income for such period, plus (v) any
amounts paid (excluding fees, expenses and other
costs) in settlement of or as a result of a final
judgment in the Kochenash litigation referenced in
Section 2.02C(ii) of the Agreement, up to a maximum
of $1,500,000.
(h) For the purposes of this Section,
"Net Income" shall mean the Company's consolidated
net income (or loss) after income and franchise
taxes and shall have the meaning given such term by
GAAP, provided that there shall be specifically
excluded therefrom tax-adjusted (a) gains or losses
from the sale of capital assets, (b) net income of
any person in which the Company has an ownership
interest unless received by the Company in a cash
distribution and (c) any gains arising from
extraordinary items, as determined in accordance
with GAAP.
Section 4. Registration Rights.
Section 3 of the Agreement is hereby amended by adding the
following at the end of such Section:
Notwithstanding anything contained in the Agreement
or the Registration Agreement (as defined in the
Agreement) to the contrary, only the Senior Holders
shall have the right to request a Demand Registration
(as defined in Section 1 of the Registration
Agreement), but Allied and the Junior Holders may, on
a pro-rata basis and subject to the terms and
conditions of the Registration Agreement, include any
of
9
<PAGE> 10
its or their Warrant Shares (the "Additional Warrant
Shares") in any Demand Registration that may be
requested so long as the inclusion of any such
Additional Warrant Shares does not interfere with or
restrict the number of Warrant Shares desired to be
included by any Senior Holder in connection with such
Demand Registration. In the event any of the
Additional Warrant Shares held by Allied are included
in such Demand Registration, the Additional Warrant
Shares held by the Junior Holders may be included in
such Demand Registration only to the extent that the
inclusion of such Additional Warrant Shares would not
interfere with or restrict the number of Warrant
Shares desired to be included by Allied.
Section 5. Affirmative Covenants.
Section 6 of the Agreement is hereby amended by
deleting Paragraphs 6.01, 6.02, 6.03, 6.04, 6.07,
6.08, 6.10, 6.11, 6.12, 6.17 and 6.18 and inserting
the following at the end of such Section:
6.20 Taxes. The Company will pay, prior to
delinquency, all taxes, assessments, claims and other
charges (herein "taxes") lawfully levied or assessed
upon the Company and if such taxes remain unpaid
after the date fixed for the payment thereof, unless
such taxes are being diligently contested in good
faith by the Company by appropriate proceedings..
6.21 Compliance with Laws. The Company: (a) will
comply with all acts, rules, regulations and orders
of any legislative, administrative or judicial body
or official, which the failure to comply with would
have a material and adverse impact on the operation
of the Company's business; provided, however, that
the Company may contest any acts, rules, regulations,
orders and directions of such bodies or officials in
any reasonable manner which will not, in Holders'
reasonable opinion, materially and adversely affect
the operation of the Company's business; (b) will
comply with all environmental statutes, acts, rules,
regulations or orders as presently existing or as
adopted or amended in the future, applicable to the
ownership and/or use of its real property and
operation of its business, which the failure to
comply with would have a material and adverse impact
on the operation of the business of the Company.
6.22 Financial Statements. Until termination of
the Agreement and payment and satisfaction of all
obligations due hereunder, the Company agrees that,
unless Holders shall have otherwise consented in
writing, the Company will furnish to Holders, within
ninety (90) days after the end of each fiscal year of
the Company, an audited Consolidated Balance Sheet as
at the close of such year, and statements of
consolidated earnings, cash flow and reconciliation
of surplus of the
10
<PAGE> 11
Company and its Consolidated Subsidiaries, audited by
Price Waterhouse, LLP, or such other independent
public accountants of national standing selected by
the Company, within forty-five (45) days after the
end of each fiscal quarter a Balance Sheet as at the
end of such period and statements of earnings, cash
flow and surplus of the Company, certified by an
authorized financial or accounting officer of the
Company; and within thirty (30) days after the end of
each month monthly interim financial statements,
certified by an authorized financial or accounting
officer of the Company; and from time to time, such
further information regarding the business affairs
and financial condition of the Company as Holders may
reasonably request. The Company shall deliver to
Holders no later than (60) days from the start of
each fiscal year end of the Company, annual cash flow
projections for such fiscal year, including a
projected consolidated balance sheet and consolidated
statements of earnings, cash flow and surplus (and
such consolidating statements as Holders may
request). All such financial statements shall be
prepared in accordance with generally accepted
accounting principles consistently applied, subject
to year end adjustments. Each financial statement
which the Company is required to submit hereunder
must be accompanied by an officer's certificate
certifying that: (i) the financial statement(s)
fairly and accurately represent(s) the Company's and
Consolidated Subsidiaries' financial condition at the
end of the particular accounting period, as well as
the Company's and Consolidated Subsidiaries'
operating results during such accounting period,
subject to year-end audit adjustments; (ii) during
the particular accounting period there has been no
default or condition which, with the passage of time
or notice, or both, would constitute a default or
event of default under this Agreement or the
Agreements executed in connection with the Senior
Debt; provided, however, that if any executive
officer of the Company has knowledge that any such
default or event of default has occurred during such
period, the existence of and a detailed description
of same shall be set forth in the officer's
certificate; and (iii) the exhibits attached to such
financial statement(s) constitute detailed
calculations showing compliance with all financial
covenants contained in this Agreement.
The Company shall furnish to Holders promptly upon
receipt thereof, copies of any reports submitted to
the Company by independent certified accountants in
connection with the examination of the financial
statements and financial, accounting and auditing
controls (including, without limitation, management
letters) of the Company and its Consolidated
Subsidiaries made by such accountants.
Section 6. Negative Covenants.
(a) Section 7 of the Agreement is hereby amended by
deleting sections
11
<PAGE> 12
7.01, 7.02, 7.03, 7.04, 7.05, 7.07, 7.08 and 7.09 and modifying section 7.06 as
follows:
The third line of paragraph 7.06 is restated to read:
"the Company to exceed or violate the Permitted
Indebtedness definition set forth below, enter any
material ..."
(b) The following paragraphs are added at the end of
Section 7:
7.10 Certain Restrictions. Until termination of
the Agreement and payment and satisfaction of the
Debentures, the Company will not, without the prior
written consent of Holders, except as otherwise
herein provided:
A. Incur or create any Indebtedness other than
the Permitted Indebtedness;
B. Merge, consolidate or otherwise alter or
modify its name, principal place of business,
structure, existence, or enter into or engage in any
or activity materially different from that being
conducted by the Company;
C. Assume, guarantee, endorse, or otherwise
become liable upon the obligations of any person,
firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary
course of business;
D. Declare or pay any dividend of any kind on,
or purchase, acquire, redeem or retire, any of the
capital stock or equity interest, of any class
whatsoever, whether now or hereafter outstanding;
E. Make any advance or loan to, or any
investment in, any firm, entity, person or
corporation; or
F. Change its fiscal year.
7.11 Minimum Consolidated Net Worth. The Company
and its Consolidated Subsidiaries shall maintain at
the end of each Rolling Period a Consolidated Net
Worth of not less than the following:
<TABLE>
<CAPTION>
Rolling Period Amount
-------------- ------
<S> <C>
January 31, 1996 $17,000,000
April 30, 1996 $17,000,000
July 31, 1996 $17,000,000
July 31, 1997 $22,000,000
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
July 31, 1998 $27,000,000
July 31, 1999 $33,500,000
July 31, 2000 $40,500,000
and thereafter
</TABLE>
7.12 Consolidated Interest Coverage Ratio. The
Company and its Consolidated Subsidiaries shall
maintain at the end of each Rolling Period, a
Consolidated Interest Coverage Ratio of not less than
the following-
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C> <C> <C>
January 30, 1996 1.65 to 1.00
April 30, 1996 2.19 to 1.00
July 31, 1996 2.41 to 1.00
July 31, 1997 2.93 to 1.00
July 31, 1998 3.50 to 1.00
July 31, 1999 3.60 to 1.00
July 31, 2000 3.60 to 1.00
and thereafter
</TABLE>
7.13 Consolidated Total Liabilities to
Consolidated Net Worth. The Company and its
Consolidated Subsidiaries will not at the end of each
Rolling Period, permit the ratio of Consolidated
Current Liabilities to Consolidated Net Worth to be
greater than the following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C> <C> <C>
January 31, 1996 5.75 to 1.00
April 30, 1996 5.64 to 1.00
July 31, 1996 5.29 to 1.00
July 31, 1997 4.18 to 1.00
July 31, 1998 3.30 to 1.00
July 31, 1999 3.25 to 1.00
July 31, 2000 3.25 to 1.00
and thereafter
</TABLE>
7.14 Consolidated Current Ratio. The Company and
its Consolidated Subsidiaries shall have at the end
of each Rolling Period a ratio of Consolidated
Current Assets to Consolidated Current Liabilities of
not less than the following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C> <C> <C>
January 31, 1996 0.88 to 1.00
April 30, 1996 0.89 to 1.00
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
July 31, 1996 0.94 to 1.00
July 31, 1997 1.08 to 1.00
July 31, 1998 1.25 to 1.00
July 31, 1999 1.35 to 1.00
July 31, 2000 1.35 to 1.00
and thereafter
</TABLE>
7.15 Consolidated Fixed Charge Coverage Ratio. The
Company and its Consolidated Subsidiaries shall
maintain at the end of each Rolling Period a
Consolidated Fixed Charge Coverage Ratio of not less
than the following:
<TABLE>
<CAPTION>
Rolling Period Ratio
-------------- -----
<S> <C> <C> <C>
January 31, 1996 0.51 to 1.00
April 30, 1996 0.73 to 1.00
July 31, 1996 0.90 to 1.00
July 31, 1997 1.38 to 1.00
July 31, 1998 1.45 to 1.00
July 31, 1999 1.50 to 1.00
July 31, 2000 1.50 to 1.00
and hereafter
</TABLE>
7.16 Consolidated EBITDA. The Company and its
Consolidated Subsidiaries shall have as of the end of
each Rolling Period an amount of Consolidated EBITDA
of not less than the following:
<TABLE>
<CAPTION>
Rolling Period Amount
-------------- ------
<S> <C>
January 31, 1996 $ 1,641,000
April 30, 1996 $ 4,309,000
July 31, 1996 $ 6,500,000
July 31, 1997 $12,000,000
July 31, 1998 $14,500,000
July 31, 1999 $16,000,000
July 31, 2000 $17,000,000
and thereafter
</TABLE>
7.17 Certain Adjustments. Notwithstanding the
foregoing financial covenants set forth in paragraphs
7.11 though 7.16 of this Section 7, to the extent
that the Company is obligated to pay any amounts in
settlement of the litigation entitled Kochenash v.
Stanwich Oil & Gas, Inc. et al, and such obligation
or payment results in noncompliance by the Company
and its Consolidated Subsidiaries for any period with
any or all of such financial covenants, then for the
relevant period and for the purpose of determining
such compliance, Consolidated EBITDA (in
14
<PAGE> 15
the case of the financial covenants in paragraph
7.12, 7.15 and 7.16) will be increased, and
Consolidated Current Liabilities (in the case of the
financial covenants in paragraphs 7.11, 7.13, and
7.14) will be decreased, by the lesser of (i)
$2,000,000, or (ii) such amount as may be necessary
to effect the minimum level of compliance with the
relevant financial covenant.
7.18 Capital Expenditures. The aggregate amount
of all Capital Expenditures of Company and its
Subsidiaries will not exceed $1,500,000 for the
period from October 23, 1995 through July 31, 1996 or
$1,500,000 in any fiscal year thereafter. In any
fiscal year the Company and its Subsidiaries shall be
entitled to add to the $1,500,000 ceiling for such
fiscal year, Capital Expenditures equal to one-half
of the amount, if any, by which $1,500,000 exceeds
the amount of Capital Expenditures which were made in
the preceding fiscal year, provided that for the
fiscal year commencing August 1, 1996 the applicable
addition shall be one-half of the excess of
$1,500,000 over the amount of Capital Expenditures
made in the period from October 23, 1995 through
July 31, 1996.
7.19 Environmental Compliance. The Company will
advise Holders in writing of: a) all expenditures
(actual or anticipated) in excess of $150,000 for x)
environmental clean-up, y) environmental compliance
or z) environmental testing and the impact of said
expenses on the Company's working capital; and b) any
notices the Company-receives from any local, state or
federal authority advising the Company of any
environmental liability (real or potential) stemming
from the Company's operations, its premises, its
waste disposal practices, or waste disposal sites
used by the Company and to provide Holders with
copies of all such notices if so required.
7.20 Transactions with Affiliates. Without the
prior written consent of Holders, the Company will
not enter into any transaction, including, without
limitation, any purchase, sale, lease, loan or
exchange of property with any Subsidiary or affiliate
of the Company unless such transaction shall be on an
arm's length basis on terms no less favorable to the
Company than a transaction with a third party.
7.21 ERISA Notices. The Company will deliver to
Holders, if and when (but in no case less than ten
(10) days from the date of such event) (i) the
Company or any ERISA Affiliate gives or is required
to give notice to the PBGC of any Reportable Event
with respect to any Pension Plan, a copy of the
notice of such Reportable Event; (ii) the Company or
any ERISA Affiliate becomes obligated to contribute
to a Multiemployer Plan to which such entity was not
obligated to contribute on the Closing Date, a letter
of a financial officer describing such event
15
<PAGE> 16
and estimating the future contingent withdrawal
liability with respect thereto; (iii) the Company or
any ERISA Affiliate receives notice of complete or
partial withdrawal liability with respect to a
Multiemployer Plan or receives notice that a
Multiemployer Plan may be or has been terminated, in
Reorganization or Insolvency, or receives notice from
the administrator of a Multiemployer Plan that
indicates the existence of potential withdrawal
liability under a Multiemployer Plan, a copy of such
notice; (iv) the Company or any ERISA Affiliate
receives notice from the PBGC of an intent to
terminate or appoint a trustee to administer any
Pension Plan or Multiemployer Plan, a copy of such
notice; (v) the Company or any ERISA Affiliate fails
to make a timely contribution to a Pension Plan which
may give rise or has given rise to an accumulated
funding deficiency or a lien, a letter of a financial
officer describing such event; (vi) the Company or
any ERISA Affiliate adopts or proposes to adopt an
amendment which may require or requires the granting
of a security interest, a letter of a financial
officer describing such event; (vii) the Company or
any ERISA Affiliate fails to make a contribution
required under the terms of an Employee Benefit Plan
or Pension Plan or as required by law, which failure
has a material adverse effect on such Employee
Benefit Plan or Pension Plan, a letter of a financial
officer describing such event; (ix) if any Pension
Plan intending to qualify under section 401(a) or
401(k) of the Code fails to so qualify, a letter of a
financial officer describing such event; (x) a
transaction prohibited under section 4975 of the Code
or section 406 of ERISA occurs resulting in liability
to the Company or any entity which the Company has an
obligation to indemnify, a letter of a financial
officer describing such event. Upon the request of
Holders made from time to time, the Company will
deliver a copy of the most recent actuarial report
and annual report completed with respect to any
Employee Benefit Plan or any other financial
information the Company or any ERISA Affiliate has
with respect to any Employee Benefit Plan.
7.22 ERISA Covenant. The Company will, and will
cause each of its ERISA Affiliates to, maintain all
Employee Benefit Plans and Pension Plans in material
compliance with all applicable law, including any
reporting requirements, and make all contributions
due under the terms of each Pension Plan and Employee
Benefit Plan or as required by law.
(b) As used in this Agreement the following terms shall
have the following meanings:
"Capital Expenditures" shall mean, for any
period, the aggregate of all expenditures of the Company and
its Subsidiaries during such period that in conformity with
GAAP are required to be included in or reflected by the
property, plant or equipment or similar fixed asset account
reflected in the balance sheet of the Company and its
Consolidated Subsidiaries.
16
<PAGE> 17
"Capital Lease" shall mean any lease of
property whether real, personal or mixed) which, in conformity
with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Company.
"Code" shall mean the Internal Revenue Code
of 1986, as amended.
"Consolidated Current Assets" shall mean
those assets of the Company and its Consolidated Subsidiaries
on a consolidated basis, which in accordance with GAAP, are
classified as "current".
"Consolidated Current Liabilities" shall mean
those liabilities of the Company and its Consolidated
Subsidiaries, on a consolidated basis, which in accordance
with GAAP, are classified as "current"; provided, however,
that notwithstanding GAAP, the Revolving Loans under the
Senior Debt and the current portion of Permitted Indebtedness
shall be considered "current liabilities".
"Consolidated EBITDA" shall mean, in any
period, all earnings of the Company and its Consolidated
Subsidiaries, on a consolidated basis, before all interest tax
obligations, depreciation and amortization of intangibles of
the Company and its Consolidated Subsidiaries, on a
consolidated basis, for said period determined in accordance
with GAAP.
"Consolidated Fixed Charge Coverage Ratio"
shall mean for any period, a ratio determined as of the
relevant calculation date by dividing (a) Consolidated EBITDA
by (b) the sum for such period of (i) Consolidated Interest
Expense, plus (ii) payments made on the term portion of the
Senior Debt, plus (iii) Capital Expenditures, plus (iv) income
taxes of the Company and its Consolidated Subsidiaries
determined in accordance with GAAP.
"Consolidated Interest Expense" shall mean
total consolidated interest obligations of the Company and its
Consolidated Subsidiaries determined in accordance with GAAP
and in a manner consistent with the latest audited statements
of the Company, but exclusive of amortization of debt discount.
"Consolidated Interest Coverage Ratio" shall
mean a ratio determined as of the relevant calculation date by
dividing Consolidated EBITDA by Consolidated Interest Expense
for the relevant period.
"Consolidated Net Worth" shall mean, with
respect to the Company and its Consolidated Subsidiaries,
assets in excess of liabilities determined in accordance with
GAAP in a manner consistent with the latest audited financial
statements of the Company and its Consolidated Subsidiaries.
17
<PAGE> 18
"Consolidated Subsidiaries" shall mean all
subsidiaries of the Company that should be included in the
Company's consolidated financial statements, all as determined
in accordance with GAAP.
"Employee Benefit Plan" shall mean any plan,
agreement, arrangement or commitment which is an employee
benefit plan, as defined in section 3(3) of ERISA, maintained
by the Company or any ERISA Affiliate with respect to which
the Company or any ERISA Affiliate at any relevant time has
any liability or obligation to contribute.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time and
the rules and regulations promulgated thereunder from time to
time.
"ERISA Affiliate" shall mean, with respect to
the Company, any entity required to be aggregated with the
Company under Section 414(b), (c), (m) or (o) of the Code.
"GAAP" shall mean generally accepted
accounting principals in the United States of America as in
effect from time to time and for the period as to which such
accounting principles are to apply.
"Insolvency" shall mean, at any particular
time, a Multiemployer Plan which is insolvent within the
meaning of section 4245 of ERISA.
"Multiemployer Plan" shall mean a plan which
is a multiemployer plan as defined in Section 3(37) of ERISA.
"PBGC" shall mean Pension Benefit Guaranty
Corporation.
"Pension Plan" shall mean any Employee
Benefit Plan which is a "pension plan" within the meaning of
Section 3(2) of ERISA.
"Permitted Indebtedness" shall mean: (i) the
Senior Debt, which may be increased to an amount not in excess
of $32 million (ii) Indebtedness maturing in less than one
year and incurred in the ordinary course of business for raw
materials, supplies, equipment, services, taxes or labor;
(iii) Indebtedness secured by the Purchase Money Liens; (iv)
Indebtedness arising under this Agreement; (v) deferred taxes
and other expenses incurred in the ordinary course of
business; and (vi) other Indebtedness existing on October 23,
1995 and listed in the most recent financial statement
delivered to the Holders; and (vii) Capital Leases, provided
the amount thereof shall not exceed $5,000,000 in the
aggregate outstanding at any one time..
"Purchase Money Liens" shall mean liens on
any item of
18
<PAGE> 19
equipment acquired after the date of this Agreement; provided,
however, that (i) each such lien shall attach only to the
property to be acquired, and (ii) the debt incurred in
connection with such acquisition shall not exceed in the
aggregate $500,000 in any fiscal year.
"Reorganization" shall mean with respect to
any Multiemployer Plan, the condition that such plan is in
reorganization under section 4241 of ERISA.
"Reportable Event" shall mean an event
described in section 4043 of ERISA or in the regulations
thereunder.
"Rolling Period" shall mean (a) with respect
to any fiscal quarter ending on or prior to October 31, 1996,
the period commencing with the first fiscal quarter commencing
November 1, 1995 and ending on the last day of such fiscal
quarter, and (b) with respect to a fiscal quarter ending after
October 31, 1996, such fiscal quarter and the preceding three
fiscal quarters.-
Section 7. Default.
Section 8 of the Agreement is hereby amended in the following
respects:
(a) Paragraph 8.01 is hereby amended by inserting the
word "or" between "Warrants" and "Debentures" and deleting the words "or
Security Documents."
(b) Paragraph 8.02 of the Agreement is hereby deleted in
its entirety and replaced with the following new paragraph:
8.02 Breach. "The Company shall fail to comply with the covenants
in this Agreement, or CPS shall fail to comply with the covenants in
the CPS Registration Agreement, as such covenants exist on the date
hereof and such failure shall continue for a period of thirty (30)
days after the date of breach."
(c) Paragraph 8.03 of the Agreement is hereby amended by
adding the word "material" before the word "representation" in the first line,
and adding the words "in any material respect" after the word "untrue" in the
second line.
(d) Paragraph 8.04 of the Agreement is deleted in its
entirety and replaced with the following new Paragraph:
8.04 Bankruptcy. The Company shall generally not
pay its debts as they become due or shall admit in
writing its inability to pay its debts, or shall make
a general assignment for the benefit of creditors; or
the Company shall commence any case, proceeding or
other action seeking to have an order for relief
entered on its behalf as debtor or to
19
<PAGE> 20
adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under
any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or
other similar official for it or for all or any
substantial part of its property or shall file an
answer or other pleading in any such case, proceeding
or other action admitting the material allegations of
any petition, complaint or similar pleading filed;
(e) Paragraph 8.05 of the Agreement is deleted in its
entirety and replaced with the following new Paragraph:
8.05 Actions Seeking Reorganization. Any
involuntary case, proceeding or other action against
the Company is commenced seeking to have an order for
relief entered against it as debtor or to adjudicate
it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under
any law relating to bankruptcy, insolvency,
reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or
other similar official for it or for all or any
substantial part of its property, and such case,
proceeding or other action (i) results in the entry
of any order for relief against it or (ii) shall
remain undismissed for a period of sixty (60) days;
(f) Paragraph 8.06 of the Agreement is deleted in its
entirety.
(g) Paragraph 8.07 of the Agreement is deleted in its
entirety and replaced with the following new Paragraph:
8.07 Other Defaults. A default by the Company
shall have occurred and be continuing under the
Senior Debt and/or the Junior Debentures, and/or in
any payment of principal of or interest on any other
obligation for borrowed money (or any obligation or
obligations under a conditional sale or other title
retention agreement or any obligation or obligations
issued or assumed as full or partial payment for
property whether or not secured by a purchase money
mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit)
beyond any period of grace provided with respect
thereto in each case involving any individual
obligation or one or more obligations in an aggregate
principal amount of $250,000 or more or (ii) a
default by the Company shall have occurred and be
continuing in the performance of any other agreement,
term or condition contained in any agreement under
which any such obligation referred to in clause (i)
is created (or if any other default under any such
agreement shall occur and be continuing) if the
effect of such default is to cause, or permit the
holder or holders of such obligation or obligations
(or a trustee on behalf of
20
<PAGE> 21
such holder or holders) to cause, such obligation or
obligations to become due prior to its or their
stated maturity in each case involving any individual
obligation or one or more obligations in an aggregate
principal amount of $250,000 or more.
(h) Paragraph 8.08 of the Agreement is deleted in its
entirety.
Section 8. Security Interest.
Paragraph 12.02 of the Agreement is hereby amended by deleting
such Paragraph in its entirety.
Section 9. Notice.
Section 13 of the Agreement is hereby amended by adding the
following at the end of such section:
<TABLE>
<S> <C>
To Bradley: c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
To Poole: c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
</TABLE>
Section 10. Holders.
(a) Except as provided in this Section 10, as of the date
hereof, Allied shall no longer have any rights as a Holder under the Agreement.
Notwithstanding the foregoing, so long as Allied continues to be a holder of
any Warrants, it shall be treated as a Holder for purposes of Paragraphs 2.01,
2.02, 2.03, 6.13, 6.14, 6.15, 9.02 and 12.01, and Sections 3, 5, 10, 13, 14,
15, 17, 18, 19, 20, 21 and 22. Additionally, so long as the Company is
required to comply with the reporting requirements of the Securities Exchange
Act of 1934, as amended, the Company shall provide Allied with the information
reported to the Commission in connection therewith within ten (10) days after
the same is provided to the Commission; provided, however, in the event the
Company is not required to comply, or fails to comply, with the reporting
requirements of the Securities Exchange Act of 1934, as amended, Allied shall
receive the information described in Paragraph 6.22 of this Agreement, as and
when provided to the Holders. Notwithstanding anything to the contrary
contained herein, no failure on the part of the Company to provide any
information to Allied shall constitute an Event of Default under the Agreement;
provided, however, Allied shall have the right to seek injunctive relief to
compel the Company to provide such information.
(b) The parties hereto acknowledge that concurrently with
the execution of
21
<PAGE> 22
this Amendment, the Company shall repay to Allied all outstanding sums owed by
the Company under the Debentures held by Allied.
(c) The parties hereto acknowledge that concurrently with
the execution of this Amendment, the Junior Holders are purchasing the Junior
Debentures and that the Junior Holders have the right to sell all or a part of
the Junior Debentures to third parties. The parties hereto agree that no part
of the Junior Debentures may be sold to third parties without the prior written
consent of the Senior Holders, which consent shall not be unreasonably
withheld.
(d) The parties hereto agree that the Agreement is hereby
modified to provide that wherever the consent of a "Holder" or the "Holders" is
required thereunder, such consent shall only be required from the Senior
Holders.
Section 9. Conditions Precedent to the Obligations of the Senior Holders.
The obligation of the Senior Holders and Allied to execute and
deliver this Amendment and consummate the transactions contemplated by this
Amendment is subject to the satisfaction of each of the following conditions
precedent:
(a) the representations and warranties of the Company in
the Agreement shall be true and correct in all material respects as of the date
hereof as if made at such time subject to disclosures made to the Holders in
writing in connection with the execution of this Agreement;
(b) all covenants and agreements of the Company to be
performed or observed at or prior to the date hereof shall have been performed
or observed;
(c) no Material Adverse Change shall have occurred with
respect to the Company;
(d) Holdings shall have delivered a fully executed copy
of the Pledge Agreement;
(e) CPS shall have delivered a fully executed copy of the
CPS Registration Agreement;
(f) the Company and the Junior Holders shall have
delivered a fully executed copy of the Holders' Intercreditor Agreement;
(g) the Company shall have delivered to the Senior
Holders and Allied, the following:
(i) an Officer's Certificate of the Company executed
by its President and certifying that each of the conditions specified in
subsections (a) through (c) above, insofar as they relate to the Company, have
been satisfied;
22
<PAGE> 23
(ii) a Secretary's Certificate of the Company
certifying as to its Certificate of Incorporation, By-Laws, resolutions and
incumbency;
(iii) a Good Standing Certificate of the Company
issued by the Secretary of State of Delaware; and
(iv) an opinion of the Company's counsel addressed
to the Senior Holders and in form and substance reasonably acceptable to the
Senior Holders and their counsel;
(h) Holdings shall have delivered to the Senior Holders
and Allied a Secretary's Certificate of Holdings certifying (i) as to its
Certificate of Incorporation, By-Laws, resolutions and incumbency, and (ii)
that all of the documents executed and actions taken by or on behalf of
Holdings in connection with this Amendment and the transactions related thereto
have been duly authorized by the Board of Directors of Holdings;
(i) The Company shall have paid all of the fees, costs
and expenses, including without limitation, attorney's fees, of the Senior
Holders and Allied which are incurred in connection with the negotiation and
execution of this Amendment and the consummation of the transactions
contemplated herein.
(j) The Company shall have delivered all of the other
documents, instruments and agreements to the Senior Holders and Allied which
are required by the terms of this Amendment.
Section 10. Miscellaneous.
(a) The Company agrees to pay and save the Holders
harmless against liability for the payment of all reasonable out-of-pocket
expenses of the Holders arising in connection with this Amendment, including
fees and expenses of counsel for the Holders.
(b) The provisions of the Agreement shall remain in full
force and effect except as modified hereby.
[End of Document]
23
<PAGE> 24
IN WITNESS WHEREOF, the parties, by their duly authorized officers,
have executed and delivered this First Amendment to Investment Agreement as of
the date first written above.
<TABLE>
<S> <C>
DEVLIEG-BULLARD, INC.
ATTEST: By: /s/ W. O. Thomas
--------------------------- -------------------------------
ALLIED INVESTMENT CORPORATION
ATTEST: By: /s/ Richard E. Fearon, Jr.
--------------------------- -------------------------------
ALLIED INVESTMENT CORPORATION II
ATTEST: By: /s/ Richard E. Fearon, Jr.
--------------------------- -------------------------------
ALLIED CAPITAL CORPORATION II
ATTEST: By: /s/ Richard E. Fearon, Jr.
--------------------------- -------------------------------
BANC ONE CAPITAL PARTNERS CORPORATION
ATTEST: By: /s/ James H. Wolfe
--------------------------- -------------------------------
PNC CAPITAL CORP
ATTEST: By: /s/ David J. Blair
--------------------------- -------------------------------
WITNESS: /s/ Charles E. Bradley, Sr.
-------------------------- ----------------------------------
CHARLES E. BRADLEY, SR.
WITNESS: /s/ John G. Poole
-------------------------- ----------------------------------
JOHN G. POOLE
</TABLE>
24
<PAGE> 1
Exhibit 10.5
DEBENTURE
$2,500,000
October 23, 1995
FOR VALUE RECEIVED, the undersigned DeVlieg-Bullard, Inc., a Delaware
corporation (hereinafter "Company"), promises to pay to the order of Charles E.
Bradley, Sr. (hereinafter "Holder") the principal sum of Two Million Five
Hundred Thousand Dollars ($2,500,000), together with interest as set out herein
at his office or such other place as Holder may designate in writing.
Investment Agreement: This Debenture is subject to the terms of an Investment
Agreement between the Company, the Holder and certain other parties dated May
25, 1994, as amended by a certain First Amendment to Investment Agreement dated
today (collectively, the "Investment Agreement"), a copy of which may be
examined during normal business hours at the Company's offices. The Holder is
entitled to the benefits of the Investment Agreement and all of the exhibits
thereto, and reference is made thereto for a description of all rights and
remedies thereunder. Neither reference to the Investment Agreement, nor any
provision thereof or security for the other obligations evidenced hereby, shall
affect or impair the absolute and unconditional obligation of the Company to
pay the principal amount hereof, together with all interest accrued thereon and
expenses, when due. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Investment Agreement.
Interest: From date of advance and thereafter until repayment, interest on the
principal outstanding from time to time hereunder shall accrue hereunder at the
rate of fourteen and one-half percent (14.5%) per annum compounded annually.
Interest shall be calculated on the basis of a 360-day year and shall be
computed for each payment period on the basis of the actual number of days
elapsed.
Payments:
A. Payment of Interest. Interest at the rate of eleven percent (11%) per annum
(simple interest) on the principal amount due hereof shall be due and payable
on the first day of each calendar quarter, in arrears, commencing on the first
day of January 1, 1996 and continuing until the entire principal amount hereof
shall have been paid in full. The balance of the interest on the principal
amount due hereof shall be due and payable on the Maturity Date.
B. Payment of Principal. The entire principal amount of this Debenture shall
be due and payable on the Maturity Date.
C. Penalty. A penalty of an additional seven percent (7%), on an annualized
basis, of the amount of any late payment shall be due and payable with respect
to any such late payment.
1 of 5
<PAGE> 2
D. Other Payment Provisions. All payments of principal and interest hereunder
shall be payable to the Holder in lawful money of the United States of America
and in immediately available funds, not later than 5 p.m. eastern time on the
date when due, without offset. Any payment coming due on a day which is not a
business day shall be made on the next succeeding such business day, and any
such extension of the time of payment shall be included in the computation of
interest hereunder.
Maturity Date: As used herein, the term "Maturity Date" means June 30, 2001 or,
if earlier, a date which is the thirty (30) days after the date on or by which
the Senior Subordinated Debentures are paid in full. As used herein, the term
"Senior Subordinated Debentures" means the two Debentures, each dated May 25,
1994 and each in the original principal amount of Four Million Dollars
($4,000,000), issued to, respectively, Banc One Capital Partners Corporation
and PNC Capital Corp.
Prepayment: This Debenture may be prepaid in whole or in part prior to May 25,
1996, but only upon payment of a prepayment penalty equal to four percent (4%)
of the principal balance so prepaid, and only upon ten (10) days written notice
to Holder. Thereafter, payment of any installment of principal or interest may
be made prior to the Maturity Date thereof without penalty but only upon ten
(10) days prior written notice to Holder. Prepayments made without the
required notice will not be credited against principal until ten (10) days
after receipt. Notwithstanding the foregoing, this Debenture may not be
prepaid prior to the payment in full of the Senior Subordinated Debentures.
Collateral: This Debenture is secured by certain collateral under the terms of
the Investment Agreement.
Subordination: The indebtedness herein is junior to certain debts of the
Company (i) as referenced in the Investment Agreement and the Intercreditor
Agreement referenced therein and (ii) as referenced in that certain
Intercreditor Agreement of even date herewith among The CIT Group/Business
Credit, Inc. and the parties to the Investment Agreement.
No Assignment: This Debenture and the obligations hereunder may not be assigned
by the Company without the prior written consent of Holder. Holder may freely
assign its rights hereunder.
Default and Acceleration:
A. If any of the below-listed events occur prior to maturity hereof, then a
default may be declared at the option of the Holder without presentment,
demand, protest or further notice of any kind (all of which are hereby
expressly waived). In such event the Holder shall be entitled to be paid in
full the balance of any unpaid principal amount plus all accrued and unpaid
interest and any costs to enforce the terms hereof, including reasonable
attorneys' fees, and to any other remedies which may be available herein, in
the Investment Agreement or under any applicable law:
1. Failure to pay any part of the indebtedness hereof when due;
2 of 5
<PAGE> 3
2. The sale, transfer or other disposition of all or substantially all of the
assets of the Company, or all or substantially all of the capital stock of
the Company; or
3. The occurrence of any default hereunder or as provided under the Investment
Agreement pertaining hereto.
B. No course of dealing between the Holder and any other party hereto or any
failure or delay on the part of the Holder in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of the Holder
under this or any other applicable instrument. No single or partial exercise
of any rights or remedies hereunder shall operate as a waiver or preclude the
exercise of any other rights or remedies hereunder.
C. None of the rights, remedies, privileges or powers of the Holder expressly
provided for herein shall be exclusive, but each of them shall be cumulative
with and in addition to every other right, remedy, privilege and power now or
hereafter existing in favor of Holder, whether at law or in equity, by statute
or otherwise.
D. The Company shall pay all reasonable expenses of any nature, whether
incurred in or out of court, and whether incurred before or after this
Debenture shall become due at its Maturity Date or otherwise (including but not
limited to reasonable attorneys' fees and costs) which Holder may reasonably
deem necessary or proper in connection with the satisfaction of indebtedness or
the administration, supervision, preservation, protection of (including, but
not limited to, the maintenance of adequate insurance) or the realization upon
the collateral. Holder is authorized to pay at any time and from time to time
any or all of such expenses, add the amount of such payment to the amount of
principal outstanding and charge interest thereon at the rate specified herein.
E. The security rights of Holder and its assigns shall not be impaired by
Holder's sale, hypothecation or rehypothecation of this Debenture or any item
of the collateral, or by any indulgence, including, but not limited to:
1. Any renewal, extension or modification which Holder may grant with respect
to the indebtedness or any part thereof; or
2. Any surrender, compromise, release, renewal, extension, exchange or
substitution which Holder may grant in respect of the collateral; or
3. Any indulgence granted in respect of any endorser, guarantor or surety. The
purchaser, assignee, transferee or pledgee of this Debenture, the
collateral, any guaranty and any other document (or any of them), sold,
assigned, transferred, pledged or repledged by Holder, shall forthwith
become vested with and entitled to exercise all the powers and rights given
by this Debenture as if said purchaser, assignee, transferee or pledgee were
originally named as Holder in this Debenture.
Cost and Fees: The Company agrees that the Holder shall be reimbursed for any
and all costs and fees, including reasonable attorneys' fees and expenses,
incurred by the Holder
3 of 5
<PAGE> 4
or his affiliates in connection with (i) any suit, action or proceeding of the
Holder to enforce the provisions of this Debenture or any other loan document,
and (ii) any suit, action, claim or proceeding relating to this Debenture or
any other loan document asserted against the Holder of his affiliates by any
such party, in connection with which such other party does not prevail with
respect to substantially all of its claims. In the event any one or more of
the provisions contained in this Debenture or any other loan document shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Debenture or such other loan documents, but this Debenture and such
other loan document shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein. The
Company hereby declares, represents and warrants that it is a business or
commercial organization and that the indebtedness evidenced hereby is made for
the purpose of acquiring or carrying on a business or commercial enterprise
within the meaning of the laws of the State of Connecticut.
Definitions: The term indebtedness as used herein shall mean the indebtedness
evidenced by this Debenture, including principal, interest and expenses whether
contingent, now due or hereafter to become due, and whether heretofore or
contemporaneously herewith or hereafter contracted, and all other amounts due
under the provisions of the Investment Agreement. The term collateral as used
in this Debenture shall mean any funds, guarantees or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are or hereafter may be hypothecated directly or indirectly by the undersigned
or others in connection with, or as security for the indebtedness or any part
thereof. The collateral and each part thereof shall secure the indebtedness
and each part thereof.
Power of Attorney: If payment of the indebtedness evidenced by this Debenture,
or any part thereof, shall not be made when due and at the Maturity Date, by
acceleration or otherwise, the undersigned hereby authorizes and empowers any
attorney of any court of record in the United States to appear for the
undersigned in court, or before any clerk thereof, and confess judgment against
the undersigned in favor of the Holder of this Debenture for the amount due
thereon with interest and costs.
Waiver of Trial by Jury: The Company agrees that any suit, action or
proceeding, whether claim or counterclaim, brought or instituted by the Holder
on or with respect to this Debenture or any event, transaction or occurrence
arising out of or in any way connected with the Investment Agreement or the
dealing of the parties with respect thereto, shall be tried only by a court and
not by a jury. THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. the Company acknowledges and
agrees that the Holder would not extend credit under the Investment Agreement
to the Company and purchase this Debenture if this waiver of jury trial were
not part of the Investment Agreement.
Usury Savings: This Debenture is subject to the express condition and it is the
expressed intent of the parties, that at no time shall the Company be obligated
or required to pay
4 of 5
<PAGE> 5
interest on the principal balance due hereunder at a rate which could subject
the Holder to either civil or criminal liability as a result of being in excess
of the maximum interest rate which the Company is permitted by law to contract
or agree to pay. If by the terms of this Debenture, the Company is at any time
required or obligated to pay interest on the principal balance due hereunder at
a rate in excess of such maximum rate, such rate of interest shall be deemed to
be immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance hereof. No application to the principal
balance hereof pursuant to this paragraph shall give rise to any requirement to
pay any prepayment premium due hereunder.
Controlling Law: This Debenture shall be construed in accordance with and
governed by the laws of the State of Connecticut, without regard to its
principles of conflicts of law. Venue for any adjudication hereof shall be
only in the courts of the State of Connecticut or the Federal courts in the
State of Connecticut, to the jurisdiction of which courts all parties hereby
consent. The Company intends that the courts of the jurisdiction(s) in which
the Company is incorporated and conducts business shall afford full faith and
credit to any judgment rendered by a court of the State of Connecticut against
the Company hereunder, and should hold that the Connecticut courts have
jurisdiction to enter a valid, in personam judgement against the Company
hereunder.
Severability: To the extent any provision herein violates any applicable law,
that provision shall be considered void and the balance of this Agreement shall
remain unchanged and fully enforceable.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be executed
and its seal affixed on the day and year first above written.
[Seal] DEVLIEG-BULLARD, INC.
Attest: /s/ Sharon E. Huguet By: /s/ William O. Thomas
---------------------------- -----------------------------
Sharon E. Huguet, Secretary William O. Thomas, President
5 of 5
<PAGE> 1
Exhibit 10.6
DEBENTURE
$1,500,000
October 23, 1995
FOR VALUE RECEIVED, the undersigned DeVlieg-Bullard, Inc., a Delaware
corporation (hereinafter "Company"), promises to pay to the order of John G.
Poole (hereinafter "Holder") the principal sum of One Million Five Hundred
Thousand Dollars ($1,500,000), together with interest as set out herein at his
office or such other place as Holder may designate in writing.
Investment Agreement: This Debenture is subject to the terms of an Investment
Agreement between the Company, the Holder and certain other parties dated May
25, 1994, as amended by a certain First Amendment to Investment Agreement dated
today (collectively, the "Investment Agreement"), a copy of which may be
examined during normal business hours at the Company's offices. The Holder is
entitled to the benefits of the Investment Agreement and all of the exhibits
thereto, and reference is made thereto for a description of all rights and
remedies thereunder. Neither reference to the Investment Agreement, nor any
provision thereof or security for the other obligations evidenced hereby, shall
affect or impair the absolute and unconditional obligation of the Company to
pay the principal amount hereof, together with all interest accrued thereon and
expenses, when due. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Investment Agreement.
Interest: From date of advance and thereafter until repayment, interest on the
principal outstanding from time to time hereunder shall accrue hereunder at the
rate of fourteen and one-half percent (14.5%) per annum compounded annually.
Interest shall be calculated on the basis of a 360-day year and shall be
computed for each payment period on the basis of the actual number of days
elapsed.
Payments:
A. Payment of Interest. Interest at the rate of eleven percent (11%) per annum
(simple interest) on the principal amount due hereof shall be due and payable
on the first day of each calendar quarter, in arrears, commencing on the first
day of January 1, 1996 and continuing until the entire principal amount hereof
shall have been paid in full. The balance of the interest on the principal
amount due hereof shall be due and payable on the Maturity Date.
B. Payment of Principal. The entire principal amount of this Debenture shall
be due and payable on the Maturity Date.
C. Penalty. A penalty of an additional seven percent (7%), on an annualized
basis, of the amount of any late payment shall be due and payable with respect
to any such late payment.
1 of 5
<PAGE> 2
D. Other Payment Provisions. All payments of principal and interest hereunder
shall be payable to the Holder in lawful money of the United States of America
and in immediately available funds, not later than 5 p.m. eastern time on the
date when due, without offset. Any payment coming due on a day which is not a
business day shall be made on the next succeeding such business day, and any
such extension of the time of payment shall be included in the computation of
interest hereunder.
Maturity Date: As used herein, the term "Maturity Date" means June 30, 2001 or,
if earlier, a date which is the thirty (30) days after the date on or by which
the Senior Subordinated Debentures are paid in full. As used herein, the term
"Senior Subordinated Debentures" means the two Debentures, each dated May 25,
1994 and each in the original principal amount of Four Million Dollars
($4,000,000), issued to, respectively, Banc One Capital Partners Corporation
and PNC Capital Corp.
Prepayment: This Debenture may be prepaid in whole or in part prior to May 25,
1996, but only upon payment of a prepayment penalty equal to four percent (4%)
of the principal balance so prepaid, and only upon ten (10) days written notice
to Holder. Thereafter, payment of any installment of principal or interest may
be made prior to the Maturity Date thereof without penalty but only upon ten
(10) days prior written notice to Holder. Prepayments made without the
required notice will not be credited against principal until ten (10) days
after receipt. Notwithstanding the foregoing, this Debenture may not be
prepaid prior to the payment in full of the Senior Subordinated Debentures.
Collateral: This Debenture is secured by certain collateral under the terms of
the Investment Agreement.
Subordination: The indebtedness herein is junior to certain debts of the
Company (i) as referenced in the Investment Agreement and the Intercreditor
Agreement referenced therein and (ii) as referenced in that certain
Intercreditor Agreement of even date herewith among The CIT Group/Business
Credit, Inc. and the parties to the Investment Agreement.
No Assignment: This Debenture and the obligations hereunder may not be assigned
by the Company without the prior written consent of Holder. Holder may freely
assign its rights hereunder.
Default and Acceleration:
A. If any of the below-listed events occur prior to maturity hereof, then a
default may be declared at the option of the Holder without presentment,
demand, protest or further notice of any kind (all of which are hereby
expressly waived). In such event the Holder shall be entitled to be paid in
full the balance of any unpaid principal amount plus all accrued and unpaid
interest and any costs to enforce the terms hereof, including reasonable
attorneys' fees, and to any other remedies which may be available herein, in
the Investment Agreement or under any applicable law:
1. Failure to pay any part of the indebtedness hereof when due;
2 of 5
<PAGE> 3
2. The sale, transfer or other disposition of all or substantially all of the
assets of the Company, or all or substantially all of the capital stock of
the Company; or
3. The occurrence of any default hereunder or as provided under the Investment
Agreement pertaining hereto.
B. No course of dealing between the Holder and any other party hereto or any
failure or delay on the part of the Holder in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of the Holder
under this or any other applicable instrument. No single or partial exercise
of any rights or remedies hereunder shall operate as a waiver or preclude the
exercise of any other rights or remedies hereunder.
C. None of the rights, remedies, privileges or powers of the Holder expressly
provided for herein shall be exclusive, but each of them shall be cumulative
with and in addition to every other right, remedy, privilege and power now or
hereafter existing in favor of Holder, whether at law or in equity, by statute
or otherwise.
D. The Company shall pay all reasonable expenses of any nature, whether
incurred in or out of court, and whether incurred before or after this
Debenture shall become due at its Maturity Date or otherwise (including but not
limited to reasonable attorneys' fees and costs) which Holder may reasonably
deem necessary or proper in connection with the satisfaction of indebtedness or
the administration, supervision, preservation, protection of (including, but
not limited to, the maintenance of adequate insurance) or the realization upon
the collateral. Holder is authorized to pay at any time and from time to time
any or all of such expenses, add the amount of such payment to the amount of
principal outstanding and charge interest thereon at the rate specified herein.
E. The security rights of Holder and its assigns shall not be impaired by
Holder's sale, hypothecation or rehypothecation of this Debenture or any item
of the collateral, or by any indulgence, including, but not limited to:
1. Any renewal, extension or modification which Holder may grant with respect
to the indebtedness or any part thereof; or
2. Any surrender, compromise, release, renewal, extension, exchange or
substitution which Holder may grant in respect of the collateral; or
3. Any indulgence granted in respect of any endorser, guarantor or surety. The
purchaser, assignee, transferee or pledgee of this Debenture, the
collateral, any guaranty and any other document (or any of them), sold,
assigned, transferred, pledged or repledged by Holder, shall forthwith
become vested with and entitled to exercise all the powers and rights given
by this Debenture as if said purchaser, assignee, transferee or pledgee were
originally named as Holder in this Debenture.
Cost and Fees: The Company agrees that the Holder shall be reimbursed for any
and all costs and fees, including reasonable attorneys' fees and expenses,
incurred by the Holder
3 of 5
<PAGE> 4
or his affiliates in connection with (i) any suit, action or proceeding of the
Holder to enforce the provisions of this Debenture or any other loan document,
and (ii) any suit, action, claim or proceeding relating to this Debenture or
any other loan document asserted against the Holder of his affiliates by any
such party, in connection with which such other party does not prevail with
respect to substantially all of its claims. In the event any one or more of
the provisions contained in this Debenture or any other loan document shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Debenture or such other loan documents, but this Debenture and such
other loan document shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein or therein. The
Company hereby declares, represents and warrants that it is a business or
commercial organization and that the indebtedness evidenced hereby is made for
the purpose of acquiring or carrying on a business or commercial enterprise
within the meaning of the laws of the State of Connecticut.
Definitions: The term indebtedness as used herein shall mean the indebtedness
evidenced by this Debenture, including principal, interest and expenses whether
contingent, now due or hereafter to become due, and whether heretofore or
contemporaneously herewith or hereafter contracted, and all other amounts due
under the provisions of the Investment Agreement. The term collateral as used
in this Debenture shall mean any funds, guarantees or other property or rights
therein of any nature whatsoever or the proceeds thereof which may have been,
are or hereafter may be hypothecated directly or indirectly by the undersigned
or others in connection with, or as security for the indebtedness or any part
thereof. The collateral and each part thereof shall secure the indebtedness
and each part thereof.
Power of Attorney: If payment of the indebtedness evidenced by this Debenture,
or any part thereof, shall not be made when due and at the Maturity Date, by
acceleration or otherwise, the undersigned hereby authorizes and empowers any
attorney of any court of record in the United States to appear for the
undersigned in court, or before any clerk thereof, and confess judgment against
the undersigned in favor of the Holder of this Debenture for the amount due
thereon with interest and costs.
Waiver of Trial by Jury: The Company agrees that any suit, action or
proceeding, whether claim or counterclaim, brought or instituted by the Holder
on or with respect to this Debenture or any event, transaction or occurrence
arising out of or in any way connected with the Investment Agreement or the
dealing of the parties with respect thereto, shall be tried only by a court and
not by a jury. THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. the Company acknowledges and
agrees that the Holder would not extend credit under the Investment Agreement
to the Company and purchase this Debenture if this waiver of jury trial were
not part of the Investment Agreement.
Usury Savings: This Debenture is subject to the express condition and it is the
expressed intent of the parties, that at no time shall the Company be obligated
or required to pay
4 of 5
<PAGE> 5
interest on the principal balance due hereunder at a rate which could subject
the Holder to either civil or criminal liability as a result of being in excess
of the maximum interest rate which the Company is permitted by law to contract
or agree to pay. If by the terms of this Debenture, the Company is at any time
required or obligated to pay interest on the principal balance due hereunder at
a rate in excess of such maximum rate, such rate of interest shall be deemed to
be immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance hereof. No application to the principal
balance hereof pursuant to this paragraph shall give rise to any requirement to
pay any prepayment premium due hereunder.
Controlling Law: This Debenture shall be construed in accordance with and
governed by the laws of the State of Connecticut, without regard to its
principles of conflicts of law. Venue for any adjudication hereof shall be
only in the courts of the State of Connecticut or the Federal courts in the
State of Connecticut, to the jurisdiction of which courts all parties hereby
consent. The Company intends that the courts of the jurisdiction(s) in which
the Company is incorporated and conducts business shall afford full faith and
credit to any judgment rendered by a court of the State of Connecticut against
the Company hereunder, and should hold that the Connecticut courts have
jurisdiction to enter a valid, in personam judgement against the Company
hereunder.
Severability: To the extent any provision herein violates any applicable law,
that provision shall be considered void and the balance of this Agreement shall
remain unchanged and fully enforceable.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be executed
and its seal affixed on the day and year first above written.
[Seal] DEVLIEG-BULLARD, INC.
Attest: /s/ Sharon E. Huguet By: /s/ William O. Thomas
--------------------------- ----------------------------
Sharon E. Huguet, Secretary William O. Thomas, President
5 of 5
<PAGE> 1
Exhibit 10.7
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
DEVLIEG-BULLARD, INC.
---------------
CLASS A STOCK PURCHASE WARRANT
---------------
I. Grant.
DeVlieg-Bullard, Inc., a Delaware corporation (hereinafter "Company"),
for value received hereby grants to Charles E. Bradley, Sr. or his registered
assigns (hereinafter "Holder"), under the terms herein the right to purchase
fifty-two thousand eighty-three (52,083) fully paid and non-assessable shares
of the Company's outstanding common stock, as provided by paragraph 2.01B. of
the Investment Agreement referenced below, in addition to any shares that may
arise under any other stock purchase warrants or stock acquisitions.
II. Expiration.
This Warrant may be exercised at any time in whole or in part from and
after May 25, 1996 and shall expire the later of (i) three (3) years from the
date of the final payment on the Debentures issued under the Investment
Agreement or (ii) May 25, 2004.
III. Exercise Price.
The exercise price of this Warrant shall be One Cent ($0.01) per share.
IV. Investment Agreement.
This Warrant is subject to the terms of an Investment Agreement dated
May 25, 1994 between the Company, the Holder and certain other parties, as
amended by a certain First Amendment to Investment Agreement dated the date
hereof, a copy of which is on file and may be examined at the Company's offices
during regular business hours.
V. Anti-dilution and Registration Rights.
Regardless of the above grant provision, the Holder shall have certain
anti-dilution rights as set forth in the Investment Agreement and registration
rights as set forth in a Registration Agreement dated May 25, 1994 between the
Company, the Holder and certain other parties, as amended by a certain First
Amendment to Registration Agreement of even date herewith.
VI. Exercise Procedure.
This Warrant may be exercised, in whole or in part, by presenting it and
tendering the exercise price in legal tender or by bank cashier's or certified
check at the principal office of the Company along with written subscription
substantially in the form of Exhibit A hereof. In lieu of paying such
exercise price in cash the Holder may tender to the Company for cancellation
that number of shares issuable under this
<PAGE> 2
Warrant which represents the aggregate fair market value (as determined in good
faith by the board of directors of the Company and the Holder) equal to such
exercise price. The date on which this Warrant is thus surrendered,
accompanied by tender or payment as hereinbefore or hereinafter provided, is
referred to herein as the Exercise Date. The Company shall forthwith at its
expense (including the payment of issue taxes) issue and deliver the proper
number of shares, and such shares shall be deemed issued for all purposes as of
the opening of business on the Exercise Date notwithstanding any delay in the
actual issuance.
VII. Sale or Exchange of Company or Assets.
If prior to issuance of stock under this Warrant the Company sells or
exchanges all or substantially all of its assets, or all of the
then-outstanding shares of capital stock of the Company are sold or exchanged
to any party other than the Holder, then the Holder at his option may receive,
in lieu of the stock otherwise issuable hereunder, such money or property as he
would have been entitled to receive if this Warrant had been exercised prior to
such sale or exchange.
VIII. Sale of Warrant or Shares.
Neither this Warrant nor other shares of common stock issuable upon
exercise of the conversion rights herein, have been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
Neither this Warrant nor any shares when issued may be sold, assigned,
transferred, pledged or hypothecated or otherwise disposed of in the absence of
(i) an affective registration statement for this Warrant or the shares, as the
case may be, under the Securities Act of 1933, as amended, and such
registration or qualification as may be necessary under the securities laws of
any state, or (ii) an opinion of counsel reasonably satisfactory to and at the
cost of the Company that such registration or qualification is not required.
The Company shall cause a certificate or certificates evidencing all or any of
the shares issued upon exercise of the conversion rights herein prior to said
registration or qualification of such shares to bear the following legend:
"The shares evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
The shares may not be sold, assigned, transferred, pledged or hypothecated or
otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any state, or an
opinion of counsel satisfactory to the Company that such registration or
qualification is not required."
IX. Transfer.
This Warrant shall be registered on the books of the Company which
shall be kept for that purpose, and shall be transferable in whole or in part
but only on such books by the Holder in person or by duly authorized attorney
with written notice substantially in the form of Exhibit B hereof, and only in
compliance with the preceding paragraph. The Company may issue appropriate
stop orders to its transfer agent to prevent a transfer in violation of the
preceding paragraph.
X. Replacement of Warrant.
At the request of the Holder and on production of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) if required by the
Company, upon delivery of an indemnity agreement, the Company, at Holder's
expense, will issue in lieu thereof a new Warrant of like tenor.
2
<PAGE> 3
XI. Covenants of the Company.
The Company hereby makes the same covenants as set out in the
Investment Agreement, subject to the applicable limitations therein.
XII. Investment Covenant.
The Holder by its acceptance hereof covenants that this Warrant is,
and any stock issued hereunder will be, acquired for his own account for
investment purposes, and that the Holder will not distribute the same in
violation of any state or federal law or regulation.
XIII. Governing Law.
This Warrant shall be construed according to the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its President and to be attested by
its Secretary, as of this 23rd day of October, 1995.
DEVLIEG-BULLARD, INC.
Attest: /s/ Sharon E. Huguet By: /s/ William O. Thomas
---------------------------- ----------------------------
Sharon E. Huguet, Secretary William O. Thomas, President
3
<PAGE> 4
Exhibit A
IRREVOCABLE SUBSCRIPTION
To: DeVlieg-Bullard, Inc.
Gentlemen:
The undersigned hereby elects to exercise his rights under the attached
Warrant by purchasing ____________ shares of the Common Stock of your company,
and hereby irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
- --------------------------------------------------------
(Name)
- --------------------------------------------------------
(Address)
- --------------------------------------------------------
(Taxpayer Number)
and delivered to:
- --------------------------------------------------------
(Name)
- --------------------------------------------------------
(Address)
The exercise price of $__________ is enclosed.
Date:
--------------------
Signed:
------------------------------------------------
(Name of Holder, Please Print)
------------------------------------------------
(Address)
------------------------------------------------
(Signature)
<PAGE> 5
Exhibit B
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto:
- ------------------------------------------------------
(Name)
- ------------------------------------------------------
(Address)
the attached Warrant together with all right, title and interest therein to
purchase _____________ shares of Common Stock in DeVlieg-Bullard, Inc., to
which the Warrant relates, and does hereby irrevocably appoint ________________
________________________________________ attorney to transfer said Warrant on
the books of ______________________________, Inc., with full power of
substitution in the premises.
Dated:
--------------------------
----------------------------------
(Signature)
----------------------------------
(Name and Title)
----------------------------------
----------------------------------
(Address)
<PAGE> 1
Exhibit 10.8
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
DEVLIEG-BULLARD, INC.
_______________________________________
CLASS B STOCK PURCHASE WARRANT
_______________________________________
I. Grant.
DeVlieg-Bullard, Inc., a Delaware corporation (hereinafter "Company"),
for value received hereby grants to PNC CAPITAL CORP., a Maryland corporation
or its registered assigns (hereinafter "Holder"), under the terms herein the
right to purchase that number of fully paid and non-assessable shares of the
Company's outstanding common stock, as provided by paragraph 2.02B of the
Investment Agreement referenced below, in addition to any shares that may arise
under any other stock purchase warrants or stock acquisitions.
II. Expiration.
This Warrant may be exercised at any time in whole or in part from and
after May 25, 1996 and shall expire the later of (i) three (3) years from the
date of the final payment on the Debentures issued under the Investment
Agreement or (ii) May 25, 2004.
III. Exercise Price.
The exercise price of this Warrant shall be One Cent ($0.01) per share.
IV. Investment Agreement.
This Warrant is subject to the terms of an Investment Agreement dated
May 25, 1994 between the Company, the Holder and certain other parties, as
amended by a certain First Amendment to Investment Agreement dated the date
hereof (collectively, the "Investment Agreement"), a copy of which is on file
and may be examined at the Company's offices during regular business hours.
V. Anti-Dilution and Registration Rights.
Regardless of the above grant provision, the Holder shall have certain
anti-dilution rights as set forth in the Investment Agreement and registration
rights as set forth in a Registration Agreement dated May 25, 1994 between the
Company, the Holder and certain other parties, as amended by a certain First
Amendment to Registration Rights Agreement dated the date hereof (collectively,
the "Registration Rights Agreement").
<PAGE> 2
VI. Exercise Procedure.
This Warrant may be exercised, in whole or in part, by presenting it
and tendering the exercise price in legal tender or by bank cashier's or
certified check at the principal office of the Company along with written
subscription substantially in the form of Exhibit A hereof. In lieu of paying
such exercise price in cash the Holder may tender to the Company for
cancellation that number of shares issuable under this Warrant which represents
the aggregate fair market value (as determined in good faith by the board of
directors of the Company and the Holder) equal to such exercise price. The
date on which this Warrant is thus surrendered, accompanied by tender or
payment as hereinbefore or hereinafter provided, is referred to herein as the
Exercise Date. The Company shall forthwith at its expense (including the
payment of issue taxes) issue and deliver the proper number of shares, and such
shares shall be deemed issued for all purposes as of the opening of business on
the Exercise Date notwithstanding any delay in the actual issuance.
VII. Sale or Exchange of Company or Assets.
If prior to issuance of stock under this Warrant the Company sells or
exchanges all or substantially all of its assets, or all of the
then-outstanding shares of capital stock of the Company are sold or exchanged
to any party other than the Holder, then the Holder at its option may receive,
in lieu of the stock otherwise issuable hereunder, such money or property as it
would have been entitled to receive if this Warrant had been exercised prior to
such sale or exchange.
VIII. Sale of Warrant or Shares.
Neither this Warrant nor other shares of common stock issuable upon
exercise of the conversion rights herein, have been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
Neither this Warrant nor any shares when issued may be sold, assigned,
transferred, pledged or hypothecated or otherwise disposed of in the absence of
(i) an effective registration statement for this Warrant or the shares, as the
case may be, under the Securities Act of 1933, as amended, and such
registration or qualification as may be necessary under the securities laws of
any state, or (ii) an opinion of counsel reasonably satisfactory to and at the
cost of the Company that such registration or qualification is not required.
The Company shall cause a certificate or certificates evidencing all or any of
the shares issued upon exercise of the conversion rights herein prior to said
registration and qualification of such shares to bear the following legend:
"The shares evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
The shares may not be sold, assigned, transferred, pledged or hypothecated or
otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any state, or an
opinion of counsel satisfactory to the Company that such registration or
qualification is not required."
2
<PAGE> 3
IX. Transfer.
This Warrant shall be registered on the books of the Company which
shall be kept for that purpose, and shall be transferable in whole or in part
but only on such books by the Holder in person or by duly authorized attorney
with written notice substantially in the form of Exhibit B hereof, and only in
compliance with the preceding paragraph. The Company may issue appropriate
stop orders to its transfer agent to prevent a transfer in violation of the
preceding paragraph.
X. Replacement of Warrant.
At the request of the Holder and on production of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) if required by the
Company, upon delivery of an indemnity agreement, the Company, at Holder's
expense, will issue in lieu thereof a new Warrant of like tenor.
XI. Covenants of the Company.
The Company hereby makes the same covenants as set out in the
Investment Agreement, subject to the applicable limitations therein.
XII. Investment Covenant.
The Holder by its acceptance hereof covenants that this Warrant is,
and any stock issued hereunder will be, acquired for its own account for
investment purposes, and that the Holder will not distribute the same in
violation of any state or federal law or regulation.
XIII. Governing Law.
This Warrant shall be construed according to the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its President and to be attested by
its Secretary, as of this 23rd day of October, 1995.
DEVLIEG-BULLARD, INC.
Attest: /s/ Sharon E. Huguet By: /s/ William O. Thomas
---------------------- ----------------------------
Secretary William O. Thomas, President
3
<PAGE> 4
Exhibit A
IRREVOCABLE SUBSCRIPTION
To: DeVlieg-Bullard, Inc.
Gentlemen:
The undersigned hereby elects to exercise its right under the attached Warrant
by purchasing _____________________ shares of the Common Stock of your company,
and hereby irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
- ---------------------------------------------------
(Name)
- ---------------------------------------------------
(Address)
- ---------------------------------------------------
(Taxpayer Number)
and delivered to:
- ---------------------------------------------------
(Name)
- ---------------------------------------------------
(Address)
The exercise price of $___________ is enclosed.
Date:
-----------------------
Signed:
----------------------------------
(Name of Holder, Please Print)
----------------------------------
(Address)
----------------------------------
(Signature)
<PAGE> 5
Exhibit B
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto:
- ---------------------------------------------------
(Name)
- ---------------------------------------------------
(Address)
the attached Warrant together with all right, title and interest therein to
purchase _________________ shares of Common Stock in DeVlieg-Bullard, Inc., to
which the Warrant relates, and does hereby irrevocably appoint _______________
__________________________ attorney to transfer said Warrant on the books of
DeVlieg-Bullard, Inc., with full power of substitution in the premises.
Done this _______ day of ___________________, 19____.
------------------------------------------
(Signature)
------------------------------------------
(Name and Title)
------------------------------------------
------------------------------------------
(Address)
<PAGE> 1
Exhibit 10.9
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
DEVLIEG-BULLARD, INC.
---------------------
CLASS C STOCK PURCHASE WARRANT
---------------------
I. Grant.
DeVlieg-Bullard, Inc., a Delaware corporation (hereinafter "Company"),
for value received hereby grants to PNC Capital Corp., a Delaware corporation,
or its registered assigns (hereinafter "Holder"), under the terms herein the
right to purchase two hundred fifty thousand (250,000) fully paid and
non-assessable shares of the Company's outstanding common stock, as provided by
section 2.04 of the Investment Agreement referenced below, in addition to any
shares that may arise under any other stock purchase warrants or stock
acquisitions.
II. Expiration.
This Warrant may be exercised at any time in whole or in part from and
after October 31, 1998 and shall expire the later of (i) three (3) years from
the date of the final payment on the Debentures issued under the Investment
Agreement or (ii) May 25, 2004.
III. Exercise Price.
The exercise price of this Warrant shall be One Cent ($0.01) per share.
IV. Investment Agreement.
This Warrant is subject to the terms of an Investment Agreement dated
May 25, 1994 between the Company, the Holder and certain other parties, as
amended by a certain First Amendment to Investment Agreement dated the date
hereof, a copy of which is on file and may be examined at the Company's offices
during regular business hours.
V. Anti-dilution and Registration Rights.
Regardless of the above grant provision, the Holder shall have certain
anti-dilution rights as set forth in the Investment Agreement and registration
rights as set forth in a Registration Agreement dated May 25, 1994 between the
Company, the Holder and certain other parties, as amended by a certain First
Amendment to Registration Agreement of even date herewith.
VI. Exercise Procedure.
This Warrant may be exercised, in whole or in part, by presenting it and
tendering the exercise price in legal tender or by bank cashier's or certified
check at the principal office of the Company along with written subscription
substantially in the form of Exhibit A hereof. In lieu of paying such
exercise price in cash the Holder may tender to the Company for cancellation
that number of shares issuable under this
<PAGE> 2
Warrant which represents the aggregate fair market value (as determined in good
faith by the board of directors of the Company and the Holder) equal to such
exercise price. The date on which this Warrant is thus surrendered,
accompanied by tender or payment as hereinbefore or hereinafter provided, is
referred to herein as the Exercise Date. The Company shall forthwith at its
expense (including the payment of issue taxes) issue and deliver the proper
number of shares, and such shares shall be deemed issued for all purposes as of
the opening of business on the Exercise Date notwithstanding any delay in the
actual issuance.
VII. Sale or Exchange of Company or Assets.
If prior to issuance of stock under this Warrant the Company sells or
exchanges all or substantially all of its assets, or all of the
then-outstanding shares of capital stock of the Company are sold or exchanged
to any party other than the Holder, then the Holder at its option may receive,
in lieu of the stock otherwise issuable hereunder, such money or property as it
would have been entitled to receive if this Warrant had been exercised prior to
such sale or exchange.
VIII. Sale of Warrant or Shares.
Neither this Warrant nor other shares of common stock issuable upon
exercise of the conversion rights herein, have been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
Neither this Warrant nor any shares when issued may be sold, assigned,
transferred, pledged or hypothecated or otherwise disposed of in the absence of
(i) an affective registration statement for this Warrant or the shares, as the
case may be, under the Securities Act of 1933, as amended, and such
registration or qualification as may be necessary under the securities laws of
any state, or (ii) an opinion of counsel reasonably satisfactory to and at the
cost of the Company that such registration or qualification is not required.
The Company shall cause a certificate or certificates evidencing all or any of
the shares issued upon exercise of the conversion rights herein prior to said
registration or qualification of such shares to bear the following legend:
"The shares evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any state.
The shares may not be sold, assigned, transferred, pledged or hypothecated or
otherwise disposed of in the absence of an effective registration statement
under the Securities Act of 1933, as amended, and such registration or
qualification as may be necessary under the securities laws of any state, or an
opinion of counsel satisfactory to the Company that such registration or
qualification is not required."
IX. Transfer.
This Warrant shall be registered on the books of the Company which
shall be kept for that purpose, and shall be transferable in whole or in part
but only on such books by the Holder in person or by duly authorized attorney
with written notice substantially in the form of Exhibit B hereof, and only in
compliance with the preceding paragraph. The Company may issue appropriate
stop orders to its transfer agent to prevent a transfer in violation of the
preceding paragraph.
X. Replacement of Warrant.
At the request of the Holder and on production of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) if required by the
Company, upon delivery of an indemnity agreement, the Company, at Holder's
expense, will issue in lieu thereof a new Warrant of like tenor.
2
<PAGE> 3
XI. Covenants of the Company.
The Company hereby makes the same covenants as set out in the
Investment Agreement, subject to the applicable limitations therein.
XII. Investment Covenant.
The Holder by its acceptance hereof covenants that this Warrant is,
and any stock issued hereunder will be, acquired for its own account for
investment purposes, and that the Holder will not distribute the same in
violation of any state or federal law or regulation.
XIII. Governing Law.
This Warrant shall be construed according to the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its President and to be attested by
its Secretary, as of this 23rd day of October, 1995.
DEVLIEG-BULLARD, INC.
Attest: /s/ Sharon E. Huguet By: /s/ William O. Thomas
---------------------------- -----------------------------
Sharon E. Huguet, Secretary William O. Thomas, President
3
<PAGE> 4
Exhibit A
IRREVOCABLE SUBSCRIPTION
To: DeVlieg-Bullard, Inc.
Gentlemen:
The undersigned hereby elects to exercise its rights under the attached
Warrant by purchasing ____________ shares of the Common Stock of your company,
and hereby irrevocably subscribes to such issue. The certificates for such
shares shall be issued in the name of
- --------------------------------------------------------
(Name)
- --------------------------------------------------------
(Address)
- --------------------------------------------------------
(Taxpayer Number)
and delivered to:
- --------------------------------------------------------
(Name)
- --------------------------------------------------------
(Address)
The exercise price of $__________ is enclosed.
Date:
--------------------
Signed:
------------------------------------------------
(Name of Holder, Please Print)
------------------------------------------------
(Address)
------------------------------------------------
(Signature)
<PAGE> 5
Exhibit B
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers unto:
- ------------------------------------------------------
(Name)
- ------------------------------------------------------
(Address)
the attached Warrant together with all right, title and interest therein to
purchase _____________ shares of Common Stock in DeVlieg-Bullard, Inc., to
which the Warrant relates, and does hereby irrevocably appoint ______________
________________________________________ attorney to transfer said Warrant on
the books of ______________________________, Inc., with full power of
substitution in the premises.
Dated:
------------------------------
----------------------------------
(Signature)
----------------------------------
(Name and Title)
----------------------------------
----------------------------------
(Address)
<PAGE> 1
Exhibit 10.10
CREDIT SUPPORT AGREEMENT
This Agreement dated as of October 23, 1995 is between
DeVlieg-Bullard, Inc. ("DBI") and CPS Holdings, Inc. (the "Company"), both
Delaware corporations.
WHEREAS, on or about May 25, 1994, DBI incurred certain indebtedness
(the "Subordinated Indebtedness") under certain Debentures in the aggregate
principal amount of $12,000,000 (the "Debentures") issued to Allied Investment
Corp. ("AIC"), Allied Investment Corp. II ("AIC II"), Allied Capital
Corporation II ("ACC II" and, together with AIC and AIC II, the "Allied
Companies"), Banc One Capital Partners Corporation ("Banc One") and PNC Capital
Corp. ("PNC" and together with the Allied Companies and Banc One, the "Original
Subordinated Creditors"); and
WHEREAS, DBI and the Original Subordinated Creditors propose to amend
certain terms and provisions of the Subordinated Indebtedness and/or the
Debentures and/or the agreements, instruments and documents relating thereto
(the "Related Documents"); and
WHEREAS, Charles E. Bradley, Sr. ("Bradley") and John G. Poole
("Poole" and, together with Bradley, the "Affiliates") are directors and
stockholders of the Company and of DBI; and
WHEREAS, in connection with the transactions referred to above, at
the request of DBI, the Affiliates propose to purchase the Debentures issued to
the Allied Companies (the "Allied Debentures") or to make loans to DBI to
enable DBI to prepay the Allied Debentures (the "Affiliate Loans"); and
WHEREAS, DBI and the Affiliates have requested that the Company make a
pledge (the "Pledge") of up to 600,000 shares (the "Company's CPS Shares") of
the Common Stock of Consumer Portfolio Services, Inc. ("CPS") to one or more of
the Original Subordinated Creditors and/or to the Affiliates (collectively, the
"Pledgees") to secure all or a portion of the obligations of DBI under the
Subordinated Indebtedness and/or the Debentures and/or the Related Documents
and/or the Affiliate Loans (collectively, the "DBI Obligations"); and
WHEREAS, DBI has agreed to pay the Company a credit support fee for
making the Pledge as provided for herein; and
WHEREAS, the Company is expected to merge with and into CPS on or
before November 15, 1995 (the "Merger"); and
WHEREAS, in the Merger Bradley will receive more than 600,000 shares
of the Common Stock of CPS ("Bradley's CPS Shares"); and
WHEREAS, Bradley and the Company have entered into a certain Credit
Support Substitution and Indemnity Agreement (the "Substitution and Indemnity
Agreement") dated as of October 14, 1995 pursuant to which, among other
things, Bradley has agreed, promptly after
<PAGE> 2
consummation of the Merger, to substitute 600,000 of Bradley's CPS Shares
and/or to cause others to substitute CPS shares for the Company's CPS Shares
under the Pledge and to cause the Company's CPS Shares to be released from the
Pledge.
NOW THEREFORE, the parties hereby agree as follows:
1. DBI shall pay the Company a fee (the "Fee") for making the
Pledge at the rate of $90,000 per year for so long as the Pledge is in effect.
The fee shall be payable in monthly installments of $7,500 in arrears on the
15th day of each calendar month beginning November 15, 1995. If the Pledge is
in effect for only part of a period, the Fee allocable to such period shall be
prorated.
2. If, as contemplated by the Substitution and Indemnity
Agreement, Bradley and/or one or more other persons or entities (collectively,
the "Substitute Pledgors") pledge shares of CPS common stock and/or other
collateral to secure the DBI Obligations (the"Substitute Pledge") in
substitution for and replacement of the Pledge, then, in such case the
following provisions shall apply:
(a) The Fee shall be payable to the Company for the period to
the date on which the Substitute Pledge is made and the Pledge is
released (the "Substitute Date"), but not thereafter.
(b) From and after the Substitute Date, DBI shall pay a fee
(the "Substitute Fee") to the Substitute Pledgors for making the
Substitute Pledge at the rate of $90,000 per year for so long as the
Substitute Pledge is in effect. The Substitute Fee shall be payable in
arrears in monthly installments of $7,500 on the 15th day of each
calendar month beginning on the first day after the Substitute Date
which is the 15th day of a calendar month. If the Substitute Pledge
is in effect for only part of a period, the Substitute Fee allocable
to such period shall be prorated.
3. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by first class, registered or certified mail,
return receipt requested, postage and registry fees prepaid, and addressed as
follows:
(a) If to DBI:
DeVlieg-Bullard, Inc.
One Gorham Island
Westport, CT 06880
Attention: Chief Financial Officer
2
<PAGE> 3
(b) If to the Company:
CPS Holdings, Inc.
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06905
Attention: President
(c) If to Bradley:
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06905
(d) If to any other Substitute Pledgor:
At the address to be provided
in writing to DBI by such Substitute Pledgor.
Addresses may be changed by notice in writing signed by the party
changing such party's address and such notice shall be effective only upon
receipt by the other parties.
4. The Substitute Pledgors are intended to be third-party
beneficiaries of this Agreement.
5. This Agreement (i) contains the entire understanding of the
parties with respect to the subject matter hereof; (ii) supersedes all prior
agreements and understandings if any, with respect to such subject matter;
(iii) may be amended only in writing signed by DBI and, prior to the Substitute
Date, by the Company or, from and after the Substitute Date, by the Substitute
Pledgors; (iv) shall inure to the benefit of and be binding upon DBI, the
Company, the Substitute Pledgors and their respective successors, assigns,
personal representatives and heirs; (v) shall be governed and construed in
accordance with the laws of the State of Connecticut without regard to
principles of conflicts of laws; and (vi) may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken further shall constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written,
CPS HOLDINGS, INC. DEVLIEG-BULLARD, INC.
By: /s/ John G. Poole By: /s/ W. O. Thomas
-------------------------- --------------------------
Name: John G. Poole Name: William O. Thomas
------------------------ ------------------------
Title: Vice President Title: President
----------------------- -----------------------
4
<PAGE> 1
Exhibit 10.11
FIRST AMENDMENT TO
REGISTRATION AGREEMENT
This First Amendment to Registration Agreement dated as of October 23,
1995 is among DeVlieg-Bullard, Inc., a Delaware Corporation (the "Company");
Allied Investment Corporation ("AIC"), Allied Investment Corporation II ("AIC
II"), and Allied Capital Corporation II ("ACC II" and, together with AIC and
AIC II, the "Allied Companies"), all Maryland corporations; Banc One Capital
Partners Corporation ("Banc One"), a Texas corporation; PNC Capital Corp.
("PNC"), a Delaware Corporation; and Charles E. Bradley, Sr., ("Bradley") and
John G. Poole ("Poole").
WHEREAS, the Company, the Allied Companies, Banc One and PNC are
parties to a certain Registration Agreement dated as of May 25, 1994 (the
"Agreement") and
WHEREAS, the parties desire to amend the Agreement as hereinafter
provided;
NOW THEREFORE, the parties agree as follows:
1. Bradley and Poole hereby become parties to the Agreement and
each of them is, and shall be deemed to be an "Investor" as such term is used
in the Agreement.
2. Section 1 of the Agreement is hereby amended to provide that
only Banc One and PNC shall have a right to request a Demand Registration, but
the Allied Companies, Bradley and Poole may, on a pro rata basis, include any
of its or their Investor Registrable Securities in any Demand Registration
that may be requested so long as the inclusion of any such securities does not
interfere with or restrict the number of Investor Registrable Securities
desired to be included by Banc One or PNC in connection with such Demand
Registration. In the event that any Investor Registrable Securities held by
the Allied Companies are included in such Demand Registration, the Investor
Registrable Securities held by Bradley or Poole may be included in such Demand
Registration only to the extent that such inclusion would not interfere with or
restrict the number of Investor Registrable Securities desired to be included
by the Allied Companies in connection with such Demand Registration.
3. The address for notices under this Agreement to both Bradley
and Poole is as follows:
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, CT 06902
(End of text of Agreement. Signatures appear on next page)
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this instrument as of
the date first above written.
Allied Investment Corporation DeVlieg - Bullard, Inc.
By: /s/ Richard E. Fearon, Jr. By: /s/ W. O. Thomas
---------------------------- ----------------------------
Allied Investment Corporation II PNC Capital Corporation
By: /s/ Richard E. Fearon, Jr. By: /s/ David J. Blair
---------------------------- -----------------------------
Allied Capital Corporation II /s/ Charles E. Bradley, Sr.
---------------------------------
Charles E. Bradley, Sr.
By: /s/ Richard E. Fearon, Jr.
---------------------------- /s/ John G. Poole
---------------------------------
Banc One Capital Partners John G. Poole
By: /s/ James H. Wolfe
----------------------------
2
