SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file number 0-18198
DeVlieg-Bullard, Inc.
(Exact name of registrant as specified in its charter)
Delaware 62-1270573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Gorham Island, Westport, CT 06880
(Address of principal executive offices) (Zip Code)
203-221-8201
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of common stock outstanding as of March 1, 1998 was
12,309,900.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DeVlieg-Bullard, Inc.
Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
--------- ---------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 471 $ 637
Accounts receivable, net 24,726 25,798
Inventories, net 38,703 38,195
Other current assets 1,824 1,519
--------- ---------
Total current assets 65,724 66,149
Property, plant and equipment, net 12,599 12,657
Engineering drawings 17,184 18,039
Goodwill 11,884 11,948
Other assets 12,326 12,651
--------- ---------
Total assets $ 119,717 $ 121,444
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,378 $ 9,751
Accrued expenses and other current liabilities 6,873 11,969
Revolving credit agreement 27,417 22,525
Current portion of long-term debt 2,857 3,631
--------- ---------
Total current liabilities 49,525 47,876
Long-term debt (related party $4,227) 13,558 14,179
Postretirement benefit obligation 20,954 21,999
Other noncurrent liabilities 11,898 11,677
--------- ---------
Total liabilities 95,935 95,731
Stockholders' equity:
Common stock, $0.01 par value; authorized
30,000 shares; issued and outstanding
12,297,900 and 12,275,400 shares 123 123
Additional paid-in capital 34,151 34,096
Excess purchase price over net assets acquired from
related parties (16,242) (16,242)
Retained earnings 5,884 7,844
Cumulative translation adjustment (134) (108)
--------- ---------
Total stockholders' equity 23,782 25,713
--------- ---------
Total liabilities and stockholders' equity $ 119,717 $ 121,444
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
DeVlieg-Bullard, Inc.
Statement of Operations
(unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 28,008 $ 31,363 $ 54,491 $ 63,497
Cost of sales 23,255 23,455 41,750 47,254
-------- -------- -------- --------
Gross profit 4,753 7,908 12,741 16,243
Operating expenses:
Engineering 509 395 1,005 786
Selling 2,927 2,680 5,671 5,349
General and administrative 3,607 2,207 6,575 4,965
-------- -------- -------- --------
Total E S G & A expenses 7,043 5,282 13,251 11,100
Anticipated loss on disposal 250 -- 250 --
Other expense/(income), net (7) 52 (18) 98
-------- -------- -------- --------
Total operating expenses 7,286 5,334 13,483 11,198
-------- -------- -------- --------
Operating (loss)/income (2,533) 2,574 (742) 5,045
Interest expense (including related party interest
of $185, $171, $370 and $341) 1,317 1,274 2,637 2,491
-------- -------- -------- --------
(Loss)/income before income taxes (3,850) 1,300 (3,379) 2,554
(Benefit)/provision for income taxes (1,618) 546 (1,419) 1,071
-------- -------- -------- --------
Net (loss)/income $ (2,232) $ 754 $ (1,960) $ 1,483
======== ======== ======== ========
Income per common share:
Basic $ (0.16) $ 0.05 $ (0.14) $ 0.11
======== ======== ======== ========
Diluted $ (0.16) $ 0.05 $ (0.14) $ 0.10
======== ======== ======== ========
Average number of shares outstanding:
Basic 14,065 14,032 14,062 14,031
======== ======== ======== ========
Diluted 14,065 15,120 14,062 15,058
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
DeVlieg-Bullard, Inc.
Statements of Cash Flows
(unaudited - in thousands)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
Cash flows from operating activities: 1998 1997
-------- --------
<S> <C> <C>
Net income $ (1,960) $ 1,483
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,595 2,525
Provision for losses on accounts receivable 134 (46)
Loss on disposal of assets held for sale 250 --
Changes in assets and liabilities, net of effects from acquisitions
Decrease/(increase) in accounts receivable 938 (6,365)
(Increase)/decrease in inventories (508) 4,223
Increase in other current assets (305) (187)
Increase in accounts payable 2,627 487
(Decrease)/increase in accrued expenses and
other current liabilities (5,096) 543
Other, net (800) (289)
-------- --------
Net cash provided by operating activities (2,125) 2,374
Cash flows from investing activities:
Purchase of business -- (763)
Capital expenditures (810) (714)
-------- --------
Net cash used for investing activities (810) (1,477)
Cash flows from financing activities:
Borrowings under revolving credit agreement 60,307 62,026
Repayments under revolving credit agreement (55,415) (60,801)
Payments of long-term debt (2,152) (1,858)
Debt issuance costs -- (129)
Proceeds from exercise of stock options 55 --
-------- --------
Net cash provided by (used for) financing activities 2,795 (762)
Effect of exchange rate changes on cash (26) 58
-------- --------
Net increase in cash and cash equivalents (166) 193
Cash and cash equivalents at beginning of period 637 768
-------- --------
Cash and cash equivalents at end of period $ 471 $ 961
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 2,305 $ 2,027
Income taxes, net of refunds 254 118
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Supplemental disclosure of cash flow information (continued):
During the six months ended January 31, 1997, the Company issued debt consisting
of a $2,600 Seller's note and an increase in term debt of $3,500 in connection
with acquisitions.
During the six months ended January 31, 1998 and 1997, the Company entered into
capital leases for computer equipment totaling $475 and $192, respectively,
which were financed by capital lease obligations.
5
<PAGE>
DeVlieg-Bullard, Inc.
Notes to Financial Statements
NOTE 1: Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange Commission
for Form 10-Q, the financial statements, footnote disclosures and other
information normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed. The financial
statements contained in this report are unaudited but, in the opinion of
DeVlieg-Bullard, Inc. (the "Company"), reflect all adjustments, consisting of
only normal recurring adjustments, necessary to fairly present the financial
position as of January 31, 1998 and the results of operations and cash flows for
the interim periods of the fiscal year ending July 31, 1998 ("fiscal 1998") and
the fiscal year ended July 31, 1997 ("fiscal 1997") presented herein. The
results of operations for any interim period are not necessarily indicative of
results for the full year. These financial statements, footnote disclosures and
other information should be read in conjunction with the financial statements
and the notes thereto included in the Company's annual report on Form 10-K for
the year ended July 31, 1997. Certain amounts in the fiscal 1997 financial
statements have been reclassified to conform to the fiscal 1998 presentation.
The financial statements include all accounts of the Company after elimination
of all significant interdivision transactions and balances. Amounts in these
notes, except per share data, are expressed in thousands.
NOTE 2: Inventories
January 31, July 31,
Inventories consisted of: 1998 1997
------- -------
(unaudited)
Raw materials $ 1,464 $ 1,448
Work-in-process 11,799 11,452
Finished goods 25,440 25,295
------- -------
$38,703 $38,195
======= =======
Valuation reserves for obsolete, excess and slow-moving inventory aggregated
$10,684 and $10,504 at January 31, 1998 and July 31, 1997, respectively.
Inventories valued using LIFO were $12,834 and $12,819 at January 31, 1998 and
July 31, 1997, respectively. There was no LIFO reserve against those
inventories. The financial accounting basis for the inventories of acquired
companies exceeds the tax basis by $12,224 at January 31, 1998 and July 31,
1997.
NOTE 3: Earnings per Share
Effective with the quarter ended January 31, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). In
accordance with the provisions of SFAS 128, all prior periods have been
restated. The diluted earnings per share under SFAS 128 is not materially
different from the earnings per share the Company previously reported. In
accordance with the provisions of SFAS 128, the number of basic shares includes
the average of shares outstanding and the stock purchase warrants that are not
contingently issuable (the Class A and Class B Warrants). The contingently
issuable stock purchase warrants and stock options are included in the number of
shares to be used in the diluted earnings per share calculation. Loss per share
is computed by dividing net loss by the number of basic shares outstanding
during the period. Stock options and contingently issuable stock purchase
warrants are not included in this calculation, as they would be antidilutive.
6
<PAGE>
NOTE 4: Long-Term Debt
On March 11, 1998, the Company amended its credit facility with its senior
lender to increase the term loan by $2,500. The new term loan was consolidated
with the existing term loans for an aggregate new term loan of $7,600. The
proceeds from the new term loan will be used to repay a portion of the
outstanding revolving credit agreement. Payments on the term loan are $200
monthly, starting March 31, 1998.
7
<PAGE>
DeVlieg-Bullard, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Summarized below is a discussion of the results of operations of the Company,
including its Machine Tool, Tooling Systems and Industrial operating groups.
Amounts, except per share data, are expressed in thousands.
Three months ended January 31, 1998 compared to three months ended January 31,
1997.
Net sales for the second quarter of fiscal 1998 were $28,008 compared to $31,363
for the second quarter of fiscal 1997, a decrease of $3,355, or 10.7%. The
decrease in net sales was primarily new and rebuilt machines in the Machine Tool
Group. As more fully discussed as part of the Machine Tool Group business
segment below, the decline in sales in the second quarter of fiscal 1998 was the
result of inadequate inventory levels to support the Company during a transition
to outsourcing a major portion of machine and/or aftermarket parts that had
previously been produced internally. The inadequate levels of inventory led to
disruptions in production and meeting shipping schedules of machines and
aftermarket sales during the quarter. The Industrial Group's net sales for the
second quarter were even with the prior year, while second quarter net sales
were 6.1% lower for the Tooling Systems Group and 15.9% lower for the Machine
Tool Group.
Gross profit for the second quarter of fiscal 1997 was $4,753 compared to $7,908
for the second quarter of fiscal 1997, a decrease of $3,155, or 39.9%. The
Tooling Systems Group and the Industrial Group were basically even with the
prior year, while the Machine Tool Group was down 62.3% from the prior year as a
result of the production and shipping problems in the new and rebuilt machines
business of the Machine Tool Group.
E S G & A expenses were $7,043, or 25.1% of net sales, and $5,342, or 17.0% of
net sales, in the second quarter of fiscal 1998 and fiscal 1997, respectively.
The increase in operating expenses is primarily an increase in the international
sales effort and computer costs related to upgrading systems and making them
year 2000 compliant, as well as increases in personnel costs related to the
fiscal 1997 acquisition and temporary help related to the transition to
outsourcing the Machine Tool Group parts production. The increase in the
operating expenses as a percent to sales is the result of a decline in sales as
discussed above, as well as the increase in expenses.
Interest expense was $1,317 in the second quarter of fiscal 1998 compared to
$1,274 in fiscal 1997's second quarter. The increase in interest expense is a
result of increased debt.
An income tax benefit of $1,618 was recorded for the second quarter of fiscal
1998 compared to tax expense of $546 for the same period last year, reflecting
the loss in fiscal 1998.
Operating Results by Business Segment
Machine Tool Group. On August 1, 1997, the Machine Tool Group implemented a
change to outsourcing a major portion of National Acme's parts, which had been
produced internally prior to August 1, 1997. The outsourced parts are used in
the manufacture of new Acme-Gridley machines and are also sold separately in the
aftermarket. As a result of planning difficulties encountered during the
changeover to outsourcing, including delays in vendor parts deliveries, which
resulted in inadequate inventory levels to support the Company during the
transition, the Machine Tool Group encountered disruptions in production which
extended through the second quarter. Due to this inadequate supply of parts
needed for new machine production and
8
<PAGE>
aftermarket sales, fiscal 1998 second quarter sales were $16,243, or $3,063
lower than the $19,306 reported in the second quarter of fiscal 1997. An
operating loss of $1,649 was recorded for the second quarter of fiscal 1998
compared to operating income of $2,423 in the second quarter of the prior year.
This is the result of the reduction in sales volume, as well as lower
productivity levels due to the difficulties mentioned above. Operating expenses
for the second quarter were higher than the first quarter as a result of an
increase in computer costs related to upgrading systems and making them year
2000 compliant, as well as increases in temporary help related to the transition
to outsourcing the parts production. In addition, during the second quarter of
fiscal 1998, the Machine Tool Group incurred a $250 charge for the write-down of
property and plant that was being held for sale to the current market value.
The operational problems discussed above have been addressed and aggressive
action has been taken to correct the problems, including replacing senior
management of the Machine Tool Group who were responsible for the initial
planning errors, scheduling a portion of the parts production at the Tooling
Systems Group and adding key people to our engineering and purchasing staff to
quickly bring this transition to a close.
Tooling Systems Group sales were $5,028 in the second quarter of fiscal 1998,
compared to $5,352 in the second quarter of the prior year, a decrease of $324,
or 6.1%. The decline from the prior year is primarily one large order for HSK
Tools that was not repeated during fiscal 1998. Operating income for the second
quarter of fiscal 1998 was $75, compared with $179 the second quarter of the
prior year. The reduction in operating income is due to the volume changes.
Industrial Group sales were $6,737 in the second quarter of fiscal 1998,
compared to $6,705 in the second quarter of the prior year, an increase of $32.
Operating income was $268 for the second quarter of fiscal 1998, compared to
$367 in the same period a year ago. The decline in operating income is the
result of higher operating expenses primarily related to computer systems
investment to deal with the year 2000 problem.
New Accounting Pronouncements
During the second quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The
diluted earnings per share calculation under SFAS 128 is not materially
different from the earnings per share the Company had previously reported. In
accordance with SFAS 128, prior periods have been restated.
Six months ended January 31, 1998 compared to six months ended January 31, 1997.
Net sales for the first six months of fiscal 1998 were $54,491 compared to
$63,497 for the first six months of fiscal 1997, a decrease of $9,006, or 14.2%.
The decrease in net sales was primarily new and rebuilt machines and related
aftermarket sales in the Machine Tool Group. As more fully discussed as part of
the Machine Tool Group business segment below, the decline in sales in the first
six months of fiscal 1998 was the result of inadequate inventory levels to
support the Company during a transition to outsourcing a major portion of
machine and/or aftermarket parts that had previously been produced internally.
The inadequate levels of inventory led to disruptions in production and meeting
shipping schedules of machines and aftermarket parts during the first half of
the year. Net sales for the first six months of fiscal 1998 compared to the
prior year were 6.5% higher for the Industrial Group and 23.9% lower for the
Machine Tool Group, while the Tooling Systems Group was even with the prior
year.
Gross profit for the first six months of fiscal 1997 was $12,741 compared to
$16,243 for the first six months of fiscal 1997, a decrease of $3,502, or 21.6%.
Gross profit for the Tooling Systems Group
9
<PAGE>
increased 26.6% and the Industrial Group increased 20.7% over the prior year,
while the Machine Tool Group was down 41.9% from the prior year as a result of
the production and shipping problems.
E S G & A expenses were $13,251, or 24.3% of net sales, and $11,221, or 17.7% of
net sales, in the first six months of fiscal 1998 and fiscal 1997, respectively.
The increase in operating expenses is primarily an increase computer costs
related to upgrading systems and making them year 2000 compliant, as well as
increases in temporary help related to the transition to outsourcing the Machine
Tool Group parts production. The increase in the operating expenses as a percent
to sales is the result of a decline in sales as discussed above, as well as the
increase in expenses.
Interest expense was $2,637 in the first six months of fiscal 1998 compared to
$2,491 in the same period in fiscal 1997. The increase in interest expense is a
result of increased debt.
An income tax benefit of $1,419 was recorded for the first six months of fiscal
1998 compared to tax expense of $1,071 for the same period last year, reflecting
the loss in fiscal 1998.
Operating Results by Business Segment
Machine Tool Group. On August 1, 1997, the Machine Tool Group implemented a
change to outsourcing a major portion of National Acme's parts, which had been
produced internally prior to August 1, 1997. The outsourced parts are used in
the manufacture of new Acme-Gridley machines and are also sold separately in the
aftermarket. As a result of planning difficulties encountered during the
changeover to outsourcing, which resulted in inadequate inventory levels to
support the Company during the transition, the Machine Tool Group encountered
disruptions in production during the period. Due to this inadequate supply of
parts needed for new machine production and aftermarket sales, fiscal 1998 first
six months sales were $31,336, or $9,841 lower than the $41,177 reported in the
first six months of fiscal 1997. Operating income was a loss of $235 for the
first six months of fiscal 1998 compared to operating income of $5,352 in the
first six months of the prior year. This is the result of the reduction in sales
volume, as well as lower productivity levels due to the difficulties mentioned
above. Operating expenses for the six months ended January 1998 were higher than
the fiscal 1997 first six months as a result of an increase in the computer
costs related to upgrading systems and making them year 2000 compliant, as well
as increases in temporary help related to the transition to outsourcing the
parts production. In addition, during the first six months of fiscal 1998, the
Machine Tool Group incurred a $250 charge for the write-down of property and
plant that was being held for sale to the current market value.
These problems have been addressed and aggressive action has been taken to
correct the problems, including replacing senior management of the Machine Tool
Group who were responsible for the initial planning errors, scheduling a portion
of the parts production at the Tooling Systems Group and adding key people to
our engineering and purchasing staff to quickly bring this transition to a
close.
Tooling Systems Group sales were $10,350 in the first six months of fiscal 1998,
compared to $10,297 in the first six months of the prior year, an increase of
$53. Operating income for the first six months of fiscal 1998 was $888, compared
with $394 the first six months of the prior year. The increase in operating
income is due to productivity improvements and reductions in benefit costs from
changes in the postretirement medical program.
Industrial Group sales were $12,805 in the first six months of fiscal 1998,
compared to $12,023 in the first six months of the prior year, an increase of
$782, or 6.5%. Operating income was $668 for the first six months of fiscal
1998, compared to $447 in the same period a year ago. The increase in operating
income is the result of increased volume and improved productivity, offset by
increased operating expenses related to computer systems.
10
<PAGE>
Liquidity and Capital Resources
Cash Flows
Historically, the Company's continuing operations have been financed by
internally generated funds. Acquisitions have been funded with increases in
indebtedness, while funds from divestitures have generally been used to reduce
indebtedness.
Net cash used by operating activities was $2,125 for the six months ended
January 31, 1998, compared to net cash provided by operating activities of
$2,374 for the first six months of fiscal 1997.
Cash used for capital expenditures was $810 and $714 for the first six months of
fiscal 1998 and 1997, respectively. The Company currently has no material
commitments for specific capital expenditures. Cash of $763 was used for
acquisitions during January 1997. The balance of the purchase price ($6,100) was
financed through an increase in debt.
Financing and Investing
The balance outstanding under the Company's revolving credit agreement was
$27,417 at January 31, 1998, compared to $22,525 at July 31, 1997. Long-term
debt, including current maturities, at January 31, 1998, was $16,415, compared
to $17,810 at July 31, 1997, a decrease of $1,395. The Company's total
indebtedness was $43,832 and $40,335 at January 31, 1998 and July 31, 1997,
respectively, an increase of $3,497. The increase in debt was used to finance
working capital needs, particularly those of the Machine Tool Group as the
Company works through the current difficulties, as discussed above. Cash and
equivalents at January 31, 1998 were $471, a decrease of $166 compared to July
31, 1997. Net cash provided by financing activities was $2,795 in the first half
of fiscal 1998 compared to a use of $762 in the first six months of the prior
year.
The senior credit facility aggregating $40,000 is comprised of $5,086 in term
loans and a revolving credit agreement, which provides for borrowings up to
$30,000. Interest on the outstanding borrowings under the revolving credit
agreement is payable monthly in arrears at 1% above the prime rate or, at the
Company's option, at alternative rates based on LIBOR. The effective rate based
on LIBOR was 8.59% at January 31, 1998. The amount the Company may borrow under
the revolving credit agreement is based upon a formula related to the Company's
eligible accounts receivable and inventories, reduced by outstanding letters of
credit. On March 11, 1998, the Company increased the existing term loans by
$2,500 and consolidated all term loans together for a new term loan of $7,600.
The proceeds from the new term loan will be used to repay a portion of the
outstanding revolving credit agreement. Payments on the new term loan are $200
monthly, starting March 31, 1998. Unused borrowings available at February 28,
1998, after the effects of the new term loan, were approximately $3,500.
Interest on the term loans is payable monthly at 1.25% above prime rate or, at
the Company's option, at alternative rates based on LIBOR. The effective rate
based on LIBOR was 8.84% at January 31, 1998.
Pursuant to the subordinated debt facility, the Company issued Subordinated
Debentures in May 1994 in the principal amount of $12,000. Of this amount,
$4,000 was replaced by Junior Subordinated Debentures. Interest payments on the
Subordinated Debentures of 11.5% per annum are payable quarterly in arrears
commencing July 1, 1994. The Subordinated Debentures provide for the repayment
of principal of $2,000 in fiscal 1999 and fiscal 2000 and $4,000 in fiscal 2001.
Interest on the Junior Subordinated Debentures accrues at 14.5%, and the cash
interest of 11% per annum is payable quarterly in arrears commencing January 1,
1996. The Junior Subordinated Debentures provide for the repayment
11
<PAGE>
of principal of $4,000 and unpaid interest in June 2001 or thirty days after the
payment of the Subordinated Debentures.
The Company expects to continue to provide liquidity and finance its ongoing
operational needs primarily through internally generated funds.
Outlook
As more fully described above in Operating Results by Business Segment under the
heading Machine Tool Group, difficulties encountered during the changeover to
outsourcing on August 1, 1997, caused fiscal 1998 second quarter and first six
months net sales and net earnings per share to be significantly lower than in
the comparable periods in fiscal 1997. The difficulties encountered were
primarily the result of inadequate levels of parts inventory needed for first
and second quarter new machine production and aftermarket sales. As discussed
above, the Company has taken steps to address the problems, and expects improved
results in the third and fourth quarters of fiscal 1998. It is anticipated that
full year fiscal 1998 net sales and earnings will be significantly below those
reported in fiscal 1997.
The Company plans to continue expanding product and service offerings, both
internally and through strategic acquisitions, and to identify and implement
additional cost savings measures.
A number of factors may affect future results, liquidity and capital resources;
actual results may differ materially from those reflected by forward-looking
statements made by the Company. These factors are discussed in the Company's
Annual Report on Form 10-K for the year ended July 31, 1997.
12
<PAGE>
PART II - Other Information
Item 4: Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of DeVlieg-Bullard, Inc. was held on December
10, 1997, at which meeting the stockholders elected all directors to hold office
until the next annual meeting and until their successors are duly elected and
qualified.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Third Amendment to Amended and Restated Financing and Security Agreement
dated December 29, 1997 among DeVlieg-Bullard, Inc., the CIT
Group/Business Credit, Inc. and BNY Financial Corporation.
10.2 Fourth Amendment to Amended and Restated Financing and Security
Agreement dated March 11, 1998 among DeVlieg-Bullard, Inc., the CIT
Group/Business Credit, Inc. and BNY Financial Corporation.
10.3 Amended and Restated Term Loan Promissory Note dated March 11, 1998 in
the principal amount of $4,750,000 between the DeVlieg-Bullard, Inc. and
BNY Financial Corporation.
10.4 Amended and Restated Term Loan Promissory Note dated March 11, 1998 in
the principal amount of $2,850,000 between the DeVlieg-Bullard, Inc. and
BNY Financial Corporation.
10.5 Fourth Amendment to Investment Agreement dated September 17, 1997
DeVlieg-Bullard, Inc., Banc One Capital Partners Corporation, PNC
Capital Corp., Charles E. Bradley and John G. Poole.
10.6 Fifth Amendment to Investment Agreement dated March 11, 1998 among
DeVlieg-Bullard, Inc., Banc One Capital Partners Corporation, PNC
Capital Corp., Charles E. Bradley and John G. Poole.
10.7 Amendment to Intercreditor Agreement dated March 11, 1998 between the
CIT Group/Business Credit, Inc., Charles E. Bradley, John G. Poole, Banc
One Capital Partners Corporation, and PNC Capital Corp.
11 Computation of Earnings per Share
27 Financial Data Schedules (SEC use only)
(b) Reports on Form 8-K
During the quarter ended January 31, 1998, the Company did not file any reports
on Form 8-K.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DeVlieg-Bullard, Inc.
--------------------------------
(Registrant)
Date: March 17, 1997 By: /s/ W.O. Thomas
---------------------------
William O. Thomas
President and Chief
Executive Officer
(Acting Principal
Accounting Officer)
14
Exhibit 10.1
THIRD AMENDMENT TO AMENDED AND RESTATED FINANCING
AGREEMENT AND GUARANTY
THIRD AMENDMENT TO AMENDED AND RESTATED FINANCING AGREEMENT AND GUARANTY
dated as of December 29, 1997 ("Third Amendment") among DEVLIEG BULLARD, INC.
(the Borrower"), THE CIT GROUP/BUSINESS CREDIT, INC. ("CITBC"), BNY FINANCIAL
CORPORATION ("BNYFC") (each of CITBC and BNYFC referred to as a "Lender" and
collectively, the "Lenders") and THE CIT GROUP/BUSINESS CREDIT, INC., as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Lenders Agent").
PRELIMINARY STATEMENT. Reference is made to the Amended and Restated
Financing and Security Agreement dated as of January 17, 1997 among the
Borrower, CITBC, each other lender which may thereafter execute and deliver an
instrument of assignment under the Financing Agreement pursuant to Section 9(18)
(each a "Lender" and collectively, the "Lenders") and the Lenders Agent, as
amended by a First Amendment to Amended and Restated Financing and Security
Agreement dated as of April 1, 1997 and as further amended by a Second Amendment
to Amended and Restated Financing and Security Agreement dated as of September
17, 1997 (as it may be further amended, supplemented or modified from time to
time, the "Financing Agreement"). Any term used in this Third Amendment and not
otherwise defined in this Third Amendment shall have the meaning assigned such
term in the Financing Agreement.
Each of the parties hereto has agreed to amend the Financing Agreement as
hereinafter set forth.
SECTION 1. Amendments to Financing Agreement. The financing Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The definition of "Availability" included in Section 1 "Definitions" is
amended in full to read as follows:
Availability shall mean at any time the excess, as determined by
Lenders Agent based upon the most recently delivered 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 Unbilled Accounts
Receivable 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, plus c) Eligible Inventory
multiplied by the percentage provided for in clause (b)(iii) 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
<PAGE>
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 and the maximum amount guaranteed under the guaranties of
CITBC issued pursuant to the Letter of Guaranty Agreement.
(b) Each of the following definitions will be added to Section 1
"Definitions" in proper alphabetical order:
Eligible Unbilled Accounts Receivable shall mean the then current
amount of the Borrower's Unbilled Accounts Receivable where in the case of
each Unbilled Accounts Receivable at least sixty-five percent (65%) of the
work required to complete the manufacture of the machine upon which such
Unbilled Accounts Receivable is based is completed, less any Unbilled
Accounts Receivable that either are not acceptable to the Required Lenders
in the exercise of their reasonable business judgment, less any Unbilled
Account Receivable that upon completion of the sale of the particular
machine creating the Unbilled Account Receivable such sale will not, for
any reason, result in the creation of an Eligible Account Receivable and
less any Unbilled Account Receivable where for any reason the Borrower will
be unable to complete the manufacture and delivery of the machine creating
such Unbilled Account Receivable in accordance with the terms of the
purchase order for such machine.
Unbilled Account Receivable means, once at least twenty-five percent
(25%) of the work required to complete the manufacture of a machine subject
to a specific purchase order for such machine has been completed, an amount
equal to the gross account receivable that will be generated upon
completion of such particular machine multiplied by a fraction the
numerator of which is a percentage (expressed as a decimal) equal to the
percentage of work that has been completed on such machine at the time of
determining such Unbilled Account Receivable and the denominator of which
is one, less any offsetting account or liability.
(c) The third sentence of Section 3(1)(a) of "Revolving Loans" is
amended in full to read as follows:
Such loans and advances shall be in amounts up to the lesser of (a)
$30,000,000 less the aggregate face amount of all outstanding Letters of
Credit Guaranties or (b) the sum of the following less the aggregate face
amount of all outstanding Letters of Credit Guaranties (i) eighty-five
percent (85%) of the outstanding Eligible Accounts Receivable of the
Borrower, plus (ii) forty percent (40%) of the Existing Eligible Unbilled
Accounts Receivable, provided, however, that the amount calculated pursuant
to this clause (ii) shall not exceed $3,000,000 at any time, plus (iii)
fifty percent (50%) of the aggregate value of Eligible Inventory of the
Borrower, provided, however, that the amount calculated pursuant to this
clause (iii) shall not exceed $20,000,000 at any time.
<PAGE>
SECTION 2. Conditions of Effectiveness. This Third Amendment shall become
effective as of the date on which each of the following conditions have been
fulfilled:
(1) This Third Amendment. The Borrower, CITBC, BNYFC and Lenders Agent
shall each have executed and delivered this Third Amendment;
(2) Officer's Certificate. The following statement shall be true and
Lenders Agent shall have received a certificate signed by a duly authorized
officer of Borrower dated the date hereof stating that, after giving effect
to this Third Amendment and the transactions contemplated hereby;
(a) The representations and warranties contained in the Financing
Agreement and each of the other Loan Documents are correct on and as
to the Date hereof as though made on and as of such date; and
(b) No Default or Event of Default has occurred and is
continuing; and
(3) Additional Documentation. CITBC shall receive such other
approvals, opinions or documents as CITBC may reasonably request.
SECTION 3. Reference to and Effect on the Loan Documents. (a) Upon the
effectiveness of Section 1 hereof, on and after the date hereof each reference
in the Financing Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import, and each reference in the other Loan Documents to the
Financing Agreement, shall mean and be a reference to the Financing Agreement as
amended hereby.
(b)The execution, delivery and effectiveness of this Third Amendment shall
not operate as a waiver of any right, power or remedy of CITBC under any of the
Loan Documents, nor constitute a waiver of any provision of any of the Loan
Documents, and, except as specifically provided herein, the Financing Agreement
and each other Loan Document shall remain in full force and effect and are
hereby ratified and confirmed.
SECTION 4. Costs, Expenses and Taxes. The Borrower agrees to reimburse
CITBC on demand for all out-of-pocket costs, expenses and charges (including,
without limitation, all fees and charges of external legal counsel for CITBC)
incurred by CITBC in connection with the preparation, reproduction, execution
and delivery of the Third Amendment and any instruments and documents to be
delivered hereunder. In addition, the Borrower shall be obligated to pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery, filing or recording of this Third
Amendment and the other instruments and documents to be delivered hereunder, and
agree to save CITBC harmless from and against any and all liabilities with
respect or resulting from any delay in paying or omission to pay such taxes or
fees.
<PAGE>
SECTION 5. Governing Law. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 6. Headings. Section headings in this Third Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Third Amendment for any other purpose.
SECTION 7. Counterparts. This Third Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Third Amendment by signing any
such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment bo
be duly executed as of the day and year first above written.
DeVLIEG-BULLARD, INC.,
as Borrower
By /s/ L. M. Murray
---------------------------------
Name
Title
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lender
By /s/ Edward Hirshfield
---------------------------------
Name Edward Hirshfield
Title Assistant Secretary
BNY FINANCIAL CORPORATION,
As Lender
By /s/ Anthony P. Vassallo
---------------------------------
Name Anthony P. Vassallo
Title Assistant Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lenders Agent
By
---------------------------------
Name
Title
[Execution Copy]
FOURTH AMENDMENT TO AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
FOURTH AMENDMENT TO AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
("Fourth Amendment") dated as of March 11, 1998 among DEVLIEG BULLARD, INC. (the
"Borrower"), THE CIT GROUP/BUSINESS CREDIT, INC. ("CITBC"), BNY FINANCIAL
CORPORATION ("BNYFC") (each of CITBC and BNYFC referred to as a "Lender" and
collectively, the "Lenders") and THE CIT GROUP/BUSINESS CREDIT, INC., as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Lenders Agent").
PRELIMINARY STATEMENT. Reference is made to the Amended and Restated
Financing and Security Agreement dated as of January 17, 1997 among the
Borrower, CITBC, each other lender which may thereafter execute and deliver an
instrument of assignment under the Financing Agreement pursuant to Section 9(18)
(each a "Lender" and collectively, the "Lenders") and the Lenders Agent ("1997
Agreement"), as amended by a First Amendment to Amended and Restated Financing
and Security Agreement dated as of April 1, 1997, as amended by a Second
Amendment to Amended and Restated Financing and Security Agreement dated as of
September 17, 1997 and as amended by a Third Amendment to Amended and Restated
Financing and Security Agreement dated as of December 29, 1997 (as it may be
further amended, supplemented or modified from time to time, the "Financing
Agreement"). Any term used in this Fourth Amendment and not otherwise defined in
this Fourth Amendment shall have the meaning assigned to such term in the
Financing Agreement.
The parties hereto have agreed to amend certain terms and provisions of the
Financing Agreement as hereinafter set forth.
SECTION 1. Amendments to Financing Agreement. The Financing Agreement is,
subject to the satisfaction of the conditions precedent set forth in Section 2
hereof, hereby amended as follows:
(a) The listing of Exhibits A1 to A5 is amended in full to read as
follows:
Exhibit A1 - Form of Term Loan Promissory Note
Exhibit A5 - Form of Revolving Loans Promissory Note
(b) Each of the Schedules is replaced by each of the Schedules
attached to the Fourth Amendment.
<PAGE>
(c) The following definitions shall be added in their proper
alphabetical order:
"'Quarterly Date' means each January 31, April 30, July 31 and
October 31."
"'Term Loan' have the meaning specified in Section 4(1)."
"'Term Loan Promissory Note' shall mean the note, in the form of
Exhibit A1 attached hereto, delivered by the Borrower to each Lender
to evidence each such Lender's respective portion of the Term Loan
pursuant to, and repayable in accordance with, the provisions of
Section 4 of this Financing Agreement."
"'Fourth Amendment Fee' means a fee equal to Fifty Thousand
Dollars ($50,000)."
"'Third Closing Date' means March 11, 1998."
(c) The definition of "Consolidated Fixed Charge Coverage Ratio" is
amended in full to read as follows:
"'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 (other than any such Expenses incurred
under the Seller Note (Mattison)), 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."
(d) The definition of "Early Termination Fee" is amended in full to
read as follows:
"'Early Termination Fee' shall: i) mean the fee the Lenders are
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 Final Maturity Date; and ii) be an amount equal to (x)
$400,000 if the Early Termination Date is a date after the Third
Closing Date but prior to the first anniversary of the Third Closing
Date; (y) $300,000 if the Early Termination Date is a date on or after
the first anniversary of the Third Closing Date but prior to the
second anniversary of the Third Closing Date; and (z) $200,000 if the
Early
2
<PAGE>
Termination Date is a date on or after the second anniversary of the
Third Closing Date."
(e) The definition of "Final Maturity Date" is amended in full to read
as follows:
"'Final Maturity Date' means October 31, 2001.
(f) The definition of "Mandatory Prepayment" is amended in full to
read as follows:
"'Mandatory Prepayment' shall mean (i)the amount by which the
Borrower must prepay the Revolving Loans immediately upon demand as
provided in Section 3, paragraph 1(c) or (d) of this Financing
Agreement or (ii) the amount by which the Borrower must prepay the
Term Loan pursuant to Section 4, paragraph 4 of this Financing
Agreement, or any or all of the foregoing, all as the context may
require."
(g) In each of the Loan Documents each of "any Term Loan", "any of the
Term Loans", "such Term Loan", "the Term Loans" and "Term Loans" is changed
to "the Term Loan".
(h) In each of the Loan Documents each of "the Term Loan I Promissory
Note, the Term Loan II Promissory Note, the Term Loan III Promissory Note,
[and/or] the Term Loan IV Promissory Note" is changed to "the Term Loan
Notes".
(i) The following definitions are deleted in their entirety "Term Loan
I", "Term Loan II", Term Loan III", "Term Loan IV", "Term Loan I Promissory
Note", "Term Loan II Promissory Note", Term Loan III Promissory Note" and
"Term Loan IV Promissory Note".
(j) Section 4, Term Loans, is amended in full to read as follows:
SECTION 4. Term Loans.
1. The Lenders and the Borrower acknowledge that Two Million Six
Hundred Eighty-Five Thousand Seven Hundred Thirteen Dollars and Ninety
Cents ($2,685,713.90) of Term Loan I made pursuant to and as defined in the
1997 Agreement remains outstanding, One Million Three Hundred Thirty-Three
Thousand Three Hundred Thirty-Three Dollars and Forty Cents ($1,333,333.40)
of Term Loan II made pursuant to and as defined in the 1997 Agreement
remains outstanding, the Term Loan III made pursuant to
3
<PAGE>
and as defined in the 1997 Agreement has been repaid in full and One
Million Sixty-Six Thousand Six Hundred Sixty-Six Dollars and Seventy-One
Cents ($1,066,666.71) of Term Loan IV made pursuant to and as defined in
the 1997 Agreement remains outstanding and the Lenders agree on the terms
and conditions set forth in this Fourth Amendment, to make a loan to the
Borrower on the Third Closing Date in the principal amount of Two Million
Five Hundred Fourteen Thousand Two Hundred Eighty-Five Dollars and
Ninety-Nine Cents ($2,514,285.99). The Lenders and the Borrower agree to
combine the loans in the preceding sentence to make one loan in the
principal amount of Seven Million Six Hundred Thousand Dollars ($7,600,000)
("Term Loan"). Amounts prepaid on Term Loan cannot be reborrowed."
2. The Borrower hereby agrees to execute and deliver to each Lender
the Term Loan Promissory Note, in the form of Exhibit A1 attached hereto,
to evidence the Term Loan made by such Lender on the Third Closing Date.
3. The principal amount of the Term Loan shall be repaid to the
Lenders by the Borrower in thirty-eight (38) consecutive, monthly
installments each in the amount of $200,000 with the first installment due
on March 31, 1998, and with subsequent installments due on each Monthly
Date thereafter to and including April 30, 2001.
4. Mandatory Prepayments shall be made with respect to the Term Loan
within 90 days after the end of each fiscal year of the Borrower,
commencing with the fiscal year ended July 31, 1998, in an amount equal to
fifty percent (50%) of Excess Cash Flow of the Borrower for such fiscal
year. The proceeds of all of these prepayments shall be applied to the
scheduled installments of principal in the inverse order of maturity.
5. The Borrower may prepay any or all of the Term Loan in whole or in
part at any time, at its 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 5 shall be applied to the last maturing
installment(s) of principal on the Term Loan.
6. In the event this Financing Agreement and the Revolving Line of
Credit are terminated by either the Lenders 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.
4
<PAGE>
7. The Borrower hereby authorizes Lenders Agent 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 Lenders Agent may so make to its account as herein provided
will be made as an accommodation to the Borrower and solely at Lenders
Agent's discretion.
(k) Section 7(16), Application of Proceeds, is amended in full to read as
follows:
"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 Borrower represents and warrants that the proceeds of the
Revolving Loans and Term Loan I (as defined in the 1997 Agreement) were
used at the First Closing Date 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 (National Acme). The
Borrower represents and warrants that the proceeds of the Term Loan II (as
defined in the 1997 Agreement) were used by the Borrower to make payments
in connection with each of the Watson Bowman Judgment and the Kochenash
Litigation. The proceeds of the Revolving Loans up to an aggregate amount
of $1,300,000 and the proceeds of the Term Loan III (as defined in the 1997
Agreement) and Term Loan IV (defined in the 1997 Agreement) were used by
Borrower to finance the Acquisition (Mattison). The proceeds of the Term
Loan made on the Third Closing Date will be used to repay outstanding
Revolving Loans. The other proceeds of the Revolving Loans will be used 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 Notes, 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."
(l) Section 8(5)(b)(i) is amended in full to read as follows:
"(b) 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 and such
5
<PAGE>
payments will be applied to the Term Loan in the inverse order of
maturity."
(m) Section 8(10), Minimum Consolidated Net Worth, is amended in full to
read as follows:
"10. Minimum Consolidated Net Worth. The Borrower and its Consolidated
Subsidiaries shall have as of each date specified below a Consolidated Net
Worth of not less than the amount specified below for such date:
Date Amount
---- ------
April 30, 1998 $25,000,000
July 31, 1998 $25,000,000
October 31, 1998 $25,000,000
January 31, 1999 $25,000,000
April 30, 1999 $27,500,000
July 31, 1999 $27,500,000
October 31, 1999 $27,500,000
January 31, 2000 $27,500,000
April 30, 2000 $27,500,000
July 31, 2000 $27,500,000
October 31, 2000 and each
Quarterly Date thereafter $30,000,000"
(n) Section 8(11), Consolidated Interest Coverage Ratio, is amended in full
to read as follows:
"11. Consolidated Interest Coverage Ratio. The Borrower and its
Consolidated Subsidiaries will have for each period specified below a
Consolidated Interest Coverage Ratio of not less than the ratio specified
below for such period:
Period Ratio
------ -----
Four quarters ended
January 31, 1998 2.50 to 1.00
February 1, 1998 to
April 30, 1998 2.50 to 1.00
February 1, 1998 to
July 31, 1998 2.50 to 1.00
February 1, 1998 to
October 31, 1998 2.50 to 1.00
February 1, 1998 to
6
<PAGE>
January 31, 1999 2.50 to 1.00
Four quarters ended
April 30, 1999 3.00 to 1.00
Four quarters ended
July 31, 1999 3.00 to 1.00
Four quarters ended
October 31, 1999 and each
four quarters ended on each
Quarterly Date thereafter 4.00 to 1.00"
(o) Section 8(12), Consolidated Total Liabilities to Consolidated Net
Worth, is amended in full to read as follows:
"12. Consolidated Total Liabilities to Consolidated Net Worth. The
Borrower and its Consolidated Subsidiaries will not as of any date
specified below have a ratio of Consolidated Total Liabilities to
Consolidated Net Worth of greater than the ratio specified below for such
date:
Date Ratio
---- -----
April 30, 1998 3.80 to 1.00
July 31, 1998 3.80 to 1.00
October 31, 1998 3.80 to 1.00
January 31, 1999 3.80 to 1.00
April 30, 1999 3.50 to 1.00
July 31, 1999 3.50 to 1.00
October 31, 1999 and each
Quarterly Date thereafter 3.00 to 1.00"
(p) Section 8(13), Consolidated Current Ratio, is amended in full to read
as follows:
"13. Consolidated Current Ratio. The Borrower and its Consolidated
Subsidiaries will have on each date specified below a ratio of Consolidated
Current Assets to Consolidated Current Liabilities of not less than the
ratio specified below for such date:
"Date Ratio
----- -----
April 30, 1998 1.20 to 1.00
July 31, 1998 1.20 to 1.00
October 31, 1998 1.20 to 1.00
January 31, 1999 1.20 to 1.00
April 30, 1999 1.20 to 1.00
7
<PAGE>
July 31, 1999 1.30 to 1.00
October 31, 1999 1.30 to 1.00
January 31, 2000 1.30 to 1.00
April 30, 2000 1.30 to 1.00
July 31, 2000 and each Quarterly
Date thereafter 1.40 to 1.00"
(q) Section 8(14), Consolidated Fixed Charge Coverage Ratio, is amended in
full to read as follows:
"14. Consolidated Fixed Charge Coverage Ratio. The Borrower and its
Consolidated Subsidiaries shall have for the period from February 1, 1998
to April 30, 1998, for the period from February 1, 1998 to July 31, 1998,
for the period from February 1, 1998 to October 31, 1998, for the period
from February 1, 1998 to January 31, 1999, for the Rolling Period ended on
April 30, 1999 and for each Rolling Period ending on a Quarterly Date
thereafter, a Consolidated Fixed Charge Coverage Ratio for such period of
not less than 1.10 to 1.00."
(r) Section 8(15), Consolidated EBITDA, is amended in full to read as
follows:
"15. Consolidated EBITDA. The Borrower and its Consolidated
Subsidiaries shall have for each period specified below an amount of
Consolidated EBITDA of not less than the amount specified below for such
period:
Period Amount
------ ------
For the four quarters ended
on January 31, 1998 $12,000,000
February 1, 1998 to
April 30, 1998 $ 2,500,000
February 1, 1998 to
July 31, 1998 $ 5,500,000
February 1, 1998 to
October 31, 1998 $ 8,500,000
February 1, 1998 to
January 31, 1999 $12,000,000
For the four quarters
ended on April 30, 1999 $13,500,000
For the four quarters
ended on July 31, 1999 $13,500,000
For the four quarters
8
<PAGE>
ended on October 31, 1999 $13,500,000
For the four quarters
ended January 31, 2000 $13,500,000
For the four quarters
ended on April 30, 2000 $13,500,000
For the four quarters
ended July 31, 2000
and for the four quarters
ended on each Quarterly
Date thereafter $15,000,000
(s) Subsection (c) of Section 8(16), Certain Adjustments, is deleted in its
entirety.
(t) A new Section 8(23), Updated Appraisals, is added after Section 8(22),
Certain Notices, and such new Section reads as follows:
23. Updated Appraisals. Within sixty (60) days from the Third Closing
Date the Borrower agrees to deliver to Lenders Agent a current appraisal of
all of Borrower's Equipment and Real Estate. The Borrower agrees to bear
the cost of such an appraisal.
(u) Section 9(2), Interest on Term Loan, is amended in full to read as
follows:
"2. Interest on Term Loan. Interest on the Term Loans shall be payable
monthly on each Monthly Date on the unpaid balance or on payment in full
prior to maturity in an amount equal to (a) the Chase 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 Chase 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 Chase 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.
Lenders Agent 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."
9
<PAGE>
SECTION 2. Conditions of Effectiveness. This Fourth Amendment shall become
effective as of the date on which each of the following conditions has been
fulfilled:
(a) Fourth Amendment. The Borrower, CITBC, BNYFC, and the Lenders
Agent shall each have executed and delivered this Fourth Amendment;
(b) The Term Loan Promissory Notes. Each of CITBC and BNYFC shall have
received their respective Term Loan Promissory Note payable to it and each
duly executed and delivered by the Borrower with all blanks appropriately
filled in.
(c) Fourth Amendment Fee. Payment in full by the Borrower of the
Fourth Amendment Fee.
(d) Board Resolution. Lenders Agent shall have received a copy of the
resolutions of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of (i) this Fourth Amendment 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
Fourth Amendment 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.
(e) 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
Mortgage Modifications as CITBC may reasonably require and such Mortgage
Modifications shall have been recorded in each jurisdiction where it is
necessary to appropriate to secure the interest of the Lenders and the
Lenders Agent.
(f) Title Continuations. Lenders Agent shall have received, in respect
of each Mortgage, a title search indicating that no Liens have been filed
or recorded against any of the properties covered by the Mortgages after
the date of filing each Mortgage.
(g) Subordinated Debt. Lenders Agent shall have received copies of
amendments to all documents evidencing or related to the Subordinated Debt
which amend such agreements and documents to provide that the financial
covenants in such agreements and documents are no more onerous than those
set forth in this Fourth Amendment.
10
<PAGE>
(h) Opinions. The Borrower shall have delivered to Lenders Agent a
favorable opinion of Bass Berry & Sims satisfactory to Lenders and their
special counsel dated the Third Closing Date.
(i) Fees and Expenses. On the Third Closing Date, subject to the
credit presently available to the Borrower, the Borrower shall have
reimbursed Lenders and Lenders Agent for all Out-of-Pocket Expenses for
which a request for payment shall have been made at or prior to the Third
Closing Date.
(j) Officer's Certificate. The following statements shall be true and
the Lenders Agent shall have received a certificate signed by a duly
authorized officer of the Borrower dated the date hereof stating that,
after giving effect to this Fourth Amendment and the transactions
contemplated hereby:
(i) The representations and warranties contained in each of the Loan
Documents are true and correct on and as of the date hereof as
though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is continuing;
and
(k) Legal Bills. Dewey Ballantine has been paid in full for all past
due legal fees, costs and expenses and for all fees, costs and expenses in
connection with this Fourth Amendment.
(l) Other Documents. The Bank shall have received such other
approvals, opinions or documents as the Bank may reasonably request.
SECTION 3. Reference to and Effect on the Loan Documents. (a) Upon the
effectiveness of Section 1 hereof, on and after the date hereof each reference
in the Financing Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import, and each reference in the other Loan Documents to the
Financing Agreement, shall mean and be a reference to the Financing Agreement as
amended hereby.
(b) The execution, delivery and effectiveness of this Fourth Amendment
shall not operate as a waiver of any right, power or remedy of the Bank under
any of the Loan Documents, nor constitute a waiver of any provision of any of
the Loan Documents, and, except as specifically provided herein, the Financing
Agreement and each other Loan Document shall remain in full force and effect and
are hereby ratified and confirmed.
11
<PAGE>
SECTION 4. Governing Law. This Fourth Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5. Headings. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Fourth Amendment for any other purpose.
SECTION 6. Counterparts. This Fourth Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Fourth Amendment by
signing any such counterpart.
[INTENTIONALLY LEFT BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
be duly executed as of the day and year first above written.
DEVLIEG BULLARD, INC.
By /s/ WO Thomas
--------------------------------
Name: WO Thomas
Title: President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lender
By /s/ Edward Hirshfield
--------------------------------
Name: Edward Hirshfield
Title: Assistant Secretary
BNY FINANCIAL CORPORATION,
as Lender
By /s/ Anthony P. Vassallo
--------------------------------
Name: Anthony P. Vassallo
Title: Assistant Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Lenders Agent
By /s/ Edward Hirshfield
--------------------------------
Name: Edward Hirshfield
Title: Assistant Secretary
13
Exhibit 10.3
AMENDED AND RESTATED TERM LOAN PROMISSORY NOTE
Reference is made to the $5,000,000 Amended and Restated Term Loan
Promissory Note dated January 17, 1997 of DeVlieg-Bullard, Inc. and payable
to the CIT Group/Business Credit, Inc. (the "Term Loan I Note") the
$3,000,000 Amended and Restated Term Loan II Promissory Note dated January
17, 1997 (the "Term Loan II Note"), the $2,000,000 Term Loan III Promissory
Note, dated January 17, 1997 (the "Term Loan III Promissory Note"), the
$1,500,000 Term Loan IV Promissory Note, dated January 17, 1997 (the "Term
Loan II Promissory Note"). To the extent that this Amended and Restated
Term Loan Promissory Note amends each of the Term Loan I Promissory Note,
the Term Loan II Promissory Note, the Term Loan III Promissory Note and the
Term Loan IV Promissory Note, each such Note is amended. To the extent this
Amended and Restated Term Loan I Promissory Note restates each of the Term
Loan I Promissory Note, the Term Loan II Promissory Note, the Term Loan III
Promissory Note and the Term Loan IV Promissory Note, each such Note is
restated.
$4,750,000 New York, New York
March 11, 1998
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 Four Million
Seven Hundred Fifty Thousand Dollars ($4,750,000) in thirty-eight (38) equal
principal installments of each payable monthly on the last business day of each
month commencing March 31, 1998 and one (1) final installment of the remaining
principal amount outstanding, plus all other amounts having accrued and
outstanding, payable on April 30, 2001.
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 Agreement referred
to below. 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 of Interest.
<PAGE>
If any payment on this Amended and Restated 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
Amended and Restated Financing Security Agreement, dated as of January 17, 1997,
between the Borrower and CITBC as amended by a First Amendment to Amended and
Restated Financing and Security Agreement dated as of April 1, 1997, as amended
by a Third Amendment to Amended and Restated Financing and Security Agreement
dated as of September 17, 1997 and as amended by a Fourth Amendment to Amended
and Restated Financing and Security Agreement dated as of March 11, 1998 (as it
may be amended, modified or supplemented from time to time, the "Financing
Agreement") and is subject to, the 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.
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 Amended and Restated 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/ WO Thomas
-------------------------------
Name: William O. Thomas
Title: President & Chief Executive
Officer
2
Exhibit 10.4
AMENDED AND RESTATED TERM LOAN PROMISSORY NOTE
Reference is made to the $5,000,000 Amended and Restated Term Loan
Promissory Note dated January 17, 1997 of DeVlieg-Bullard, Inc. and payable
to the CIT Group/Business Credit, Inc. (the "Term Loan I Note") the
$3,000,000 Amended and Restated Term Loan II Promissory Note dated January
17, 1997 (the "Term Loan II Note"), the $2,000,000 Term Loan III Promissory
Note, dated January 17, 1997 (the "Term Loan III Promissory Note"), the
$1,500,000 Term Loan IV Promissory Note, dated January 17, 1997 (the "Term
Loan II Promissory Note"). To the extent that this Amended and Restated
Term Loan Promissory Note amends each of the Term Loan I Promissory Note,
the Term Loan II Promissory Note, the Term Loan III Promissory Note and the
Term Loan IV Promissory Note, each such Note is amended. To the extent this
Amended and Restated Term Loan I Promissory Note restates each of the Term
Loan I Promissory Note, the Term Loan II Promissory Note, the Term Loan III
Promissory Note and the Term Loan IV Promissory Note, each such Note is
restated.
$2,850,000 New York, New York
March 11, 1998
FOR VALUE RECEIVED, the undersigned, DeVlieg-Bullard, Inc., a Delaware
corporation (herein the "Borrower"), promises to pay to the order of the BNY
Financial Corporation ("BNYFC"), at The CIT Group/Business Credit, Inc.'s
("CITBC") 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 Two Million Eight Hundred Fifty Thousand Dollars
($2,850,000) in thirty-eight (38) equal principal installments of each payable
monthly on the last business day of each month commencing March 31, 1998 and one
(1) final installment of the remaining principal amount outstanding, plus all
other amounts having accrued and outstanding, payable on April 30, 2001.
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 Agreement referred
to below. 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 of Interest.
<PAGE>
If any payment on this Amended and Restated 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
Amended and Restated Financing Security Agreement, dated as of January 17, 1997,
between the Borrower and CITBC as amended by a First Amendment to Amended and
Restated Financing and Security Agreement dated as of April 1, 1997, as amended
by a Third Amendment to Amended and Restated Financing and Security Agreement
dated as of September 17, 1997 and as amended by a Fourth Amendment to Amended
and Restated Financing and Security Agreement dated as of March 11, 1998 (as it
may be amended, modified or supplemented from time to time, the "Financing
Agreement") and is subject to, the 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.
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 BNYFC 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 Amended and Restated 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/ WO Thomas
-------------------------------
Name: William O. Thomas
Title: President & Chief Executive
Officer
2
Exhibit 10.5
FOURTH AMENDMENT TO INVESTMENT AGREEMENT
THIS FOURTH AMENDMENT TO INVESTMENT AGREEMENT ("Amendment"), dated as of
September 17, 1997, is made by and among (i) DEVLIEG-BULLARD, INC., a Delaware
corporation (the "Company"), (ii) BANC ONE CAPITAL PARTNERS CORPORATION, a Texas
corporation ("Banc One"), and PNC CAPITAL CORP, a Delaware corporation ("PNC")
(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 New York ("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").
W I T N E S S E T H:
WHEREAS, the Senior Holders, Allied (as defined in the Agreement) and the
Company entered into that certain Investment Agreement dated as of May 25, 1994
(the "Original Agreement"), as amended by that certain First Amendment to
Investment Agreement dated as of October 23, 1995, by and among Senior Holders,
Allied, Junior Holders and the Company (the "First Amendment"), that certain
Second Amendment to Investment Agreement dated as of April 12, 1996, by and
among Senior Holders, Junior Holders and the Company (the "Second Amendment"),
and that certain Third Amendment to Investment Agreement dated as of January 17,
1997, by and among Senior Holders, Junior Holders and the Company (the "Third
Amendment"; the Original Agreement, the First Amendment, the Second Amendment,
and the Third Amendment are herein collectively referred to as the "Agreement"),
pursuant to which the Senior Holders and Allied agreed to purchase $12,000,000
of subordinated debentures and Junior Holders agreed to purchase $4,000,000 of
junior debentures (the proceeds of said junior debentures having been used to
satisfy the senior debentures held by Allied), all in accordance with, and as
provided in, the Agreement; and
<PAGE>
WHEREAS, the Company has requested that the Senior Holders and the Junior
Holders further amend the Agreement in certain respects; and
WHEREAS, Allied remains a "Holder" under the Agreement for limited purposes
only and, accordingly, is not required to join in this Amendment;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreement contained herein, intending to be legally bound hereby, the parties
agree as follows:
1. Consolidated Fixed Charge Coverage Ratio. Section 7.15 of the Agreement
is hereby amended in its entirety to read as follows:
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:
Rolling Period Ratio
-------------- -----
July 31, 1997 1.10 to 1.00
July 31, 1998 1.10 to 1.00
July 31, 1999 1.10 to 1.00
July 31, 2000 1.10 to 1.00
and thereafter
2. Capital Expenditures. Section 7.18 of the Agreement is hereby amended in
its entirety to read as follows:
7.18 Capital Expenditures. The aggregate amount of all Capital
Expenditures of Company and its Subsidiaries will not exceed $2,100,000
in any fiscal year. In any fiscal year the Company and its Subsidiaries
shall be entitled to add to the $2,100,000 ceiling for such fiscal
year, Capital Expenditures equal to one-half of the amount, if any, by
which $2,100,000 exceeds the amount of Capital Expenditures which were
made in the preceding fiscal year.
3. Miscellaneous. The provisions of the Agreement shall remain in full
force and effect except as modified hereby.
2
<PAGE>
IN WITNESS WHEREOF, the parties, by their duly authorized officers, have
executed and delivered this Fourth Amendment to Investment Agreement as of the
date first written above.
DEVLIEG-BULLARD, INC.
ATTEST: _______________________ By: /s/ WO Thomas
--------------------------
Title: President
BANC ONE CAPITAL PARTNERS
CORPORATION
ATTEST: _______________________ By: /s/ James H. Wolfe
--------------------------
Title: Managing Director
PNC CAPITAL CORP
ATTEST: _______________________ By: /s/ David J. Blair
--------------------------
Title: Senior Vice President
and Principle
WITNESS: ______________________ /s/ Charles E. Bradley
------------------------------
CHARLES E. BRADLEY, SR.
WITNESS: ______________________ /s/ John G. Poole
------------------------------
JOHN G. POOLE
3
Exhibit 10.6
FIFTH AMENDMENT TO INVESTMENT AGREEMENT
THIS FIFTH AMENDMENT TO INVESTMENT AGREEMENT ("Amendment"), dated as of
March 11, 1998, is made by and among (i) DEVLIEG-BULLARD, INC., a Delaware
corporation (the "Company"), (ii) BANC ONE CAPITAL PARTNERS CORPORATION, a Texas
corporation ("Banc One"), and PNC CAPITAL CORP, a Delaware corporation ("PNC")
(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 New York ("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").
W I T N E S S E T H:
WHEREAS, the Senior Holders, Allied (as defined in the Agreement) and the
Company entered into that certain Investment Agreement dated as of May 25, 1994
(the "Original Agreement"), as amended by that certain First Amendment to
Investment Agreement dated as of October 23, 1995, by and among Senior Holders,
Allied, Junior Holders and the Company (the "First Amendment"), that certain
Second Amendment to Investment Agreement dated as of April 12, 1996, by and
among Senior Holders, Junior Holders and the Company (the "Second Amendment"),
that certain Third Amendment to Investment Agreement dated as of January 17,
1997, by and among Senior Holders, Junior Holders and the Company (the "Third
Amendment") and that certain Fourth Amendment to Investment Agreement dated as
of September __, 1997, by and among Senior Holders, Junior Holders and the
Company (the "Fourth Amendment"; the Original Agreement, the First Amendment,
the Second Amendment, the Third Amendment and the Fourth Amendment are herein
collectively referred to as the "Agreement"), pursuant to which the Senior
Holders and Allied agreed to purchase $12,000,000 of subordinated debentures and
Junior Holders agreed to purchase $4,000,000 of junior debentures (the proceeds
of said junior debentures having been used to satisfy the senior debentures held
by Allied), all in accordance with, and as provided in, the Agreement; and
WHEREAS, the Company has requested that the Senior Holders and the Junior
Holders further amend the Agreement in certain respects; and
<PAGE>
WHEREAS, Allied remains a "Holder" under the Agreement for limited purposes
only and, accordingly, is not required to join in this Amendment;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreement contained herein, intending to be legally bound hereby, the parties
agree as follows:
1. Senior Debt. In accordance with the provisions of Paragraph 1.03 (Senior
Debt), Holders hereby consent to a $2,514,285.99 increase in the term Senior
Debt of the Company, to aggregate amount of $7,600,000, the consolidation of
said term debt into a single term facility to be repaid in equal, monthly
installments of $200,000 each, plus accrued interest, beginning March 31, 1998,
and maturing April 30, 2001, and the extension of the maturity date of the
remaining Senior Debt to October 31, 2001.
2. Financial Covenants. Sections 7.11 (Minimum Consolidated Net Worth),
7.12 (Consolidated Interest Coverage Ratio), 7.13 (Consolidated Total
Liabilities to Consolidated Net Worth), 7.14 (Consolidated Current Ratio), 7.15
(Consolidated Fixed Charge Coverage Ratio), and 7.16 (Consolidated EBITDA) of
the Agreement are hereby deleted and the following are substituted in lieu
thereof (and, as used therein, "Quarterly Date" shall mean each January 31,
April 30, July 31 and October 31):
7.11 Minimum Consolidated Net Worth. The Company and its Consolidated
Subsidiaries shall maintain as of each date specified below a Consolidated
Net Worth of not less than the following:
Date Amount
---- ------
April 30, 1998 $22,000,000
July 31, 1998 $22,000,000
October 31, 1998 $22,000,000
January 31, 1999 $22,000,000
April 30, 1999 $25,000,000
July 31, 1999 $25,000,000
October 31, 1999 $25,000,000
January 31, 2000 $25,000,000
April 30, 2000 $25,000,000
July 31, 2000 $27,000,000
and thereafter
7.12 Consolidated Interest Coverage Ratio. The Company and its
Consolidated Subsidiaries shall maintain for each period specified below a
Consolidated Interest Coverage Ratio of not less than the following:
2
<PAGE>
Period Ratio
------ -----
Four quarters ended
January 31, 1998 2.40 to 1.00
February 1, 1998 to
April 30, 1998 2.40 to 1.00
February 1, 1998 to
July 31, 1998 2.40 to 1.00
February 1, 1998 to
October 31, 1998 2.40 to 1.00
February 1, 1998 to
January 31, 1999 2.40 to 1.00
Four quarters ended
April 30, 1999 2.90 to 1.00
Four quarters ended
July 31, 1999 2.90 to 1.00
Four quarters ended
October 31, 1999 2.90 to 1.00
Four quarters ended
January 31, 2000 2.90 to 1.00
Four quarters ended
April 30, 2000 2.90 to 1.00
Four quarters ended
July 31, 2000 3.60 to 1.00
and on each Quarterly
Date thereafter
7.13 Consolidated Total Liabilities to Consolidated Net Worth. The
Company and its Consolidated Subsidiaries will not as of any date specified
below permit the ratio of Consolidated Current Liabilities to Consolidated
Net Worth to be greater than the following:
Date Ratio
---- -----
April 30, 1998 4.00 to 1.00
July 31, 1998 4.00 to 1.00
October 31, 1998 4.00 to 1.00
January 31, 1999 4.00 to 1.00
April 30, 1999 4.00 to 1.00
July 31, 1999 3.75 to 1.00
October 31, 1999 3.75 to 1.00
January 31, 2000 3.75 to 1.00
April 30, 2000 3.75 to 1.00
July 31, 2000 3.25 to 1.00
and each Quarterly
Date thereafter
3
<PAGE>
7.14 Consolidated Current Ratio. The Company and its Consolidated
Subsidiaries shall have as of any date specified below a ratio of
Consolidated Current Assets to Consolidated Current Liabilities of not less
than the following:
Date Ratio
---- -----
April 30, 1998 1.08 to 1.00
July 31, 1998 1.08 to 1.00
October 31, 1998 1.08 to 1.00
January 31, 1999 1.08 to 1.00
April 30, 1999 1.08 to 1.00
July 31, 1999 1.25 to 1.00
October 31, 1999 1.25 to 1.00
January 31, 2000 1.25 to 1.00
April 30, 2000 1.25 to 1.00
July 31, 2000 1.35 to 1.00
and each Quarterly
Date thereafter
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 1.10 to 1.00.
7.16 Consolidated EBITDA. The Company and its Consolidated
Subsidiaries shall have for each period specified below an amount of
Consolidated EBITDA of not less than the following:
Period Amount
------ ------
For the four quarters
ended on January 31,
1998 $12,000,000
February 1, 1998 to
April 30, 1998 $ 2,500,000
February 1, 1998 to
July 31, 1998 $ 5,500,000
February 1, 1998 to
October 31, 1998 $ 8,500,000
February 1, 1998 to
January 31, 1999 $11,500,000
For the four quarters
ended on April 30, 1999 $13,000,000
For the four quarters
ended on July 30, 1999 $13,500,000
For the four quarters
ended on October 31, 1999 $13,500,000
For the four quarters
ended on January 31, 2000 $13,500,000
4
<PAGE>
For the four quarters
ended on April 30, 2000 $13,500,000
For the four quarters
ended on July 31,
2000 and for the four
quarters ended on
each Quarterly Date
thereafter $14,500,000
3. Miscellaneous. The provisions of the Agreement shall remain in full
force and effect except as modified hereby.
IN WITNESS WHEREOF, the parties, by their duly authorized officers, have
executed and delivered this Fourth Amendment to Investment Agreement as of the
date first written above.
DEVLIEG-BULLARD, INC.
ATTEST: _______________________ By: /s/ WO Thomas
---------------------------
Title: PRESIDENT
BANC ONE CAPITAL PARTNERS
CORPORATION
ATTEST: _______________________ By:/s/ James H. Wolfe
-------------------------------
Title: Managing Director
PNC CAPITAL CORP
ATTEST: _______________________ By: /s/ David J. Blair
-------------------------------
Title: Senior Vice President
and Principle
WITNESS: ______________________ /s/ Charles E. Bradley
-------------------------------
CHARLES E. BRADLEY, SR.
WITNESS: ______________________ /s/ John G. Poole
-------------------------------
JOHN G. POOLE
5
Exhibit 10.7
March 11, 1998
Charles E. Bradley
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, Connecticut 06902
John G. Poole
c/o Stanwich Partners, Inc.
One Stamford Landing
62 Southfield Avenue
Stamford, Connecticut 06902
Banc One Capital Partners Corporation
150 E. Gay Street
Columbus, Ohio 43215
PNC Capital Corp.
3100 CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222
Re: Amendment to Intercreditor Agreement ("Amendment")
Gentlemen:
Reference is made to the Intercreditor Agreement made as of October 23,
1995 between The CIT Group/Business Credit, Inc. ("CIT"), a financial
institution, Charles E. Bradley, Sr. ("Bradley"), John G. Poole ("Poole"), Banc
One Capital Partners Corporation, a Texas Corporation, ("Bank One") and PNC
Capital Corp., a Delaware corporation ("PNC"), as amended (the "Intercreditor
Agreement"). Capitalized terms used in this letter and defined in the
Intercreditor
<PAGE>
Agreement shall have the same meanings in this letter as in the Intercreditor
Agreement unless otherwise specifically defined in this letter.
Each of the undersigned hereby agree that Paragraph A of the Introduction
to the Intercreditor Agreement is amended in full to read:
"A. DeVLIEG BULLARD, INC. (the "Borrower") is indebted to CIT and BNY
Financial Corporation and their respective successors in interest and
assigns (referred to herein collectively as the "Senior Debt Holder") in
the original principal amount of up to $40,000,000 (together with all other
indebtedness, liabilities and obligations of the Borrower to any Senior
Debt Holder under the Financing Agreement hereinafter referred to, the
"Senior Indebtedness"), as evidenced by, among other things, an Amended and
Restated Financing and Security Agreement between CIT and the Borrower
dated January 17, 1997 (as amended and as it may be amended in the future,
the "Financing Agreement"), the Borrower's $30,000,000 revolving credit
promissory notes and the Borrower's $7,600,000 term loan promissory notes
(collectively and as amended and assigned and as they may be amended and
assigned, the "Senior Notes"). All documents and agreements delivered
pursuant to or in connection with the Senior Indebtedness are herein
referred to as the "Senior Financing Documents"."
In addition, each of the undersigned hereby agrees that CIT executed the
Intercreditor Agreement for itself and as Agent for each Senior Debt Holder and
all Senior Debt Holders are entitled to rely on the terms of the Intercreditor
Agreement.
This Amendment shall become effective on the date when the Borrower,
Bradley, Poole, Banc One, PNC and CIT shall have executed and delivered this
Amendment.
This Amendment may be executed in counterparts.
The execution and delivery of this Amendment shall not, except as
specifically provided above, constitute a waiver of any right, power or remedy
of any Senior Debt Holder under the Intercreditor Agreement or any other
document
2
<PAGE>
related thereto and the Intercreditor Agreement and each other document related
thereto shall remain in full force and effect and are hereby ratified and
confirmed.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By /s/ Edward Hirshfield
---------------------------
Name: Edward Hirshfield
Title: Assistant Secretary
Agreed and Accepted:
CHARLES E. BRADLEY
By /s/ Charles E. Bradley
-------------------------
Name:
JOHN G. POOLE
By /s/ John G. Poole
--------------------
Name:
BANC ONE CAPITAL PARTNERS
By /s/ James H. Wolfe
-------------------------
Name: James H. Wolfe
Title: Managing Director
3
<PAGE>
PNC CAPITAL CORP.
By: /s/ David J. Blair
-------------------------
Name: David J. Blair
Title: Senior Vice President
and Principle
DeVLIEG-BULLARD, INC.
By /s/ WO Thomas
---------------------------
Name: WO THOMAS
Title: PRESIDENT
4
Exhibit 11
DeVlieg-Bullard, Inc.
Computation of Earnings per Share
(unaudited - in thousands, except per share data) (a)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net (loss) income $ (2,232) $ 754 $ (1,960) $ 1,483
======== ======== ======== ========
Shares for basic earnings per share:
Average number of common shares
outstanding 12,281 12,250 12,278 12,250
Dilutive effect of outstanding stock
purchase warrants (b):
Class A 1,496 1,494 1,496 1,494
Class B (c) 288 288 288 287
-------- -------- -------- --------
Total Basic shares outstanding 14,065 14,032 14,062 14,031
======== ======== ======== ========
Basic earnings per share $ (0.16) $ 0.05 $ (0.14) $ 0.11
======== ======== ======== ========
Additional shares for dilution:
Basic shares outstanding 14,065 14,032 14,062 14,031
Dilutive effect of outstanding options (b) (e) 341 (e) 280
Dilutive effect of outstanding stock
purchase warrants - Class C (b) (d) (e) 747 (e) 747
-------- -------- -------- --------
Total shares used in calculation of
diluted earnings per share 14,065 15,120 14,062 15,058
======== ======== ======== ========
Diluted earnings per share $ (0.16) $ 0.05 $ (0.14) $ 0.10
======== ======== ======== ========
</TABLE>
Notes:
(a) In accordance with the provisions of SFAS 128, "Earnings per Share," the
prior year has been restated.
(b) As determined by application of the treasury stock method.
(c) A total of 289 Class B stock purchase warrants were issuable May 1997 using
a formula based on the average closing stock price for the 90 days prior to
issuance. The Class B warrants became issuable on March 18, 1996, but at
that time, the number of shares was unknown.
(d) In connection with the refinancing of the senior debt facility in October
1995, 750 Class C stock purchase warrants ("Class C Warrants") were issued.
The Company has the opportunity to earn back these warrants based on
earnings as defined in the agreement. For the three and six months ended
January 31, 1998 and 1997, the Company did not meet the defined earnings
level, therefore all Class C Warrants were considered outstanding.
(e) Not included in calculation as effect would be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the Quarter ended January 31, 1998 and is qualified in its entirety by
reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 471
<SECURITIES> 0
<RECEIVABLES> 16,054
<ALLOWANCES> (997)
<INVENTORY> 38,703
<CURRENT-ASSETS> 65,724
<PP&E> 28,519
<DEPRECIATION> (15,920)
<TOTAL-ASSETS> 119,717
<CURRENT-LIABILITIES> 49,525
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 23,659
<TOTAL-LIABILITY-AND-EQUITY> 119,717
<SALES> 54,491
<TOTAL-REVENUES> 54,491
<CGS> 41,750
<TOTAL-COSTS> 41,750
<OTHER-EXPENSES> 232
<LOSS-PROVISION> 134
<INTEREST-EXPENSE> 2,637
<INCOME-PRETAX> (3,379)
<INCOME-TAX> (1,419)
<INCOME-CONTINUING> (1,960)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,960)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
