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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 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 0-19544
AUTOCAM CORPORATION
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(Exact name of Registrant as specified in its charter)
MICHIGAN 38-2790152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4070 EAST PARIS AVE., KENTWOOD, MICHIGAN 49512
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (616) 698-0707
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Without Par Value
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(Title of Class)
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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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock of the Registrant held by
nonaffiliates was $31,486,213 as of September 4, 1998.
The number of shares outstanding of the Registrant's common stock as of
September 4, 1998 was 6,106,680 shares of common stock without par value.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which Portions of
Document Documents are Incorporated
- ---------------------------------- ------------------------------------------
Autocam Corporation 1998 Annual Report to
Shareholders. Parts I, II and IV
Definitive Proxy Statement for the 1998 Annual
Meeting of Shareholders filed with Securities and
Exchange Commission, September 1998. Part III
[Cover page 2 of 2]
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AUTOCAM CORPORATION
FORM 10-K
Year Ended June 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C> <C>
PART I.
Item 1. Business 1-5
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security-Holders 6
PART II.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 8
PART III.
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - Index 8-12
SIGNATURES
Principal Executive Officer, Principal Financial and Accounting Officer 13
Directors 13
EXHIBITS E-1 - E-156
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
The Company designs and manufactures close-tolerance, specialty metal-alloy
components sold to the transportation, medical device and computer electronics
industries. These components are used primarily in gasoline and diesel fuel and
braking systems, devices for surgical procedures, and computer rigid disk
drives. The Company's production equipment consists of high-precision, automatic
cam-driven turning machines and computer numerically-controlled turning, milling
and grinding machines capable of high-volume production while maintaining close
tolerances.
BUSINESS STRATEGY
The Company's sales have grown from $18 million in fiscal 1990 to $90 million in
fiscal 1998. The Company's management attributes its growth to the following
factors: (i) increased sales of domestically-produced automobiles and the trend
toward more environmentally efficient port electronic fuel injectors; (ii)
increased sales of braking system components reflecting the acquisition of a
leading supplier of braking system components in fiscal 1997 and increased
demand and acceptance of anti-lock braking systems as a safety feature; (iii)
the introduction of precision-machined medical devices to its product offerings;
and, (iv) the proliferation of personal computers and their need for precise
machined components. The Company's growth and profitability reflect its business
strategy to:
- Identify Products Which are Early in Their Life Cycles - The Company
selectively pursues new sales opportunities based primarily on
identifying products early in their product life cycles that have
strong unit growth potential. The Company believes these components can
be manufactured with unit price structures and quality standards that
favor the Company in its highly competitive environment. By identifying
products early in their life cycles and building strong customer
relationships, sales growth has been enhanced through sole source,
long-term supply contracts with selected customers. In fiscal 1998, 55%
of the Company's total sales were to two customers, Delphi Automotive
Systems ("DAS"; a division of General Motors Corporation), and Robert
Bosch Corporation ("Bosch").
- Provide Technologically High Quality Products on a Timely Basis - The
Company believes that the reputation it has achieved in supplying high
quality components has been instrumental in allowing it to achieve new
business and maintain existing business. The Company's manufacturing
strategy is to produce high-volume, close-tolerance, high-precision
components that have excellent growth prospects. To this end, the
Company has identified products in the transportation industry, such as
fuel and braking systems components, the medical devices industry, such
as minimally invasive ophthalmic and cardiovascular surgery equipment
components, and the computer electronics industry, such as rigid disk
drive fasteners and motor and microprocessor heat dispersion
components. The Company's manufacturing expertise includes process
flexibility and product quality to meet customer demands. The Company
was one of 41 of General Motors' worldwide supplier base of over 30,000
companies to receive the General Motors Supplier of the Year Award in
June 1998, 1997 and 1996. In fiscal 1998, the Company also received the
1997 Partnership in Quality award from Hitachi Automotive Products, the
top quality award bestowed by Hitachi on its suppliers. The Company has
used in the past and expects to use in the future this experience and
knowledge to diversify its industry, customer and product bases.
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- Focus on Aggressively Reducing Cost - Since its inception, the Company
has emphasized a continuous improvement program involving all
employees. The Company believes that this ongoing program, in
conjunction with the capital expenditures it has made, allows it to be
the low-cost producer of the products it manufactures. The Company
believes that there are future opportunities to increase efficiency,
improve productivity and reduce costs.
The Company intends to continue focusing on manufacturing components requiring
high-volume, close-tolerance, high-precision production, which have excellent
growth prospects. The Company's strategy is to expand its base of transportation
customers as well as diversify its product mix to that market. Current and
future supplier consolidation within the industry will require the Company to
provide high-tolerance machining capability for the production of many more
products in order to maintain its position as a premier supplier to the
industry. In addition, the Company plans to increase its penetration of
non-transportation markets, such as medical devices, by identifying products
consistent with its business strategy. These expansion plans will be realized
through strategic acquisitions. The Company is continually seeking to acquire
businesses that complement and expand its product offerings. Such opportunities
should be created as original equipment manufacturers ("OEM") continue to
consolidate their supplier bases.
MARKETS
The Company currently sells its products in the transportation, medical devices
and computer electronics industries as described below.
Transportation Industry. The transportation parts industry is composed of two
major segments -- the OEM market and the transportation aftermarket. The Company
sells substantially all of its products to tier-one and tier-two suppliers to
OEMs for installation as original equipment on new cars, trucks and heavy
equipment. The market for new cars and light trucks in North America, the
largest user of Company products, is large and cyclical, with new vehicle demand
tied closely to the overall strength of the North American economy. Developments
within the industry, including consolidation among suppliers and increased
outsourcing of components by OEMs, have substantially altered the competitive
environment for transportation suppliers and have had a favorable impact on the
Company's growth.
Due to ever-increasing global competition, OEMs are continually revising their
supplier requirements. OEMs are requiring suppliers to meet increasingly strict
standards of quality, overall cost reductions and increased support for up-front
design, engineering and project management. These requirements are continually
accelerating the trend toward consolidation of the OEMs' supplier bases. For
more capable suppliers, the new environment will continue to create the
opportunity to grow rapidly by obtaining business previously provided by other
suppliers.
In addition, automotive manufacturers are producing vehicles with more features
designed for convenience, vehicle performance, and, in response to both state-
and federally-imposed standards related to safety and the environment such as
the Federal Corporate Average Fuel Economy Requirements, emission standards and
passive restraint requirements. As a result, new, more sophisticated systems
have been added to automobiles that require components of the type produced by
the Company. As the OEMs follow this trend, significant opportunities should
develop for the Company.
The Company believes it will continue to be well positioned as a supplier to
this market.
Medical Devices Industry. The health care industry continues to undergo a major
transformation affecting all segments of the industry. While the final outcome
of this transformation is unknown, certain identifiable developments have
already impacted this industry. Cost concerns are increasing the trend toward
outpatient and non-physician attended facilities. These facilities will require
more compact, mobile and user-friendly diagnostic and surgical devices. The
industry is also demanding suppliers that enhance quality while lowering costs.
The Company believes it can capitalize on its transportation manufacturing
expertise by applying these skills to similar manufacturing processes used
within the medical devices industry. The Company has already made positive
impressions on companies within this market who were skeptical about a
transportation company's ability to meet the expectations of the medical
industry.
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Computer Electronics Industry. Computer electronics is a dynamic, innovative
industry that encompasses a wide range of products. The Company has focused on
the manufacture of precision components used in suspension assemblies for rigid
disk drives, microprocessor heat dispersion units and rigid disk drive motors.
These and other personal computer subassemblies require high-precision
metal-machined components of the type manufactured by the Company. This industry
also experiences frequent product changes with short lead times from development
to market as a result of technology advances and increasing demand for a variety
of product configurations. The Company believes its ability to make rapid
product changeovers while maintaining high-volume production has, and will
continue to, enable it to take advantage of certain opportunities as they arise.
PRODUCT APPLICATIONS
A summary of the Company's sales and percentage of total sales by product
application for each of the last three fiscal years is presented on page E-3 of
the Exhibit 13 to this Form 10-K.
Fuel Systems. Sales of fuel system components represented 57%, 74% and 63%
of the Company's sales for the years ended June 30, 1998, 1997 and 1996,
respectively. Sales of such components to DAS represented 47%, 62% and 74% of
total fuel system component sales for each of the respective periods presented.
Sales of such components to Bosch represented 26%, 20% and 11% of total fuel
system component sales for each of the respective periods presented. Fuel
systems meter fuel flow more precisely than traditional carburation, and
therefore, permit engines to burn less fuel cleaner. The Company expects fuel
system components to be its primary product for the near-term. The Company has
built a strong reputation in the industry for lowest total cost, which it has
earned through continuous process improvement and equipment and labor
adaptability. The Company believes that most light vehicles manufactured in
North America are equipped with multi-port fuel injection systems, and it does
not expect meaningful growth in North American light vehicle production in the
foreseeable future. Management expects Company sales to grow in the face of
these market conditions through employing a market diversification strategy. The
Company has established relationships with several new customers in this market,
including two that manufacture diesel fuel injectors, which should provide a
majority of its fuel system sales growth in the near future. In addition,
management expects that its focus on global expansion, through acquisition, will
provide additional growth opportunities as it enters new markets.
Braking Systems. Sales of braking system components represented 20%, 11% and 22%
of the Company's sales for the years ended June 30, 1998, 1997 and 1996,
respectively. The Company manufactures several production components for
anti-lock braking systems ("ABS"), including components of pistons, sensors,
plugs, solenoids and valve bodies. It also manufactures valve rods and push rod
assemblies used in the assembly of ABS and conventional braking systems. The
Company expects to benefit from a market diversification strategy in this area
through exploiting core competencies for consistently holding to increasingly
tight machining tolerances and stringent requirements for cleanliness.
Other Automotive. Other automotive components sales represented 3%, 2% and 2% of
the Company's sales for the years ended June 30, 1998, 1997 and 1996,
respectively. The Company manufactures components used in automotive electronic
motors, which allow the remote operation power windows, door locks and seats.
The Company believes that the consumer-desired safety and convenience of these
features will lead to increased sales of these systems and corresponding
increased sales of components manufactured by the Company.
Medical Devices. Medical device components sales represented 11%, 10% and 7% of
the Company's sales for the years ended June 30, 1998, 1997 and 1996,
respectively. The Company manufactures components sold to the ophthalmic and
cardiovascular surgical device industries. It continues to benefit from
increased penetration by its largest ophthalmic surgical device customer into
foreign markets. During late fiscal 1996, the Company began manufacturing
precision-machined metal components for innovative cardiovascular surgical
device manufacturers, including those that sell stents.
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Computer Electronics. Sales of computer electronics components represented 7%,
3% and 7% of the Company's sales for the years ended June 30, 1998, 1997 and
1996, respectively. During fiscal 1996 and 1997, these components were primarily
machined, precision fastening devices, known as baseplates, used to join certain
components of rigid disk drives used on personal computers. Baseplate sales
dropped during fiscal 1997 as the Company fell victim to characteristic life
cycle shifts; specifically, demand for suspension assemblies that featured
machined baseplates produced by the Company were replaced by those featuring
stamped baseplates. The Company reversed this decline in sales in fiscal 1998
through the sale of high-volume, high-precision metal components used in the
production of thermoplates for computer microprocessors.
MANUFACTURING
The Company manufactures its products using turning, grinding and milling
processes. Substantially all of the Company's production machinery has been
acquired new since 1985 and consists of high-precision, automatic cam-driven
turning machines and computer numerically-controlled turning, milling and
grinding machines. These machines are capable of high-volume production while
maintaining close tolerances. Products are typically produced from bar stock
using multi-spindle cam automatic bar machines or centerless grinders. Secondary
machining in some cases is necessary. Parts are then deburred, cleaned, in some
cases, plated or heat treated at outsource locations, packaged and shipped
directly to the customer.
On a new job, the first parts produced are used to establish process capability
and sent to the customer for approval. After approval, the part is placed in the
Company's production planning systems and, as production begins, statistical
process control techniques are employed to maintain quality and gather data for
the Company's continuous improvement efforts. The continuous improvement process
focuses the attention of all employees on improving each step of the process in
order to increase quality, lower cost and improve customer service. In the
manufacturing area, this focus emphasizes reducing dimensional variation to
narrow the tolerance range for a given process, increasing perishable tool life,
reducing scrap, and increasing both human and equipment productivity.
The Company anticipates that additional manufacturing equipment will be
necessary if firm orders are received during fiscal 1999 and 2000 in quantities
currently contemplated under its existing contracts and purchase orders. The
Company has entered into commitments to purchase certain of such equipment (See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Business - Contracts and
Purchase Orders").
Raw materials and other resources used by the Company are generally not
restricted in availability; however, the Company obtains 70% of its supply of
metal alloys from one supplier. While these materials are available from several
other sources, the Company could experience production delays and lost sales
while qualifying a new supplier.
MARKETING AND SALES
The Company markets its products primarily by bidding upon component
specifications submitted by the customer. In addition, the Company makes direct
calls on potential customers, domestically by its internal sales department and
internationally through independent sales representatives. It is the Company's
objective to establish long-term sole source contracts in order to strengthen
its position in the marketplace. In addition, the Company continues to expand
its base of customers in order to reduce its dependence on any particular
customer or industry.
CONTRACTS AND PURCHASE ORDERS
The Company's transportation customers typically award blanket purchase orders
for each calendar year, and is occasionally successful in receiving
life-of-the-product supplier agreements, as is the case with most of its current
business with DAS. The remainder of its components may be subject to an annual
rebidding process.
Additionally, the Company is currently operating with open and blanket purchase
orders from approximately 40 customers primarily covering transportation fuel
and braking systems, medical devices, and computer electronics components.
Orders are not firm under blanket purchase orders until specific releases are
granted.
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BACKLOG AND SEASONALITY
The Company's business is relatively consistent throughout the year, except for
slowness traditionally experienced in July and August due to automotive model
changeovers and during late December as its customers in the transportation
industry typically shut down around the Christmas and New Year holidays.
The Company does not reflect an order in backlog until it has received a
purchase order and release committing to a quantity and delivery date.
Generally, orders are shipped within three months of a release and as a result,
the Company does not believe backlog is a material concept to its business.
COMPETITION
The markets in which the Company competes are highly competitive, and the
Company believes that it competes within the above industries on the basis of
price, quality and technology. The Company believes that there are approximately
40 companies in the United States that have the equipment to be manufacturers of
precision metal parts in competition with the Company. Certain of the Company's
competitors have greater resources than the Company and could move components
currently manufactured by the Company in-house. The Company also competes with
approximately 10 companies in Europe and Asia. Some of the components currently
manufactured by the Company can also be manufactured using alternative
technologies including stamping and coldheading processes which, in some cases,
can process high-precision parts as efficiently as those technologies utilized
by the Company.
EMPLOYEES
The Company had 953 full-time employees as of June 30, 1998. Those
employees can be segregated into the following disciplines:
<TABLE>
<CAPTION>
Salaried Managerial Workers Engaged in
and Administrative Salaried Engineers Manufacturing Total
<S> <C> <C> <C> <C>
Kentwood, Michigan 56 17 236 309
Campinas, Brazil 22 4 211 237
Pinhal, Brazil 7 2 200 209
Dowagiac, Michigan 15 2 85 102
Hayward, California 4 4 39 47
Gaffney, South Carolina 4 1 28 33
Boituva, Brazil 2 14 16
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Totals 108 32 813 953
=== == === ===
</TABLE>
None of the Company's U.S. employees are part of a collective bargaining unit,
except for 85 employees of the Company's Dowagiac, Michigan facility who are
represented by the two local units of The United Steelworkers of America. A
governmental union represents all Brazilian employees. The Company has never
experienced a work stoppage and considers relations with its employees to be
excellent.
EXPORT SALES
During the fiscal years ended June 30, 1998, 1997 and 1996, the Company's export
sales of fuel and braking system, computer electronic, and refrigeration and
air-conditioning system components to thirteen customers in Europe, Mexico,
Canada, Brazil, and Asia were $9,032,600, $8,485,000 and $7,961,500,
respectively.
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ITEM 2. PROPERTIES
The Company owns or leases manufacturing facilities suitable and adequate for
the production and marketing of its products. The Company's executive and
administrative offices occupy 12,000 square feet of its Kentwood, Michigan
facility. The following is a list of the Company's locations and approximate
square footages:
<TABLE>
<CAPTION>
Approximate Square
Feet
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<S> <C>
Owned:
Kentwood, Michigan 88,000
Marshall, Michigan (opened July 1998) 56,000
Dowagiac, Michigan 67,000
Gaffney, South Carolina 25,000
Leased:
Kentwood, Michigan 100,000
Hayward, California 27,000
Campinas, Brazil 22,000
Pinhal, Brazil 24,000
Boituva, Brazil (opened August 1998) 32,000
</TABLE>
The Company subleases 67,000 square feet of its leased Kentwood, Michigan
facility to a company related by virtue of its 100%-ownership by the Company's
president.
The Company has machinery and equipment with an aggregate cost of $108,445,000.
The Company owns $88,606,000 of this equipment and $19,839,000 is leased under
operating leases. For information concerning minimum future lease payments under
non-cancelable leases, see Note 6 of Notes to Consolidated Financial Statements
filed as Exhibit 13 hereto.
The Company believes its facilities are modern, well maintained, adequately
insured and suitable for their present and intended uses. In order to meet
demand primarily from transportation customers, management will purchase $20.1
million of equipment and invest $2.1 million in facilities over the next year
(on which deposits of $3.7 million and $1.5 million, respectively, had been
placed as of June 30, 1998). See Item 1 under "Business - Manufacturing" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings other than
ordinary or routine proceedings incidental to its operations, which in the
opinion of management, would not have a material adverse effect on the Company
if determined against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol ACAM. The following table sets forth the
range of high and low sales prices of the Company's common stock as reported by
the Nasdaq Stock Market, adjusted for the effects of share dividends issued
during the periods presented.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
High Low
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fiscal 1998:
Fourth quarter 21 1/8 16 3/8
Third quarter 16 3/4 13 1/8
Second quarter 15 1/2 12 1/8
First quarter 13 1/8 10 1/4
Fiscal 1997:
Fourth quarter 11 11/16 7 7/8
Third quarter 11 11/16 10 1/4
Second quarter 11 7/16 7 15/16
First quarter 10 7 15/16
</TABLE>
As of September 4, 1998, 186 holders of record, and approximately 2,000
beneficial shareholders held the Company's common stock.
DIVIDENDS
The Company began paying quarterly cash dividends of two cents per common share
in the second quarter of fiscal 1997. The Company expects this practice of
paying quarterly dividends on its common shares will continue, although future
dividends will continue to depend upon the Company's earnings, capital
requirements, financial condition and other factors.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this Item 6 is incorporated by reference to page E-1 of
the Company's 1998 Annual Report to Shareholders filed as Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this Item 7 is incorporated by reference to pages E-2 -
E-7 of the Company's 1998 Annual Report to Shareholders filed as Exhibit 13
hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates the financial statements required by this Item 8
by reference to Item 14(a)(1) hereof, and the supplementary financial
information required by this Item 8 by reference to page E-1 of the Company's
1998 Annual Report to Shareholders filed as Exhibit 13 hereto.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The Registrant hereby incorporates the information required by Form 10-K, Items
10-13 by reference to the Registrant's definitive proxy statement for its 1998
annual meeting of shareholders which will be filed with the Commission prior to
September 30, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K - INDEX
(a) The following documents are filed as a part of this report:
1. Financial Statements - The following consolidated financial statements
and the report of independent auditors set forth on pages E-8 - E-23 of
the Company's 1998 Annual Report to Shareholders filed as Exhibit 13
hereto are incorporated by reference in this Annual Report on Form
10-K:
Consolidated Balance Sheets as of June 30, 1998 and 1997
For each of the three years in the period ended June 30, 1998:
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. Financial Statement Schedules - No such schedules are included because
of the absence of the conditions under which they are required, or
because the information called for is included in the consolidated
financial statements or notes thereto.
3. Exhibits
3(a) Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3(a) of the
Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
3(b) Bylaws of the Registrant (incorporated by reference to Exhibit
3(b) of the Registrant's Form S-1, Registration No. 33-42670,
filed September 17, 1991).
4(a) Specimen Common Stock Certificate of Registrant (incorporated
by reference to Exhibit 4(a) of the Registrant's Form S-1,
Registration No. 33-42670, filed September 17, 1991).
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10(a) Revolving Credit Loan Agreement, dated June 27, 1997, between
Comerica Bank and the Registrant (incorporated by reference to
Exhibit 10(a) of the Registrant's Form 10-K, filed September
23, 1997).
First Amendment to Revolving Credit Agreement, dated December
22, 1997, between Comerica Bank and the Registrant (filed
herewith, E-24 - E-33).
10(b) Stock Redemption Agreements, dated November 6, 1992 and
September 20, 1993, between John C. Kennedy and Nancy G.
Kennedy in their individual capacities and as co-trustees of
the John C. Kennedy Living Trust u/a, dated February 14, 1986,
as amended, and the Registrant (incorporated by reference to
Exhibit 10(b) of the Registrant's Form 10-K, filed September
27, 1993).
Stock Redemption Agreement, dated August 1, 1996, between John
C. Kennedy and Nancy G. Kennedy in their individual capacities
and as co-trustees of the John C. Kennedy Living Trust u/a,
dated February 14, 1986, as amended, and the Registrant
(incorporated by reference to Exhibit 10(b) of the
Registrant's Form 10-K, filed September 19, 1996).
Stock Redemption Agreement, dated September 1, 1998, between
John C. Kennedy and Nancy G. Kennedy in their individual
capacities and as co-trustees of the John C. Kennedy Living
Trust u/a, dated February 14, 1986, as amended, and the
Registrant (filed herewith, E-34 - E-36).
10(c) Autocam Corporation 1991 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10(c) of the
Registrant's Form 10-K, filed September 23, 1994).
10(d) Employment Agreement dated September 1, 1991, between
Registrant and Edward W. Hekman (incorporated by reference to
Exhibit 10(e) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(e) Northwestern Mutual Life Insurance Company Joint Comp Life
insurance policies covering John C. Kennedy and Nancy G.
Kennedy, Policy Nos. 12 443 196 and 12 200 147 (incorporated
by reference to Exhibit 10(e) of the Registrant's Form 10-K,
filed September 27, 1993).
10(f) Northwestern Mutual Life Insurance Company Adjustable Whole
Life Insurance Policies covering John C. Kennedy, Policy Nos.
9 718 337, 10 755 204 and 10 755 185 (incorporated by
reference to Exhibit 10(f) of the Registrant's Form S-1,
Registration No. 33-42670, filed September 17, 1991).
10(g) Northwestern Mutual Life Insurance Company Extraordinary Life
Insurance Policies covering John C. Kennedy, Policy Nos. 9 053
592, 9 112 232 and 10 369 805 (incorporated by reference to
Exhibit 10(g) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(h) Northwestern Mutual Life Insurance Company Disability Income
Policies covering John C. Kennedy, Policy Nos. D316131,
D316137, D374518, D532736 (incorporated by reference to
Exhibit 10(h) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(i) Northwestern Mutual Life Insurance Company Joint Comp Life
Insurance Policy covering John C. Kennedy and Nancy G.
Kennedy, Policy No. 11 199 261 (incorporated by reference to
Exhibit 10(i) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(j) Northwestern Mutual Life Insurance Company Whole Life
Insurance Policies covering John C. Kennedy, Policy Nos. 11
466 899 and 11 467 109 (incorporated by reference to Exhibit
10(j) of the Registrant's Form S-1, Registration No. 33-42670,
filed September 17, 1991).
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10(k) Connecticut Mutual Life Insurance Company Whole Life Insurance
Policy covering John C. Kennedy, Policy No. 4 400 303
(incorporated by reference to Exhibit 10(k) of the
Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
10(l) Northwestern Mutual Life Insurance Company Disability Income
Policy covering Edward W. Hekman, Policy No. D597564
(incorporated by reference to Exhibit 10(l) of the
Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(m) Northwestern Mutual Life Insurance Company Joint CompLife
Policy covering John C. Kennedy and Nancy G. Kennedy, Policy
No. 13 542 762 (incorporated by reference to Exhibit 10(m) of
the Registrant's Form 10-K, filed September 19, 1996).
10(n) Northwestern Mutual Life Insurance Company Joint CompLife
Policy covering John C. Kennedy and Nancy G. Kennedy, Policy
No. 14 538 421 (filed herewith, E-37 - E-59).
10(o) Lease Agreement, dated March 1, 1995, between Registrant as
lessee, and Rieth Partners and Marys' Share, both Michigan
partnerships, as lessors, regarding industrial facilities
located at 4060 East Paris Avenue, Kentwood, Michigan
(incorporated by reference to Exhibit 10(n) of the
Registrant's Form 10-K, filed September 25, 1995).
10(p) Equipment Leases:
1. Master Lease Agreement, dated August 21, 1989,
between Registrant and General Electric Capital
Corporation, with Schedule Nos. 4 & 5, dated May 11,
1992 and June 30, 1992, respectively, covering three
Tornos Bechler MS-7 Automatic Lathes, one Mikron
PAS-16 Multi-spindle Horizontal Machining Center, and
one Tornos Bechler SAS-16DC Multi-spindle Automatic
Bar Machine (incorporated by reference to Exhibit
10(o)(1) of the Registrant's Form S-1, Registration
No. 33-42670, filed September 17, 1991 (master lease)
and the Registrant's Form 10-K, filed September 25,
1992 (schedules)).
Equipment Lease Schedule Nos. 6, 7, 8 & 9, dated
December 11, 1992, March 31, 1993, April 30, 1993,
and June 1, 1993, respectively, covering five Tornos
Bechler SAS-16DC Multi-spindle Automatic Bar Machines
and one Mikron PAS-16 Multi-spindle Horizontal
Machining Center (incorporated by reference to
Exhibit 10(o)(1) of the Registrant's Form 10-K, filed
September 27, 1993).
Equipment Lease Schedule Nos. 10 and 11, dated
September 10, 1993 and October 22, 1993,
respectively, covering five Tornos Bechler SAS-16DC
Multi-spindle Automatic Bar Machines (incorporated by
reference to Exhibit 10(o)(1) of the Registrant's
Form 10-K, filed September 23, 1994).
Equipment Lease Schedule Nos. 12 and 13, both dated
November 22, 1994, covering four Tornos Bechler
SAS-16DCH Multi-spindle Automatic Screw Machines and
two Mikron PAS-16 rotary transfer machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 25, 1995).
Equipment Lease Schedule No. 14, dated September 1,
1995, covering two Tornos Bechler SAS-16DCH
Multi-spindle Automatic Screw Machines (incorporated
by reference to Exhibit 10(o)(1) of the Registrant's
Form 10-K, filed September 25, 1995).
10
<PAGE> 14
Equipment Lease Schedule Nos. 15 & 16, dated January
1, 1996, covering one Index G200 Horizontal Turning
Center and one Index MS-25E Multi-spindle Automatic
Screw Machine (incorporated by reference to Exhibit
10(o)(1) of the Registrant's Form 10-K, filed
September 19, 1996).
Equipment Lease Schedule No. 17, dated June 1, 1997,
covering four Mikron CX-24 Rotary Transfer Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1997).
Equipment Lease Schedule No. 18, dated November 1,
1997, covering one Tornos Bechler BS20B Multi-spindle
Automotive Screw Machine (filed herewith, E-60 -
E-65).
2. Equipment Lease Agreement, dated May 1, 1994, between
Registrant and John C. Kennedy, covering one Index
MS-25 Multi-spindle Automatic Bar Machine, eight
Tornos Bechler SAS-16 Multi-spindle Automatic Bar
Machines, and one Cincinnati Milacron 220-8
Centerless Grinder (incorporated by reference to
Exhibit 10(o)(7) of the Registrant's Form 10-K, filed
September 23, 1994).
3. Aircraft Lease Agreement, dated November 21, 1991,
between Registrant and General Electric Capital
Corporation covering a Cessna Citation II aircraft
(incorporated by reference to Exhibit 10(o)(13) of
the Registrant's Form 10-K, filed September 25,
1992).
Aircraft Lease Agreement Amendment, dated July 23,
1996, between Registrant and General Electric Capital
Corporation covering a Cessna Citation II aircraft
(incorporated by reference to Exhibit 10(o)(8) of the
Registrant's Form 10-K, filed September 19, 1996).
4. Master Equipment Lease Agreement, dated July 10,
1995, between Registrant and KeyCorp Leasing, Ltd.,
with Schedule No. 1 covering four Tornos Bechler
SAS-16DCH Multi-spindle Automatic Screw Machines
(incorporated by reference to Exhibit 10(o)(12) of
the Registrant's Form 10-K, filed September 25,
1995).
Equipment Lease Schedule No. 2, dated September 18,
1997, covering one Hydromat Rotary Transfer Machine
(filed herewith, E-66 - E-74).
Equipment Lease Schedule No. 3 & 4, both dated
December 16, 1997, covering one Tornos Bechler BS20.8
and six Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines (filed herewith, E-75 -
E-87).
10(q) Lifetime contract, dated April 26, 1993, between Registrant
and General Motors Corporation (incorporated by reference to
Exhibit 10(p) of the Registrant's Form 10-K, filed September
27, 1993, as amended by the Registrant's Form 10-K/A,
Amendment No. 1, filed November 29, 1993).
10(r) Lifetime contract, dated May 1, 1994, between Registrant and
General Motors Corporation. (incorporated by reference to
Exhibit 10(p) of the Registrant's Form S-3, filed September
23, 1994).
10(s) Promissory Note, dated May 12, 1995, between Old Kent Bank and
the Registrant (incorporated by reference to Exhibit 10(r) of
the Registrant's Form 10-K, filed September 25, 1995).
10(t) Documents pertaining to the issuance of Industrial Revenue
Bonds by the Registrant:
Loan Agreement, dated December 1, 1997, between Michigan
Strategic Fund and the Registrant (filed herewith, E-88 -
E-118).
11
<PAGE> 15
Reimbursement Agreement, dated December 1, 1997, between
Comerica Bank and the Registrant (filed herewith, E-119 -
E-142).
Pledge and Security Agreement, dated December 1, 1997, among
Norwest Bank Wisconsin N.A., Comerica Bank and the Registrant
(filed herewith, E-143 - E-147).
Remarketing Agreement, dated December 1, 1997, between Robert
W. Baird & Co., Inc., and the Registrant (filed herewith,
E-148 - E-153).
13 1998 Annual Report to Shareholders (filed herewith, pages E-1
- E-23).
21 Subsidiaries of Registrant (filed herewith, page E-154).
23 Consent of Deloitte & Touche LLP (filed herewith, page E-155).
27 Financial Data Schedule (filed herewith, page E-156).
(b) Reports on Form 8-K during quarter ended June 30, 1998 - None.
12
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AUTOCAM CORPORATION
By: /s/ John C. Kennedy
----------------------------------------
John C. Kennedy,
Principal Executive Officer
By: /s/ Warren A. Veltman
----------------------------------------
Warren A. Veltman,
Principal Financial and
Accounting Officer
Dated: September 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date Date
------------------------ ----
<S> <C>
By: /s/ John C. Kennedy September 23, 1998
- -------------------------------------------------------
John C. Kennedy, Director
By: /s/ Mark J. Bissell September 23, 1998
- -------------------------------------------------------
Mark J. Bissell, Director
By: /s/ Robert L. Hooker September 23, 1998
- -------------------------------------------------------
Robert L. Hooker, Director
By: /s/ Kim Korth September 23, 1998
- -------------------------------------------------------
Kim Korth, Director
By: /s/ Kenneth K. Rieth September 23, 1998
- -------------------------------------------------------
Kenneth K. Rieth, Director
By: /s/ Warren A. Veltman September 23, 1998
- -------------------------------------------------------
Warren A. Veltman, Director
By: /s/ David J. Wagner September 23, 1998
- -------------------------------------------------------
David J. Wagner, Director
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Not Applicable.
13
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3(a) Amended and Restated Articles of Incorporation of the Registrant
(incorporated by reference to Exhibit 3(a) of the Registrant's Form
S-1, Registration No. 33-42670, filed September 17, 1991).
3(b) Bylaws of the Registrant (incorporated by reference to Exhibit 3(b)
of the Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
4(a) Specimen Common Stock Certificate of Registrant (incorporated by
reference to Exhibit 4(a) of the Registrant's Form S-1, Registration
No. 33-42670, filed September 17, 1991).
10(a) Revolving Credit Loan Agreement, dated June 27, 1997, between
Comerica Bank and the Registrant (incorporated by reference to
Exhibit 10(a) of the Registrant's Form 10-K, filed September 23,
1997).
First Amendment to Revolving Credit Agreement, dated December 22,
1997, between Comerica Bank and the Registrant (filed herewith, E-24 -
E-33).
10(b) Stock Redemption Agreements, dated November 6, 1992 and September 20,
1993, between John C. Kennedy and Nancy G. Kennedy in their
individual capacities and as co-trustees of the John C. Kennedy
Living Trust u/a, dated February 14, 1986, as amended, and the
Registrant (incorporated by reference to Exhibit 10(b) of the
Registrant's Form 10-K, filed September 27, 1993).
Stock Redemption Agreement, dated August 1, 1996, between John C.
Kennedy and Nancy G. Kennedy in their individual capacities and as
co-trustees of the John C. Kennedy Living Trust u/a, dated February
14, 1986, as amended, and the Registrant (incorporated by reference
to Exhibit 10(b) of the Registrant's Form 10-K, filed September 19,
1996).
Stock Redemption Agreement, dated September 1, 1998, between John C.
Kennedy and Nancy G. Kennedy in their individual capacities and as
co-trustees of the John C. Kennedy Living Trust u/a, dated February
14, 1986, as amended, and the Registrant (filed herewith, E-34 -
E-36).
10(c) Autocam Corporation 1991 Incentive Stock Option Plan (incorporated by
reference to Exhibit 10(c) of the Registrant's Form 10-K, filed
September 23, 1994).
10(d) Employment Agreement dated September 1, 1991, between Registrant and
Edward W. Hekman (incorporated by reference to Exhibit 10(e) of the
Registrant's Form S-1, Registration No. 33-42670, filed September 17,
1991).
10(e) Northwestern Mutual Life Insurance Company Joint Comp Life insurance
policies covering John C. Kennedy and Nancy G. Kennedy, Policy Nos.
12 443 196 and 12 200 147 (incorporated by reference to Exhibit 10(e)
of the Registrant's Form 10-K, filed September 27, 1993).
10(f) Northwestern Mutual Life Insurance Company Adjustable Whole Life
Insurance Policies covering John C. Kennedy, Policy Nos. 9 718 337,
10 755 204 and 10 755 185 (incoporated by reference to Exhibit 10(f)
of the Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10(g) Northwestern Mutual Life Insurance Company Extraordinary Life
Insurance Policies covering John C. Kennedy, Policy Nos. 9 053 592, 9
112 232 and 10 369 805 (incorporated by reference to Exhibit 10(g) of
the Registrant's Form S-1, Registration No. 33-42670, filed September
17, 1991).
10(h) Northwestern Mutual Life Insurance Company Disability Income Policies
covering John C. Kennedy, Policy Nos. D316131, D316137, D374518,
D532736 (incorporated by reference to Exhibit 10(h) of the
Registrant's Form S-1, Registration No. 33-42670, filed September 17,
1991).
10(i) Northwestern Mutual Life Insurance Company Joint Comp Life Insurance
Policy covering John C. Kennedy and Nancy G. Kennedy, Policy No. 11
199 261 (incorporated by reference to Exhibit 10(i) of the
Registrant's Form S-1, Registration No. 33-42670, filed September 17,
1991).
10(j) Northwestern Mutual Life Insurance Company Whole Life Insurance
Policies covering John C. Kennedy, Policy Nos. 11 466 899 and 11 467
109 (incorporated by reference to Exhibit 10(j) of the Registrant's
Form S-1, Registration No. 33-42670, filed September 17, 1991).
10(k) Connecticut Mutual Life Insurance Company Whole Life Insurance Policy
covering John C. Kennedy, Policy No. 4 400 303 (incorporated by
reference to Exhibit 10(k) of the Registrant's Form S-1, Registration
No. 33-42670, filed September 17, 1991).
10(l) Northwestern Mutual Life Insurance Company Disability Income Policy
covering Edward W. Hekman, Policy No. D597564 (incorporated by
reference to Exhibit 10(l) of the Registrant's Form S-1, Registration
No. 33-42670, filed September 17, 1991).
10(m) Northwestern Mutual Life Insurance Company Joint CompLife Policy
covering John C. Kennedy and Nancy G. Kennedy, Policy No. 13 542 762
(incorporated by reference to Exhibit 10(m) of the Registrant's Form
10-K, filed September 19, 1996).
10(n) Northwestern Mutual Life Insurance Company Joint CompLife Policy
covering John C. Kennedy and Nancy G. Kennedy, Policy No. 14 538 421
(filed herewith, E-37 - E-59).
10(o) Lease Agreement, dated March 1, 1995, between Registrant as lessee,
and Rieth Partners and Marys' Share, both Michigan partnerships, as
lessors, regarding industrial facilities located at 4060 East Paris
Avenue, Kentwood, Michigan (incorporated by reference to Exhibit 10(n)
of the Registrant's Form 10-K, filed September 25, 1995).
<PAGE> 19
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10(p) Equipment Leases:
1. Master Lease Agreement, dated August 21, 1989, between
Registrant and General Electric Capital Corporation, with
Schedule Nos. 4 & 5, dated May 11, 1992 and June 30, 1992,
respectively, covering three Tornos Bechler MS-7 Automatic
Lathes, one Mikron PAS-16 Multi-spindle Horizontal Machining
Center, and one Tornos Bechler SAS-16DC Multi-spindle Automatic
Bar Machine (incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form S-1, Registration No. 33-42670, filed September
17, 1991 (master lease) and the Registrant's Form 10-K, filed
September 25, 1992 (schedules)).
Equipment Lease Schedule Nos. 6, 7, 8 & 9, dated December 11,
1992, March 31, 1993, April 30, 1993, and June 1, 1993,
respectively, covering five Tornos Bechler SAS-16DC Multi-spindle
Automatic Bar Machines and one Mikron PAS-16 Multi-spindle
Horizontal Machining Center (incorporated by reference to Exhibit
10(o)(1) of the Registrant's Form 10-K, filed September 27,
1993).
Equipment Lease Schedule Nos. 10 and 11, dated September 10,
1993 and October 22, 1993, respectively, covering five Tornos
Bechler SAS-16DC Multi-spindle Automatic Bar Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1994).
Equipment Lease Schedule Nos. 12 and 13, both dated November 22,
1994, covering four Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines and two Mikron PAS-16 rotary transfer
machines (incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 25, 1995).
Equipment Lease Schedule No. 14, dated September 1, 1995,
covering two Tornos Bechler SAS-16DCH Multi-spindle Automatic
Screw Machines (incorporated by reference to Exhibit 10(o)(1) of
the Registrant's Form 10-K, filed September 25, 1995).
Equipment Lease Schedule Nos. 15 & 16, dated January 1, 1996,
covering one Index G200 Horizontal Turning Center and one Index
MS-25E Multi-spindle Automatic Screw Machine (incorporated by
reference to Exhibit 10(o)(1) of the Registrant's Form 10-K,
filed September 19, 1996).
Equipment Lease Schedule No. 17, dated June 1, 1997, covering
four Mikron CX-24 Rotary Transfer Machines (incorporated by
reference to Exhibit 10(o)(1) of the Registrant's Form 10-K,
filed September 23, 1997).
Equipment Lease Schedule No. 18, dated November 1, 1997, covering
one Tornos Bechler BS20B Multi-spindle Automotive Screw Machine
(filed herewith, E-60 - E-65).
<PAGE> 20
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2. Equipment Lease Agreement, dated May 1, 1994, between Registrant
and John C. Kennedy, covering one Index MS-25 Multi-spindle
Automatic Bar Machine, eight Tornos Bechler SAS-16 Multi-spindle
Automatic Bar Machines, and one Cincinnati Milacron 220-8
Centerless Grinder (incorporated by reference to Exhibit 10(o)(7)
of the Registrant's Form 10-K, filed September 23, 1994).
3. Aircraft Lease Agreement, dated November 21, 1991, between
Registrant and General Electric Capital Corporation covering a
Cessna Citation II aircraft (incorporated by reference to Exhibit
10(o)(13) of the Registrant's Form 10-K, filed September 25,
1992).
Aircraft Lease Agreement Amendment, dated July 23, 1996, between
Registrant and General Electric Capital Corporation covering a
Cessna Citation II aircraft (incorporated by reference to Exhibit
10(o)(8) of the Registrant's Form 10-K, filed September 19,
1996).
4. Master Equipment Lease Agreement, dated July 10, 1995, between
Registrant and KeyCorp Leasing, Ltd., with Schedule No. 1
covering four Tornos Bechler SAS-16DCH Multi-spindle Automatic
Screw Machines (incorporated by reference to Exhibit 10(o)(12) of
the Registrant's Form 10-K, filed September 25, 1995).
Equipment Lease Schedule No. 2, dated September 18, 1997,
covering one Hydromat Rotary Transfer Machine (filed herewith,
E-66 - E-74).
Equipment Lease Schedule No. 3 & 4, both dated December 16,
1997, covering one Tornos Bechler BS20.8 and six Tornos Bechler
SAS-16DCH Multi-spindle Automatic Screw Machines (filed herewith,
E-75 - E-87).
10(q) Lifetime contract, dated April 26, 1993, between Registrant and
General Motors Corporation (incorporated by reference to Exhibit 10(p)
of the Registrant's Form 10-K, filed September 27, 1993, as amended by
the Registrant's Form 10-K/A, Amendment No. 1, filed November 29,
1993).
10(r) Lifetime contract, dated May 1, 1994, between Registrant and General
Motors Corporation (incorporated by reference to Exhibit 10(p) of the
Registrant's Form S-3, filed September 23, 1994).
10(s) Promissory Note, dated May 12, 1995, between Old Kent Bank and the
Registrant (incorporated by reference to Exhibit 10(r) of the
Registrant's Form 10-K, filed September 25, 1995).
10(t) Documents pertaining to the issuance of Industrial Revenue Bonds by
the Registrant:
Loan Agreement, dated December 1, 1997, between Michigan Strategic
Fund and the Registrant (filed herewith, E-88 - E-118).
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
Reimbursement Agreement, dated December 1, 1997, between Comerica
Bank and the Registrant (filed herewith, E-119 - E-142).
Pledge and Security Agreement, dated December 1, 1997, among Norwest
Bank Wisconsin N.A., Comerica Bank and Registrant (filed herewith,
E-143 - E-147).
Remarketing Agreement, dated December 1, 1997, between Robert W.
Baird & Co., Inc., and the Registrant (filed herewith, E-148 - E-153).
13 1998 Annual Report to Shareholders (filed herewith, pages E-1 - E-23).
21 Subsidiaries of Registrant (filed herewith, page E-154).
23 Consent of Deloitte & Touche LLP (filed herewith, page E-155).
27 Financial Data Schedule (filed herewith, page E-156).
(b) Reports on Form 8-K during quarter ended June 30, 1998 - None.
<PAGE> 1
Exhibit 13
FINANCIAL HIGHLIGHTS
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
In thousands, except per share
data 1998 1997 1998 1997 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $17,429 $14,648 $21,795 $15,270 $24,790 $16,058 $26,347 $16,011
Gross profit 3,413 3,331 5,315 3,627 6,504 3,107 5,697 3,304
Income from operations 2,361 2,483 3,939 2,680 4,783 2,029 3,755 2,391
Net income 1,136 1,404 2,104 1,541 2,482 1,080 2,019 1,386
Diluted net income per share (1) $.19 $.23 $.34 $.25 $.40 $.18 $.32 $.23
SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Statement of operations data:
Sales $90,361 $61,986 $57,711 $54,304 $47,201
Gross profit 20,925 13,369 13,480 12,610 11,197
Income from operations 14,839 9,584 9,899 9,374 7,767
Net income 7,741 5,411 5,589 5,233 4,756
Diluted net income per share (1) $1.24 $ .89 $ .92 $ .86 $ .79
Cash dividends declared per share $ .08 $ .06
Balance sheet data:
Current assets $20,801 $17,518 $13,768 $11,313 $9,106
Total assets 113,449 83,638 59,812 52,990 42,355
Current liabilities 17,675 13,216 9,241 9,163 7,423
Long-term obligations, net of current
maturities 37,851 25,192 12,086 13,334 11,089
Deferred taxes 10,051 7,802 6,333 4,620 3,203
Minority interest 2,250
Shareholders' equity 45,061 36,615 31,286 25,218 19,759
STATISTICS
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------- ------------------------------------------------
Book value per common share (1) 7.38 6.11 5.23 4.24 3.35
Current ratio 1.18 1.33 1.49 1.23 1.23
Ratio of debt to equity 0.99 0.85 0.51 0.68 0.73
Return on shareholders' equity 19.0% 15.9% 19.8% 23.3% 27.7%
</TABLE>
(1) All amounts adjusted to give effect to all common share dividends and splits
issued in fiscal 1994-1998.
E-1
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Certain matters discussed in the following pages pertaining to fiscal 1999
information include forward looking statements as defined by the Private
Securities Litigation Reform Act of 1995. Forward-looking statements should be
read with the cautionary statements and important factors included herein.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other than statements of historical facts. Such
forward-looking statements may be identified, without limitation, by the use of
the words "anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects," and other similar expressions. The Company's expectations, beliefs
and projections are expressed in good faith and are believed by the Company to
have a reasonable basis, including without limitation, management's examination
of historical operating trends, data contained in the Company's records and
other data available from third parties. There can be no assurance that
management's expectations, beliefs or projections will result or be achieved or
accomplished.
RESULTS OF OPERATIONS
For the periods indicated, the following table presents the components of the
Company's Consolidated Statements of Operations as a percentage of sales.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
For the year ended 6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of sales 76.8% 78.4% 76.6%
------- ------- ------
Gross profit 23.2% 21.6% 23.4%
Selling, general and administrative expenses 6.5% 5.8% 5.9%
Other operating expenses .2% .3% .4%
------- ------- ------
Income from operations 16.5% 15.5% 17.1%
Interest and other expenses, net 3.0% 2.2% 2.4%
Minority interest in net income .2%
------- -------
Income before tax provision 13.3% 13.3% 14.7%
Tax provision 4.7% 4.6% 5.0%
------- ------- ------
Net Income 8.6% 8.7% 9.7%
======= ======= ======
</TABLE>
E-2
<PAGE> 3
SALES
The following table indicates the Company's sales (in thousands) and percentage
of total sales by product application for the years ended June 30, 1998, 1997
and 1996.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For the year ended 6.30.98 6.30.97 6.30.96
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fuel systems $51,672 57.2% $45,700 73.7% $36,089 62.5%
Braking systems 18,226 20.2% 6,744 10.9% 12,845 22.3%
Other transportation 2,296 2.5% 1,416 2.3% 986 1.7%
------- ---- ------- ---- ------- ----
Total transportation 72,194 79.9% 53,860 86.9% 49,920 86.5%
Medical devices 9,907 11.0% 6,299 10.2% 3,875 6.7%
Computer electronics 6,458 7.1% 1,827 2.9% 3,916 6.8%
Other 1,802 2.0%
</TABLE>
Sales increased $28,375,000, or 46%, from fiscal 1997 to fiscal 1998, and
$4,275,000, or 7%, from fiscal 1996 to fiscal 1997. The Company experienced
sales growth over the three-year period ended June 30, 1998 in all product
lines. Fiscal 1997 interruptions in sales growth to the computer electronics and
braking systems industries were followed by strong gains in fiscal 1998.
Sales of components for fuel system applications were $51,672,000 during the
year ended June 30, 1998, an increase of 13% over fiscal 1997 sales, and fiscal
1997 sales of fuel system components increased 27% over fiscal 1996 levels.
Combined sales of components to the Company's two largest fuel systems customers
represented 73%, 82% and 85% of total fuel system component sales for the fiscal
years ended June 30, 1998, 1997 and 1996, respectively. Both of these customers
have embarked on new fuel injector programs during the periods presented
resulting in increased sales. In addition, during fiscal 1998, the Company
gained market share through the sale of $4,969,000 of diesel fuel injection
components by acquiring a controlling interest in Qualipart Industria E
Comercio, Ltda. ("Qualipart"), subsequently renamed, Autocam do Brasil Usinagem,
Ltda. ("Autocam do Brasil") in January 1998.
Sales of braking system components for the year ended June 30, 1998 were
$18,226,000, almost three times fiscal 1997 levels, and fiscal 1997 sales were
approximately one-half those reported in fiscal 1996. The increase in sales of
these components during fiscal 1998 can be attributed to the June 1997
acquisition of The Hamilton Group ("Hamilton"), a precision metal machining
company primarily supplying brake system components. During fiscal 1997, a large
braking system customer eliminated certain components manufactured by the
Company, which were no longer utilized on its new generation system, thereby
explaining the decrease in sales from fiscal 1996 to 1997.
Sales of components for medical device applications were $9,907,000 during
fiscal 1998, an increase of 57% over fiscal 1997 levels, and fiscal 1997 sales
were 63% greater than fiscal 1996 sales. The Company manufactures components
sold to the ophthalmic and cardiovascular surgical device industries. During
fiscal 1997 and 1998, the Company reaped the benefits of increased penetration
by its largest ophthalmic surgical device customer into foreign markets. During
late fiscal 1996, the Company began manufacturing precision-machined metal
components for innovative cardiovascular surgical device manufacturers,
including those that sell stents. Sales to these customers increased $3,596,000
and $1,539,000 during fiscal 1998 and 1997, respectively, over the preceding
years.
Sales of components for computer electronic applications were $6,458,000 during
the year ended June 30, 1998, a four-fold increase over fiscal 1997 levels, and
fiscal 1997 sales were 53% lower than fiscal 1996 sales. The increase in sales
of computer electronic components from fiscal 1997 to 1998 was attributable to
the production and sale of key components used in computer microprocessor
subassemblies. No such components were produced during fiscal 1997. Fiscal 1997
sales decreased from fiscal 1996 levels as the Company's major customer for
baseplates, a specialty metal fastener used in the manufacture of suspension
assemblies for rigid disk drives, began purchasing precision-stamped baseplates
which are more economical to manufacture than the Company's turned baseplates.
E-3
<PAGE> 4
Management believes that year-over-year sales growth in fiscal 1999 will exceed
20%, in spite of the negative impact presented by the protracted strike at
General Motors Corporation ("GM") during July and August of 1998. Growth is
expected to be generated primarily from increased sales of fuel and braking
system components, while the Company expects declines in the sale of computer
electronic components. The Company expects to see continued expansion of fuel
system component sales as new injector programs move toward full production in
fiscal 1999, and it reports a full year of sales from its Brazilian operations.
Sales of high-precision metal components used in the production of thermoplates
for computer microprocessors will decrease substantially in fiscal 1999 versus
fiscal 1998 levels due to an anticipated change in design of the customer's heat
dispersion system that eliminates the need for components produced by the
Company.
GROSS PROFIT
Gross profit, as a percentage of sales, for the years ended June 30, 1998, 1997
and 1996 was 23.2%, 21.6% and 23.4%, respectively. The increase in gross profit
margin from fiscal 1997 to 1998 can be attributed to several factors, the most
significant of which were:
- Increased contribution from the sale of medical device and
computer electronic components as these products typically
generate higher margins than the Company's overall gross
margins.
- Growth in demand for new fuel system components that allowed
for improved labor and equipment utilization.
- The integration of Hamilton's operations and the
implementation of continuous improvement concepts resulted in
better than average margins on new braking system products.
The decrease in gross profit margin between fiscal 1997 and 1996 can be
attributed primarily to project start-up costs associated with new fuel system
programs during the third and fourth quarters of fiscal 1997. Although it is
common for margins to be lower on new program start-ups, fiscal 1997 third and
fourth quarter margins were adversely affected by machine tools which were not
only delivered late, but did not perform as expected. In order to meet customer
demand for these components, the Company was forced to employ less efficient,
work-around manufacturing processes in lieu of production processes that relied
on the machine tools in question. The machine tools were in place and qualified
for production as of the end of fiscal 1997. The negative impact on margins
caused by these factors was partially offset by increased production of medical
device components that allowed for improved utilization of existing equipment
and labor.
Management expects that fiscal 1999 gross profit, as a percentage of sales, will
decline from fiscal 1998 levels, particularly in the first quarter of the year
due primarily to the negative implications of the GM strike. The significant
reduction in demand for fuel injector components from GM's Delphi Automotive
Systems unit, and the Company's unwillingness to lay off employees in the face
of extremely low unemployment rates for skilled machinists in the West Michigan
area, are expected to reduce fiscal 1999 first quarter gross profit margins by
approximately 3 percentage points below levels reported in the first quarter of
fiscal 1998. Gross profit margins for the remainder of fiscal 1999 are expected
to return to levels reported for the full fiscal year of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, as a percentage of sales, were
6.5%, 5.8% and 5.9% in fiscal 1998, 1997 and 1996, respectively. These expenses
increased monetarily during all periods presented commensurate with the growth
in business. They increased as a percentage of sales due to the following
factors:
- Selling, general and administrative expenses, as a percentage of sales,
were higher than historical Company levels at the former Hamilton
facilities and Autocam do Brasil.
- Royalty expense increased during fiscal 1998 commensurate with the
increase in sales of stents (see Sales).
E-4
<PAGE> 5
Management expects that selling, general and administrative expenses, as a
percentage of sales, will fall slightly in fiscal 1999 from fiscal 1998 levels
as further integration of the former Hamilton and Brazilian operations occurs.
OTHER OPERATING EXPENSES
Other operating expenses represent the straight-line amortization of employment
and deferred compensation agreements between the Company and a key employee.
INTEREST AND OTHER EXPENSES, NET
Net interest and other expenses increased $1,373,000 between fiscal 1997 and
1998 primarily as a result of interest incurred on notes issued by the Company
to fund the Hamilton and Qualipart acquisitions. Management expects fiscal 1999
interest expense to increase over fiscal 1998 levels, both monetarily and as a
percentage of sales. The Company will report a full year of interest expense on
debt issued in connection with its acquisition of a majority interest in
Qualipart, and the building and equipping of its Marshall, Michigan facility,
thereby resulting in a combined increase in expense of $769,000 over fiscal 1998
levels. This increase in expense is expected to be partially offset by a
decrease in interest expense on all other term debt as the Company satisfies its
normal monthly principal obligations.
MINORITY INTEREST IN NET INCOME
Minority interest in net income represents Propart Corporation's ("Propart") 49%
interest in the net income of Autocam do Brasil.
TAX PROVISION
United States Federal income tax has been provided on the earnings of its U.S.
operations at effective tax rates of 34.0%, 33.7% and 33.9% for the years ended
June 30, 1998, 1997 and 1996, respectively. The tax provision for fiscal 1998
includes provisions for Brazilian Federal and South Carolina state income taxes.
All years presented include provisions for California Unitary taxes. Management
does not expect the Company's effective income tax rate to change materially in
fiscal 1999 from fiscal 1998 levels.
LIQUIDITY AND CAPITAL RESOURCES
The Company spent $17.5 million for fixed assets (excluding assets acquired in
connection with business combinations) during the year ended June 30, 1998,
including $1.5 million in facilities and $16 million in other fixed assets. All
of these assets were financed through operating cash flows, bank borrowings
($625,000), and a portion of the funds raised through the issuance of Industrial
Revenue Bonds ($9 million).
E-5
<PAGE> 6
In order to meet demand primarily from transportation customers, management will
purchase $20.1 million of equipment and invest $2.1 million in facilities over
the next year (on which deposits of $3.7 million and $1.5 million, respectively,
had been placed as of June 30, 1998). Management expects to finance these
purchases with cash on hand (some of which was generated from the issuance of
Industrial Revenue Bonds), operating cash flows, operating leases, and/or bank
borrowings, including its equipment line of credit ($6,000,000 in availability
as of June 30, 1998) which allows the Company to retire borrowings over a period
not to exceed six years with either variable or fixed interest rates. In
December 1997, the Company issued Industrial Revenue Bonds totaling $9 million
through the Michigan Strategic Fund in order to fund the construction of a new
manufacturing facility in Marshall, Michigan and to purchase new equipment for
that facility. Principal payments are due annually (amortizing over a 15-year
period), with variable interest payments due monthly. The interest rate on the
bonds resets weekly and was set at 3.7% per annum as of June 30, 1998.
The January 1998 Qualipart acquisition was financed through bank borrowings and
a note to Propart of $5.2 million and $5 million, respectively. Bank borrowings
will be retired in 60 equal monthly principal installments, plus interest at
7.1% per annum. The note to Propart bears interest at 12% per annum to be paid
quarterly. Annual principal obligations under the note are required to begin in
2004, but may be prepaid through a capital contribution made directly to Autocam
do Brasil.
Management believes that the Company has adequate credit facilities and cash
available to meet its working capital needs through fiscal 1999. As of June 30,
1998, the Company had $4,119,200 in availability under its revolving line of
credit. Management anticipates retiring current maturities of long-term
obligations with future operating cash flows. As of June 30, 1998, $17 million
of the Company's long-term debt was subject to variable interest rates.
IMPACT OF YEAR 2000 ISSUE
The Company recognizes the importance of the Year 2000 issue and has been giving
high priority to it. In July 1998, the Company created a Year 2000 project team
to supervise a comprehensive risk-based assessment of the Company's Year 2000
readiness. The team's objective is to ensure an uninterrupted transition into
the Year 2000. The scope of the Year 2000 readiness effort includes software,
hardware, electronic data interchange, manufacturing and lab equipment,
environmental and safety systems, facilities, utilities and supplier readiness.
Since the Company makes predominate use of packaged computer applications in its
business and believes such applications to be Year 2000 compliant, management
considers the risk of a material adverse effect on the operations of the Company
to be remote. As of June 30, 1998, the Company had not spent any amounts in
connection with the planned assessment.
The Company is utilizing both internal and external resources to remediate and
test all applications and computer, manufacturing and facilities equipment that
may be adversely impacted by Year 2000 issues. It is the objective of Company
management to complete the most serious Year 2000 compliance issues for
information systems resident in United States facilities by December 1998 and
for foreign facilities by July 1999. Management expects to contract with an
outside consultant to assist in the assessment during the first quarter of
fiscal 1999 at a cost not expected to exceed $50,000. Costs to test and
remediate its systems, if any, are not expected to exceed $200,000.
In addition to internal Year 2000 software and equipment remediation activities,
the Company is in contact with its suppliers and electronic commerce customers
to assess their compliance. There can be no absolute assurances that there will
not be a material adverse effect on the Company if third parties do not convert
their systems in a timely manner and in a way that is compatible with the
Company's systems. The Company believes that its diligent actions with suppliers
and customers will minimize these risks.
E-6
<PAGE> 7
The Company's current estimates of the amount of time and costs necessary to
remediate and test its computer systems are based on the facts and circumstances
existing at this time. The estimates were derived utilizing multiple assumptions
of future events including the continued availability of certain resources,
third-party modification plans and implementation success, and other factors.
New developments may occur that could affect the Company's estimates of the
amount of time and costs necessary to modify and test its systems for Year 2000
compliance. These developments include, but are not limited to: (i) the
availability and cost of personnel trained in this area; (ii) the ability to
locate and correct all relevant computer code and equipment; and, (iii) the
planning and modification success attained by the Company's suppliers and
customers.
FOREIGN CURRENCY TRANSACTIONS
The Company derived 7% of its sales during fiscal 1998 from manufacturing
operations in Brazil. The financial position and results of operations of the
Company's subsidiary in Brazil is measured in Brazilian Reais and translated
into U.S. Dollars. With respect to 65% of this subsidiary's sales, expenses
associated therewith are generally incurred in Brazilian Reais, but sales are
generated in U.S. Dollars. As such, results of operations with regard to these
sales are directly influenced by a weakening or strengthening of the Brazilian
Real versus the U.S. Dollar. The effects of foreign currency fluctuations are
somewhat mitigated on the remainder of this subsidiary's sales by the fact that
such sales and expenses associated therewith are generally incurred in Brazilian
Reais and the reported income thereon will be higher or lower depending on a
weakening or strengthening of the U.S. Dollar.
One percent of the Company's net assets at June 30, 1998 are based in Brazil and
are translated into U.S. Dollars at the rate in effect as of that date (1.1501
Brazilian Reais per U.S. Dollar). Accordingly, the Company's consolidated
shareholders' equity will fluctuate depending upon the weakening or
strengthening of the U.S. Dollar.
E-7
<PAGE> 8
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
6.30.98 6.30.97
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 1,643,539 $ 2,510,500
Accounts receivable 11,679,824 8,841,516
Inventories 6,389,448 5,444,420
Prepaid expenses and other current assets 1,088,543 722,020
------------- ------------
Total current assets 20,801,354 17,518,456
------------- ------------
Deposits on equipment 4,411,227 2,642,269
Property, plant and equipment, net 64,421,470 53,291,418
Goodwill and other intangible assets, net 14,365,729 6,443,364
Restricted cash and equivalents 5,007,524
Other long-term assets 4,442,067 3,742,321
------------- ------------
Total Assets $113,449,371 $83,637,828
============= ============
Liabilities and Shareholders' Equity Current liabilities:
Current maturities of long-term obligations $ 6,553,588 $ 5,905,541
Accounts payable 7,830,564 4,398,050
Accrued liabilities:
Salaries and bonuses 1,955,741 839,416
Due to The Hamilton Group 171,925 1,000,000
Other 1,163,529 1,072,523
------------- ------------
Total current liabilities 17,675,347 13,215,530
------------- ------------
Long-term obligations, net of current maturities 37,850,874 25,191,778
Deferred taxes 10,051,018 7,802,000
Deferred credits and other 561,288 813,550
Minority interest 2,249,935
Shareholders' equity:
Preferred stock - no par value, 200,000 shares authorized; no shares issued or
outstanding
Common stock - no par value, 10,000,000 shares authorized; 6,102,568 and 5,711,587
shares issued and outstanding as of June 30, 1998 and 1997, respectively 31,840,086 26,270,940
Deferred compensation (490,833) (645,833)
Cumulative effect of foreign currency translation adjustments (33,896)
Retained earnings 13,745,552 10,989,863
------------- ------------
Total shareholders' equity 45,060,909 36,614,970
------------- ------------
Total Liabilities and Shareholders' Equity $113,449,371 $83,637,828
============= ============
</TABLE>
See notes to consolidated financial statements.
E-8
<PAGE> 9
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
For the year ended 6.30.98 6.30.97 6.30.96
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $90,361,063 $61,986,238 $57,711,295
Cost of sales 69,435,961 48,617,727 44,231,105
----------- ----------- -----------
Gross profit 20,925,102 13,368,511 13,480,190
Selling, general and administrative expenses 5,878,853 3,577,373 3,373,622
Other operating expenses 207,500 207,500 207,500
----------- ----------- -----------
Income from operations 14,838,749 9,583,638 9,899,068
Interest and other expenses, net 2,718,720 1,345,533 1,396,155
Minority interest in net income 166,067
----------- ----------- -----------
Income before tax provision 11,953,962 8,238,105 8,502,913
Tax provision 4,212,582 2,827,139 2,913,866
----------- ----------- -----------
Net Income $ 7,741,380 $ 5,410,966 $ 5,589,047
=========== =========== ===========
Basic Net Income Per Share $1.28 $.90 $.94
=========== =========== ===========
Diluted Net Income Per Share $1.24 $.89 $.92
=========== =========== ===========
Basic Weighted Average Shares Outstanding 6,040,147 5,989,674 5,968,619
Diluted Weighted Average Shares Outstanding 6,245,711 6,066,899 6,067,215
</TABLE>
See notes to consolidated financial statements.
E-9
<PAGE> 10
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative
Effect of
Foreign
Deferred Currency
Common Stock Compen- Translation Retained
Shares Amount sation Adjustments Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, 7.1.95 5,140,882 $19,354,444 ($955,833) $6,819,217 $25,217,828
Net income 5,589,047 5,589,047
Share dividend 257,293 3,505,616 (3,507,130) (1,514)
Exercise of stock options,
including related tax
benefits 15,700 137,786 137,786
Contribution of shares to
401(k) plan, net of share
issuance costs 14,007 187,702 187,702
Amortization of deferred
compensation 155,000 155,000
--------- ----------- ---------- ----------- -----------
Balance, 6.30.96 5,427,882 23,185,548 (800,833) 8,901,134 31,285,849
Net income 5,410,966 5,410,966
Share dividend 271,292 2,984,212 (2,985,335) (1,123)
Cash dividends (336,902) (336,902)
Exercise of stock options,
including related tax
benefits 12,413 101,180 101,180
Amortization of deferred
compensation 155,000 155,000
--------- ----------- ---------- ----------- -----------
Balance, 6.30.97 5,711,587 26,270,940 (645,833) 10,989,863 36,614,970
Net income 7,741,380 7,741,380
Share dividend 286,550 4,512,895 (4,514,603) (1,708)
Cash dividends (471,088) (471,088)
Exercise of stock options,
including related tax
benefits 104,431 1,056,251 1,056,251
Foreign currency translation
adjustments ($33,896) (33,896)
Amortization of deferred
compensation 155,000 155,000
--------- ----------- ---------- --------- ----------- -----------
Balance, 6.30.98 6,102,568 $31,840,086 ($490,833) ($33,896) $13,745,552 $45,060,909
========= =========== ========== ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
E-10
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
For the year ended 6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $89,784,141 $62,762,333 $57,135,200
Cash paid to suppliers and employees (64,794,377) (46,544,216) (42,244,679)
Income taxes paid (2,396,115) (1,395,000) (1,475,000)
Interest paid (2,507,465) (1,257,225) (1,349,677)
-------------- ------------ ------------
Net Cash Provided by Operating Activities 20,086,184 13,565,892 12,065,844
-------------- ------------ ------------
Cash flows from investing activities:
Capital expenditures (17,483,668) (10,205,483) (9,196,498)
Proceeds from sale of fixed assets 384,868 7,050 235,850
Purchase of net assets of The Hamilton Group (890,884) (16,868,594)
Purchase of majority interest in Autocam do Brasil (5,425,475)
Payment of life insurance premiums and other (435,283) (473,578) (401,850)
-------------- ------------ ------------
Net Cash Used in Investing Activities (23,850,442) (27,540,605) (9,362,498)
-------------- ------------ ------------
Cash flows from financing activities:
Repayments of line of credit, net (126,521) (162,000)
Proceeds from issuance of long-term obligations 14,825,000 19,332,853 4,025,000
Increase in restricted cash and equivalents (5,007,524)
Principal payments of long-term obligations (6,888,417) (4,060,549) (5,244,275)
Cash dividends paid (472,796) (338,023) (1,514)
Proceeds from exercise of employee stock options and other 567,555 84,181 102,670
-------------- ------------ ------------
Net Cash Provided by (Used in) Financing Activities 2,897,297 15,018,462 (1,280,119)
-------------- ------------ ------------
Net increase (decrease) in cash (866,961) 1,043,749 1,423,227
Cash at beginning of period 2,510,500 1,466,751 43,524
-------------- ------------ ------------
Cash at End of Period $ 1,643,539 $ 2,510,500 $ 1,466,751
============== ============ ============
</TABLE>
See notes to consolidated financial statements.
E-11
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The accompanying consolidated financial statements
include the accounts of Autocam Corporation and its subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Nature of operations - The Company designs and manufactures close-tolerance,
specialty metal alloy components for mechanical and electromechanical systems
using turning, grinding and milling processes. Currently, the company
manufactures components for use on fuel and braking systems, medical devices and
computer electronics. It has six manufacturing facilities in the United States
and three in Brazil. Its customers are located primarily in North America,
Brazil, Austria and Germany.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although management believes the estimates are reasonable,
actual results could differ from those estimates.
Financial instruments of the Company consist principally of cash, accounts
receivable and payable, and debt. The carrying amounts of all financial
instruments approximate estimated fair value. The Company has determined the
estimated fair value amounts using available market information and valuation
methodologies (see note 5).
Inventories are stated at the lower of standard cost, which approximates actual
cost, on a first-in, first-out (FIFO) basis, or market.
Property is stated at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets as follows:
Buildings and improvements 31 years
Leasehold improvements 3 to 12 years
Machinery and equipment 3 to 12 years
Furniture and fixtures 5 to 10 years
Maintenance and repairs that do not improve or extend the lives of the
respective assets are charged to expense. When properties are retired or sold,
the related cost and accumulated depreciation are removed from the accounts and
any gain or loss on disposition is recognized in the results of operations.
Gains arising from sale and leaseback transactions are deferred for amortization
to income over the lives of the related operating leases.
Goodwill and other intangible assets consists primarily of amounts paid in
excess of the fair value of acquired net assets and are being amortized over
estimated useful lives, ranging from 5 to 40 years, on a straight-line basis.
The amounts are shown net of accumulated amortization of $447,500 and $17,100 as
of June 30, 1998 and 1997, respectively. Amortization expense totaled $448,700,
$3,700 and $3,700 for the years ended June 30, 1998, 1997 and 1996,
respectively.
Restricted cash and equivalents consists of highly-liquid investments with
original maturities of three months or less at the date of purchase, restricted
for use in connection with the building of a new manufacturing facility and
purchasing equipment for such facility.
E-12
<PAGE> 13
Other long-term assets consists primarily of the cash surrender value of keyman
life insurance policies, receivables from officers and certain key employees
under split-dollar life insurance agreements, and a payment for an option to
purchase real estate (see Note 9).
Deferred compensation - Unearned deferred compensation, recorded as an offset to
shareholders' equity, is being amortized on a straight-line basis over the
ten-year life of the associated employment agreement.
Revenue recognition - sales are recognized at the time product is shipped.
Income taxes - Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future.
Such deferred income tax asset and liability computations are based on enacted
tax laws and rates applicable to periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities (see Note 7).
Net income per share - The Company has Adopted Statement of Financial Accounting
Standard No. 128, Earnings Per Share. As required by this standard, basic net
income per share excludes dilution and is computed by dividing net income by the
weighted-average number of common shares outstanding for the periods presented.
Diluted net income per share assumes the issuance of common stock for options
outstanding under the Company's incentive stock option plan. Weighted average
shares outstanding were determined as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
For the year ended 6.30.98 6.30.97 6.30.96
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares outstanding 6,040,147 5,989,674 5,968,619
Dilutive effect of common stock options 205,564 77,225 98,596
--------- --------- ---------
Shares applicable to diluted net income 6,245,711 6,066,899 6,067,215
========= ========= =========
</TABLE>
All share and per share amounts have been adjusted for the effects of share
dividends and splits.
Derivatives - The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
foreign currency rate risks arising out of the Company's purchases of certain
machinery and equipment (see Note 6). Gains or losses on foreign currency
futures contracts are deferred and included in the cost of machinery and
equipment purchased.
Stock-based compensation - The Company has adopted Statement of Financial
Accounting Standard No. 123 ("SFAS 123"), Accounting for Stock-Based
Compensation, and as permitted by this standard, will continue to apply the
recognition and measurement principles prescribed under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, to its
stock-based compensation (see Note 10).
New Accounting Standards - In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
Reporting Comprehensive Income, and No. 131 ("SFAS 131"), Disclosures About
Segments of an Enterprise and Related Information. SFAS 130 establishes
standards for the reporting and presentation of comprehensive income and its
components. SFAS 131 establishes standards for defining operating segments and
the reporting of certain information regarding operating segments. Because these
statements only impact how financial information is disclosed in interim and
annual reports, the adoption will have no impact on the Company's financial
condition or results of operations. Both accounting standards are effective for
the Company's fiscal year ending June 30, 1999.
Reclassifications - Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 presentation.
E-13
<PAGE> 14
2. BUSINESS COMBINATIONS
Effective January 1, 1998, the Company purchased 51% of the common stock of
Qualipart Industria E Comercio, Ltda. ("Qualipart"; subsequently renamed,
Autocam do Brasil Usinagem, Ltda., or "Autocam do Brasil") from its parent,
Propart Corporation ("Propart"). The purchase price was satisfied through the
payment of $5.2 million in cash and the issuance of a $5 million note payable to
Propart, which remains as the minority shareholder of Autocam do Brasil. Autocam
do Brasil is a contract manufacturer of precision-machined gasoline and diesel
fuel injection components to the transportation industry. The acquisition was
accounted for as a purchase, and accordingly, the purchase price was allocated
to assets acquired and liabilities assumed based upon their relative fair market
values. Cost in excess of the fair value of the net assets acquired (goodwill)
of $7,462,300 is being amortized over 40 years on a straight-line basis. The
final purchase price could be reduced by a maximum of $2,500,000 if earnings
before interest and taxes during the eighteen months ending June 30, 1999 do not
meet agreed-upon levels, and accordingly, may affect the preliminary purchase
price allocation.
Autocam-Pax, Inc. ("Autocam-Pax"), a wholly-owned subsidiary of the Company, was
formed in June 1997, solely for the purpose of acquiring certain assets and
assuming certain liabilities of Dowagiac Manufacturing Company and Hamilton-Pax,
Inc. Autocam-Pax is engaged primarily in the manufacture of close-tolerance,
specialty metal alloy components for automotive braking systems. On June 30,
1997, the acquisition was consummated for $18,081,000 in cash consideration and
the assumption of $699,000 in liabilities. Of the total purchase price,
$1,000,000 was held in escrow as contingent consideration until the related
contingencies were discharged. The acquisition was accounted for as a purchase,
and accordingly, the purchase price was allocated to assets acquired and
liabilities assumed based upon their relative fair market values. During fiscal
1998, the parties agreed to certain amendments to the purchase agreement, and as
a result, the purchase price allocation changed. Such amounts were finalized
during fiscal 1998 resulting in cost in excess of the fair value of the net
assets acquired (goodwill) of $7,196,600, which is being amortized over 20 years
on a straight-line basis.
The Consolidated Statements of Operations for fiscal 1998 include the results of
Autocam-Pax as the transaction was consummated on the last day of fiscal 1997.
The Consolidated Statements of Operations for fiscal 1998 include the results of
Autocam do Brasil subsequent to January 1, 1998. The following unaudited pro
forma information presents summary Consolidated Statements of Operations data of
the Company as if the acquisitions had occurred at the beginning of the earliest
period presented below. These pro forma results are based upon assumptions
considered appropriate by management and include adjustments as considered
necessary in the circumstances. Such adjustments include interest expense that
would have been incurred to finance the purchase, less depreciation expense
based on the fair market value of the property, plant and equipment acquired,
and the amortization of intangibles arising from the transaction. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of results which would have actually been reported had
the acquisitions taken place on July 1, 1996 or which may be reported in the
future.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the year ended (unaudited) 6.30.98 6.30.97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $97,005,700 $82,721,300
Net income 7,783,800 6,621,900
Diluted net income per share $1.25 $1.09
</TABLE>
E-14
<PAGE> 15
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
6.30.98 6.30.97
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $1,510,100 $1,389,735
Production supplies 1,249,170 1,163,588
Work in-process 2,501,324 2,073,987
Finished goods 1,128,854 817,110
---------- ----------
Total Inventories $6,389,448 $5,444,420
========== ==========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
6.30.98 6.30.97
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 1,768,504 $ 1,842,781
Buildings and improvements 6,814,988 6,869,861
Leasehold improvements 417,866 340,014
Machinery and equipment 73,222,104 59,268,918
Furniture and fixtures 3,931,500 2,543,855
Construction in progress 2,451,441 57,546
------------ ------------
Total 88,606,403 70,922,975
Accumulated depreciation and amortization (24,184,933) (17,631,557)
------------ ------------
Property, Plant and Equipment, Net $64,421,470 $53,291,418
============ ============
</TABLE>
E-15
<PAGE> 16
5. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------- ------------------ --- -------------------
6.30.98 6.30.97
- ----------------------------------------------------------------------------------- ------------------ --- -------------------
<S> <C> <C>
Term notes payable to banks - payable in equal monthly installments, plus
interest at fixed rates ranging from 6.4% to 9.25%; due through October
2003
$22,051,244 $21,599,739
Industrial Revenue Bonds - payable in annual installments beginning December
1998; interest paid monthly at variable interest rates, reset weekly by the
remarketing agent (3.7% per annum as of June 30, 1998) 9,000,000
Note payable to Propart Corporation - principal payable in five equal annual
installments beginning January 2004; interest at 12% per annum, payable
quarterly 4,320,187
Mortgage payable to bank - payable in monthly installments, including interest at
9.35%; due February 2000 946,697 1,039,234
Second mortgage payable to bank - payable in monthly installments, including
interest at 1/2% below LIBOR (7.29% per annum at June 30, 1998); due July 2003
948,035 1,007,829
Revolving credit note with bank - interest due monthly at 1/2% below the bank's
prime rate (8% at June 30, 1998); due October 1999 7,000,800 6,782,853
Other 137,499 667,664
----------- -----------
Total 44,404,462 31,097,319
Less current maturities 6,553,588 5,905,541
----------- -----------
Long-Term $37,850,874 $25,191,778
=========== ===========
</TABLE>
The Company has a master loan agreement (the "Agreement") with a bank which
includes a $13.5 million revolving credit note, a $10 million acquisition term
note, a $6 million equipment line of credit, and a $1.2 million acquisition
mortgage note. Terms of the Agreement require that the Company maintain minimum
levels of net worth and not exceed certain leverage ratios. Substantially all
machinery and equipment of the Company have been offered as collateral for loans
under the Agreement.
The following portions of the revolving credit note have been reserved:
$1,500,000 for foreign currency futures contracts, and $880,000 for two letters
of credit. As of June 30, 1998, the remaining availability under the revolving
line of credit was $4,119,200. No amounts are outstanding as of June 30, 1998
under the equipment line of credit. Borrowings under the equipment line of
credit may be retired over a period not to exceed six years with either variable
or fixed interest rates.
In January 1998, the Company issued a $5.2 million term note payable to a bank
and issued a $5 million note payable to Propart in connection with the Company's
acquisition of a 51% ownership interest in the common stock of Qualipart.
In December 1997, the Company issued Industrial Revenue Bonds totaling $9
million through the State of Michigan Strategic Fund in order to partially fund
the construction of a new manufacturing facility in Marshall, Michigan and to
purchase certain new equipment for that facility. The net proceeds from this
bond offering are included in Restricted Cash and Equivalents. Certain land and
equipment, a building and an irrevocable letter of credit issued by the Company
through its bank have been offered as collateral for the bonds.
At June 30, 1998, the annual aggregate maturities of long-term obligations for
each of the five years subsequent thereto were as follows:
E-16
<PAGE> 17
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year ending 6.30
- --------------------------------------------------------------------------------
<C> <C>
1999 $ 6,553,588
2000 13,810,541
2001 5,221,541
2002 3,593,405
2003 2,987,841
Thereafter 12,237,546
------------
Total $44,404,462
===========
</TABLE>
Based on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of long-term debt was
$45,582,400 as of June 30, 1998.
6. COMMITMENTS
The Company leases a building and certain equipment under noncancellable
operating leases. The operating leases generally contain renewal and purchase
options at fair market value at the end of the lease terms. The Company also
leased certain equipment under a capital lease. Such assets were purchased and
the associated debt retired in November 1997. The cost and accumulated
amortization of the Company's assets formerly under the capital lease were as
shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
6.30.97
- --------------------------------------------------------------------------------
<S> <C>
Machinery and equipment $1,321,700
Less accumulated amortization 593,200
-----------
Total $ 728,500
==========
</TABLE>
Amortization of machinery and equipment under capital leases, determined on a
straight-line basis over the useful lives of the assets, amounted to $42,600,
$127,800 and $242,900 for the years ended June 30, 1998, 1997 and 1996,
respectively.
Minimum future lease payments under noncancellable operating leases (including
noncancellable operating leases with the Company's majority shareholder -- see
Note 9) as of June 30, 1998 are summarized as follows:
- --------------------------------------------------------------------------------
Year ending 6.30
- --------------------------------------------------------------------------------
1999 $ 3,809,800
2000 3,676,300
2001 3,191,900
2002 2,333,700
2003 1,805,600
Thereafter 2,647,300
------------
Total $17,464,600
===========
Rent expense under operating leases summarized above was $3,460,300,
$3,104,100 and $3,535,000 for the years ended June 30, 1998, 1997 and 1996,
respectively.
E-17
<PAGE> 18
As of June 30, 1998, the Company had noncancellable purchase commitments for
machinery and equipment totaling $8,159,600. In accordance with terms of the
purchase agreements, final acceptance of such equipment is contingent upon the
equipment demonstrating certain capabilities as documented in Company purchase
orders. The Company has entered into two foreign currency futures contracts to
reduce the impact of changes in foreign currency rates on firm commitments to
purchase equipment. Under the contracts, the Company is obligated to purchase
1,345,400 Swiss Francs at a weighted-average rate of 1.50 Swiss Francs per U.S.
Dollar. The contracts expire in August 1998.
7. INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $2,361,500 $1,447,100 $1,220,900
Deferred 1,851,082 1,380,039 1,692,966
----------- ----------- -----------
Total $4,212,582 $2,827,139 $2,913,866
========== ========== ==========
The Company`s effective income tax rate differs from the United States Federal
("Federal") statutory tax rate as follows:
- ---------------------------------------------------------------------------------------------------------------------------
6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------------------------------
Tax at Federal statutory rate 34.0% 34.0% 34.0%
Research and development credit (0.5) (0.7)
State income taxes 0.4
Effect of foreign operation 0.6
Other 0.7 1.0 .3
----- ----- -----
Effective Tax Rate 35.2% 34.3% 34.3%
==== ==== ====
Temporary differences that give rise to deferred tax assets and liabilities at June 30, 1998 and 1997 are as
follows:
- ------------------------------------------------------- ---------------------------------- -----------------------------------
6.30.98 6.30.97
Asset Liability Asset Liability
- ------------------------------------------------------- --------------- -- --------------- ------------ --- ------------------
Depreciation $ 8,365,900 $6,740,000
Deferred compensation 223,400 294,000
Domestic international sales corporation income 1,125,200 911,000
Accrued expenses $215,800 $98,000
Other 336,518 (143,000)
--------- -------------- --------- -----------
Total Deferred Taxes $215,800 $10,051,018 $98,000 $7,802,000
======== =========== ======= ==========
</TABLE>
On July 1, 1998, the Company established a foreign sales corporation, and in
conjunction therewith, intends to terminate its interest-charged domestic
international sales corporation in the first quarter of fiscal 1999. Upon
dissolution, Federal income tax expense of $265,000 will be recognized.
Undistributed earnings of the Company's Brazilian subsidiary amounted to
$170,600 at June 30, 1998. All of these earnings are considered to be
indefinitely reinvested, and accordingly, a provision for Federal and state
income taxes has not been provided thereon. Upon distribution of those earnings
in the form of dividends or otherwise, the Company would be subject to both U.S.
income taxes (subject to an adjustment for foreign tax credits) and withholding
taxes in Brazil. In the event that its Brazilian subsidiary's earnings were
distributed, U.S. income taxes, net of foreign credits, would be immaterial.
E-18
<PAGE> 19
8. GEOGRAPHIC AREA AND SIGNIFICANT CUSTOMER INFORMATION
The Company operates in a single industry -- precision metal machining. For
fiscal 1997 and 1996, the Company had no foreign operations. Information about
the Company by geographic operating area for fiscal 1998 is presented below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the year ended 6.30.98
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales to Unaffiliated Customers from Company Facilities Located in:
United States $84,235,573
Brazil 6,125,490
-------------
Total $90,361,063
===========
Operating Profit of Company Facilities Located in:
United States $14,277,109
Brazil 561,640
-------------
Total $14,838,749
===========
Identifiable Assets of Company Facilities Located in:
United States $ 98,205,614
Brazil 15,243,757
--------------
Total $113,449,371
============
</TABLE>
Included in the United States sales to unaffiliated customers are export sales
of $9,032,600, $8,485,000 and $7,961,500, for the years ended June 30, 1998,
1997 and 1996, respectively, with the majority being to a customer in Austria.
The Company had two transportation industry customers that exceeded 10% of
consolidated sales for each of the three years ended June 30, 1998. Sales to
those customers were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the year ended 6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------------------------------
Transportation customer A $24,919,800 $28,188,500 $26,530,200
Transportation customer B 24,359,700 9,572,800
Transportation customer C 11,804,100
------------ ------------ -----------
Total $49,279,500 $37,761,300 $38,334,300
=========== =========== ===========
</TABLE>
9. RELATED PARTY TRANSACTIONS
The Company leases certain production equipment from its majority shareholder
under a long-term operating lease agreement. The lease, which expires in May
2001, grants the Company an option to purchase the equipment at the expiration
of the lease term. Total lease expense, including amortization of a $234,800
initial payment over the lease term, was $351,000 for each period presented.
The Company leases a building from a partnership in which a director has a 50%
interest under a ten-year, noncancellable operating lease expiring in March
2005. Annual rentals under the lease are $300,000, and for a consideration of
$630,000 paid in March 1995, the Company obtained an option to purchase the
building for $3,125,000 at the end of the lease term. The Company subleases a
portion of this facility to Conway Products Corporation ("Conway"), an affiliate
by virtue of the majority shareholder's 100% ownership of Conway. Income and
reimbursement for utility costs under this sublease was $285,200, $259,600 and
$231,500 in fiscal 1998, 1997 and 1996, respectively.
E-19
<PAGE> 20
During fiscal 1996, the Company chartered its leased aircraft to the majority
shareholder and others through AMR Executive Charters, Inc. ("AMR"), an
affiliate by virtue of the majority shareholder's then 100% ownership interest
of AMR. The Company received $96,000 in charter revenue from AMR during the year
ended June 30, 1996, and $15,100, $7,800 and $10,800 in charter revenue from its
majority shareholder during the years ended June 30, 1998, 1997 and 1996,
respectively. The Company paid AMR $68,900 during fiscal 1996 for various
services and merchandise consisting primarily of the purchase of aviation fuel
at AMR's cost. The majority shareholder sold his interest in AMR during November
1995.
The Company has stock redemption agreements with its majority shareholder
whereby the Company is obligated to redeem up to $23,000,000 of common shares
following his and his spouse's death. The Company maintains joint life insurance
policies in order to fund its obligations under the agreements.
The Company has receivables from its officers and certain key employees in
connection with a life insurance program, collateralized by the cash surrender
value of the related insurance policies. Amounts receivable from such employees,
included in Other Long-Term Assets, were $1,217,200, $1,080,000 and $901,000 at
June 30, 1998, 1997 and 1996, respectively, including $811,200, $713,000 and
$617,000, respectively, due from the majority shareholder.
10. COMMON STOCK
The Board of Directors approved and distributed five-percent common share
dividends in each year during the three-year period ended June 30, 1998. The
Board of Directors also approved 2 cent per share quarterly cash dividends in
each fiscal quarter beginning with the second quarter of fiscal 1997.
The Company has reserved 787,500 common shares for issuance to employees under
the 1991 Incentive Stock Option Plan (the "Plan"). Options are not exercisable
prior to twelve months from or ten years after the grant date. Options granted
vest at a rate of twenty percent annually over a five-year period. At June 30,
1998, 113,300 shares were available for future grants. Had the Company accounted
for the Plan based on the fair value of awards at the grant dates as prescribed
by SFAS 123, the Company's net income and net income per share would have been
decreased as indicated below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the year ended 6.30.98 6.30.97 6.30.96
- ---------------------------------------------------------------------------------------------------------------------------
Net Income:
As reported $7,741,400 $5,411,000 $5,589,000
-----------
Pro forma 7,321,600 5,292,900 5,533,700
---------
Basic Net Income Per Share:
As reported $1.28 $.90 $.94
-----------
Pro forma 1.21 .88 .93
---------
Diluted Net Income Per Share:
As reported $1.24 $.89 $.92
-----------
Pro forma 1.17 .87 .91
---------
</TABLE>
The effects of applying SFAS 123 on a pro forma basis may not be representative
of the effects on reported pro forma net income for future years as the
estimated compensation costs reflect only options vesting after June 30, 1995.
Under the methodology of SFAS 123, the fair value of the Company's fixed stock
options was estimated at the date of grant using the Black-Scholes option
pricing model. The multiple option approach was used, with the following
weighted-average assumptions: dividend yield, .48%; expected volatility, 45.09%;
risk-free interest rate, 4%; and, expected life of options, 10 years.
E-20
<PAGE> 21
Transactions of the Plan for each of the three years ended June 30, 1998 were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Weighted Average Fair
Exercise Price Value of Options Granted
Shares Ranges
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options Outstanding at 7.1.95 340,535 $6.05 to $13.60
Fiscal 1996:
Options granted 53,493 $10.32 to $10.66 $6.17
Options exercised (17,309) $6.05 to $8.46
Options terminated (10,253) $6.05 to $13.60
--------
Options Outstanding at 6.30.96 366,466 $6.05 to $13.60
Fiscal 1997:
Options granted 29,663 $8.46 to $10.42 $5.51
Options exercised (13,034) $6.05 to $8.46
Options terminated (12,410) $6.05 to $13.60
--------
Options Outstanding at 6.30.97 370,685 $6.05 to $13.60
Fiscal 1998:
Options granted 257,029 $8.85 to $18.25 $6.18
Options exercised (105,517) $6.05 to $13.60
Options terminated (22,040) $6.80 to $18.25
--------
Options Outstanding at 6.30.98 500,157 $6.05 to $18.25
========
Exercise price ranges and weighted average remaining contractual lives of
options exercisable as of June 30, 1998 are as follows:
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Weighted Average
Exercise Price Remaining Contractual
Shares Ranges Life (Yrs.)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal 1992 grants 88,735 $6.05 to $7.48 3.36
Fiscal 1993 grants 14,874 $6.20 to $6.80 4.60
Fiscal 1994 grants 50,069 $8.46 to $10.28 5.13
Fiscal 1995 grants 16,610 $10.66 to $13.60 6.31
Fiscal 1996 grants 11,232 $10.32 to $10.66 7.32
Fiscal 1997 grants 4,815 $8.46 to $10.42 8.36
-------
Options Exercisable at 6.30.98 186,335 $6.05 to $13.60 5.03
=======
</TABLE>
11. EMPLOYEE BENEFIT PLANS
The Company maintains a self-funded medical and dental plan for the majority of
its Kentwood, Michigan and Gaffney, South Carolina full-time employees. A
third-party administrator makes benefit payments, and an estimate of the
Company's liability for unpaid and incurred but not reported claims is accrued.
Employees of the Company's other subsidiaries are enrolled in various insured
group or governmental health plans.
The Company sponsors a 401(k) savings plan (the "Plan") for all qualified
full-time employees. The Plan provides for a discretionary employer matching
contribution that has historically been dollar-for-dollar up to $1,000 per
participant. Expense incurred in connection with the Plan was $286,100, $246,300
and $204,100 for the years ended June 30, 1998, 1997 and 1996, respectively.
E-21
<PAGE> 22
12. SUPPLEMENTAL CASH FLOW INFORMATION
The following is a reconciliation of net income to net cash provided by
operating activities and other supplemental cash flow information:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED 6.30.98 6.30.97 6.30.96
- --------------------------------------------------------------------------------------------------------- --------------------
Net income $ 7,741,380 $ 5,410,966 $ 5,589,047
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 7,654,238 5,521,243 4,877,683
Deferred taxes 2,101,100 1,397,000 1,720,000
Minority interest in net income 166,067
Other, net 77,628
Changes in assets and liabilities that provided (used) cash:
Accounts receivable (858,595) 814,851 (622,824)
Inventories 227,110 378,230 (362,599)
Prepaid expenses and other current assets 28,329 (65,094) (69,146)
Other long-term assets 202,904 212,838 274,368
Accounts payable 2,147,885 76,074 312,900
Accrued liabilities 427,942 (54,524) 134,616
Deferred credits and other 170,196 (125,692) 211,799
------------ ----------- -----------
Net Cash Provided by Operating Activities $ 20,086,184 $13,565,892 $12,065,844
============ =========== ===========
Details of acquisitions (see Note 2):
Fair value of assets acquired $ 14,444,190 $18,828,917
Cash paid (5,446,920) (16,868,594)
Note issued to Propart (4,834,687)
Professional fees and escrow amounts to be paid (130,000) (1,260,989)
------------ -----------
Liabilities assumed $ 4,032,583 $ 699,334
============ ===========
</TABLE>
The Company issued 5% share dividends during each year presented.
E-22
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Autocam Corporation,
We have audited the accompanying consolidated balance sheets of Autocam
Corporation and subsidiaries as of June 30, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity and of cash flows
for each of the three years in the period ended June 30, 1998. These financial
statements are the responsibility of Autocam's management. Our responsibility is
to express an opinion on these financial statements based upon 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, such financial statements present fairly, in all material
respects, the financial position of Autocam Corporation and subsidiaries at June
30, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1998, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
July 29, 1998
E-23
<PAGE> 1
Exhibit 10(a)
FIRST AMENDMENT
TO
REVOLVING CREDIT LOAN AGREEMENT
Dated as of December 22, 1997
By and Between
AUTOCAM CORPORATION
and
COMERICA BANK
E-24
<PAGE> 2
FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT (thereinafter
referred to as the "First Amendment"), made and delivered as of the 22nd day of
December, 1997, by and between AUTOCAM CORPORATION, a Michigan corporation (the
"Borrower"), whose address is 4070 East Paris, S.E., Kentwood, Michigan 49512,
and COMERICA BANK, a Michigan banking corporation, whose address is 1000 Campau
Square Plaza Building, 99 Monroe, N.W., Grand Rapids, Michigan (hereinafter
referred to as the "Bank").
WHEREAS, the Bank and the Borrower entered into a certain Revolving Credit
Loan Agreement dated as of June 27, 1997 (the "Agreement"); and
WHEREAS, the Borrower has entered into an agreement to purchase fifty-one
percent (51%) of the stock of Qualipart/Target, a Brazilian corporation ("Q/T")
(the "Stock Purchase"); and
WHEREAS, the Bank has agreed to provide Borrower with a term loan in the
amount of up to Five Million Two Hundred Thousand Dollars ($5,200,000) (the
"Q/T" Term Loan") to finance the Stock Purchase; and
WHEREAS, Borrower has entered into a loan agreement with the Michigan
Strategic Fund (the "Issuer") to borrow Nine Million Dollars ($9,000,000) to
finance the acquisition, construction and equipping of a manufacturing facility
in Marshall, Michigan (the "Project"), pursuant to a Loan Agreement dated as of
December 1, 1997 (the "Loan Agreement"); and
WHEREAS, the Issuer is issuing its Variable Rate Demand Limited Obligation
Revenue Bonds, Series 1997 (Autocam Corporation Project) (the "Bonds") pursuant
to a Trust Indenture dated as of December 1, 1997 (the "Indenture"), between the
Issuer and Norwest Bank Wisconsin, N.A. (the "Trustee"); and
WHEREAS, to induce the Bond Purchasers to purchase the Bonds and as
security for the payment of the Bonds, the Bank has agreed to issue its
irrevocable Letter of Credit in the initial stated amount of $9,138,082.19 (the
"Letter of Credit") in favor of the Trustee pursuant to a Reimbursement
Agreement dated as of December 1, 1997 (the "Reimbursement Agreement"); and
WHEREAS, the Borrower and the Bank agree to amend the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and subject to the conditions hereinafter set forth, Borrower
and the Bank hereby agree as follows:
ARTICLE 1
AMENDMENTS TO AGREEMENT
1.1 The definitions of "Commitments," "Funded Debt Leverage Ratio," "Loan,"
"Maturity Date," "Notes" and "Revolving Credit Commitment Amount" as stated in
Section 1.1 of the Agreement are deleted in their entirety and the following
substituted therefor:
"Commitments" shall mean the Bank's commitments to make loans as set forth
herein. For purposes of this Agreement, Commitments may be classified as
Revolving Credit Commitments, Term Loan Commitments, Equipment Loan Commitments
or Q/T Term Loan Commitments.
"Funded Debt Leverage Ratio" shall mean the ratio of: (a) the Company's
Funded Debt, less (b) the sum of (i) cash plus (ii) marketable securities held
by the Company; to the Company's EBITDA. For purposes of this Agreement, the
Funded Debt Leverage Ratio shall be calculated at the end of each quarter of the
Company's fiscal year commencing December 31, 1997, using the previous four (4)
quarters.
E-25
<PAGE> 3
"Loan" shall mean the Revolving Credit Loan, the Term Loan, the Equipment
Loan, any Equipment Term Loan, and the Q/T Term Loan. Subject to the terms and
conditions contained herein, such Loans may also be designated as a Prime Rate
Loan, a Eurodollar Rate Loan or a Quoted Rate Loan, which are referred to herein
as "types" of Loans.
"Maturity Date" shall mean the earlier to occur of the date on which any
Loan is accelerated pursuant to Section 9.2 or (i) with respect to the Term
Loan, October 1, 2003; (ii) with respect to any Equipment Term Loan, the date
that is not more than six (6) years after the first Equipment Loan relating to
such Equipment Term Loan was made; and (iii) with respect to the Q/T Term Loan,
January 1, 2003.
"Notes" shall mean the Revolving Credit Note, the Term Note, the Equipment
Note, any Equipment Term Note and the Q/T Term Note; and "Note" shall mean any
one of them.
"Revolving Credit Commitment Amount" shall mean, as of any applicable date
of determination, Thirteen Million Five Hundred Thousand Dollars ($13,500,000)
(or such lesser amount to which the Revolving Credit Commitment Amount may be
reduced by the Borrower from time to time under Section 2.6.1 of this
Agreement). Within the Revolving Credit Commitment Amount, Twelve Million
Dollars ($12,000,000) is available to the Company for general corporate purposes
and One Million Five Hundred Thousand Dollars ($1,500,000) is reserved
exclusively to facilitate foreign exchange transactions. Within the Twelve
Million Dollars ($12,000,000) (less the amount of the Bond Reserve) available
for general corporate purposes, up to Five Hundred Thousand Dollars ($500,000)
is reserved for the issuance of a letter of credit. The amount of any letters of
credit issued by the Bank on behalf of the Company reduces the amount available
to be advanced under the Revolving Credit Commitment.
1.2 The following definitions are hereby added to Section 1.1 of the
Agreement:
"Bond Reserve" shall mean a reduction in the amount available to be
advanced under the Revolving Credit Commitment calculated as follows: On each
March 1, June 1 and September 1 (each a "Reserve Determination Date"), an amount
equal to twenty-five percent (25%) of the principal amount of the Bonds to be
redeemed under the Redemption Notice (as defined in the Reimbursement Agreement)
then in effect shall be determined (the "Quarterly Reserve"). The Bank shall
then reduce the amount available to be advanced by the Quarterly Reserve; the
total Bond Reserve shall be the sum of all of the Quarterly Reserves during the
year; upon reimbursement to the Bank by the Company, the Bond Reserve shall be
eliminated until the next Reserve Determination Date.
"Pledge Agreement" shall mean a pledge agreement in the form and content
satisfactory to the Bank pursuant to which the Company will pledge to the Bank
all of the issued and outstanding capital stock of Q/T owned by the Company to
the Bank as security for the Indebtedness.
"Q/T Term Loan Commitment Amount" shall mean Five Million Two Hundred
Thousand Dollars ($5,200,000).
"Q/T Term Loan" shall mean any Borrowing under Section 2.3 of the
Agreement, evidenced by the Q/T Term Note and made pursuant to Section 2.1.4.
"Q/T Term Note" shall mean any promissory note of the Company evidencing
the Q/T Term Loan, in the form of Exhibit A to the First Amendment, as it may be
amended or modified from time to time, together with any promissory note or
notes in exchange or replacement therefor.
"Subordinated Debt" shall mean indebtedness of the Company to third parties
which has been subordinated to the Indebtedness pursuant to a subordination
agreement in form and content satisfactory to the Bank.
"Subordination Agreement" shall mean a subordination agreement in the form
and content satisfactory to the Bank making all present and future indebtedness
of the Company to Propart Corporation relating to the Stock Purchase subordinate
to the Indebtedness.
E-26
<PAGE> 4
"Tangible Effective Net Worth" shall mean, as of any applicable date of
determination, Tangible Net Worth plus Subordinated Debt.
1.3 The definitions of "Guarantor Mortgage," "Guarantor Premises,"
"Mortgage Commitment," "Mortgage Loan," and "Mortgage Note" are hereby deleted
from the Agreement.
1.4 Section 2.1.4 of the Agreement is deleted in its entirety and the
following Section 2.1.4 is substituted therefor:
2.1.4 Q/T Term Loan Commitment. Upon satisfaction of the conditions
contained in Sections 3.1, 3.2 and 3.4 of the Agreement, at any time prior to
February 1, 1998, the Bank agrees, subject to the terms and conditions of the
Agreement, to make the Q/T Term Loan to the Company, in such amounts as the
Company requests pursuant to Section 2.3, in an amount not to exceed the Q/T
Term Loan Commitment Amount.
1.5 Section 2.2.4 of the Agreement is deleted in its entirety and the
following Section 2.2.4 is substituted therefor:
2.2.4 Q/T Term Note. The Q/T Term Loan shall be evidenced by the Q/T
Term Note payable to the order of the Bank in an amount equal to the Q/T Term
Loan.
1.6 Section 2.4.3 of the Agreement is deleted in its entirety and the
following Section 2.4.3 is substituted therefor:
2.4.3 Quoted Rate Borrowings. All Quoted Rate Borrowings shall be for
the entire outstanding principal amount of the Term Loan, the Q/T Term Loan or
each Equipment Term Loan.
1.7 Section 2.5.2 of the Agreement is deleted in its entirety and the
following Section 2.5.2 is substituted therefor:
2.5.2 Maturity Date. The outstanding principal balance (together with
accrued interest thereon) of the Term Loan, the Q/T Term Loan and any Equipment
Term Loans shall be due and payable on the respective Maturity Date.
1.8 Section 2.6.4 of the Agreement is deleted in its entirety and the
following Section 2.6.4 is substituted therefor:
2.6.4 Q/T Term Loan Commitment. Effective January 31, 1998, the Q/T
Term Loan Commitment shall be terminated if Borrower has not completed the Stock
Purchase.
1.9 Section 2.8.2 of the Agreement is deleted in its entirety and the
following Section 2.8.2 is substituted therefor:
2.8.2 Quoted Rate Election.
(a) Term Loan. The Company may elect to have the entire
outstanding principal balance of the Term Loan bear interest at a Quoted Rate
for the Applicable Interest Period by delivering to the Bank an appropriate
Notice of Borrowing confirming the Quoted Rate as provided in Section 2.3 of the
Agreement.
(b) Q/T Term Loan. The Company may elect to have the entire
outstanding principal balance of the Q/T Term Loan bear interest at a Quoted
Rate for the Applicable Interest Period by delivery to the Bank an appropriate
Notice of Borrowing confirming the Quoted Rate as provided in Section 2.3 of the
Agreement.
(c) Equipment Term Loan. The Company may elect to have the entire
principal balance of any Equipment Term Loan as of a Conversion Date bear
interest at a Quoted Rate for the Applicable Interest Period by delivering to
the Bank an appropriate Notice of Borrowing confirming the Quoted Rate as
provided in Section 2.3 of the Agreement.
1.10 Section 3.4 of the Agreement is deleted in its entirety and the
following Section 3.4 is substituted therefor:
E-27
<PAGE> 5
3.4 Additional Conditions for the Q/T Term Loan. in to the requirements
set forth in Article III, the obligation of the Bank to make the Q/T Term Loan
is subject to receipt by the Bank of the following documents and completion of
the following matters, in form and substance satisfactory to the Bank:
3.4.1 Documents Executed and Filed. The Company shall have executed (or
caused to be executed) and delivered to the Bank the following:
(i) the Q/T Term Note; and
(ii) either: (a) the Stock Pledge, or (b) the Subordination
Agreement.
3.4.2 Stock Purchase Complete. The Stock Purchase shall have been
completed on terms and conditions acceptable to the Bank and the Bank shall have
been provided with a complete copy of the documentation related to the Stock
Purchase.
1.11 Section 4.1.4 of the Agreement is deleted in its entirety and the
following Section 4.1.4 is substituted therefor:
4.1.4 Q/T Term Loan. The Company shall pay to the Bank the principal
amount of the Q/T Term Loan, unless accelerated pursuant to the terms of this
Agreement, in not more than sixty (60) equal installments on the first day of
each consecutive calendar month, beginning no later than March 1, 1998. All
outstanding principal and accrued interest shall be due and payable on the
Maturity Date.
1.12 Section 7.5 of the Agreement is deleted in its entirety and the
following Section 7.,5 is substituted therefor:
7.5 Maintain Tangible Net Worth. On a consolidated basis, maintain a
Tangible Net Worth for it of not less than Twenty-six Million Dollars
($26,000,000).
ARTICLE 2
TERM LOAN/MORTGAGE LOAN
2.1 Term Loan. By September 30, 1997, the Company provided the Bank with an
acceptable appraisal as requested in Section 2.6.2 of the Agreement. Therefore,
there was no reduction in the Term Loan under Section 2.6.2.
2.1 Mortgage Loan. The Company elected not to take any disbursement of the
Mortgage Loan. Therefore, the Mortgage Loan Commitment terminated September 30,
1997, and no Mortgage Loan was made.
ARTICLE 3
OTHER TERMS
Except as specifically amended above, all of the terms and conditions of
the Agreement shall remain in full force and effect.
ARTICLE 4
CONDITIONS
The obligations of the Bank under this First Amendment are subject to the
occurrence, prior to or simultaneously with the first borrowing hereunder, of
each of the following conditions, any or all of which may be waived in whole or
in part by the Bank in writing.
4.1 Documents Executed. The Borrower shall have executed and delivered to
the Bank this First Amendment, the Q/T Term Note, the Stock Pledge Agreement,
the Subordination Agreement, and an affirmation of the Guaranty in the form of
Exhibit B to this First Amendment.
E-28
<PAGE> 6
4.2 Preparation Fees. The Company agrees to pay to the Bank the amount of
the expenses (including without limit reasonable attorneys' fees and
disbursements) incurred by the Bank from time to time in connection with the
preparation of this First Amendment and related instruments.
4.3 Approval of Bank Counsel. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this First
Amendment or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by Miller, Canfield, Paddock and Stone,
counsel to the Bank, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
ARTICLE
5MISCELLANEOUS
5.1 Successors. The First Amendment shall be binding upon the parties
hereto and their respective successors, assigns, heirs, executors and
administrators.
5.2 Governing Law. This First Amendment will be governed by and construed
in accordance with the internal laws of Michigan. The parties hereto select the
state and federal court of appropriate jurisdiction in Michigan as the sole
proper forums having jurisdiction over all disputes arising from or in
connection herewith. The parties hereto consent to be subject to jurisdiction of
the courts of Michigan with respect to any such dispute.
5.3 Severability. If any part of this First Amendment is declared invalid
or unenforceable, such provision may be changed to the extent reasonably
necessary to make the provision, as changed, legal, valid and binding. If any
provision hereof is declared invalid or unenforceable in its entirety, the other
provisions hereof will not be affected, but will remain in full force and
effect.
5.4 Counterparts. This First Amendment may be signed in counterparts, all
of which together will be deemed an original.
5.5 Entire Agreement; Amendment. This First Amendment and the agreements
referred to herein constitute the entire agreement of the parties hereto with
respect to the subject matter hereof. This First Amendment may be amended only
by a written instrument executed by all parties hereto.
E-29
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date set forth in the introductory paragraph of this First Amendment.
BANK:
COMERICA BANK
By:
--------------------------------
Its:
-------------------------------
BORROWER:
AUTOCAM CORPORATION
By:
--------------------------------
Its:
-------------------------------
E-30
<PAGE> 8
EXHIBIT A
Q/T TERM NOTE
$5,200,000.00 December 22, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
COMERICA BANK (the "Bank") at any office of the Bank, the principal sum of Five
Million Two Hundred Thousand and 00/100 Dollars ($5,200,000.00) in consecutive
monthly installments as provided in that certain Revolving Credit Loan Agreement
dated June 27, 1997 (the "Loan Agreement"), which Loan Agreement, as it may be
amended from time to time, is by this reference incorporated herein and made a
part hereof, beginning February 1, 1998, and on the first day of each month
thereafter, with all outstanding principal and accrued but unpaid interest due
and payable on January 1, 2003.
The unpaid principal amount of this Note shall bear interest at the rate
provided in the Loan Agreement.
This Note is the Q/T Term Note referred to in the First Amendment to Loan
Agreement.
This Note is secured as described in the Loan Agreement, to which reference
is made for, among other things, the conditions under which this Note may be
accelerated. The Bank is hereby granted a security interest in all property of
the undersigned at any time in the possession of the Bank or any Affiliate (as
defined in the Agreement) of the Bank (or as to which the Bank or any Affiliate
of the Bank at any time controls possession by documents or otherwise) and in
all balances of deposit or other accounts (including without limit an account
evidenced by a certificate of deposit) of the undersigned from time to time with
the Bank or any Affiliate of the Bank.
If an Event of Default (as defined in the Loan Agreement) occurs and is not
cured within the time, if any, provided for by the Loan Agreement, the Bank may
exercise any one or more of the rights and remedies granted by the Loan
Agreement or any document contemplated thereby or given to a secured party under
applicable law, including without limit the right to accelerate this Note and
any other Indebtedness (as defined in the Loan Agreement), and may set off
against the principal of and interest on this Note or against any other
Indebtedness (i) any amount owing by the Bank to the undersigned, (ii) any
property of the undersigned at any time in the possession of the Bank or any
Affiliate of the Bank and (iii) any amount in any deposit or other account
(including without limit an account evidenced by a certificate of deposit) of
the undersigned with the Bank or any Affiliate of the Bank.
The undersigned and all accommodation parties, guarantors and endorsers (i)
waive presentment, demand, protest and notice of dishonor, (ii) agree that no
extension or indulgence to the undersigned or release or non-enforcement of any
security, whether with or without notice, shall affect the obligations of any
accommodation party, guarantor or endorser, and (iii) agree to reimburse the
holder of this Note for any and all costs and expenses incurred in collecting or
attempting to collect any and all principal and interest under this Note
(including, but not limited to, court costs and reasonable attorney fees,
whether in-house or outside counsel is used and whether such costs and expenses
are incurred al or informal collection actions, federal bankruptcy proceedings,
appellate proceedings, probate proceedings, or otherwise). This Note shall be
governed by and construed in accordance with the laws of the State of Michigan.
To the extent not defined in this Note, capitalized terms used herein shall
have the meanings assigned to them in the Loan Agreement.
E-31
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this Note as of the 22nd
day of December, 1997.
AUTOCAM CORPORATION
By
--------------------------------
Its
--------------------------------
E-32
<PAGE> 10
EXHIBIT B
AFFIRMATION OF GUARANTY
The undersigned hereby ratify and confirm their prior Guaranty in favor of
Comerica Bank (the "Bank"), dated June 27, 1997 (the "Guaranty"), whereunder
they guaranteed the indebtedness of Autocam Corporation, a Michigan corporation,
of 4070 East Paris, S.E., Grand Rapids, Michigan 49512 (the "Borrower") in
accordance with the terms contained in said Guaranty, and represent and warrant
to the Bank that said Guaranty remains in full force and effect, is valid and
binding in accordance with its terms, that they have no defenses to the
enforceability thereof and that said Guaranty runs in favor of the Bank. The
undersigned acknowledge and agree that the Borrower is incurring additional
indebtedness from the Bank, including indebtedness and obligations pursuant to a
Reimbursement Agreement dated as of December 1, 1997, relating to The Michigan
Strategic Fund Variable Rate Demand Limited Obligation Revenue Bonds (Autocam
Corporation Project), Series 1997, and the Q/T Term Loan in the amount of Five
Million Two Hundred Thousand Dollars ($5,200,000). The undersigned have obtained
such information as they desire as to the affairs of the Borrower and understand
that the Bank has no duty or obligation, now or in the future, to supply them
with any information whatsoever concerning the Borrower. The undersigned
furthermore understand and agree that the giving of this affirmation at this
time does not create an obligation on the Bank to obtain an affirmation in the
future or affect the terms of the Guaranty as expressed therein, and that the
failure of the Bank to obtain such an affirmation in the future shall not at any
time affect the validity of the Guaranty. The failure of the Bank to obtain an
affirmation from any other guarantor of the Borrower shall not at any time
affect the validity of the Guaranty.
Dated: December 22, 1997.
AUTOCAM PAX, INC. AUTOCAM SOUTH CAROLINA, INC.
By By
---------------------------- ----------------------------
Its Its
---------------------------- ---------------------------
AUTOCAM LASER TECHNOLOGIES, INC. AUTOCAM ACQUISITION, INC.
By By
---------------------------- ----------------------------
Its Its
---------------------------- ---------------------------
E-33
<PAGE> 1
EXHIBIT 10(b)
STOCK REDEMPTION AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of September,
1998, by and among AUTOCAM CORPORATION, a Michigan corporation (hereinafter
referred to as "Company"), and JOHN C. KENNEDY, in his individual capacity and
as the donor and co-trustee of the John C. Kennedy Living Trust u/a dated
February 14, 1986, as amended (hereinafter sometimes referred to as the "Living
Trust"), and NANCY G. KENNEDY, in her individual capacity and as co-trustee of
the Living Trust. John C. Kennedy and Nancy G. Kennedy are hereinafter sometimes
referred to collectively as "Stockholders" and individually as a "Stockholder."
WHEREAS, John C. Kennedy owns or controls a substantial number of
the outstanding shares of Common stock of the Company; and
WHEREAS, John C. Kennedy intends to make all of said stock presently
owned or controlled by him subject to the terms of this Agreement; and
WHEREAS, John C. Kennedy may in the future, during his lifetime or upon
his death, transfer shares of said stock to the trustees of his Living Trust as
to which the trustees desire to bind the Living Trust, and any trust or trust
share established thereunder, to sell those shares of stock to the extent
provided in this Agreement; and
WHEREAS, the Company and the Stockholders have previously entered into
certain Stock Redemption Agreements, dated November 6, 1992, September 20, 1993
and August 1, 1996, which provide for the redemption of up to Eighteen Million
Dollars ($18,000,000) of the Stockholders' shares in the Company following both
of their deaths; and
WHEREAS, the Company has previously acquired Northwestern Mutual
Joint Complife policies No. 12200147, No. 12443196 and No. 13542762 in the
amount of Five Million Dollars ($5,000,000), Six Million Dollars ($6,000,000)
and Seven Million Dollars ($7,000,000), respectively, in order to fund its
obligations under the Stock Redemption Agreements; and
WHEREAS, the Company and the Stockholders, for their mutual protection
and the success of the Company, wish to make provisions for the redemption of an
additional Five Million Dollars ($5,000,000) of the Stockholders' stock in the
Company following both of their deaths.
NOW, THEREFORE, in consideration of the mutual covenants to buy and
sell and the obligations expressed herein by the parties, the Stockholders do
hereby bind themselves, their executors, administrators, and the Living Trust,
and the Company does hereby bind itself and its successors, and each hereto
agree as follows:
ARTICLE I
Redemption of Decedent's Stock
1.1. Upon the death of the last to die of John C. Kennedy and
Nancy G. Kennedy, the Company shall redeem and the estate of such deceased
Stockholder, or trust holding stock includable in the estate of such deceased
Stockholder, shall sell to the Company that number of shares of Common stock
included in the deceased's estate for federal estate tax purposes, at the value
specified in Article II, below, as shall equal (rounded down to the nearest
whole share) the amount eligible for treatment as a Section 303 redemption but
not more than Five Million Dollars ($5,000,000), in any event. For purposes of
this Agreement, a Section 303 redemption means a distribution in full payment in
exchange for stock pursuant to Section 303 of the Internal Revenue Code of 1986,
as amended (the "Code").
E-34
<PAGE> 2
1.2. If more than one entity bound by this Agreement owns shares
of Common stock included in the estate of a deceased Stockholder, the redemption
of which will qualify as a Section 303 redemption, then the redemption of shares
of each class shall be made proportionately from each such holder according to
the number of shares held by each.
1.3. The sale required by this Agreement shall be consummated
within such time as to assure the redemption shall be treated as a Section 303
redemption. Subject to such limitation, the sale closing shall be held upon
sixty (60) days' written notice given to the Company by the then holder of the
stock to be redeemed but in no event shall the date specified for closing be
earlier than two hundred forty (240) days after the death of the Stockholder.
The closing of the redemption shall be at the principal office of the Company at
which time the trustees of the Living Trust (or trust or trust shares
established thereunder) or the Stockholder's legal representative, or both,
shall deliver certificates representing the shares being redeemed under this
Agreement appropriately endorsed in blank.
1.4. The redemption price shall be paid in cash in full at
closing.
1.5. The Company shall, as part of this Agreement, purchase and
maintain Northwestern Mutual Joint Complife Policy No. 14538421 on the lives of
the Stockholders in the amount of Five Million Dollars ($5,000,000.00) (the
"Policy"). The Policy and any proceeds received under the Policy shall be held
by the Company in trust for the purposes of this Agreement. The Company shall
pay all premiums on the Policy and shall give proof of payment to the
Stockholders within 15 days after the due date of each premium. The Company
shall be the sole owner of the Policy and may apply to the payment of premiums
any dividends declared and paid on the Policy.
ARTICLE II
Valuation
The price at which shares shall be redeemed hereunder shall be the
value of the shares to be redeemed as included in the estate of the deceased
Stockholder for federal estate tax purposes.
ARTICLE III
Miscellaneous
3.1. The Company and the Stockholders may alter, amend, or
terminate this Agreement by a written agreement to that effect signed by the
Company and all of the then living Stockholders.
3.2. The Stockholders, for themselves, their executors,
administrators, and the Living Trust, and the Company, for itself and its
successors, hereby agree to execute any and all instruments necessary to carry
out the terms of this Agreement.
3.3. The references herein to Section 303 of the Code shall
include any corresponding provisions of any successor federal revenue act.
E-35
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day, month and year first above written.
AUTOCAM CORPORATION
By: \s\ John C. Kennedy
-----------------------------
John C. Kennedy, President
\s\ John C. Kennedy
------------------------------------------
John C. Kennedy, Individually and as co-Trustee of the John
C. Kennedy Living Trust u/a dated February 14, 1986
\s\ Nancy G. Kennedy
------------------------------------------
Nancy G. Kennedy, Individually and as co-Trustee of the John
C. Kennedy Living Trust u/a dated February 14, 1986
E-36
<PAGE> 1
Exhibit 10(n)
The Northwestern Mutual Life Insurance Company
agrees to pay the benefits provided in this
policy, subject to its terms and conditions.
Signed at Milwaukee, Wisconsin on the Date of
Issue.
\s\ James D. Ericson \s\ John M. Brenner
PRESIDENT AND C.E.O. SECRETARY
JOINT LIFE PROTECTION POLICY
INSURANCE PAYABLE ON SECOND DEATH
Eligible for Annual Dividends.
Premiums payable for period shown on page 3.
Right To Return Policy - Please read this policy carefully. The policy
may be returned by the Owner for any
reason within ten days after it was
received. The policy may be returned to
your agent or to the Home Office of the
Company at 720 East Wisconsin Avenue,
Milwaukee, WI 53202. If returned, the
policy will be considered void from the
beginning. Any premium paid will then be
refunded.
<TABLE>
<S> <C> <C> <C>
INSURED Nancy G Kennedy AGE AND SEX 37 Female
John C Kennedy III 40 Male
POLICY DATE February 4, 1998 POLICY NUMBER 14 538 421
PLAN Joint Life Protection INITIAL TOTAL
Payable on Second Death INSURANCE AMOUNT $5,000,000
</TABLE>
This policy is a legal contract between the Owner and The Northwestern
Mutual Life Insurance Company. Read your
policy carefully.
GUIDE TO POLICY PROVISIONS
BENEFITS AND PREMIUMS
SECTION 1. THE CONTRACT
Life Insurance Benefit payable on death of the second of the insured to die.
Notice and proof of death. Incontestability. Suicide. Definition of dates.
SECTION 2. OWNERSHIP
Rights of the Owner. Assignment as collateral.
SECTION 3. ADDITIONAL PROTECTION
Description of Additional Protection. Reduction of Additional Protection.
E-37
<PAGE> 2
SECTION 4. PREMIUMS AND REINSTATEMENT
Payment of premiums. Grace period of 31 days to pay premium. Premium refund
at second death. How to reinstate the policy.
SECTION 5. DIVIDENDS
Annual dividends. Paid-up additions and other dividend options. Dividend at
death.
SECTION 6. PAID-UP ADDITIONS
SECTION 7. CASH VALUES AND PAID-UP INSURANCE
Cash surrender value. What happens if premium is not paid. Basis of values.
SECTION 8. LOANS
Policy loans. Premium loans. Effect of policy debt. Interest on loans.
SECTION 9. CHANGE OF POLICY
SECTION 10. BENEFICIARIES
Naming and change of beneficiaries. Succession in interest of beneficiaries.
SECTION 11. PAYMENT OF POLICY BENEFITS
Payment of death or surrender proceeds. Payment plans for policy proceeds.
Right to increase income under payment plans. Guaranteed payment tables.
ADDITIONAL BENEFITS (if any)
APPLICATION
STATEMENT OF POLICY COST AND BENEFIT INFORMATION
FOR INFORMATION CONTACT YOUR AGENT OR THE HOME OFFICE
ROBERT O. SMITH CLU THE NORTHWESTERN MUTUAL LIFE INS. CO.
85 CAMPAU N W 720 E. WISCONSIN AVENUE
GRAND RAPIDS MI 49501 MILWAUKEE, WI 53202
<TABLE>
<CAPTION>
PREMIUM
INITIAL IF PAID YEARS
PLAN AND ADDITIONAL BENEFITS AMOUNTS ANNUALLY PAYABLE
<S> <C> <C> <C>
JOINT LIFE PROTECTION
PAYABLE ON SECOND DEATH
BASIC AMOUNT $5,000,000 $46,100.00 FIRST 63
</TABLE>
E-38
<PAGE> 3
<TABLE>
<CAPTION>
DIVIDENDS USED TO REDUCE PREMIUMS DIVIDENDS TO ADDITIONS*
GUARANTEED CASH DIVIDEND TOTAL TOTAL
POLICY DEATH CASH VALUE PAYABLE AT DEATH BENEFIT CASH VALUE
YEAR BENEFIT END OF YEAR END OF YEAR* END OF YEAR END OF YEAR
<S> <C> <C> <C> <C> <C>
1 5,000,000 0 598 5,003,937 598
2 5,000,000 41,850 3,198 5,024,118 45,699
3 5,000,000 85,700 4,398 5,051,240 94,286
4 5,000,000 131,750 5,698 5,085,490 146,791
5 5,000,000 180,000 7,048 5,126,762 203,412
10 5,000,000 458,250 15,498 5,446,021 563,176
15 5,000,000 807,900 26,198 5,961,368 1,095,204
20 5,000,000 1,242,200 50,748 6,763,001 1,908,684
23 5,000,000 1,506,400 80,298 7,614,390 2,609,071
28 5,000,000 1,993,200 108,748 9,463,033 4,235,160
</TABLE>
<TABLE>
<CAPTION>
BASIC POLICY BASIC POLICY
10 YEARS 20 YEARS 10 YEARS 20YEARS
<S> <C> <C> <C> <C>
SURRENDER COST INDEX* .87 -.92 .68 -1.64
NET PAYMENT COST INDEX* 7.81 6.23 9.00 8.51
EQUIVALENT DIVIDEND INDEX* 1.41 2.99 1.55 3.55
</TABLE>
NOTE-This statement is recommended by the National Association of Insurance
Commissioners. It may not necessarily reflect all the benefits
contained in the policy. Even though dividends must be used to buy
additions in order to maintain the total death benefit of this policy,
values are also shown for the premium reduction dividend option. An
explanation of the intended use of the cost indexes and the equivalent
level annual dividend is included in the Life Insurance Buyers Guide,
available from your agent.
*Dividends are refunds of premium and are determined annually. They reflect
mortality and expense savings and investment gains. Not an estimate or
guarantee of future results.
VARIABLE RATE LOAN INTEREST OPTION PREPARED MARCH 27, 1998
THIS POLICY IS ISSUED IN A SELECT PREMIUM CLASS ON NANCY G KENNEDY AND A SELECT
PREMIUM CLASS ON JOHN C KENNEDY III
INSUREDS NANCY G KENNEDY AGE AND SEX 37 FEMALE
JOHN C. KENNEDY III 40 MALE
POLICY DATE FEBRUARY 4, 1998 POLICY NUMBER 14 538 421
E-39
<PAGE> 4
BENEFITS AND PREMIUMS
DATE OF ISSUE - JANUARY 20, 1998
<TABLE>
<CAPTION>
Annual Years
Plan and Additional Benefits Amount Premiums Payable
<S> <C> <C> <C>
Joint Life Protection
Payable on Second Death
Basic Amount $5,000,000 $46,100.00 To 2nd Death
Additional Protection
One Year Term Insurance 0++
Initial Totals $5,000,000 $46,100.00
</TABLE>
++ Additional Protection is not part of this policy. Section 3 Additional
Protection is of no effect.
A monthly premium is payable on February 4, 1998 and on the 4th day of every
calendar month after that.
The first premium is $4,031.43 which consists of a monthly premium of $3,978.43
and $53.00 which provides coverage from the date of issue to the policy date.
The minimum unscheduled additional premium under Section 4.3 is $100.00.
This policy is issued in a select (nonsmoker) premium class on Nancy G Kennedy
and in a select (nonsmoker) premium class on John C Kennedy III.
DIRECT BENEFICIARY Autocam Corporation, employer
OWNER Autocam Corporation, Other of the Insured
<TABLE>
<S> <C> <C> <C>
INSURED Nancy G Kennedy AGE AND SEX 37 Female
John C Kennedy 111 40 Male
POLICY DATE February 4, 1998 POLICY NUMBER 14 538 421
PLAN Joint Life Protection INITIAL TOTAL
Payable on Second Death INSURANCE AMOUNT $5,000,000
</TABLE>
TABLE OF GUARANTEED VALUES
FOR $5,000,000 BASIC AMOUNT
<TABLE>
<CAPTION>
END OF
POLICY PAID-UP
YEAR February 4, CASH VALUE INSURANCE
<S> <C> <C> <C> <C>
1 1999 $ 0 $ 0
2 2000 41,850 260,000
3 2001 85,700 510,000
4 2002 131,750 745,000
5 2003 180,000 970,000
6 2004 230,600 1,185,000
7 2005 283,600 1,390,000
8 2006 339,150 1,585,000
</TABLE>
E-40
<PAGE> 5
<TABLE>
<CAPTION>
END OF
POLICY PAID-UP
YEAR February 4, CASH VALUE INSURANCE
<S> <C> <C> <C> <C>
9 2007 $ 397,350 $ 1,770,000
10 2008 458,250 1,945,000
11 2009 522,050 2,110,000
12 2010 588,800 2,270,000
13 2011 658,600 2,420,000
14 2012 731,600 2,565,000
15 2013 807,900 2,700,000
16 2014 887,550 2,830,000
17 2015 970,750 2,950,000
18 2016 1,057,500 3,070,000
19 2017 1,147,950 3,180,000
20 2018 1,242,200 3,285,000
23 2021 1,506,400 3,570,000
28 2026 1,993,200 3,965,000
33 2031 2,521,200 4,275,000
</TABLE>
Values are increased by paid-up insurance and decreased by policy debt. Values
shown at end of policy year do not reflect any premium due on that policy
anniversary.
The mortality basis is the Commissioners 1980 Standard Ordinary Smoker/Nonsmoker
Mortality Table with Ten-Year Select Mortality Factors for the sex of each
Insured. Interest is based on an annual effective rate of 5% for the first 20
years and 4% thereafter. All values assume the continuous payment of premiums
and the immediate payment of claims.
TABLE OF CASH VALUES
FOR $1.00 OF PAID-UP ADDITIONS
<TABLE>
<CAPTION>
END OF END OF
POLICY CASH POLICY CASH
YEAR February 4, VALUE YEAR February 4, VALUE
<S> <C> <C> <C> <C> <C>
0 1998 $.14479 50 2048 $ .85141
1 1999 .15202 51 2049 .86191
2 2000 .15962 52 2050 .87201
3 2001 .16758 53 2051 .88184
4 2002 .17594 54 2052 .89159
5 2003 .18470 55 2053 .90138
6 2004 .19389 56 2054 .91137
7 2005 .20352 57 2055 .92165
8 2006 .21361 58 2056 .93221
9 2007 .22418 59 2057 .94299
10 2008 .23525 60 2058 .95429
11 2009 .24685 61 2059 .96766
12 2010 .25898 62 2060 .98064
13 2011 .27168
14 2012 .28496
15 2013 .29885
16 2014 .31335
</TABLE>
E-41
<PAGE> 6
<TABLE>
<CAPTION>
END OF END OF
POLICY CASH POLICY CASH
YEAR February 4, VALUE YEAR February 4, VALUE
<S> <C> <C> <C> <C> <C>
17 2015 $ .32851
18 2016 .34433
19 2017 .36083
20 2018 .37804
21 2019 .39220
22 2020 .40678
23 2021 .42177
24 2022 .43716
25 2023 .45294
26 2024 .46908
27 2025 .48556
28 2026 .50234
29 2027 .51939
30 2028 .53669
31 2029 .55421
32 2030 .57188
33 2031 .58973
34 2032 .60766
35 2033 .62560
36 2034 .64347
37 2035 .66118
38 2036 .67864
39 2037 .69579
40 2038 .71258
41 2039 .72898
42 2040 .74495
43 2041 .76045
44 2042 .77542
45 2043 .78979
46 2044 .80350
47 2045 .81650
48 2046 .82879
49 2047 .84040
</TABLE>
Values during a policy year will reflect any portion of the year's premium paid
and the time elapsed in that year. These cash values are not guaranteed for
increases in scheduled additional premiums or unscheduled additional premiums
paid after the first 20 years.
E-42
<PAGE> 7
TABLE OF MAXIMUM ANNUAL PREMIUMS PER $1,000 OF TERM INSURANCE
USED FOR CALCULATION OF ADDITIONAL PROTECTION PREMIUMS
SEE SECTION 3.2
NOT APPLICABLE
SECTION 1. THE CONTRACT
1.1 LIFE INSURANCE BENEFIT
The Northwestern Mutual Life Insurance Company will pay a benefit on the
death of the second of the Insureds to die (the "second death"). No benefit is
payable on the death of the first of the Insureds to die. Subject to the terms
and conditions of the policy:
- payment of the death proceeds will be made after proof of the deaths of
both Insureds is received at the Home Office; and
- payment will be made to the beneficiary or other payee under Sections 10
and 11.
The amount of the death proceeds when all premiums due have been paid will
be:
- the Basic Amount shown on page 3; plus
- the amount of Additional Protection then in force under Section 3; plus
- the amount of any paid-up additions then in force under Section 6.3; plus
- the amount of any premium refund (Section 4.1) and any dividend at death
(Section 5.3); less the amount of any policy debt (Section 8.3).
These amounts will be determined as of the date of the second death.
The amount of the death proceeds when the second death occurs during the
grace period following the due date of any unpaid premium will be:
- the amount determined above assuming the overdue premium had been paid;
less
- the amount of the unpaid premium.
The amount of the death proceeds when the second death occurs while the
policy is in force as paid-up insurance will be determined under Section 7.2.
1.2 NOTICE AND PROOF OF DEATH
Written notice and proof of the death of each Insured must be given to the
Company as soon as reasonably possible after each death.
1.3 ENTIRE CONTRACT; CHANGES
This policy with the attached application is the entire contract. Statements
in the application are representations and not warranties. A change in the
policy is valid only if it is approved in writing by an officer the Company. The
Company may require that the policy be sent to it for endorsement to show a
change. No agent has the authority to change the policy or to waive any of its
terms.
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<PAGE> 8
1.4 INCONTESTABILITY
The Company will not contest insurance under this policy after the insurance
has been in force during the lifetime of at least one Insured for two years from
the Date of Issue. In issuing the insurance, the Company has relied on the
application. While the insurance is contestable, the Company, on the basis of a
material misstatement in the application, may rescind the insurance or deny a
claim.
1.5 SUICIDE
If either Insured dies by suicide within one year from the Date of Issue, the
policy will terminate. The amount payable by the Company will be limited to the
premiums paid, less the amount of any policy debt, and less the cash value of
any paid-up additions surrendered.
1.6 DATES
Policy months, years and anniversaries are computed from the Policy Date. The
contestable and suicide periods begin with the Date of Issue. These dates are
shown on Sage 3. The Date of Issue for any insurance issued under Scheduled
Additional Premiums After Issue (Section 4.2) or Unscheduled Additional Premium
Option (Section 4.3) will be shown on an amendment to the Schedule of Benefits
and Premiums.
1.7 MISSTATEMENT OF AGE OR SEX
If the age or sex of either Insured has been misstated, the amount payable
will be the amount which the premiums paid would have purchased at the correct
age and sex.
1.8 PAYMENTS BY THE COMPANY
All payments by the Company under this policy are payable at its Home Office.
1.9 INSURABILITY REQUIREMENTS
To make some changes under this policy, the Insureds (or the surviving
Insured) must meet the Company's insurability requirements. These requirements
are as follows:
- evidence of insurability must be given that is satisfactory to the
Company; and
- under the Company's underwriting standards, the Insureds are (or the
surviving Insured is) in an underwriting classification that is the same
as, or is better than, the one for this policy.
SECTION 2. OWNERSHIP
2.1 THE OWNER
The Owner is named on page 3. The Owner, or the Owner's successor or
transferee, may exercise policy rights without the consent of any beneficiary.
After the second death, policy rights may be exercised only as provided in
Sections 10 and 11.
2.2 TRANSFER OF OWNERSHIP
The Owner may transfer the ownership of this policy. Written proof of
transfer satisfactory to the Company must be received at its Home Office. The
transfer will then take effect as of the date that it was signed. The Company
may require that the policy be sent to it for endorsement to show the transfer.
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<PAGE> 9
2.3 COLLATERAL ASSIGNMENT
The Owner may assign this policy as collateral security. The Company is not
responsible for the validity or effect of a collateral assignment. The Company
will not be responsible to an assignee for any payment or other action taken by
the Company before receipt of the assignment in writing at its Home Office.
The interest of any beneficiary will be subject to any collateral assignment
made either before or after the beneficiary is named.
A collateral assignee is not an Owner. A collateral assignment is not a
transfer of ownership. Ownership can be transferred only by complying with
Section 2.2.
SECTION 3. ADDITIONAL PROTECTION
3.1 ADDITIONAL PROTECTION
Description. Additional Protection consists of one year term insurance
payable on the second death and paid-up additions payable on the second death.
The amount of one-year term insurance will be reduced by the amount of paid-up
additions purchased under Section 6.2 by dividends or by the payment of
additional premiums.
If the Company determines that the premium for Additional Protection is
greater than the premium for the one year term insurance portion of Additional
Protection, the amount by which the premium for Additional Protection exceeds
the premium for one year term insurance will be treated as an additional premium
under Section 6.2.
Amount. The amount of Additional Protection for each policy year will be the
amount shown on page 3 so long as premiums are paid when due unless:
- the amount of Additional Protection is reduced by the Company under
Section 3.2; or
- the amount of Additional Protection is reduced by the Owner under Section
3.3.
3.2 REDUCTION BY COMPANY; OWNER'S RIGHT TO CONTINUE EXISTING PROTECTION
If, on any policy anniversary, any part of Additional Protection is one year
term insurance, the Company may reduce the one year term insurance. The Company
will determine annually, based on the mortality, investment earnings and expense
factors then being used to determine dividends payable on the policy, whether
the Basic Amount and Additional Protection will generate sufficient values to
pay the cost of one year term insurance. if the cost of one-year term insurance
is greater than these values, the one year term insurance will be reduced so
that its cost equals these values. The reduction of one-year term insurance will
cause a like reduction in the amount of Additional Protection, so that the
amount of Additional Protection will be less than the amount shown on page 3.
The Company will send written notice of the reduction.
The Owner may prevent a reduction that would otherwise occur by the payment
of an increased premium for the portion of one-year term insurance that is part
of Additional Protection. The premium rates for one-year term insurance will not
be more than the rates shown on page 6.
The increased premium for Additional Protection will be payable for the
remainder of the premium paying period. The premium must be received at the Home
Office within 31 days of the date the reduction would take effect.
The right of the Owner to continue the amount of Additional Protection will
terminate as of the first policy anniversary on which the Owner fails to pay an
increased premium when due, or, if earlier, when the Owner reduces Additional
Protection under Section 3.3.
E-45
<PAGE> 10
3.3 OTHER REDUCTIONS OF ADDITIONAL PROTECTION
Reduction if Dividend Option Other Than Paid-Up Additions. If the Owner
directs that dividends be used other than to purchase paid-up additions, any one
year term insurance in force will terminate. The amount of Additional Protection
will then be the amount of paid-up additions in force under Section 6.2.
Reduction If Additions To Reduce Term Insurance Surrendered. If additions
under Section 6.2 are surrendered, any one-year term insurance will terminate.
The amount of Additional Protection will then be the amount of paid-up additions
in force under Section 6.2. However, if the Company determines, based on the
mortality, investment earnings and expense factors then being used to determine
dividends on the policy, that the Basic Amount and Additional Protection, after
the surrender of these additions, would generate sufficient values to pay the
cost of one year term insurance, then:
- one year term insurance will not terminate; and
- the amount of Additional Protection will be reduced by the amount of
paid-up additions under Section 6.2 that are surrendered
SECTION 4. PREMIUMS AND REINSTATEMENT
4.1 PREMIUM PAYMENT
Payment. All premiums after the first are payable at the Home Office or to an
authorized agent upon delivery of a receipt signed by an officer of the Company.
A premium must be paid on or before its due date. The date when each premium is
due and the number of years for which premiums are payable are described on page
3.
No premiums may be paid while this policy is in force as paid-up insurance
under Section 7.2, except as provided in Reinstatement (Section 4.4).
Frequency. Premiums are payable annually. Premiums may be paid on any other
frequency with the consent of the Company.
Grace Period. A grace period of 31 days will be allowed to pay a premium that
is not paid on its due date. The policy will be in full force during this
period. If the second death occurs during the grace period, any overdue premium
will be paid from the proceeds of the policy.
If a premium is not paid within the race period, the policy will terminate as
of the due gate unless it continues as paid-up insurance under Section 7.2.
Premium Refund At Second Death. The Company will refund a portion of a
premium which was due and was paid for the policy year in which the second death
occurs. The refund will be the amount by which the premium paid is more than the
premium on an annual basis multiplied by the fraction of the policy year that
has elapsed at the time of the second death. Any premium amount used to purchase
a paid-up addition will not be included in determining the refund. The refund
will be part of the policy proceeds.
4.2 AMOUNT OF PREMIUM; ADJUSTMENTS
Scheduled Premiums. The premium due on this policy is the scheduled premium.
The scheduled premium is the sum of the premium for the Basic Amount, any
premium for Additional Protection, any scheduled additional premium used to
purchase additions under Section 6.3, and any premium that is due for any
additional benefit that is a part of this policy. These premium amounts at issue
are shown on page 3.
An increased premium for Additional Protection will be based on the attained
ages of both Insureds and the amount of one year term insurance that is in force
as part of Additional Protection as of the date used to determine the increased
premium.
E-46
<PAGE> 11
Scheduled Additional Premiums At issue. This policy may have been issued with
additional premiums. The amount of these additional premiums is shown on page 3.
Scheduled Additional Premiums After Issue. The Owner may pay additional
premiums by requesting that the premium payable on the policy be increased and
paying any required fees. An increase in the level amount may be made at any
time before the policy anniversary that is nearest to the 75th birthday of the
older (or of the surviving) Insured. Additional premiums may be scheduled only
if, at the time the increases are applied for:
- the insurance in force after applying the scheduled additional premiums
will be within the Company's issue limits;
- the Company's insurability requirements are met (Section 1.9); and
- the total amount of the scheduled additional premiums and other premiums
paid to the Company under any policy for purchases of paid-up life
insurance on the life of each Insured is within the Company's limits for
such premiums; however, the Company may not set a limit below $1,000 per
calendar year.
Owner's Right To Decrease Scheduled Additional Premiums. The Owner may
decrease the scheduled additional premium amount used to purchase paid-up
additions under Section 6.3. This may be done at any time by written request
sent to the Home Office. Later increases in the amount may be made only as
provided in the preceding paragraph.
Effective Date. A premium change will take effect on the first premium due
date that follows the receipt at the Home Office of the Owner's written request
for change. When the Owner increases or decreases premiums, the Company will
send an amendment to the Schedule of Benefits and Premiums.
Scheduled Additional Premiums Used To Purchase Paid-Up Additions. Each
scheduled additional premium paid will be used, as of the due date of the
premium, to purchase a paid-up addition as described in Section 6.
4.3 UNSCHEDULED ADDITIONAL PREMIUM OPTION
Unscheduled additional premiums may be paid to the Company at any time before
the policy anniversary that is nearest to the 75th birthday of the older (or of
the surviving) Insured. An unscheduled additional premium may be paid only if,
at the time the premium and any required fees are paid:
- the insurance in force after applying the unscheduled additional premium
will within the Company's issue limits;
- the Company's insurability requirements are met; and
- the total amount of unscheduled additional premiums and other premiums
paid to the Company under any policy for purchases of paid-up life
insurance on the life of each Insured is within the Company's limits for
such premiums; however, the Company may not set a limit below $1,000 per
calendar year.
Each unscheduled additional premium may not be less than the minimum amount
shown on page 3. Each unscheduled additional premium will be used, as of the
date the premium is paid, to purchase a paid-up addition as described in Section
6.
4.4 REINSTATEMENT
This policy may be reinstated within three years after the due date of the
overdue premium. All unpaid premiums (except premiums that would purchase
paid-up additions) and interest as required below must e received by the
Company:
- while both Insureds are alive; or
- while one insured is alive if only that Insured was alive on the due date
of the overdue premium.
The policy may not be reinstated if the policy was surrendered for its cash
surrender value. Any policy debt on the due date of the overdue premium, with
interest from that date at the policy loan interest rate, must be repaid or
reinstated.
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<PAGE> 12
SECTION 5. DIVIDENDS
5.1 ANNUAL DIVIDENDS
This policy will share in the divisible surplus of the Company. This surplus
is determined each year. This policy's share will be credited as a dividend on
the policy anniversary.
5.2 USE OF DIVIDENDS
Annual dividends may be paid in cash or used for one of the following:
- Paid-Up Additions. Dividends will purchase paid-up additional insurance as
described in Section 6.
- Premium Payment. Dividends will be used to reduce premiums. If the balance
of a premium is not paid, or if this policy is in force as paid-up
insurance, the dividend will purchase paid-up additions.
Other uses of dividends may be made available by the Company.
If no direction is given for the use of dividends, they will purchase paid-up
additions.
5.3 DIVIDEND AT DEATH
A dividend payable for the period from the beginning of the policy year to
the date of the second death will be payable as part of the policy proceeds.
SECTION 6. PAID-UP ADDITIONS
6.1 PURCHASE OF ADDITIONS; CHARGES
Paid-up additions are purchased by additional premiums and by dividends.
Paid-up auditions can be used to reduce term insurance (Section 6.2) or to
increase coverage (Section 6.3). Paid-up additions increase the policy's cash
value and will share in divisible surplus. They may be surrendered, subject to
the limitations of Section 3.3, unless they are used for a loan.
The Company may deduct a charge for expenses for each additional premium that
is used to purchase a paid-up addition. The charge will be 9% for additional
premiums that were scheduled at issue or that are applied for before the 20th
policy anniversary. The charge will be 9% for unscheduled additional premiums
that are paid before the 20th policy anniversary.
6.2 ADDITIONS TO REDUCE TERM INSURANCE
This type of paid-up addition will be part of the Additional Protection. Each
addition will reduce the amount of one-year term insurance that is in force as
part of Additional Protection, and the amount of Additional Protection will
remain unchanged.
6.3 ADDITIONS TO INCREASE COVERAGE
This type of paid-up addition will be used to provide paid-up insurance that
is not included in Additional Protection. Each addition will immediately
increase the death proceeds payable under Section 1.1.
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<PAGE> 13
6.4 ALLOCATION OF ADDITIONAL PREMIUMS AND DIVIDENDS
When there is no one year term insurance in force as part of Additional
Protection, the dividends and the additional premiums will be applied under
Section 6.3. When there is one-year term insurance in force, dividends and any
part of the premium for Additional Protection treated as an additional premium
will be applied under Section 6.2. Scheduled additional premiums which are not
part of the premium for Additional Protection will be applied under Section 6.3.
Subject to the preceding paragraph, the Owner may change the allocation of
additional premiums between Sections 6.2 and 6.3. This may be done by written
request that is sent to the Home Office, if the Company's insurability
requirements are met (Section 1.9). An allocation must e made in whole dollars.
An increase in the amount of premium allocated to the Purchase of additions
under Section 6.2 will be reflected as an increase in the amount of the premium
payable for Additional Protection.
In addition, for the policy to be reinstated more than 31 days after the end
of the grace period:
- evidence of insurability must be given that is satisfactory to the
Company:
a. for both Insureds; or
b. for one Insured if only that Insured was alive on the due date of the
overdue premium; and
- all unpaid premiums (except premiums that would purchase paid-up
additions) must be paid with interest from the due date of each premium.
Interest is at an annual effective rate of 6%.
SECTION 7. CASH VALUES AND PAID-UP INSURANCE
7.1 CASH VALUE
The cash value for this policy, when all premiums due have been paid, will be
the sum of:
- the cash value from the Table of Guaranteed Values on page 4; and
- the cash value of any paid-up additions.
The cash value within three months after the due date of any unpaid premium
will be the cash value on that due date reduced by any later surrender of
paid-up additions. After that, the cash value will be the cash value of the
insurance then in force.
The cash value of any paid-up insurance or paid-up additions will be the net
single premium for that insurance at the attained ages of both Insureds.
7.2 PAID-UP INSURANCE
If any premium is unpaid at the end of the grace period, this policy will be
in force as paid-up insurance. The amount of paid-up insurance will be
determined by using the cash value from the Table of Guaranteed Values as a net
single premium at the attained ages of both Insureds. Any paid-up additions and
any policy debt will continue.
Paid-up insurance will share in divisible surplus.
The amount of the death proceeds when this policy is in force as paid-up
insurance will be:
- the amount of paid-up insurance determined above; plus
- the amount of any in force paid-up additions; plus
- the amount of any dividend at death (Section 5.3); less
- the amount of any policy debt (Section 8.3).
E-49
<PAGE> 14
These amounts will be determined as of the date of the second death.
If paid-up insurance is surrendered within 31 days after a policy
anniversary, the cash value will not be less than the cash value on that
anniversary reduced by any later surrender of paid-up additions.
7.3 CASH SURRENDER
The Owner may surrender this policy for its cash surrender value. The cash
surrender value is the cash value less any policy debt. A written surrender of
all claims, satisfactory to the Company, will be required. The date of surrender
will be the date of receipt at the Home Office of the written surrender. The
policy will terminate and the cash surrender value will be determined as of the
date of surrender. The Company may require that the policy be sent to it.
7.4 TABLE OF GUARANTEED VALUES
Cash values and paid-up insurance for the Basic Amount are shown on page 4
for the end of the policy years indicated. These values assume that all premiums
due have been paid for the number of years. They do not reflect paid-up
additions or policy debt. Values during a policy year will reflect the time
elapsed in that year.
Cash values for paid-up additions are shown on page 5. Each cash value is
equal to the net single premium at the attained ages of both Insureds. Values
during a policy year reflect the time elapsed in that year.
Values for policy years not shown are calculated on the same basis as those
on page 4. A list of these values will be furnished on request. All values are
at least as great as those required by the state in which this policy is
delivered.
7.5 BASIS OF VALUES
The cash value for each policy year not shown on page 4 equals the reserve
the Basic Amount for that year calculated on the Commissioners Reserve Valuation
Method. Cash values and net single premiums are calculated using the basis of
values shown on page 4. Calculations assume the continuous payment of premiums
and the immediate payment of claims.
For unscheduled additional premiums or increases in scheduled additional
premiums applied for after the 20th anniversary, the Company may base cash
values an premiums on the interest rates and mortality tables being used as the
basis of values for whole life insurance then being issued by the Company.
SECTION 8. LOANS
8.1 POLICY AND PREMIUM LOANS
The Owner may obtain a loan from the Company in an amount that is not more
than the loan value.
Policy Loan. The loan may be obtained on written request. The Company may
defer making the loan for up to six months unless the loan is to be used to pay
premiums due the Company.
Premium Loan. If the premium loan provision is in effect on this policy, a
loan will be made to pay an overdue scheduled premium. If the loan value is not
large enough to pay the overdue scheduled premium on a quarterly frequency, the
policy will continue in force or terminate as provided in Grace Period (Section
4.1). The Owner may elect or revoke the premium loan provision by written
request received at the Home Office.
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<PAGE> 15
8.2 LOAN VALUE
The loan value is the smaller of a. or b., less any policy debt and any
scheduled premium then due or billed; a. and b. are defined as:
a. the cash value one year after the date of the loan, assuming all scheduled
premiums due within that year are paid, less interest to one year from the
date of the loan.
b. the cash value on the due date of the first scheduled premium not yet
billed that is due after the date of the loan, less interest from the date
of the loan to that premium due date.
8.3 POLICY DEBT
Poll debt consists of all outstanding loans and accrued interest. It may be
paid to the Company at any time. Any policy debt will be deducted from the
policy proceeds. If the policy debt equals or exceeds the cash value, this
policy will terminate. Termination occurs 31 days after a notice has been mailed
to the Owner and to any assignee on record at the Home Office.
8.4 LOAN INTEREST
Interest accrues on a daily basis from the date of the loan on policy loans
and from the premium due date on premium loans. Unpaid interest is added to the
loan. Interest is payable at an annual effective rate that is set by the Company
annually and applied to new or outstanding policy debt during the year beginning
each January 1. The highest loan interest rate that may be set by the Company is
the greater of:
- a rate 1 % higher than the rate shown on page 4 used to calculate cash
values and net single premiums; and
- a rate based on the Corporate Bond Yield Averages -- Monthly Average
Corporate for the immediately preceding October. This Average is published
by Moody's Investors Service, Inc. If it is no Conger published, the
highest loan rate will be based on some other similar average established
by the insurance supervisory official of the state in which this policy is
delivered.
The loan interest rate set by the Company will not exceed the maximum rate
permitted by the laws of the state in which this policy is delivered. The loan
interest rate may be increased only if the increase in the annual effective rate
is at least 1/2%. The loan interest rate will be decreased if the decrease in
the annual effective rate is at least 1/2%.
The Company will give notice:
- of the initial loan interest rate in effect at the time a policy or
premium loan is made.
- of an increase in loan interest rate on outstanding policy debt no later
than 30 days before the January 1st on which the increase takes effect.
This policy will not terminate during a policy year as the sole result of an
increase in the loan interest rate during that policy year.
SECTION 9. CHANGE OF POLICY
9.1 CHANGE OF PLAN
The Owner may reduce the amount of this policy, subject to the Company's
minimum policy amount rules. The Owner may also change this policy to any
permanent life insurance plan agreed to by the Owner and the Company by:
- paying the required costs; and
- meeting any other conditions set by the Company.
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<PAGE> 16
9.2 POLICY SPLIT
Policy Split Right. While both Insureds are alive, the Owner may exchange
this policy for two policies (the "new policies"), one on the life of each
Insured, if there is a change in federal estate tax law which results in either:
a. the repeal of the unlimited marital deduction provision; or
b. at least a 50% reduction in the maximum percentage rate set forth in the
federal estate tax schedule in effect on the Date of Issue of this Policy.
This exchange may be made without evidence of insurability.
Conditions. The exchange may be made by meeting any conditions set by the
Company, including the following:
a. the Company must receive a written request from the owner no more than 180
days after the earlier of the date of enactment of the law repealing the
unlimited marital deduction or the date of enactment of the law reducing
the maximum percentage rate of federal estate tax by 50%; and
b. any required costs are paid. These costs include the first premiums on the
new policies and any difference in cash values between this policy and the
new policies.
Terms Of The New Policies. The new policies will be issued on the Whole Life
Paid Up at 90 plan. The new policies will have the same Date of Issue and Policy
Date as this policy. The new policies will take effect on the date the written
request to exchange this policy for the new policies is received at the Home
Office. This policy will terminate when the new policies take effect.
The amount of the death benefit of each new policy will be one-half the
amount of the death benefit this policy, including the amount of any additions
purchased under Section 6.3. The cash value of this policy will be allocated to
each new policy as determined appropriate by the Company. Any policy debt will
be divided between the new policies in proportion to the cash value. Any
assignment will continue on the new policies.
The premium for each new policy will be based on the Company's premium rates
in effect on the Policy Date of this policy, the Insured's sex, the Insured's
age on the Policy Date of this policy, and the insured's underwriting
classification for this policy.
A new policy may have the Waiver of Premium Benefit if the Insured under the
new policy is a Covered insured under the Waiver of Premium Benefit on this
policy. If premiums are waived on this policy at the time of the exchange,
premiums will continue to be waived on the new policy insuring the disabled
Covered insured for as long as they would have been waived under this policy.
If the sum of the cash values of the new policies is less than the cash value
of this policy, the excess cash value will be used to purchase paid-up additions
on the new policies.
SECTION 10. BENEFICIARIES
10.1 DEFINITION OF BENEFICIARIES
The term "beneficiaries" as used in this policy includes direct
beneficiaries, contingent beneficiaries and further payees.
10.2 NAMING AND CHANGE OF BENEFICIARIES
By Owner. The Owner may name and change the beneficiaries of death proceeds:
- before the second death.
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<PAGE> 17
- during the first 60 days after the date of the second death, if the second
insured was not the Owner immediately prior to the second death. A change
made during this 60 days may not be revoked.
By Direct Beneficiary. A direct beneficiary may name and change the
contingent beneficiaries and further payees of the direct beneficiary's share of
the proceeds:
- if the direct beneficiary is the Owner;
- if, at any time after the second death, no contingent beneficiary or
further payee of that share is living: or
- if, after the second death, the direct beneficiary elects a payment plan.
The interest of any other beneficiary in the share of that direct
beneficiary will end.
These direct beneficiary rights are subject to the Owner's rights during the
60 days after the second death.
Effective Date. A naming or change of a beneficiary will be made on receipt
at the Home Office of a written request that is acceptable to the Company. The
request will then take effect as of the date it was signed. The Company is not
responsible for any payment or other action that is taken by it before the
receipt of the request. The Company may require that the policy be sent to it to
be endorsed to show the naming or change.
10.3 SUCCESSION IN INTEREST OF BENEFICIARIES
Direct Beneficiaries. The proceeds of this policy will be payable in equal
shares to the direct beneficiaries who survive and receive payment. If a direct
beneficiary dies before receiving all or part of the direct beneficiary's full
share, the unpaid portion will be payable in equal shares to the other direct
beneficiaries who survive and receive payment.
Contingent Beneficiaries. At the death of all of the direct beneficiaries,
the proceeds, or the present value of any unpaid payments under a payment plan,
will be payable in equal shares to the contingent beneficiaries who survive and
receive payment. If a contingent beneficiary dies before receiving all or part
of the contingent beneficiary's full share, the unpaid portion will be payable
in equal shares to the other contingent beneficiaries who survive and receive
payment.
Further Payees. At the death of all of the direct and contingent
beneficiaries, the proceeds, or the present value of any unpaid payments under a
payment plan, will be paid in one sum:
- in equal shares to the further payees who survive and receive payment; or
- if no further payees survive and receive payment, to the estate of the
last to die of all of the direct and contingent beneficiaries.
Owner Or The Owner's Estate. If no beneficiaries are alive on the date of the
second death, the proceeds will be paid to the Owner or to the Owner's estate.
10.4 GENERAL
Transfer Of Ownership. A transfer of ownership of itself will not change the
interest of a beneficiary.
Claims Of Creditors. So far as allowed by law, no amount payable under this
policy will be subject to the claims of creditors of a beneficiary.
Succession Under Payment Plans. A direct or contingent beneficiary who
succeeds to an interest in a payment plan will continue under the terms of the
plan.
E-53
<PAGE> 18
SECTION 11. PAYMENT OF POLICY BENEFITS
11.1 PAYMENT OF PROCEEDS
Death proceeds will be paid under the payment plan that takes effect on the
second death. The Interest Income Plan (Option A) will be in effect if no
payment plan has been elected. Interest will accumulate from the date of the
second death until a payment plan is elected or the proceeds are withdrawn in
cash.
Surrender proceeds will be the cash surrender value as of the date of
surrender. These proceeds will be paid in cash or under a payment plan that is
elected. The Company may defer paying the surrender proceeds for up to six
months from the date of surrender. If payment is deferred for 30 days or more,
interest will be paid on the surrender proceeds from the date of surrender to
the date of payment. Interest will be at the annual effective interest rate
shown on page 4 used to calculate cash values and net single premiums.
11.2 PAYMENT PLANS
Interest Income Plan (Option A). The proceeds will earn interest, which may e
received each month or accumulated. The first payment is due one month after the
date on which the plan takes effect. Interest that has accumulated may be
withdrawn at any time. Part or all of the proceeds may be withdrawn at any time.
Installment Income Plans. Payments will be made each month on the terms of
the plan that is elected. The first payment is due on the date that the plan
takes effect.
- Specified Period (Option B). The proceeds with interest will be paid over
a period of from one to 30 years. The present value of any unpaid
installments may be withdrawn at any time.
- Specified Amount (Option D). Payments of not less than $10 per $1,000 of
proceeds will be made until all of the proceeds with interest have been
paid. The balance may be withdrawn at any time.
Life Income Plans. Payments will be made each month on the terms of the plan
that is elected. The first payment is due on the date that the plan takes
effect. Proof of the date of birth, acceptable to the Company, must be furnished
for each person on whose the payments are based.
- Single Life Income (Option C). Payments will be made for a chosen period
and, after that, for the life of the person on whose life the payments are
based. The choices for the period are:
a. zero years;
b. 10 years;
c. 20 years; or
d. a refund period which continues until the sum of the payments that have
been made is equal to the proceeds that were placed under the plan.
- Joint And Survivor Life Income (Option E). Payments are based on the lives
of two persons. Level payments will be made for a period of 10 years and,
after that, for as long as one or both of the persons are living.
- Other Selections. The Company may offer other selections under the Life
Income Plans.
- Withdrawal. The present value of any unpaid payments that are to be made
for the chosen period (Option C) or the 10 year period (Option E) may be
withdrawn only after the death of all of the persons on whose lives the
payments are based.
- Limitations. A direct or contingent beneficiary who is a natural person
may be paid under a Life Income Plan only if the payments depend on that
beneficiary's life. If a direct or contingent beneficiary is not a natural
person, the Company's approval of the payment plan is required.
Payment Frequency. On request, payments will be made once every 3, 6 or 12
months instead of each month.
E-54
<PAGE> 19
Transfer Between Payment Plans. A beneficiary who is receiving payment under
a plan which includes the right to withdraw may transfer the amount withdrawable
to any other plan that is available.
Minimum Payment The Company may limit the election of a payment plan to one
that results in payments of at least $50.
If payments under a payment plan are or become less than $50, the Company may
change the frequency of payments. If the payments are being made once every 12
months and are less than $50, the Company may pay the present value or the
balance of the payment plan.
11.3 PAYMENT PLAN RATES
Interest Income And Installment Income Plans. Proceeds will earn interest at
rates declared each year by the Company. None of these rates will be less than
an annual effective rate of 2%. Interest of more than 2% will increase the
amount of the payments or, for the Specified Amount Plan (Option D), increase
the number of payments. The Company may offer guaranteed rates of interest
higher than 2% with conditions on withdrawal.
The present value of the amount of any unpaid installments will be based on
the rate of interest used to determine the amount of the payment.
Life Income Plans. Payments will be based on rates declared by the Company.
These rates will provide at least as much income as would the Company's rates,
on the date that the payment plan takes effect, for a single premium immediate
annuity contract. Payments under these rates will not be less than the amounts
that are described in Minimum Payment Rates.
Minimum Payment Rates. The minimum payment rates for the Installment Income
Plans (Options B and D) and the Life Income Plans (Options C and E) are shown in
the Minimum Payment Rate Tables.
The Life Income Plan payment rates in those tables depend on the sex and on
the adjusted age of each person on whose life the payments are based. The
adjusted age is:
- the age on the birthday that is nearest to the date on which the payment
plan takes effect; plus
- the age adjustment shown below for the number of policy years that have
elapsed from the Policy Date to the date that the payment plan takes
effect. A part of a policy year is counted as a full year.
<TABLE>
<CAPTION>
POLICY AGE POLICY AGE
YEARS ADJUSTMENT YEARS ADJUSTMENT
ELAPSED ELAPSED
<S> <C> <C> <C>
1 to 8 0 33 to 40 -4
9 to 16 -1 41 to 48 -5
17 to 24 -2 49 or more -6
25 to 32 -3
</TABLE>
11.4 EFFECTIVE DATE FOR PAYMENT PLAN
A payment plan that is elected for death proceeds will take effect on the
date of the second death if:
- the plan is elected by the Owner; and
- the election is received at the Home Office before the second death.
In all other cases, a payment plan that is elected will take effect:
E-55
<PAGE> 20
- on the date the election is received at the Home Office; or
- on a later date, if requested.
11.5 PAYMENT PLAN ELECTIONS
For Death Proceeds By Owner. The Owner may elect payment plans for death
proceeds:
- before the second death.
- during the first 60 days after the date of the second death, if the second
insured to die was not the Owner immediately prior to the second death. An
election made during those 60 days may not be changed.
For Death Proceeds By Direct Or Contingent Beneficiary. A direct or
contingent beneficiary may elect payment plans for death proceeds payable to
that beneficiary if no payment plan that has been elected is in effect. This
right is subject to the Owner's rights during the 60 days after the date of the
second death.
For Surrender Proceeds. The Owner may elect payment plans for surrender
proceeds. The Owner will be the direct beneficiary.
11.6 INCREASE OF MONTHLY INCOME
A direct beneficiary who is to receive proceeds under a payment plan may
increase the amount of the monthly payments. This is done by the
payment of an annuity premium to the Company at the time the payment plan
elected under Section 11.5 takes effect. The amount that will be applied under
the payment plan will be the net premium. The net premium is the annuity premium
less a charge of not more than 2% and less an any. The net premium will be
applied under the same payment plan and at the same rates as the proceeds. The
Company may limit this net premium to an amount that is equal to the direct
beneficiary's share of the proceeds payable under this Policy.
MINIMUM PAYMENT RATE TABLES
Minimum Monthly income Payments Per $1,000 Of Proceeds
INSTALLMENT INCOME PLANS (OPTIONS B AND D)
<TABLE>
<CAPTION>
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
<S> <C> <C> <C> <C> <C>
1 $84.09 11 $8.42 21 $4.85
2 42.46 12 7.80 22 4.67
3 28.59 13 7.26 23 4.51
4 21.65 14 6.81 24 4.36
5 17.49 15 6.42 25 4.22
6 14.72 16 6.07 26 4.10
7 12.74 17 5.77 27 3.98
8 11.25 18 5.50 28 3.87
9 10.10 19 5.26 29 3.77
10 9.18 20 5.04 30 3.68
</TABLE>
E-56
<PAGE> 21
MINIMUM PAYMENT RATE TABLES
Minimum Monthly Income Payments Per $1,000 Of Proceeds
LIFE INCOME PLAN (OPTION C)
SINGLE LIFE MONTHLY PAYMENTS
<TABLE>
<CAPTION>
MALE CHOSEN PERIOD (YEARS) FEMALE CHOSEN PERIOD (YEARS)
ADJUSTED ADJUSTED
AGE* ZERO 10 20 REFUND AGE ZERO 10 20 REFUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.48 $4.43 $4.28 $4.29 55 $4.09 $4.07 $4.00 $ 3.99
56 4.56 4.50 4.34 4.36 56 4.15 4.13 4.05 4.05
57 4.65 4.59 4.40 4.43 57 4.22 4.20 4.11 4.11
58 4.75 4.68 4.46 4.50 58 4.30 4.27 4.17 4.17
59 4.85 4.77 4.52 4.58 59 4.38 4.34 4.23 4.24
60 4.96 4.87 4.59 4.66 60 4.46 4.42 4.29 4.30
61 5.07 4.97 4.66 4.75 61 4.55 4.50 4.36 4.38
62 5.20 5.08 4.72 4.84 62 4.65 4.59 4.43 4.46
63 5.33 5.19 4.79 4.94 63 4.75 4.69 4.50 4.54
64 5.48 5.32 4.86 5.04 64 4.86 4.79 4.57 4.62
65 5.63 5.44 4.92 5.15 65 4.97 4.89 4.64 4.71
66 5.80 5.58 4.99 5.26 66 5.10 5.01 4.71 4.81
67 5.97 5.72 5.05 5.38 67 5.23 5.12 4.79 4.91
68 6.16 5.86 5.12 5.51 68 5.38 5.25 4.86 5.02
69 6.36 6.01 5.18 5.64 69 5.53 5.39 4.93 5.14
70 6.58 6.17 5.23 5.78 70 5.70 5.53 5.01 5.26
71 6.81 6.33 5.29 5.93 71 5.88 5.68 5.08 5.39
72 7.O5 6.49 5.34 6.08 72 6.08 5.83 5.15 5.53
73 7.31 6.66 5.38 6.25 73 6.29 6.00 5.21 5.67
74 7.59 6.83 5.43 6.42 74 6.52 6.17 5.27 5.83
75 7.89 7.01 5.46 6.60 75 6.77 6.35 5.33 5.99
76 8.21 7.19 5.50 6.79 76 7.04 6.54 5.38 6.17
77 8.56 7.37 5.53 6.99 77 7.33 6.73 5.43 6.35
78 8.93 7.55 5.56 7.20 78 7.65 6.93 5.47 6.55
79 9.32 7.72 5.58 7.42 79 7.99 7.13 5.51 6.76
80 9.75 7.90 5.60 7.66 80 8.36 7.34 5.54 6.98
81 10.20 8.07 5.62 7.90 81 8.76 7.54 5.57 7.21
82 10.69 8.23 5.63 8.16 82 9.20 7.74 5.59 7.46
83 11.21 8.39 5.64 8.43 83 9.67 7.93 5.61 7.72
84 11.76 8.54 5.65 8.71 84 10.18 8.12 5.63 7.99
85 and over 12.35 8.68 5.66 9.01 85 and over 10.74 8.30 5.64 8.28
</TABLE>
E-57
<PAGE> 22
LIFE INCOME PLAN (OPTION E)
JOINT AND SURVIVOR MONTHLY PAYMENTS
<TABLE>
<CAPTION>
MALE FEMALE ADJUSTED AGE
ADJUSTED
AGE* 55 60 65 70 75 80 85 and over
<S> <C> <C> <C> <C> <C> <C> <C>
55 $ 3.79 $ 3.93 $4.07 $4.19 $4.29 $4.35 $4.39
60 3.87 4.07 4.27 4.46 4.61 4.73 4.80
65 3.94 4.18 4.45 4.73 4.98 5.19 5.32
70 3.99 4.27 4.61 4.99 5.37 5.70 5.94
75 4.02 4.34 4.73 5.20 5.72 6.21 6.60
80 4.05 4.38 4.81 5.35 6.00 6.67 7.24
85 and over 4.06 4.40 4.86 5.45 6.18 7.00 7.75
</TABLE>
*See Section 11.3
CHANGE OF INSURED PROVISION
As of the Date of Issue, the policy is amended to include the following
provision:
Change. While both Insureds are alive, the Owner may change either Insured
under this policy by:
- paying the required costs; and
- meeting any other conditions set by the Company, including the
following:
a. on the date of change, the new insured's age may not be more than 75;
b. the new insured must have reached age 15 on or before the Policy Date
of this policy;
c. the new insured must be insurable; and
d. the Owner must have an insurable interest in the life of the new
insured.
Date Of Change. The date of change will be the later of:
- the date of the request to change; or
- the date of the medical examination (or the non-medical application).
Terms Of Policy After Change. The policy will cover the continuing Insured
and the new insured starting on the date of change. When coverage on the new
insured starts, coverage on the prior Insured will terminate.
- The contestable and suicide periods for the new insured start on the date
of change.
- There will be no change in the death benefit of the policy at the time of
change.
- Any policy debt or assignment will continue after the change.
\s\ John M. Brenner
Secretary
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
E-58
<PAGE> 23
Northwestern
Mutual Life
POLICY APPLICATION SUPPLEMENT
FOR JOINT LIFE PROTECTION
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
INSURED: Nancy G. Kennedy
John C. Kennedy III
POLICY: Basic Amount
Additional Protection
Additions to Increase Coverage
Scheduled Annual Additional Premium to: Reduce Term Insurance increase Coverage
Additional Initial Premium to:
Reduce Term Insurance
Increase Coverage
Estate Preservation Rider
First Insured: Disability Waiver
Death Waiver
Second Insured: Disability Waiver
Death Waiver
ANNUAL DIVIDENDS: Purchase paid-up additional insurance
POLICY LOAN INTEREST RATE:
Illustration No. MI1320-RRJNB-092131
Dividend Scale Year 1998 RR
Inside Additions $0
Underwriting Amount $5,000,000
MI JCL - $5,000,000 Total Protection
Age 37, Female, Select Age 40, Male, Select
E-59
<PAGE> 1
Exhibit 10(p)(1)
================
MACHINE TOOLS EQUIPMENT SCHEDULE
SCHEDULE NO. 018
DATED THIS November 1, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF August 21, 1989
<TABLE>
<CAPTION>
<S> <C>
Lessor & Mailing Address: Lessee & Mailing Address:
General Electric Capital Corporation Autocam Corporation
1787 Sentry Parkway/West 16 Sentry Park/West, Suite 200 4070 E. Paris Avenue
Blue Bell, PA 19422 Kentwood, MI 49512
</TABLE>
Capitalized terms not defined herein shall have the meanings assigned to them
in the Master Lease Agreement identified above ("Agreement"; the Agreement as
it relates to this Schedule, together with this Schedule being collectively
referred to as "Lease").
A. Equipment: Subject to the terms and conditions of the Lease, Lessor
agrees to Lease to Lessee the Equipment described below (the
"Equipment").
<TABLE>
<CAPTION>
Number Capitalized Lessors
of Units Cost Per Unit Manufacturer Serial Numbers Model and Type of Equipment
-------- ------------- ------------ -------------- ---------------------------
<S> <C> <C> <C> <C>
1 $290,060.00 Tornos Bechler T.60704 BS-20B Multi Spindle
Automatic Screw Machine
</TABLE>
Equipment immediately listed above is located at: 4070 E. Paris Avenue,
Kentwood, Kent County, MI 49512
<TABLE>
<CAPTION>
B. Financial Terms
<S> <C> <C>
1. Advance Rent (if any): $ 3,500.36. 5. Basic Term Commencement Date: November 1, 1997.
2. Capitalized Lessor's Cost: $290,060.00. 6. Lessee Federal Tax ID No.: 38-2790152.
3. Basic Term (No. of Months): 96 Months. 7. Last Delivery Date: November 1, 1997.
4. Basic Term Lem Rate Factor: .01206771. 8. Daily Lease Rate Factor: .000402.
</TABLE>
9. First Termination Date: Thirty-six (36) months after the Basic Term
Commencement Date.
10. Interim Rent: For the period from and including the Lease Commencement
Date to the Basic Term Commencement Date ("Interim Period"), Lessee shall
pay as rent ("Interim Rent") for each unit of Equipment, the product of
the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such
unit times the number of days in the Interim Period. Interim Rent shall
be due on Not Applicable.
11. Basic Term Rent. Commencing on November 1, 1997 and on the same day of
each month thereafter (each, a "Rent Payment Date") during the Basic
Term, Lessee shall pay as rent ("Basic Term Rent") the product of the
Basic Term Lease Rate Factor times the Capitalized Lessor's Cost of all
Equipment on this Schedule.
E-60
<PAGE> 2
12. Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by
no more than ten percent (10%) to account for equipment change orders,
equipment returns, invoicing errors and similar matters. Lessee
acknowledges and agrees that the Rent shall be adjusted as a result of
such change in the Capitalized Lessor's Cost. Lessor shall send Lessee a
written notice stating the final Capitalized Lessor's Cost, if different
from that disclosed on this Schedule.
C. Tax Benefits. Depreciation Deductions:
1. Depreciation method is the 200% declining balance method, switching
to straight line method for the 1st taxable year for which using the
straight line method with respect to the adjusted basis as of the
beginning of such year will yield a larger allowance.
2. Recovery Period: Seven (7) Years.
3. Basis: 100% of Capitalized Lessors Cost.
D. Property Tax
APPLICABLE TO EQUIPMENT LOCATED IN KENTWOOD, MI: Lessee agrees that it
will (a) list all such Equipment, (b) report all property taxes assessed
against such Equipment and (c) pay all such taxes when due directly to
the appropriate taxing authority until Lessor shall otherwise direct in
writing. Upon request of Lessor, Lessee shall promptly provide proof of
filing and proof of payment to Lessor.
Lessor may notify Lessee (and Lessee agrees to follow such notification)
regarding any changes in property tax reporting and payment
responsibilities.
E. Insurance
1. Public Liability: At least $1,000,000 total liability per
occurrence.
2. Casualty and Property Damage: An amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the
Equipment.
F. Article 2A Notice
IN ACCORDANCE WITH THE REQUIREMENTS OF ARTICLE 2A OF THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN THE APPLICABLE STATE, LESSOR HEREBY MAKES
THE FOLLOWING DISCLOSURES TO LESSEE PRIOR TO EXECUTION OF THE LEASE, (A)
THE PERSON(S) SUPPLYING THE EQUIPMENT IS Tornos Technologies (THE
"SUPPLIER(S)"), (B) LESSEE IS ENTITLED TO THE PROMISES AND WARRANTIES,
INCLUDING THOSE OF ANY THIRD PARTY, PROVIDED TO THE LESSOR BY
SUPPLIER(S), WHICH IS SUPPLYING THE EQUIPMENT IN CONNECTION WITH OR AS
PART OF THE CONTRACT BY WHICH LESSOR ACQUIRED THE EQUIPMENT AND (C) WITH
RESPECT TO SUCH EQUIPMENT, LESSEE MAY COMMUNICATE WITH SUPPLIER(S) AND
RECEIVE AN ACCURATE AND COMPLETE STATEMENT OF SUCH PROMISES AND
WARRANTIES, INCLUDING ANY DISCLAIMERS AND LIMITATIONS OF THEM OR OF
REMEDIES. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES
ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE IN ARTICLE 2A AND
ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE WHICH MAY
LIMIT OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES UNDER SECTION XII OF
THE AGREEMENT.
E-61
<PAGE> 3
<TABLE>
<CAPTION>
G. Stipulated Loss and Termination Value Table*
<S> <C> <C> <C> <C> <C>
Rental Termination Stipulated Loss Rental Termination Stipulated Loss
Number Value % Value % Number Value % Value %
1 100.705 103.725 49 66.286 70.296
2 100.169 103.209 50 65.417 69.447
3 99.613 102.674 51 64.542 68.593
4 99.051 102.132 52 63.661 67.733
5 98.483 101.585 53 62.772 66.865
6 97.905 101.029 54 61.879 65.992
7 97.319 100.463 55 60.980 65.114
8 96.724 99.889 56 60.076 64.230
9 96.120 99.305 57 59.167 63.342
10 95.510 98.715 58 58.251 62.446
11 94.890 98.117 59 57.329 61.545
12 94.262 97.509 60 56.402 60.639
13 93.627 96.895 61 55.468 59.726
14 92.994 96.272 62 54.529 58.807
15 92.331 95.639 63 53.584 57.883
16 91.672 95.001 64 52.633 56.952
17 91.007 94.357 65 51.674 56.014
18 90.334 93.705 66 50.709 55.070
19 89.655 93.046 67 49.739 54.120
20 88.969 92.380 68 48.764 53.166
21 88.275 91.707 69 47.783 52.205
22 87.575 91.028 70 46.795 51.238
23 86.868 90.342 71 45.801 50.264
24 86.154 89.648 72 44.801 49.286
25 85.433 88.948 73 43.794 48.299
26 84.705 88.241 74 42.782 47.308
27 83.970 87.527 75 41.764 46.310
28 83.229 86.806 76 40.738 45.305
29 82.481 86.079 77 39.705 44.293
30 81.728 85.346 78 38.668 43.276
31 90.968 84.607 79 37.626 42.255
32 80.203 83.862 80 36.580 41.229
33 79.432 83.112 81 35.529 40.199
34 78.655 82.355 82 34.471 39.161
35 77.871 81.592 83 33.408 38.119
36 77.082 80.824 94 32.340 37.072
37 76.286 90.049 85 31.265 36.018
38 75.484 79.268 86 30.185 34.959
39 74.677 78.480 87 29.101 33.895
40 73.862 77.687 88 28.009 32.823
41 73.042 76.886 89 26.909 31.744
42 72.216 76.081 90 25.811 30.666
43 71.385 75.271 91 24.714 29.590
44 70.549 74.456 92 23.618 28.515
45 69.708 73.636 93 22.524 27.441
46 68.861 72.809 94 21.422 26.360
47 68.008 71.977 95 20.321 25.279
</TABLE>
E-62
<PAGE> 4
<TABLE>
<CAPTION>
Rental Termination Stipulated Loss Rental Termination Stipulated Loss
Number Value % Value % Number Value % Value %
<S> <C> <C> <C> <C> <C>
49 67.151 71.140 96 19.221 24.200
</TABLE>
*The Stipulated Loss Value of Termination Value for any unit of Equipment
shall be the Capitalized Lessor's Cost of such unit multiplied by the
appropriate percentage derived from the above table. In the event that
the Lease is for any reason extended, then the last percentage figure
shown above shall control throughout any such extended term.
H. Modifications and Additions for This Schedule Only
For purposes of this Schedule only, the Agreement is amended as follows:
1. Section I(a) of the Agreement is hereby deleted in its entirety and
the following substituted in its stead:
Subject to the terms and conditions set forth below, Lessor agrees to
lease to Lessee, and Lessee agrees to lease from Lessor, the
equipment ("Equipment") described in Annex A to any schedule hereto
("Schedule") or, if applicable, to Section A of any Schedule. Terms
defined in a Schedule and not otherwise defined herein shall have the
meanings ascribed to them in such Schedule.
2. EQUIPMENT SPECIFIC PROVISIONS
RETURN PROVISIONS: In addition to the provisions provided for in
Section XI of the Lease ("Return of Equipment"), and provided that
Lessee has elected not to exercise its option to purchase the
Equipment, Lessee shall, at its expense:
(a) Provide to Lessor at least two hundred forty (240) days prior to
the expiration of the Lease a detailed inventory of all
components of the Equipment with consideration to the conditions
set forth in Section VII ("Service") of the Lease. The inventory
should include but not be limited to a detailed listing of all
items of the Equipment by both the model and serial number for
all components comprising this Agreement.
(b) Ensure that the Equipment is returned to Lessor as follows: (i)
all operating and application specific software used to control
the machine will be updated to the most current release
available from the manufacturer; (ii) all batteries for control
memories must be My charged; (iii) any tooling and/or grinding
wheels returned to Lessor at lease termination should be
identical to those on the original invoice.
(c) At least ninety (90) days prior to the expiration of the Lean:
(i) and upon receiving reasonable notice by Lessor, make the
Equipment available for operational inspections (where
applicable) by potential purchasers; (ii) cause the
Manufacturer(s), or other persons expressly authorized by the
Manufacturer and/or Lessor (the "Authorized Inspector"), to
inspect, examine and test all material and workmanship to ensure
the Equipment is operating within the manufacturer's
specifications; (iii) provide to Lessor a written report from
the Authorized Inspector detailing said inspection and condition
of the Equipment; (iv) if during such inspection, examination
and test, the Authorized Inspector finds any of the material or
workmanship to be defective or the equipment not operating
within the manufacturer's specifications, then Lessee shall
repair or replace such defective material and, after corrective
measures are completed Lessee will provide for another
inspection of die equipment by the Authorized Inspector as
outlined above.
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<PAGE> 5
(d) At least forty-five (45) days prior to the expiration of the
Lease and upon request by Lessor provide, or cause the
Manufacturer(s) to provide to Lessor, the following documents:
(i) one set of service and operating manuals including
replacements and/or additions hereto, such that all
documentation is completely up to date; (ii) one set of
documents detailing equipment configuration, operating
requirements, maintenance records, and other technical data
concerning die set-up and operation of the Equipment including
replacements and additions thereto, such that all documentation
is completely up to date.
(e) Provide for the de-installation, packing and transporting of the
Equipment to include, but not limited to the following: (i) the
manufacturer's representative shall de-install all Equipment
(including all wire, cable and mounting hardware); (ii) all
process fluids shall be removed from the Equipment and disposed
of in accordance with then current waste disposal laws and
regulations including regulations specified by the Environmental
Protection Agency (EPA) and related government agencies; (iii)
dismantling and handling is to be done per the original
manufacturer's specifications or normal industry accepted
practices for new machines must be followed. Any special
transportation devices such as metal skids, lifting slings,
brackets, etc., which were with the machine when it originally
arrived must be used; (iv) all keys belonging to the Equipment
are to be wired together and secured to a major component of d
machine; (v) Lessee shall provide for transportation of the
Equipment in a manner consistent with die manufacture's
recommendations and practices to any locations within the
continental United States as Lessor shall direct, and shall have
the Equipment unloaded at such locations; (vi) Lessee shall
obtain and pay for a policy of await insurance for the delivery
period in an amount equal to the replacement value of the
Equipment with the Lessor named as loss payee on all such
policies of insurance; (vii) Lessee shall provide safe, secure
storage for the Equipment for a period of up to one hundred
twenty (120) days after expiration or early termination of the
Lean at an accessible location satisfactory to Lessor.
(f) Provide that all Equipment will be cleaned and cosmetically
acceptable (free from all Lessee installed markings), and in
such condition so that it may be immediately installed and
placed into use in a similar operating environment.
(g) Ensure all Equipment and equipment operations conform to all
applicable local, state, EPA, and federal laws, health and
safety guidelines.
(h) Lessor has the right to attempt resale of the Equipment from
Lessee's facility with the Lessee's 6A cooperation and
assistance, for a period of one hundred twenty (120) days from
the expiration of the Lease. During this period, the equipment
must remain operational with die necessary electrical power,
lighting, heat, water, lubricating fluids, air pollution
controls and compressed air necessary to maintain and
demonstrate the Equipment to any potential buyer.
3. LEASE TERM OPTIONS
Early Lease Term Options - The Lease is amended by adding the
following thereto: EARLY PURCHASE OPTION:
(a) Provided that the Lease has not been earlier terminated and
provided further that Lessee is not in default under the Lease
or any other agreement between Lessor and Lessee. Lessee may,
UPON AT LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN
NOTICE TO LESSOR OF LESSEE'S IRREVOCABLE ELECTION TO EXERCISE
SUCH OPTION, purchase on an AS IS BASIS all (but not less than
all) of the Equipment listed and described in this Schedule on
the rent payment date (the "Early Purchase Date") which is 72
months from the Basic Term Commencement Date for a price equal
to FORTY-THREE AND 794/100 percent (43.794%) of the Capitalized
Lessor's Cost (the "FMV Early Option Price"), plus all
applicable sales taxes.
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Lessor and Lessee agree that the FMV Early Option Price is a
reasonable prediction of the Fair Market Value (as such term is
defined in Section XIX(b) hereof) of the Equipment at the time
the option is exercisable. Lessor and Lessee agree that if
Lessee makes any non-severable improvement to the Equipment
which increases the value of the Equipment and is not required
or permitted by Sections VII or XI of the Lease prior to lease
expiration, then at the time of such option being exercised,
Lessor and Lessee shall adjust the purchase price to reflect any
addition to the price anticipated to result from such
improvement. (The purchase option granted by this subsection
shall be referred to herein as the "Early Purchase Option".)
(b) If Lessee exercises its Early Purchase Option with respect to
the Equipment leased hereunder, then on the Early Purchase
Option Date, Lessee shall pay to Lessor any Rent and other sums
due and unpaid on the Early Purchase Option Date and Lessee
shall pay die FMV Early Option Price, plus all applicable sales
taxes, to Lessor in cash.
I. Payment Authorization
You are hereby irrevocably authorized and directed to deliver and apply
the proceeds due under this Schedule as follows:
Company Name Address Amount
Tornos Technologies 70 Pocono Road $290,060.00
Brookfield, CT06804
This authorization and direction is given pursuant to the same authority
authorizing the above-mentioned financing.
Pursuant to the provisions of the lease, as it relates to this Schedule,
Lessee hereby certifies and warrants that (i) all Equipment listed above has
been delivered and installed (if applicable) as of the date stated above; (ii)
Lessee has inspected the Equipment, and all such testing as it deems necessary
has been performed by Lessee, Supplier or the manufacturer; and (iii) Lessee
accepts the Equipment for all purposes of the Lease, the purchase documents and
all attendant documents.
Lessee does further certify, and Lessor hereby waives any requirement of
a separate Certificate of Acceptance, that as of the date hereof (i) Lessee is
not in default under the Lease; (ii) the representations and warranties made by
Lessee pursuant to or under the Lease are true and correct on the date hereof
and (iii) Lessee has reviewed and approves of the purchase documents for the
Equipment, if any.
Except as expressly modified hereby, all terms and provisions of the
Agreement shall remain in full force and effect. This Schedule is not binding or
effective with respect to the Agreement or Equipment until executed on behalf of
Lessor and Lessee by authorized representatives of Lessor and Lessee,
respectively.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of die date first above
written.
LESSOR: LESSEE:
General Electric Capital Corporation Autocam Corporation
By: \s\ Stacy Porter By: \s\ Warren A. Veltman
------------------ -----------------------
Name: Stacy Porter Name: Warren Veltman
Title: Region Credit Analyst Title: Treasurer
Attest
By: \s\ Mark R. Scott
Name: Mark R. Scott
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<PAGE> 1
Exhibit 10(p)(4)
================
KeyCorp Leasing Ltd.
EQUIPMENT SCHEDULE NO. 02
EQUIPMENT SCHEDULE NO. 02 dated as of September 18, 1997 (this "Schedule")
between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC. ("Lessor"),
and AUTOCAM CORPORATION, a Michigan corporation ("Lessee").
INTRODUCTION:
------------
Lessor and Lessee have heretofore entered into that certain Master
Equipment Lease Agreement dated as of July 10, 1995 (the "Master Lease"; the
Master Lease and this Schedule hereinafter collectively referred to as, this
"Lease"). 'Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Master Lease. The Master Lease provides for
the execution and delivery of a Schedule substantially in the form hereof for
the purpose of confirming the acceptance and lease of the Equipment under this
Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof and hereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. EQUIPMENT. Pursuant to the terms and conditions of this Lease,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment listed on Exhibit attached hereto (the "Equipment"). The aggregate
Total Cost of such Equipment is $553,940.00.
2. TERM. The Initial Term of this Lease with respect to the Equipment
described on this Schedule shall commence on the date on which such Equipment is
delivered to Lessee, and, unless earlier terminated as provided herein, shall
expire on One Hundred Two (102) months after the Rent Commencement Date (the
"Initial Term Expiration Date").
3. RENT PAYMENT DATES; RENT. Lessee hereby agrees to pay Rent for the
Equipment throughout the Initial Term in One Hundred and Two (102) consecutive
monthly installments payable in advance on the Rent Commencement Date and on the
same day each month thereafter (each, a "Rent Payment Date"). Each such
installment of Rent shall be in an amount equal to $6,543.07.
4. EQUIPMENT LOCATION; BILLING ADDRESS. The Equipment described on
this Schedule shall be located at, and except as otherwise provided in this
Lease, shall not be removed from, the following address:
4070 East Paris Avenue, Kentwood, MI 49512. The billing address
of Lessee is as follows: AUTOCAM CORPORATION, 4070 East Paris
Avenue, Kentwood, MI 49512.
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<PAGE> 2
5. TAX INDEMNIFICATION. (a) Lessee acknowledges that Lessor has
executed this Lease, and that the Rent payable by Lessee under this Lease has
been computed, upon the assumptions that Lessor will (i) be entitled to
depreciation or cost recovery deductions ("MACRS Deductions") for Federal income
tax purposes under the Modified Accelerated Cost Recovery System provided for in
Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), and
depreciation or cost recovery deductions ("State Depreciation Deductions") for
state income tax purposes for the State of New York ("New York"), in each case
on the basis that (1) each Item of Equipment constitutes '7-year property"
within the meaning of Section 168(e) of the Code, (2) the initial tax basis for
each Item of Equipment will be equal to the Total Cost, (3) deductions for each
Item of Equipment will be computed by using the method specified in Section
168(b)(1) of the Code over the 7-year recovery period described in Section
168(c) of the Code, and (4) the applicable convention for each Item of Equipment
under Section 168(d) of the Code is the half-year convention; (ii) be entitled
to deductions for Federal income tax purposes (available in the manner and as
provided by Section 163 of the Code) for interest payable with respect to any
indebtedness incurred by Lessor in connection with any financing by Lessor of
any portion of the Total Cost of each Item of Equipment ("Interest Deductions");
and (iii) be subject to tax for each year at a composite Federal and New York
corporate income tax rate equal to the then highest marginal rate for
corporations provided for under the Code and the laws of New York (the "Highest
Marginal Tax Rate"). The MACRS Deductions, State Depreciation Deductions and
Interest Deductions are hereinafter collectively referred to as the "Tax
Benefits".
(b) Lessee represents and warrants to Lessor that (i) each Item
of Equipment constitutes 7-year property" within the meaning of Section 168(e)
of the Code, (ii) Lessee shall not attempt to claim such Tax Benefits, (iii) at
and after the time of delivery of the Equipment to Lessee pursuant to this
Lease, the Equipment shall be owned by Lessor for Federal income tax purposes
and Lessee shall not claim any ownership or title in and to the Equipment, and
(iv) Lessee has not, and will not, at any time after such delivery throughout
the Term of this Lease, take any action or omit to take any action (whether or
not the same is permitted or required hereunder) which will result in the loss
by Lessor of all or any part of such Tax Benefits.
(c) If, as a result of any act, omission or misrepresentation of
Lessee, (x) the Tax Benefits are lost, disallowed, deferred, eliminated,
reduced, recaptured, compromised or otherwise unavailable to Lessor, (y) for
Federal, foreign, state or local income tax purposes, any item of income, loss
or deduction with respect to any Item of Equipment is treated as derived from,
or allocable to, sources outside the United States, or (z) there shall be
included in the gross income of Lessor for Federal, state or local income tax
purposes any amount on account of any addition, modification, substitution or
improvement to or in respect of any Item of Equipment made or paid for by Lessee
(any of the foregoing being hereinafter a "Tax Loss",), then, within thirty (30)
days of Lessee's receipt of written notice from Lessor that such a Tax Loss has
occurred, Lessee shall pay to Lessor an amount which, after deduction therefrom
of all taxes to be paid in respect of the receipt thereof, will enable Lessor to
receive the same Net Economic Return (as hereinafter defined) that Lessor would
have realized on this Lease had such Tax Loss (together with any interest,
penalties or additions to tax) not occurred. Any event which, by the terms of
this Lease, requires payment by Lessee to Lessor of the Stipulated Loss Value of
the Equipment shall not constitute the act of Lessee for purpose of the
foregoing sentence.
(d) As used in this Section, the term "Net Economic Return" shall
mean Lessor's net after-tax yield, aggregate after-tax cash flow and return on
assets, based on (i) the assumptions used by Lessor in originally calculating
Rent and Stipulated Loss Value percentages, including the assumptions set forth
above (as such assumptions may have been revised pursuant to the last sentence
of this subsection) and (ii) the Highest Marginal Tax Rate actually in effect
during each year from the date of such original calculations to the date of
such Tax Loss, both dates inclusive. In the event Lessor shall suffer a Tax
Loss with respect to which Lessee is required to pay an indemnity hereunder,
and the full amount of such indemnity has been paid or provided for hereunder,
the aforesaid assumptions, without further act of the parties hereto, shall
thereupon be and be deemed to be amended, if and to the extent appropriate, to
reflect such Tax Loss.
(e) For purposes of this Section, the term "Lessor' shall include
the entity or entities, if any, with which Lessor consolidates any tax return.
Lessee acknowledges that it has neither sought nor received tax advice from
Lessor as to the availability to Lessee of any tax benefits with respect to the
Equipment. All of Lessor's rights and privileges arising from the indemnities
contained in this Lease will survive the expiration or other termination or
cancellation of this Lease. Such indemnities are expressly made for the benefit
of, and are enforceable by, Lessor and its successors and assigns.
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<PAGE> 3
6. TRUE LEASE TRANSACTION. (a) It is the express intent of the
parties that this Lease constitutes a true lease and not a sale of the
Equipment. Title to the Equipment shall at all times remain in Lessor, and
Lessee shall acquire no ownership, title, property, right, equity, or interest
in the Equipment other than its leasehold interest solely as Lessee subject to
all the terms and conditions hereof. To the extent that Article 2A ("Article 2X)
of the Uniform Commercial Code ("UCC") applies to the characterization of this
Lease, the parties hereby agree that this Lease is a "Finance Lease" as defined
therein. Lessee acknowledges: (i) that Lessee has selected the "Supplier" (as
defined in the UCC) and has directed Lessor to purchase the Equipment from the
Supplier in connection with this Lease, and (ii) that Lessee has been informed
in writing in this Lease, before Lessee's execution of this Lease, that Lessee
is entitled under Article 2A to the promises and warranties, including those of
any third party, provided to Lessor by the Supplier in connection with or as
part of the Purchase Agreement, and that Lessee may communicate with the
Supplier and receive an accurate and complete statement of those promises and
warranties, including any disclaimers and limitations of them or of remedies.
The filing of UCC financing statements pursuant to Section 34 of the Master
Lease is precautionary and shall not be deemed to have any effect on the
characterization of this Lease.
(b) Notwithstanding the express intent of Lessor and Lessee that
this agreement constitute a true lease and not a sale of the Equipment, should a
court of competent jurisdiction determine that this agreement is not a true
lease, but rather one intended as security, then solely in that event and for
the expressly limited purposes thereof, Lessee shall be deemed to have hereby
granted Lessor a security interest in the Equipment and all accessions,
substitutions and replacements thereto and therefor, and proceeds (cash and
non-cash), including, without limitation, insurance proceeds thereof (but
without power of sale), to secure the prompt payment and performance as and when
due of all obligations and indebtedness of Lessee, now existing or hereafter
created, to Lessee pursuant to this Lease or otherwise. In furtherance of the
foregoing, Lessee shall execute and deliver to Lessor, to be recorded at
Lessee's expense, Uniform Commercial Code financing statements, statements of
amendment and statements of continuation as reasonably may be required by Lessor
to perfect and maintain perfected such security interest.
(c) In the event that the Supplier erroneously invoices Lessee
for the Equipment, Lessee agrees to forward said invoice to Lessor immediately.
Lessee acknowledges that the Equipment is, and shall at all times remain, the
property of Lessor, and that Lessee has no right, title or interest therein or,
thereto except as expressly set forth in the Lease.
7. LESSEE'S PURCHASE AND RENEWAL OPTIONS. Lessee shall have the
purchase and renewal options set forth on the End of Lease Options Addendum
attached hereto and made a part hereof.
8. MODIFICATIONS TO MASTER LEASE. With respect to the Equipment
described on this Schedule, the Master Lease shall be modified as follows:
(a) The following shall be inserted as the penultimate sentence
of Section 11 of the Master Lease ("Use; Alterations"):
Title to all such alterations, additions, modifications or
improvements shall immediately, and without further act, vest in Lessor and
thereupon shall be deemed to constitute Items of Equipment and be fully subject
to this Lease as if originally leased hereunder.
(b) The following shall be inserted as the penultimate sentence
of Section 12 of the Master Lease ("Repairs and Maintenance"):
Title to such replacement part shall immediately (and without
further act) vest in Lessor upon installation, attachment or incorporation of
the same in, on or into such Item of Equipment and thereupon shall be deemed to
constitute an Item of Equipment and be fully subject to this Lease as if
originally leased hereunder.
(c) As used in Section 22(a) of the Master Lease ("Events of
Default"), the term "Event of Default" shall also mean any of the following
events: (1) a change in control occurs in Lessee or any Guarantor, or (2) the
death or dissolution of Lessee or any Guarantor.
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<PAGE> 4
(d) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended as follows: (1) with respect to Section 22(b)(4), the word
"terminate" is hereby deleted and the words "cancel or terminate" are hereby
substituted in its place; (2) with respect to Section 22(b)(6), the word
"termination" is hereby deleted and the words .,cancellation or termination" are
hereby substituted in its place; and (3) with respect to Section 22(b)(7), the
word "terminated" is hereby deleted and the words "canceled or terminated" are
hereby substituted in its place.
9. STIPULATED LOSS VALUE. The Stipulated Loss Values applicable to
the Equipment and this Lease are as set forth on a supplement (the "Stipulated
Loss Value Supplement') prepared by Lessor.
10. GOVERNING LAW. This Schedule is being delivered in the State of
New York and shall in all respects be governed by, and construed in accordance
with, the laws of the State of New York, including all matters of construction,
validity and performance.
11. COUNTERPARTS. This Schedule may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
12. PERSONAL PROPERTY TAX. To insure Lessee's compliance with the
provisions of the Lease with respect to the payment of personal property taxes
on the Equipment described on this Schedule, Lessee hereby covenants and agrees
that, unless otherwise directed in writing by Lessor or required by applicable
law, Lessee will not list itself as owner of any Item of Equipment for property
tax purposes. Upon receipt by Lessee of any property tax bill pertaining to such
Item of Equipment from the appropriate taxing authority, Lessee will promptly
forward such property tax bill to Lessor. Upon receipt by Lessor of any such
property tax bill, Lessor will pay such tax and will invoice Lessee for the
expense. Upon receipt of such invoice, Lessee will promptly reimburse Lessor for
such expense.
13. ADDITIONAL ADDENDA. In addition to the End of Lease Options
Addendum, please see the following addenda to this Schedule, attached hereto and
made a part hereof, for additional terms and conditions governing the leasing of
the Equipment described on this Schedule: Early Buyout Addendum.
14. MORE THAN ONE LESSEE. If more than one person or entity executes
this Schedule, and all addenda or other documents executed in connection
herewith, as "Lessee," the obligations of "Lessee" contained herein and therein
shall be deemed joint and several and all references to "Lessee" shall apply
both individually and jointly.
15. RELATIONSHIP TO MASTER LEASE; FURTHER ASSURANCES. This Schedule
shall be construed in connection with and as part of the Lease, and all terms
and conditions contained in the Master Lease are hereby incorporated herein by
reference with the same force and effect as if such terms and conditions were
fully stated herein. By execution of this Schedule, Lessee and Lessor reaffirm
all terms and conditions of the Master Lease except as they may be modified
hereby. To the extent that any of the terms and conditions of this Schedule are
contrary to or inconsistent with any terms and conditions of the Master Lease,
the terms and conditions of this Schedule shall govern. LESSEE HEREBY CERTIFIES
TO LESSOR THAT THE REPRESENTATIONS AND WARRANTIES MADE BY LESSEE IN THE MASTER
LEASE (INCLUDING, WITHOUT LIMITATION, SECTION 31 THEREOF) ARE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS SCHEDULE WITH THE SAME EFFECT AS
THOUGH MADE ON AND AS OF SUCH DATE. Lessee shall take such additional actions
and execute and deliver such additional documents as Lessor shall deem necessary
from time to time to effectuate the terms of the Lease.
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<PAGE> 5
IN WITNESS WHEREOF, Lessor and Lessee have caused this Schedule to be
duly executed and delivered on the day and year first above written.
Lessor: Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Warren A. Veltman
By: \s\ Linda L. Huff Name: Warren A. Veltman
Name: Linda L Huff Title: Chief Financial Officer
Title: Vice President
COUNTERPART NO. 1 OF 1 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL
CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF
ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
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<PAGE> 6
Exhibit A
---------
(EQUIPMENT DESCRIPTION)
Lease: Equipment Schedule No. 02 dated as of September 18, 1997 to
Master Equipment Lease Agreement Dated as of July 10, 1995
Lessor: KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC.
Lessee: AUTOCAM CORPORATION
Vendor HYDROMAT INC.
11600 ADIE ROAD
ST. LOUIS, MO 63043
Quantity: Description:
1 ROTARY TRANSFER MACHINE
2 TRAINING VIDEOS
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<PAGE> 7
KeyCorp Leasing Ltd.
End of Lease Options Addendum
To Equipment Schedule Number 02
To Master Equipment Lease Agreement Dated As Of July 10, 1995
Between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC.,
As Lessor,
And AUTOCAM CORPORATION, As Lessee.
(First Amendment Option)
THIS END OF LEASE OPTIONS ADDENDUM is annexed to, and made a part of,
the above-referenced Equipment Schedule and Master Equipment Lease Agreement, as
it relates to such Equipment Schedule (collectively, the "Lease"). Unless
otherwise specified herein, all capitalized terms shall have the meanings
ascribed to them in the Lease. Lessor and Lessee hereby agree as follows:
1. LESSEE'S PURCHASE AND RENEWAL, OPTIONS. (a) With respect to the
Equipment described on this Schedule, Section 32 of the Master Lease ("Renewal
and Purchase Options") is hereby deleted in its entirety.
(b) So long as no Default or Event of Default shall have occurred and be
continuing and Lessee shall have given Lessor at least ninety (90) days prior
written notice to Lessor, Lessee shall have the option (the "Purchase Option")
to purchase all, but not less than all, Items of Equipment on the Initial Term
Expiration Date at a price (the "Purchase Option Price") equal to the greater of
(1) the then Fair Market Sale Value thereof, or (2) fifteen percent (15%) of the
Total Cost of the Equipment, in each case plus any applicable sales taxes.
Payment of the Purchase Option Price, applicable sales taxes, together with all
other amounts due and owing by Lessee under the Lease (including, without
limitation, Rent) on or before the Initial Term Expiration Date, shall be made
on the Initial Term Expiration Date in immediately available funds against
delivery of a bill of sale transferring to Lessee all right, title and interest
of Lessor in and to the Equipment ON AN "AS IS" 'WHERE IS" BASIS, WITHOUT ANY
WARRANTIES, EXPRESS OR IMPLIED. AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS
FOR ANY PARTICULAR PURPOSE, LESSOR MAY SPECIFICALLY DISCLAIM ANY SUCH
REPRESENTATIONS AND WARRANTIES. Lessor and Lessee shall mutually agree upon the
Fair Market Sale Value with respect to the Purchase Option; provided, however
,that, if Lessor and Lessee are unable to agree upon the Fair Market Sale Value
within fifteen (15) days after Lessor's receipt of the Option Notice, the Fair
Market Sale Value shall be determined in accordance with the Appraisal
Procedure.
(c) If the Purchase Option is not exercised or consummated for any
reason, then (1) the Term of the Lease shall be automatically extended for an
additional, non-cancelable period of fifteen (15) months (the "Extended Lease
Term"), and (2) Lessee hereby agrees to pay Rent For the Equipment throughout
the Extended Lease Term in fifteen (15) consecutive monthly installments payable
in advance commencing on the Initial Term Expiration Date and on the same day
each month thereafter. Each such installment of Rent during the Extended Lease
Term shall be in an amount equal to $5,891.87.
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<PAGE> 8
(d) So long as no Default or Event of Default shall have occurred and is
continuing upon not less than ninety (90) days prior written notice (the "Option
Notice") to Lessor, Lessee shall have the option at the expiration of the
Extended Lease Term (the "Extended Term Expiration Date") to (1) purchase all,
but not less than all, Items of Equipment for a purchase price equal to the Fair
Market Sale Value thereof, or (2) return the Equipment in accordance with the
terms and conditions of this Lease. If Lessee fails to give Lessor the Option
Notice at least ninety (90) days before the Extended Term Expiration Date,
Lessee shall be deemed to have chosen option (1) above. Payment of the Fair
Market Sale Value, applicable sales taxes, together with all other amounts due
and owing by Lessee under the Lease (including, without limitation, Rent) on or
before the Extended Term Expiration Date, shall be made on the Extended Term
Expiration Date in immediately available funds against delivery of a bill of
sale transferring to Lessee all right, title and interest of Lessor in and to
the Equipment ON AN "AS IS" "WHERE IS" BASIS WITHOUT ANY WARRANTIES, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION. THE
CONDITION OF THE EQUIPMENT. ITS MERCHANTABILITY OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE. LESSOR MAY SPECIFICALLY DISCLAIM ANY SUCH REPRESENTATIONS
AND WARRANTIES.
2. MODIFICATIONS TO MASTER LEASE. With respect to the Equipment
described on this Schedule, Section 4(ae) of the Master Lease ("Definitions")
is hereby deleted in its entirety and the following is substituted in its
place:
(ae) "Term" shall mean the Initial Term as defined in Section 8
hereof, any Renewal Term, as defined in Section 8 hereof, any
Renewal Term, as defined in Section 8 hereof, and any Extended
Lease Term, as defined in an Equipment Schedule.
Except as modified hereby, all of the terms, covenants and conditions of
the Lease shall remain in full force and effect and are in all respects hereby
ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this End of Lease
Options Addendum as of September 18, 1997.
Lessor:
KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Linda Huff
Name: Linda L. Huff
Title: Vice President
Lessee:
AUTOCAM CORPORATION
By: \s\ Warren A. Veltman
Name: Warren A. Veltman
Title: Chief Financial Officer
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<PAGE> 9
KeyCorp Leasing Ltd.
Early Buyout Addendum
Equipment Schedule No.02
Master Equipment Lease Agreement dated as of July 10, 1995
This Early Buyout Addendum is annexed to, and made a part of, the
above-referenced Equipment Schedule and Master Equipment Lease Agreement, as it
relates to such Equipment Schedule (collectively, the "Lease"). Unless otherwise
specified herein, all capitalized terms shall have the meanings ascribed to them
in the Lease. Lessor and Lessee hereby agree as follows:
So long as no Default or Event of Default shall have occurred and be
continuing, Lessee shall have the option to purchase all, but not less
than all, Items of Equipment on the date which is ninety (90) months
after the Rent Commencement Date (the "EB0 Date") at a price (the "EBO
Price") equal to twenty eight and forty five hundredths percent (28.45%)
of the Total Cost of the Equipment, plus any applicable sales taxes. For
Lessee to exercise its option hereunder, Lessee shall notify Lessor in
writing of its desire to effect such option at least ninety (90) days
(but not more than one hundred eighty (180) days) prior to the EBO Date.
Such notice shall be irrevocable. The EBO Price represents the parties
present best estimate of the fair market value of the Equipment on the
EBO Date determined by using commercially reasonable methods which are
standard in the industry. Payment of the EBO Price, applicable sales
taxes, together with all other amounts due and owing by Lessee under the
Lease (including, without limitation, Rent) on or before the EBO Date,
shall be made on the EBO Date in immediately available funds. Upon
Lessee's written request, Lessor shall deliver to Lessee a bill of sale
transferring to Lessee all right, title and interest of Lessor in and to
the Equipment ON AN "AS IS" 'WHERE IS" BASIS, WITHOUT ANY WARRANTIES.
EXPRESS OR IMPLIED. AS TO ANY MATTER WHATSOEVER. If Lessee shall fail to
pay all amounts required to be paid under the Lease on the EBO Date, the
Lease shall continue in full force and effect and Lessee agrees to
reimburse Lessor for all reasonable costs, expenses and liabilities
incurred in connection therewith.
Except as modified hereby, all of the terms, covenants and conditions of
the Lease shall remain in full force and effect and are in all respects hereby
ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Early Buyout
Addendum as of September 18,1997.
Lessor: Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Warren A. Veltman
By: \s\ Linda L. Huff Name: Warren A. Veltman
Name: Linda L Huff Title: Chief Financial Officer
Title: Vice President
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<PAGE> 10
Equipment Schedule No. 03
-------------------------
EQUIPMENT SCHEDULE NO. 03 dated as of December 5, 1997 (this
"Schedule") between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC.
("Lessor"), and AUTOCAM CORPORATION, a Michigan corporation ("Lessee").
INTRODUCTION:
-------------
Lesson and Lessee have heretofore entered that certain Master
Equipment Lease Agreement dated as of July 10, 1995 (the "Master Lease"; the
Master Lease mid this Schedule hereinafter collectively referred to as, this
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Master Lease. The Master Lease provides for
the execution and delivery of a Schedule substantially in the form hereof for
the purpose of confirming the acceptance and lease of the Equipment under this
Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof and hereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. EQUIPMENT. Pursuant to the terms and conditions of this Lease,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment listed on Exhibit A attached hereto (the "Equipment"). The aggregate
Total Cost of such Equipment is $569,220.00.
2. TERM. The Initial Term of this Lease with respect to the Equipment
described on this Schedule shall commence on the date on which such Equipment is
delivered to Lessee, and, unless earlier terminated as provided herein, shall
expire on a date which is one hundred and two (102) months after the Rent
Commencement Date (the "Initial Term Expiration. Date").
3. RENT PAYMENT DATES; RENT. Lessee hereby agrees to pay Rent for the
Equipment throughout the Initial Term in one hundred and two (102) consecutive
monthly installments payable in arrears on the date which is one (1) month after
the Rent Commencement Date and on the same day of each month thereafter (each, a
"Rent Payment Date"). Each such installment of Rent shall be in an amount equal
to $6,630.30.
4. EQUIPMENT LOCATION; BILLING ADDRESS. The Equipment described on
this Schedule shall be located at, and except as otherwise provided in this
Lease, shall not be removed from, the following address: 1511 George Brown
Drive, Marshall, MI 49068. The billing address of Lessee is as follows: AUTOCAM
CORPORATION, 4070 East Paris Avenue, Kentwood, MI 49512.
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<PAGE> 11
5. TAX INDEMNIFICATION. (a) Lessee acknowledges that Lessor has
executed this Lease, and that the Rent payable by Lessee under this Lease has
been computed, upon the assumptions that Lessor win (i) be entitled to
depreciation or cost recovery deductions ("MACRS Deductions") for Federal income
tax purposes under the Modified Accelerated Cost Recovery System provided for in
Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), and
depreciation or cost recovery deductions ("State Depreciation Deductions") for
state income tax purposes for the State of New York ("New York"), in each case
on the basis that (1) each Item of Equipment constitutes seven-year property"
within the meaning of Section 168(e) of the Code, (2) the initial tax basis for
each Item of Equipment will be equal to the Total Cost, (3) deductions for each
Item of Equipment will be computed by using the method specified in Section
168(b)(1) of the Code over the seven-year recovery period described in Section
168(c) of the Code, and (4) the applicable convention for each Item of Equipment
under Section 168(d) of the Code is the half-year convention, (ii) be entitled
to deductions for Federal income tax purposes (available in the manner and as
provided by Section 163 of the Code) for interest payable with respect to any
indebtedness incurred by Lessor in connection with any financing by Lessor of
any portion of the Total Cost of each item of Equipment ("Interest Deductions");
and (iii) be subject to tax for each year at a composite Federal and New York
corporate income tax rate equal to the then highest marginal rate for
corporations provided for under the Code and the laws of New York (the "Highest
Marginal Tax Rate"). The MACRS Deductions, State Depreciation Deductions and
Interest Deductions are hereinafter collectively referred to as the "Tax
Benefits".
(b) Lessee represents and warrants to Lessor that (i) each Item
of Equipment constitutes seven-year property" within the meaning of Section
168(e) of the Code, (ii) Lessee shall not attempt to claim such Tax Benefits,
(iii) at and after the time of delivery of the Equipment to Lessee pursuant to
this Lease, the Equipment shall be owned by Lessor for Federal income tax
purposes and Lessee shall not claim any ownership or title in and to the
Equipment, and (iv) Lessee has not, and will not, at any time after such
delivery throughout the Term of this Lease, take any action or omit to take any
action (whether or not the same is permitted or required hereunder) which will
result in the loss by Lessor of all or any part Of Such Tax Benefits.
(c) If, as a result of any act, omission or misrepresentation of
Lessee, (x) the Tax Benefits are lost, disallowed, deferred, eliminated,
reduced, recaptured, compromised or otherwise unavailable to Lessor, (y) for
Federal, foreign, state or local income tax purposes, any item of income, loss
or deduction with respect to any Item of Equipment is treated as derived from,
or allocable to, sources outside the United States, or (z) there shall be
included in the gross income of Lessor for Federal, state or local income tax
purposes any amount on account of any addition, modification, substitution or
improvement to or in respect of any Item of Equipment made or paid for by Lessee
(any of the foregoing being hereinafter a "Tax Loss"), then, within thirty (30)
days of Lessee's receipt of written notice from Lessor that such a Tax Loss has
occurred, Lessee shall pay to Lessor an amount which, after deduction therefrom
of all taxes to be paid in respect of the receipt thereof, will enable Lessor to
receive the same Net Economic Return (as hereinafter defined) that Lessor would
have realized on this Lease had such Tax Loss (together with any interest,
penalties or additions to tax) not occurred. Any event which, by the terms of
this Lease, requires payment by Lessee to Lessor of the Stipulated Loss Value of
the Equipment shall not constitute the act of Lessee for purpose of the
foregoing sentence.
(d) As used in this Section, the term "Net Economic Return"
shall mean Lessor's net after-tax yield, aggregate after-tax cash flow and
return on assets, based on (i) the assumptions used by Lessor in originally
calculating Rent and Stipulated Loss Value percentages, including the
assumptions set forth above (as such assumptions may have been revised pursuant
to the last sentence of this subsection) and (ii) the Highest Marginal Tax Rate
actually in effect during each year from the date of such original calculations
to the date of such Tax Loss, both dates inclusive. In the event Lessor shall
suffer a Tax Loss with respect to which Lessee is required to pay an indemnity
hereunder, and the full amount of such indemnity has been paid or provided for
hereunder, the aforesaid assumptions, without further act of the parties hereto,
shall thereupon be and be deemed to be amended, if and to the extent
appropriate, to reflect such Tax Loss.
(e) For purposes of this Section, the term "Lessor" shall
include the entity or entities, if any, with which Lessor consolidates any tax
return. Lessee acknowledges that it has neither sought nor received tax advice
from Lessor as to the availability to Lessee of any tax benefits with respect to
the Equipment. All of Lessor's rights and privileges arising from the
indemnities contained in this Lease will survive the expiration or other
termination or cancellation of this Lease. Such indemnities are expressly made
for the benefit of, and are enforceable by, Lessor and its successors and
assigns.
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<PAGE> 12
6. TRUE LEASE TRANSACTION. (a) It is the express intent of the
parties that this Lease constitutes a true lease and not a sale of the
Equipment. Title to the Equipment shall at all times remain in Lessor, and
Lessee shall acquire no ownership, title, property, right, equity, or interest
in the Equipment other than its leasehold interest solely as Lessee subject to
all the terms and conditions hereof. To the extent that Article 2A ("Article
2A") of the Uniform Commercial Code ("UCC") applies to the characterization of
this Lease, the parties hereby agree that this Lease is a "Finance Lease" is
defined therein. Lessee acknowledges: (i) that Lessee has selected the
"Supplier" (as defined in the UCC) and has directed Lessor to purchase the
Equipment from the Supplier in connection with this Lease, and (ii) that Lessee
has been informed in writing in this Lease, before Lessee's execution of this
Lease, that Lessee is entitled under Article 2A to the promises and warranties,
including those of any third party, provided to Lessor by the Supplier in
connection with or as part of the Purchase Agreement, and that Lessee may
communicate with the Supplier and receive an accurate and complete statement of
those promises and warranties, including any disclaimers and limitations of them
or of remedies. The filing of UCC financing statements pursuant to Section 34 of
the Master Lease is precautionary and shall not be deemed to have any effect on
the characterization of this Lease.
(b) Notwithstanding the express intent of Lessor and Lessee that
this agreement constitute a true lease and not a sale of the Equipment, should a
court of competent jurisdiction determine that this agreement is not a true
lease, but rather one intended as security, then solely in that event and for
the expressly limited purposes thereof, Lessee, shall he deemed to have hereby
granted Lessor a security interest in the Equipment and all accessions,
substitutions and replacements thereto and therefor, and proceeds (cash and
non-cash), including, without limitation, insurance proceeds thereof (but
without power of sale), to secure the prompt payment and performance as and when
due of all obligations and indebtedness of Lessee, now existing or hereafter
created, to Lessee pursuant to this Lease or otherwise. In furtherance of the
foregoing Lessee shall execute and deliver to Lessor, to be recorded at Lessee's
expense, Uniform Commercial Code financing statements, statements of amendment
and statements of continuation as reasonably may be required by Lessor to
perfect and maintain perfected such security interest.
(c) In the event that the Supplier erroneously invoices Lessee
for the Equipment, Lessee agrees to forward said invoice to Lessor immediately.
Lessee acknowledges that the Equipment is, and shall at all times remain, the
property of Lessor, and that Lessee has no right, title or interest therein or
thereto except as expressly set forth in the Lease.
7. LESSEE'S PURCHASE AND RENEWAL OPTIONS. Lessee shall have the
purchase and renewal options set forth on the End of Lease Options Addendum
attached hereto and made a part hereof.
8. MODIFICATIONS TO MASTER LEASE. With respect to the Equipment
described on this Schedule, the Master Lease shall be modified as follows:
(a) The following shall be inserted as the penultimate sentence
of Section 11 of the Master Lease ("Use; Alterations"):
Title to all such alterations, additions, modifications or
improvements shall immediately, and without further act, vest
in Lessor and thereupon shall be deemed to constitute Items of
Equipment and be fully subject to this Lease as if originally
leased hereunder.
(b) The following shall be inserted as the penultimate sentence
of Section 12 of the Master Lease ("Repairs and Maintenance"):
Title to such replacement part shall immediately (and without
further act) vest in Lessor upon installation, attachment or
incorporation of the same in, on or into such Item of Equipment
and thereupon shall be deemed to constitute an Item of Equipment
and be fully subject to this Lease as if originally leased
hereunder.
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<PAGE> 13
(c) As used in Section 22(a) of the Master Lease ("Events of
Default"), the term "Event of Default" shall also mean any of the following
events: (1) a change in control occurs in Lessee or any Guarantor; or (2) the
death or dissolution of Lessee or any Guarantor.
(d) Section 22(b) of the Master Lease ('Events of Default") is
hereby amended as follows: (1) with respect to Section 22(b)(4), the word
"terminate" is hereby deleted and the words "cancel or terminate" are hereby
substituted in its place; (2) with respect to Section 22(b)(6), the word
"termination" is hereby deleted and the words "cancellation or termination" are
hereby substituted in its place; and (3) with respect to Section 22(b)(7), the
word "terminated" is hereby deleted and the words "canceled or terminated" are
hereby substituted in its place.
9. STIPULATED LOSS VALUE. The Stipulated Loss Values applicable to
the Equipment and this Lease are as set forth oil a supplement (tile "Stipulated
Loss Value Supplement") prepared by Lessor.
10. GOVERNING LAW. This Schedule is being delivered in the State of
New York and shall in all respects be governed by, and construed in accordance
with, the laws of the State of New York, including all matters of construction,
validity and performance.
11. COUNTERPARTS. This Schedule may be executed in any number of
counterparts, each executed counterpart consulting all original but all
together one and the same instrument.
12. PERSONAL PROPERTY TAX. To insure Lessee's compliance with the
provisions of the Lease with respect to the payment of personal property taxes
on the Equipment described on this Schedule, Lessee hereby covenants and agrees
that, unless otherwise directed in writing by Lessor or required by applicable
law, Lessee will not list itself as owner of any Item of Equipment for property
tax purposes. Upon receipt by Lessee of any property tax bill pertaining to such
Item of Equipment from the appropriate taxing authority, Lessee will promptly
forward such property tax bill to Lessor. Upon receipt by Lessor of any such
property tax bill, Lessor will pay such tax and will invoice Lessee for the
expense. Upon receipt of such invoice, Lessee will promptly reimburse Lessor for
such expense.
13. ADDITIONAL ADDENDA. In addition to the End of Lease Options
Addendum, please see the following addenda to this Schedule, attached hereto and
made a part hereof, for additional terms and conditions governing the leasing of
the Equipment described on this Schedule: Early Buyout Addendum and Machine Tool
Return Maintenance Addendum.
14. MORE THAN ONE LESSEE. If more than one person or entity executes
this Schedule, and all addenda or other documents executed in connection
herewith, as "Lessee," the obligations of "Lessee" contained herein and therein
shall be deemed joint and several and all references to "Lessee" shall apply
both individually and jointly.
15. RELATIONSHIP TO MASTER LEASE; FURTHER ASSURANCES. This Schedule
shall be construed in connection with and as part of the Lease, and all terms
and conditions contained in the Master Lease are hereby incorporated herein by
reference with the same force and effect as if such terms and conditions were
fully stated herein. By execution of this Schedule, Lessee and Lessor reaffirm
all terms and conditions of the Master Lease except as they may be modified
hereby. To the extent that any of the terms and conditions of this Schedule are
contrary to or inconsistent with any terms and conditions of the Master Lease,
the terms and conditions of this Schedule shall govern. LESSEE HEREBY CERTIFIES
TO LESSOR THAT THE REPRESENTATIONS AND WARRANTIES MADE BY LESSEE IN THE MASTER
LEASE (INCLUDING, WITHOUT LIMITATION, SECTION 31 THEREOF) ARE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS SCHEDULE WITH THE SAME EFFECT AS
THOUGH MADE ON AND AS OF SUCH DATE. Lessee shall take such additional actions
and execute and deliver such additional documents as Lessor shall deem necessary
from time to time to effectuate the terms of the Lease.
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<PAGE> 14
IN WITNESS WHEREOF, Lessor and Lessee have caused this Schedule to be
duly executed and delivered on the day and year first above written.
Lessor: Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Warren A. Veltman
By: \s\ Linda L. Huff Name: Warren A. Veltman
Name: Linda L. Huff Title: Chief Financial Officer
Title: Vice President
COUNTERPART NO. 1 OF 1 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL
CODE. NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF
ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
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<PAGE> 15
Exhibit A
---------
(EQUIPMENT DESCRIPTION)
Lease: Equipment Schedule No. 03 dated as of December 5,1997 to
Master Equipment Lease Agreement
Dated as of July 10, 1995
Lessor: KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC.
Lessee: AUTOCAM CORPORATION
Vendor: TORNOS TECHNOLOGIES
70 POCONO ROAD
BROOKFIELD, CT 06804
Attention: ROLAND TROLLER
Quantity: Description:
1 BS20.8 AUTOMATIC TORNOS BECHLER 8 SPINDLE AUTOMATIC TYPE BS-20.8
WITH STANDARD VOLTAGE 440, 8 SPINDLES, CAPACITY 21MM ROUND BAR,
18 MM HEX 15MM SQUARE, SERIAL # T.60891, WITH ALL STANDARD
ACCESSORIES
1 AUTOMATIC BARLOADER, ROBOBAR MSL-320, SERIAL #C 13656 WITH ALL
ACCESSORIES
E-80
<PAGE> 16
End of Lease Options Addendum
(First Amendment Option)
THIS END OF LEASE OPTIONS ADDENDUM is annexed to, and made a part of,
Equipment Schedule Number 03 to Master Equipment Lease Agreement dated as of
July 10, 1995, as it relates to such Equipment Schedule (collectively, the
"Lease"). Unless otherwise specified herein, all capitalized terms; shall have
the meanings ascribed to them in the Lease. Lessor and Lessee hereby agree as
follows:
LESSEE'S PURCHASE AND RENEWAL OPTIONS. With respect to the Equipment described
on this Schedule, Section 32 of the Master Lease ("Renewal mid Purchase
Options") is hereby deleted in its entirety and the following is substituted in
its place:
So long as no Default or Event of Default shall have occurred and be
continuing and Lessee shall have given Lessor at least one hundred
and eighty (180) days prior written notice (the "Option Notice"),
Lessee shall have the option, at the expiration of the Initial Term
or any Renewal Term, to: (1) purchase all, but not less than all,
Items of Equipment for a purchase price (the "Purchase Option Price")
equal to the then Fair Market Sale Value thereof; (2) renew this
Lease on a month to month basis at the same Rent payable at the
expiration of such Initial Term or Renewal Term, as the case may be;
(3) renew this Lease for a minimum period of not less than twelve
(12) consecutive months at the then current Fair Market Rental Value;
or (4) return such Equipment to Lessor pursuant to, and in the
condition required by, the Lease, including but not limited to the
following conditions: (a) Lessee agrees to pay for the shipment of
equipment to any location in the world, (b) Lessee agrees to provide
free storage of the equipment for a period of one hundred and eighty
(180) days from the Initial Term Expiration Date. If Lessee fails to
give Lessor the Option Notice, Lessee shall be deemed to have chosen
option (2) above. Payment of the Purchase Option Price, applicable
sales taxes, together with all other amounts due and owing by Lessee
under the Lease (including, without limitation, Rent) during such
Initial Term and Renewal Term shall be made on the last day of the
Initial Term or Renewal Term, as the case may be, in immediately
available funds against delivery of a bill of sale transferring to
Lessee all right, title and interest of Lessor in and to the
Equipment ON AN "AS IS" "WHERE IS" BASIS, WITHOUT ANY WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR
ITS FITNESS FOR ANY PARTICULAR PURPOSE. LESSOR MAY SPECIFICALLY
DISCLAIM ANY SUCH REPRESENTATIONS AND WARRANTIES.
Except as modified hereby, all of the terms, covenants and conditions
of the Lease shall remain in full force and effect and are in all respects
hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this End of Lease
Options Addendum as of December 5, 1997.
Lessor. Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Linda L. Huff By: \s\ Warren A. Veltman
Name: Linda L. Huff Name: Warren A. Veltman
Title: Vice President Title: Chief Financial Officer
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<PAGE> 17
Equipment Schedule No. 04
-------------------------
EQUIPMENT SCHEDULE NO. 04 dated as of December 16, 1997 (this
"Schedule") between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC.
("Lessor"), and AUTOCAM CORPORATION, a Michigan corporation ("Lessee").
INTRODUCTION:
-------------
Lesson and Lessee have heretofore entered that certain Master
Equipment Lease Agreement dated as of July 10, 1995 (the "Master Lease"; the
Master Lease mid this Schedule hereinafter collectively referred to as, this
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Master Lease. The Master Lease provides for
the execution and delivery of a Schedule substantially in the form hereof for
the purpose of confirming the acceptance and lease of the Equipment under this
Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof and hereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. EQUIPMENT. Pursuant to the terms and conditions of this Lease,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment listed on Exhibit A attached hereto (the "Equipment"). The aggregate
Total Cost of such Equipment is $1,423,236.00.
2. TERM. The Initial Term of this Lease with respect to the Equipment
described on this Schedule shall commence on the date on which such Equipment
is delivered to Lessee, and, unless earlier terminated as provided herein,
shall expire on a date which is one hundred and two months after the Rent
Commencement Date (the "Initial Term Expiration. Date").
3. RENT PAYMENT DATES; RENT. Lessee hereby agrees to pay Rent for the
Equipment throughout the Initial Term in one hundred and two (102) consecutive
monthly installments payable in arrears on the date which is one (1) month
after the Rent Commencement Date and on the same day of each month thereafter
(each, a "Rent Payment Date"). Each such installment of Rent shall be in an
amount equal to $16,441.65.
4. EQUIPMENT LOCATION; BILLING ADDRESS. The Equipment described on
this Schedule shall be located at, and except as otherwise provided in this
Lease, shall not be removed from, the following address: 4070 East Paris Avenue,
Kentwood, MI 49512. The billing address of Lessee is as follows: AUTOCAM
CORPORATION, 4070 East Paris Avenue, Kentwood, MI 49512.
5. TAX INDEMNIFICATION. (a) Lessee acknowledges that Lessor has
executed this Lease, and that the Rent payable by Lessee under this Lease has
been computed, upon the assumptions that Lessor win (i) be entitled to
depreciation or cost recovery deductions ("MACRS Deductions") for Federal income
tax purposes under the Modified Accelerated Cost Recovery System provided for in
Section 168 of the Internal Revenue Code of 1986, as amended (the "Code"), and
depreciation or cost recovery deductions ("State Depreciation Deductions") for
state income tax purposes for the State of New York ("New York"), in each case
on the basis that (1) each Item of Equipment constitutes seven-year property"
within the meaning of Section 168(e) of the Code, (2) the initial tax basis for
each Item of Equipment will be equal to the Total Cost, (3) deductions for each
Item of Equipment will be computed by using the method specified in Section
168(b)(1) of the Code over the seven-year recovery period described in Section
168(c) of the Code, and (4) the applicable convention for each Item of Equipment
under Section 168(d) of the Code is the half-year convention, (ii) be entitled
to deductions for Federal income tax purposes (available in the manner and as
provided by Section 163 of the Code) for interest payable with respect to any
indebtedness incurred by Lessor in connection with any financing by Lessor of
any portion of the Total Cost of each item of Equipment ("Interest Deductions");
and (iii) be subject to tax for each year at a composite Federal and New York
corporate income tax rate equal to the then highest marginal rate for
corporations provided for under the Code and the laws of New York (the "Highest
Marginal Tax Rate"). The MACRS Deductions, State Depreciation Deductions and
Interest Deductions are hereinafter collectively referred to as the "Tax
Benefits".
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<PAGE> 18
(b) Lessee represents and warrants to Lessor that (i) each Item
of Equipment constitutes seven-year property" within the meaning of Section
168(e) of the Code, (ii) Lessee shall not attempt to claim such Tax Benefits,
(iii) at and after the time of delivery of the Equipment to Lessee pursuant to
this Lease, the Equipment shall be owned by Lessor for Federal income tax
purposes and Lessee shall not claim any ownership or title in and to the
Equipment, and (iv) Lessee has not, and will not, at any time after such
delivery throughout the Term of this Lease, take any action or omit to take any
action (whether or not the same is permitted or required hereunder) which will
result in the loss by Lessor of all or any part Of Such Tax Benefits.
(c) If, as a result of any act, omission or misrepresentation of
Lessee, (x) the Tax Benefits are lost, disallowed, deferred, eliminated,
reduced, recaptured, compromised or otherwise unavailable to Lessor, (y) for
Federal, foreign, state or local income tax purposes, any item of income, loss
or deduction with respect to any Item of Equipment is treated as derived from,
or allocable to, sources outside the United States, or (z) there shall be
included in the gross income of Lessor for Federal, state or local income tax
purposes any amount on account of any addition, modification, substitution or
improvement to or in respect of any Item of Equipment made or paid for by Lessee
(any of the foregoing being hereinafter a "Tax Loss"), then, within thirty (30)
days of Lessee's receipt of written notice from Lessor that such a Tax Loss has
occurred, Lessee shall pay to Lessor an amount which, after deduction therefrom
of all taxes to be paid in respect of the receipt thereof, will enable Lessor to
receive the same Net Economic Return (as hereinafter defined) that Lessor would
have realized on this Lease had such Tax Loss (together with any interest,
penalties or additions to tax) not occurred. Any event which, by the terms of
this Lease, requires payment by Lessee to Lessor of the Stipulated Loss Value of
the Equipment shall not constitute the act of Lessee for purpose of the
foregoing sentence.
(d) As used in this Section, the term "Net Economic Return"
shall mean Lessor's net after-tax yield, aggregate after-tax cash flow and
return on assets, based on (i) the assumptions used by Lessor in originally
calculating Rent and Stipulated Loss Value percentages, including the
assumptions set forth above (as such assumptions may have been revised pursuant
to the last sentence of this subsection) and (ii) the Highest Marginal Tax Rate
actually in effect during each year from the date of such original calculations
to the date of such Tax Loss, both dates inclusive. In the event Lessor shall
suffer a Tax Loss with respect to which Lessee is required to pay an indemnity
hereunder, and the full amount of such indemnity has been paid or provided for
hereunder, the aforesaid assumptions, without further act of the parties hereto,
shall thereupon be and be deemed to be amended, if and to the extent
appropriate, to reflect such Tax Loss.
(e) For purposes of this Section, the term "Lessor" shall
include the entity or entities, if any, with which Lessor consolidates any tax
return. Lessee acknowledges that it has neither sought nor received tax advice
from Lessor as to the availability to Lessee of any tax benefits with respect to
the Equipment. All of Lessor's rights and privileges arising from the
indemnities contained in this Lease will survive the expiration or other
termination or cancellation of this Lease. Such indemnities are expressly made
for the benefit of, and are enforceable by, Lessor and its successors and
assigns.
6. TRUE LEASE TRANSACTION. (a) It is the express intent of the
parties that this Lease constitutes a true lease and not a sale of the
Equipment. Title to the Equipment shall at all times remain in Lessor, and
Lessee shall acquire no ownership, title, property, right, equity, or interest
in the Equipment other than its leasehold interest solely as Lessee subject to
all the terms and conditions hereof. To the extent that Article 2A ("Article
2A") of the Uniform Commercial Code ("UCC") applies to the characterization of
this Lease, the parties hereby agree that this Lease is a "Finance Lease" is
defined therein. Lessee acknowledges: (i) that Lessee has selected the
"Supplier" (as defined in the UCC) and has directed Lessor to purchase the
Equipment from the Supplier in connection with this Lease, and (ii) that Lessee
has been informed in writing in this Lease, before Lessee's execution of this
Lease, that Lessee is entitled under Article 2A to the promises and warranties,
including those of any third party, provided to Lessor by the Supplier in
connection with or as part of the Purchase Agreement, and that Lessee may
communicate with the Supplier and receive an accurate and complete statement of
those promises and warranties, including any disclaimers and limitations of them
or of remedies. The filing of UCC financing statements pursuant to Section 34 of
the Master Lease is precautionary and shall not be deemed to have any effect on
the characterization of this Lease.
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<PAGE> 19
(b) Notwithstanding the express intent of Lessor and Lessee that
this agreement constitute a true lease and not a sale of the Equipment, should a
court of competent jurisdiction determine that this agreement is not a true
lease, but rather one intended as security, then solely in that event and for
the expressly limited purposes thereof, Lessee, shall he deemed to have hereby
granted Lessor a security interest in the Equipment and all accessions,
substitutions and replacements thereto and therefor, and proceeds (cash and
non-cash), including, without limitation, insurance proceeds thereof (but
without power of sale), to secure the prompt payment and performance as and when
due of all obligations and indebtedness of Lessee, now existing or hereafter
created, to Lessee pursuant to this Lease or otherwise. In furtherance of the
foregoing Lessee shall execute and deliver to Lessor, to be recorded at Lessee's
expense, Uniform Commercial Code financing statements, statements of amendment
and statements of continuation as reasonably may be required by Lessor to
perfect and maintain perfected such security interest.
(c) In the event that the Supplier erroneously invoices Lessee
for the Equipment, Lessee agrees to forward said invoice to Lessor immediately.
Lessee acknowledges that the Equipment is, and shall at all times remain, the
property of Lessor, and that Lessee has no right, title or interest therein or
thereto except as expressly set forth in the Lease.
7. LESSEE'S PURCHASE AND RENEWAL OPTIONS. Lessee shall have the
purchase and renewal options set forth on the End of Lease Options Addendum
attached hereto and made a part hereof.
8. MODIFICATIONS TO MASTER LEASE. With respect to the Equipment
described on this Schedule, the Master Lease shall be modified as follows:
(a) The following shall be inserted as the penultimate sentence
of Section 11 of the Master Lease ("Use; Alterations"):
Title to all such alterations, additions, modifications or
improvements shall immediately, and without further act, vest in
Lessor and thereupon shall be deemed to constitute Items of
Equipment and be fully subject to this Lease as if originally
leased hereunder.
(b) The following shall be inserted as the penultimate sentence
of Section 12 of the Master Lease ("Repairs and Maintenance"):
Title to such replacement part shall immediately (and without
further act) vest in Lessor upon installation, attachment or
incorporation of the same in, on or into such Item of Equipment
and thereupon shall be deemed to constitute an Item of Equipment
and be fully subject to this Lease as if originally leased
hereunder.
(c) As used in Section 22(a) of the Master Lease ("Events of
Default"), the term "Event of Default" shall also mean any of the following
events: (1) a change in control occurs in Lessee or any Guarantor; or (2) the
death or dissolution of Lessee or any Guarantor.
(d) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended as follows: (1) with respect to Section 22(b)(4), the word
"terminate" is hereby deleted and the words "cancel or terminate" are hereby
substituted in its place; (2) with respect to Section 22(b)(6), the word
"termination" is hereby deleted and the words "cancellation or termination" are
hereby substituted in its place; and (3) with respect to Section 22(b)(7), the
word "terminated" is hereby deleted and the words "canceled or terminated" are
hereby substituted in its place.
9. STIPULATED LOSS VALUE. The Stipulated Loss Values applicable to
the Equipment and this Lease are as set forth in a supplement (the "Stipulated
Loss Value Supplement") prepared by Lessor.
10. GOVERNING LAW. This Schedule is being delivered in the State of
New York and shall in all respects be governed by, and construed in accordance
with, the laws of the State of New York, including all matters of construction,
validity and performance.
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<PAGE> 20
11. COUNTERPARTS. This Schedule may be executed in any number of
counterparts, each executed counterpart consulting all original but all together
one and the same instrument.
12. PERSONAL PROPERTY TAX. To insure Lessee's compliance with the
provisions of the Lease with respect to the payment of personal property taxes
on the Equipment described on this Schedule, Lessee hereby covenants and agrees
that, unless otherwise directed in writing by Lessor or required by applicable
law, Lessee will not list itself as owner of any Item of Equipment for property
tax purposes. Upon receipt by Lessee of any property tax bill pertaining to such
Item of Equipment from the appropriate taxing authority, Lessee will promptly
forward such property tax bill to Lessor. Upon receipt by Lessor of any such
property tax bill, Lessor will pay such tax and will invoice Lessee for the
expense. Upon receipt of such invoice, Lessee will promptly reimburse Lessor for
such expense.
13. ADDITIONAL ADDENDA. In addition to the End of Lease Options
Addendum, please see the following addenda to this Schedule, attached hereto and
made a part hereof, for additional terms and conditions governing the leasing of
the Equipment described on this Schedule: Early Buyout Addendum and Machine Tool
Return Maintenance Addendum.
14. MORE THAN ONE LESSEE. If more than one person or entity executes
this Schedule, and all addenda or other documents executed in connection
herewith, as "Lessee," the obligations of "Lessee" contained herein and therein
shall be deemed joint and several and all references to "Lessee" shall apply
both individually and jointly.
15. RELATIONSHIP TO MASTER LEASE; FURTHER ASSURANCES. This Schedule
shall be construed in connection with and as part of the Lease, and all terms
and conditions contained in the Master Lease are hereby incorporated herein by
reference with the same force and effect as if such terms and conditions were
fully stated herein. By execution of this Schedule, Lessee and Lessor reaffirm
all terms and conditions of the Master Lease except as they may be modified
hereby. To the extent that any of the terms and conditions of this Schedule are
contrary to or inconsistent with any terms and conditions of the Master Lease,
the terms and conditions of this Schedule shall govern. LESSEE HEREBY CERTIFIES
TO LESSOR THAT THE REPRESENTATIONS AND WARRANTIES MADE BY LESSEE IN THE MASTER
LEASE (INCLUDING, WITHOUT LIMITATION, SECTION 31 THEREOF) ARE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS SCHEDULE WITH THE SAME EFFECT AS
THOUGH MADE ON AND AS OF SUCH DATE. Lessee shall take such additional actions
and execute and deliver such additional documents as Lessor shall deem necessary
from time to time to effectuate the terms of the Lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Schedule to be
duly executed and delivered on the day and year first above written.
Lessor: Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Warren A. Veltman
By: \s\ Linda L. Huff Name: Warren A. Veltman
Name: Linda L. Huff Title: Chief Financial Officer
Title: Vice President
COUNTERPART NO. 1 OF 1 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL
CODE. NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF
ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
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<PAGE> 21
Exhibit A
---------
(EQUIPMENT DESCRIPTION)
Lease: Equipment Schedule No. 04 dated as of December 16,1997 to Master
Equipment Lease Agreement
Dated as of July 10, 1997
Lessor: KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC.
Lessee: AUTOCAM CORPORATION
Vendor: TORNOS TECHNOLOGIES
70 POCONO ROAD
BROOKFIELD, CT 06804
Attention: ROLAND TROLLER
Quantity: Description:
6 SAS-16.6 AUTOMATIC TORNOS BECHLER 6- SPINDLE AUTOMATIC LATHE
TYPE SAS-16.6, SERIAL #'S: T.61676, T.61675, T.61886, T.61684,
T61362 AND T.61381.
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<PAGE> 22
End of Lease Options Addendum
(FMV Option)
----------
THIS END OF LEASE OPTION ADDENDUM is annexed to, and made a part
of, Equipment Schedule Number 04 to Master Equipment Lease Agreement dated as of
July 10, 1995, as it relates to such Equipment Schedule (collectively, the
"Lease"). Unless otherwise specified herein, all capitalized terms; shall have
the meanings ascribed to them in the Lease. Lessor and Lessee hereby agree as
follows:
LESSEE'S PURCHASE AND RENEWAL OPTIONS. With respect to the Equipment described
on this Schedule, Section 32 of the Master Lease ("Renewal mid Purchase
Options") is hereby deleted in its entirety and the following is substituted in
its place:
So long as no Default or Event of Default shall have occurred and be
continuing and Lessee shall have given Lessor at least one hundred
and eighty (180) days prior written notice (the "Option Notice"),
Lessee shall have the option, at the expiration of the Initial Term
or any Renewal Term, to: (1) purchase all, but not less than all,
Items of Equipment for a purchase price (the "Purchase Option Price")
equal to the then Fair Market Sale Value thereof; (2) renew this
Lease on a month to month basis at the same Rent payable at the
expiration of such Initial Term or Renewal Term, as the case may be;
(3) renew this Lease for a minimum period of not less than twelve
(12) consecutive months at the then current Fair Market Rental Value;
or (4) return such Equipment to Lessor pursuant to, and in the
condition required by, the Lease, including but not limited to the
following conditions: (a) Lessee agrees to pay for the shipment of
equipment to any location in the world, (b) Lessee agrees to provide
free storage of the equipment for a period of one hundred and eighty
(180) days from the Initial Term Expiration Date. If Lessee fails to
give Lessor the Option Notice, Lessee shall be deemed to have chosen
option (2) above. Payment of the Purchase Option Price, applicable
sales taxes, together with all other amounts due and owing by Lessee
under the Lease (including, without limitation, Rent) during such
Initial Term and Renewal Term shall be made on the last day of the
Initial Term or Renewal Term, as the case may be, in immediately
available funds against delivery of a bill of sale transferring to
Lessee all right, title and interest of Lessor in and to the
Equipment ON AN "AS IS" "WHERE IS" BASIS, WITHOUT ANY WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION, THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY OR
ITS FITNESS FOR ANY PARTICULAR PURPOSE. LESSOR MAY SPECIFICALLY
DISCLAIM ANY SUCH REPRESENTATIONS AND WARRANTIES.
Except as modified hereby, all of the terms, covenants and conditions
of the Lease shall remain in full force and effect and are in all respects
hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this End of Lease
Options Addendum as of December 16, 1997.
Lessor. Lessee:
KEYCORP LEASING, AUTOCAM CORPORATION
A DIVISION OF KEY CORPORATE CAPITAL INC.
By: \s\ Linda L. Huff By: \s\ Warren A. Veltman
Name: Linda L. Huff Name: Warren A. Veltman
Title: Vice President Title: Chief Financial Officer
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<PAGE> 1
Exhibit 10(t)
LOAN AGREEMENT
Between
MICHIGAN STRATEGIC FUND
(the "Issuer")
and
AUTOCAM CORPORATION
(the "Obligor")
Relating to the Issuance of
$9,000,000
Michigan Strategic Fund
Variable Rate Demand
Limited Obligation Revenue Bonds, Series 1997
(Autocam Corporation Project)
Dated as of December 1, 1997
The interest (subject to certain specified exclusions)
of the Issuer in this Loan Agreement has been
assigned to Norwest Bank Wisconsin, N.A., in
its capacity as Trustee (the "Trustee") under
a Trust Indenture dated as of December 1,
1997, between the Issuer and the Trustee.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITIONS.....................................................................................................-1-
PREMISES........................................................................................................-3-
ARTICLE I REPRESENTATIONS......................................................................-4-
Section 1.1 Obligor Representations and Covenants Regarding the
Internal Revenue Code................................................................-4-
Section 1.2 Additional Covenants.................................................................-8-
Section 1.3 Issuer Findings and Representations..................................................-9-
Section 1.4 Additional Bonds.....................................................................-9-
ARTICLE II THE BONDS AND THE PROCEEDS THEREOF...................................................-9-
Section 2.1 The Bonds............................................................................-9-
Section 2.2 Issuer Action on Redemption.........................................................-10-
Section 2.3 Investment of Bond Fund and Project Fund;
Non-Arbitrage Covenant..............................................................-10-
Section 2.4 Credit Facility.....................................................................-10-
Section 2.5 Tender..............................................................................-11-
Section 2.6 Remarketing Agent...................................................................-11-
Section 2.7 Right to Exercise Conversion Option.................................................-11-
Section 2.8 Rebate Account......................................................................-11-
ARTICLE III THE LOAN AND LOAN REPAYMENTS........................................................-12-
Section 3.1 The Loan............................................................................-12-
Section 3.2 Loan Repayments; Credit Facility....................................................-12-
ARTICLE IV THE PROJECT.........................................................................-13-
Section 4.1 Project Fund Disbursements..........................................................-13-
Section 4.2 Obligation of the Obligor to Complete the Project...................................-14-
Section 4.3 Completion Certificate..............................................................-14-
Section 4.4 Use of Surplus Bond Proceeds........................................................-14-
ARTICLE V OTHER PECUNIARY OBLIGATIONS OF THE OBLIGOR..........................................-15-
Section 5.1 Taxes and Other Costs...............................................................-15-
Section 5.2 Issuer Fees and Expenses............................................................-15-
Section 5.3 Fees and Expenses of the Trustee and Remarketing Agent..............................-15-
Section 5.4 Indemnification of the Issuer.......................................................-15-
Section 5.5 Indemnification of the Trustee......................................................-17-
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 5.6 Insurance...........................................................................-17-
ARTICLE VI PROJECT MAINTENANCE.................................................................-17-
Section 6.1 Maintenance and Operation; Removal from Site........................................-17-
Section 6.2 Remodeling and Modifications........................................................-17-
ARTICLE VII DAMAGE TO PROJECT AND CONDEMNATION..................................................-17-
ARTICLE VIII ACTIONS AFFECTING OBLIGOR AND ISSUER
INTERESTS IN THE AGREEMENT AND THE PROJECT..........................................-18-
Section 8.1 Assignment of the Agreement.........................................................-18-
Section 8.2 Obligor's Interest in the Agreement.................................................-18-
Section 8.3 Liens by the Obligor................................................................-19-
Section 8.4 Security Interest in the Project Fund...............................................-19-
ARTICLE IX FURTHER OBLIGATIONS OF THE OBLIGOR..................................................-19-
Section 9.1 Compliance with Laws................................................................-19-
Section 9.2 Maintenance of Assets; Ownership of Project.........................................-19-
Section 9.3 General Limitations with Respect to Non-Impairment
of Tax-Exempt Status of the Bonds...................................................-20-
Section 9.4 Access to Project and Records.......................................................-20-
Section 9.5 Requirements of Tenants.............................................................-20-
ARTICLE X EVENTS OF DEFAULT AND REMEDIES......................................................-21-
Section 10.1 Events of Default...................................................................-21-
Section 10.2 Remedies upon Event of Default......................................................-22-
Section 10.3 Payment of Attorneys' Fees and Other Expenses.......................................-23-
Section 10.4 Waivers and Limitation on Waivers...................................................-23-
ARTICLE XI OBLIGATIONS OF OBLIGOR UNCONDITIONAL................................................-23-
Section 11.1 Obligor Obligations.................................................................-23-
ARTICLE XII MISCELLANEOUS.......................................................................-24-
Section 12.1 Amounts Remaining in Funds..........................................................-24-
Section 12.2 Obligor Bound by Indenture..........................................................-24-
Section 12.3 Consents Under the Agreement........................................................-24-
Section 12.4 Notices.............................................................................-24-
Section 12.5 Amendment...........................................................................-25-
Section 12.6 Binding Effect......................................................................-25-
Section 12.7 Severability........................................................................-25-
Section 12.8 Execution in Counterparts...........................................................-25-
Section 12.9 Captions and Table of Contents......................................................-25-
Section 12.10 Applicable Law......................................................................-25-
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
EXHIBIT A PROJECT DESCRIPTION..................................................................A-1
EXHIBIT B REQUISITION CERTIFICATE..............................................................B-1
EXHIBIT C COMPLETION CERTIFICATE...............................................................C-1
EXHIBIT D NO ACT OF BANKRUPTCY CERTIFICATE.....................................................D-1
EXHIBIT E PRIOR ISSUE CERTIFICATE..............................................................E-1
</TABLE>
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<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of
December 1, 1997 by and between the Michigan Strategic Fund (the "Issuer") and
Autocam Corporation, a Michigan corporation (the "Obligor").
DEFINITIONS
Except as provided herein, all capitalized terms shall have the
meanings ascribed to them in the Indenture (defined below). In addition to the
words and terms elsewhere defined in the Agreement, each of the following words
and terms as used in the Agreement shall have the following meaning unless the
context or use indicates another or different meaning or intent and shall refer
to all or part of the defined subject.
"Additional Bonds" means the Additional Bonds which are authorized to
be issued in accordance with Section 112 of the Indenture in one or more series
from time to time to provide funds for the purposes contemplated by the
Agreement.
"Completion Certificate" means the certificate provided for in Section
4.3 hereof, in the form of Exhibit C hereto.
"Completion Date" means the date of completion of the Project as such
date shall be certified in the Completion Certificate.
"Engineer" means any licensed professional architect/engineer or
architectural/engineering firm (who may be in the employ of the Obligor or
chosen by the Obligor).
"Event of Default" means those events of default specified and defined
in Section 10.1.
"General Limitations" means those general limitations on Obligor action
or failure to act specified in Section 9.3 hereof, sometimes referenced as a
condition to a particular Obligor action but applicable to any action by the
Obligor under the Agreement.
"Improvements to the Project" means such additions, improvements,
modifications or relocations as the Obligor may deem necessary or desirable in,
on or to the Project, all of which shall be included in the Plans and shall
become part of the Project.
"Indemnified Persons" means the Issuer and its members, officers,
agents and employees.
"Indenture" means the Trust Indenture between the Issuer and the
Trustee, dated as of December 1, 1997, as the same may be amended or
supplemented in accordance with its terms.
"Inducement Date" means November 19, 1997, on which date a resolution
of intent or inducement to assist in the financing of the Project was adopted by
the Issuer.
"Issuance Costs" means items of expense payable or reimbursable
directly or indirectly by the Issuer and related to the authorization, sale and
issuance of the Bonds and authorization and execution of the Agreement, which
items of expense shall include, but not be limited to, the Issuer's Issuance
Fee, application fees and expenses, publication costs, printing costs, costs of
reproducing documents, filing and recording fees, Bond Counsel and Counsel fees,
initial Trustee's fees, placement agents' fees, costs of credit ratings, Credit
Facility issuance fees and charges for execution, transportation and safekeeping
of the Bonds and related documents, and other costs, charges and fees in
connection with the foregoing.
"Issuance Fee" means the Bond issuance fee payable to the Issuer on or
before the Effective Date in the amount of one-quarter of one percent (0.25%) of
the principal amount of the Bonds (i.e., $22,500).
"Municipality" means the City of Marshall, County of Calhoun, Michigan.
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<PAGE> 6
"Non-Arbitrage Certificate" means the Non-Arbitrage Certificate
described in Section 1.1 hereof.
"Permitted Encumbrances" means and includes (a) the rights of the
Issuer, the Trustee and the Bank and the liens created under the Agreement; (b)
the rights of the Issuer, the Trustee and the Bank created under the Indenture
and assignment of the Agreement; (c) any liens granted to the Bank; and (d)
liens permitted by the Reimbursement Agreement or consented to by the Bank in
writing.
"Plans" means the Obligor's plans and budget specifications for the
Project, in such reasonable detail as to satisfy to the extent applicable the
requirements of Section 9-110 of Act No. 174, Public Acts of Michigan, 1962, as
amended, as the same may be revised from time to time in accordance with Article
IV hereof, which plans are on file at the principal office of the Obligor.
"Project" means the acquisition of land, construction on the land of a
manufacturing facility and the acquisition and installation of machinery and
equipment for that facility, as set forth in Exhibit A hereto, including such
modifications thereof, substitutions therefor, and Improvements to the Project,
and excluding such deletions therefrom, as shall be made in accordance with the
Agreement.
"Project Costs" means, as applicable (a) obligations of the Issuer or
the Obligor incurred for labor and to contractors, builders and materialmen in
connection with the acquisition, construction and installation of the Project;
(b) the cost of contract bonds and of insurance of all kinds that may be
required or necessary during the course of construction of the Project which is
not paid by the contractor or contractors or otherwise provided for; (c) all
costs of engineering services, including test borings, surveys, estimates, plans
and specifications and preliminary investigations, and supervising construction,
as well as for the performance of all other duties required by or consequent
upon the proper construction of the Project; (d) Issuance Costs; (e) all other
costs which the Obligor shall be required to pay, under the terms of any
contract or contracts, for the acquisition, construction and installation of the
Project; (f) other costs of a nature comparable to those described in clauses
(a) through (e) above which the Obligor shall be required to pay as a result of
the damage, destruction, condemnation or taking of the Project or any portion
thereof; (g) interest on the Bonds or any interim obligation during the period
of construction of the Project; or (h) any other costs incurred by the Obligor
which are properly chargeable to the Project and which may be financed by the
Bonds under the Act.
"Project Purposes" means use of the Project for manufacturing purposes
during a period of usefulness of the Project of at least 18 years in the
estimate of the Obligor.
The terms "redemption," "redeem" and "redeemed" when used with
reference to the principal of the Bonds, means, when appropriate, prepayment,
prepay and prepaid, respectively.
"Requisition Certificate" means the certificate required by Section 4.1
hereof, in the form of Exhibit B hereto.
PREMISES
The Issuer is empowered under the Act to assist any person, firm or
corporation in the financing of certain projects and facilities, through the
issuance of its limited obligation revenue bonds. The Obligor has proposed the
acquisition and construction of the Project and as an inducement therefor has
requested the Issuer to assist in the financing of the Project and certain other
expenses incidental thereto, as provided in the Act.
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<PAGE> 7
The Issuer has determined that making the Loan to the Obligor will
promote and serve the intended purposes of, and in all respects will conform to
the provisions and requirements of the Act. In order to grant the Loan and
thereby assist in the financing of the Project, the Issuer is issuing the Bonds.
The Issuer, the Trustee and the Obligor understand and intend that the financing
of the Project through issuance of the Bonds and the making of the Loan will be
structured in the following general manner, as detailed in the Indenture and in
the Agreement: The Issuer will issue the Bonds under the Act and use the
principal amount thereof to make the Loan to the Obligor. The Loan shall be
repaid by the Obligor in Loan Repayments sufficient to pay the principal,
premium, if any, and interest on the Bonds as the same become due. From the
proceeds of the Loan, the Obligor will complete the Project. Under the terms of
the Agreement, the Obligor will make Loan Repayments, and will be responsible
for paying any costs of the Project which exceed the principal amount of the
Bonds, for maintaining and insuring the Project, and for paying all taxes and
expenses relating to the Project. The Issuer's obligation with respect to the
Bonds is subject to the limitations therein contained, viz., that the principal,
premium, if any, and interest on the Bonds and any other costs or pecuniary
liability relating to the Bonds, the Loan, the Project or the implementation
thereof or any proceeding, document, or certification incidental to the
foregoing, shall never be payable from tax revenues or public funds of the State
or any agency thereof or general funds or assets of the Issuer, but shall be
payable with Available Moneys solely and only from the Security. The Bonds shall
not be secured by any interest in the Project or other assets of the Obligor.
In addition, as part of the Security for the Loan Repayments, the
Obligor will cause the Credit Facility to be delivered to the Trustee. The
Trustee is instructed in the Indenture to draw under the Credit Facility up to
(a) the principal amount of the Bonds (i) to enable the Trustee to pay the
principal amount of the Bonds when due at maturity, by acceleration of maturity
or otherwise or upon redemption or (ii) to enable the Trustee to pay the portion
of the Purchase Price of Bonds delivered to the Trustee and not remarketed by
the Remarketing Agent equal to the principal amount of such Bonds, plus (b) an
amount equal to 56 days' (or, if required pursuant to Section 208 of the
Indenture, 210 days') interest on the Bonds calculated at the Maximum Rate to
enable the Trustee to pay interest on the Bonds plus (c) if the Credit Facility
is so amended, any premium on the Bonds.
The Issuer's participation in the financing of the Project is intended
to enable the Obligor to utilize certain provisions of the Code. Section 103 of
the Code encourages the construction of certain types of facilities and the
public financing thereof through issuance of limited obligation revenue bonds by
providing that the interest on such bonds, as contrasted with any bonds which
might be issued by the Obligor itself, will be excluded from gross income for
federal income tax purposes. This tax exclusion enables the purchasers of the
Bonds to accept a lower rate of interest than they would otherwise require, and
thereby further reduces the interest cost to the Obligor of financing the
Project.
ARTICLE I
REPRESENTATIONS
Section I.1 Obligor Representations and Covenants Regarding the
Internal Revenue Code. The Obligor makes the following representations and
warranties for the benefit and reliance of the Issuer, the Trustee and the Bank:
(a) The Obligor is a Michigan corporation, is duly organized,
validly existing and in good standing under the laws of the State. The Obligor
(i) has full power and authority to own the properties and assets associated
with the Project and to complete the Project, and (ii) has full power and
authority to execute and deliver the Agreement, the Reimbursement Agreement, the
Bond Purchase Agreement, the Remarketing Agreement and the Pledge Agreement, and
to perform the obligations as contemplated thereunder.
(b) Neither the execution and delivery of the Reimbursement
Agreement, the Bond Purchase Agreement, the Remarketing Agreement, the Pledge
Agreement or the Agreement, nor the consummation of the transactions
contemplated thereby, nor the fulfillment of or compliance with the terms and
conditions of the Reimbursement Agreement, the Bond Purchase Agreement, the
Remarketing Agreement, the Pledge Agreement or the Agreement, will, to the best
knowledge of the Obligor, violate the Articles of Incorporation or Bylaws of the
Obligor, any provision of law, any order of any court or other agency of
government, or any indenture, agreement or other instrument to which the Obligor
is now a party or by which it or any of its properties or assets is bound, or
will be in conflict with, result in a breach of, or constitute a default (with
due notice or the passage of time or both) under, any such indenture, agreement,
or other instrument.
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<PAGE> 8
(c) The Agreement, the Reimbursement Agreement, the Bond
Purchase Agreement, the Remarketing Agreement and the Pledge Agreement have been
duly authorized, executed and delivered and are each valid and binding
obligations of the Obligor enforceable in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws in effect from time to time
affecting the enforceability of creditors' rights generally or by general
principles of equity.
(d) The Obligor intends to occupy the Project or cause the
Project to be occupied and to operate or cause it to be operated at all times
during the term of the Agreement for Project Purposes and does not know of any
reason why the Project will not be so used by it in the absence of supervening
circumstances not now anticipated by it or beyond its control.
(e) The Project will be completed in such manner as to conform
with all applicable zoning, planning, building and other regulations of
governmental authorities having jurisdiction of the Project, all necessary
utilities are or will be available to the Project, and the Obligor has obtained
or will obtain all requisite zoning, planning, building, environmental or other
permits necessary for the construction of the Project for Project Purposes, and
additional permits necessary for the use of the Project are expected to be
obtained upon application at the appropriate times.
(f) The Obligor's estimates of Project Costs, the Completion
Date and period of usefulness of the Project which were supplied to the Issuer
have been made in good faith and are fair, reasonable and realistic.
(g) No litigation or governmental proceeding is pending or, to
the best knowledge of the Obligor, threatened against the Obligor which could
have a material adverse effect on its financial condition or business, or its
power to borrow or repay the Loan.
(h) The Obligor does not have any material contingent
obligations which are not disclosed in writing to the Bank.
(i) All representations and warranties in the Reimbursement
Agreement are incorporated herein as set forth therein.
(j) The Project qualifies as a "project" under the Act and the
Obligor intends to have the Project operated as such during the term of this
Agreement.
(k) The financing of the Project will result in the creation
of approximately 200 new jobs and will not result in the transfer of employment
of more than 20 full-time employees from another municipality to the
Municipality in violation of the Act.
(l) All the net Bond proceeds from the sale of the Bonds will
be expended on the Project to be owned by the Obligor, except for proceeds used
for the payment of costs of issuing the Bonds. Substantially all (at least 95%)
of the costs of the Project are for the acquisition or construction of land or
property of a character subject to the allowance for depreciation.
(m) There are no other bond issues, which together with the
Bonds, are to be used with respect to a single building, an enclosed shopping
mall or a strip of offices, stores or warehouses using substantial common
facilities.
(n) No portion of the Bond proceeds will be used to provide
any airplane, skybox or other private luxury box, any health club facility, any
facility primarily used for gambling or any store the principal business of
which is the sale of alcoholic beverages for consumption off premises.
(o) Less than 25% of the Bond proceeds are to be used directly
or indirectly for the acquisition of land used for other than farming purposes,
and no portion of the Bond proceeds is to be used, directly or indirectly for
the acquisition of land used for farming purposes.
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(p) None of the Bond proceeds is to be used for the
acquisition of any property (or an interest therein) the first use of which
property is not pursuant to such acquisition unless certain rehabilitation
requirements as provided in Code Section 147(d) are met.
(q) Substantially all (at least 95%) of the net proceeds of
the Bonds (face amount) and all of the earnings on Bond proceeds deposited in
the Project Fund will be used to provide manufacturing facilities within the
meaning of Code Section 144(a)(12)(C). For this purpose, the term "manufacturing
facility" means any facility which is used in the manufacturing or production of
tangible personal property (including the processing resulting in a change in
the condition of such property). The term "manufacturing facility" includes
facilities which are directly related and ancillary to a manufacturing facility
(determined without regard to this sentence) if a) such facilities are located
on the same site as the manufacturing facility and b) not more than 25% of the
net proceeds of the Bonds are used to provide such facilities. The Obligor, for
purposes of this representation, is able to meet all of the criteria below
regarding manufacturing facilities. Office space is directly related and
ancillary to a manufacturing facility where such office is located on the
premises of the manufacturing facility and not more than a de minimis (5%)
portion of the functions to be performed at such office is not directly related
to the day-to-day operations at such manufacturing facility. Facilities for the
short-term warehousing of raw materials incidental to production or the
temporary warehousing of finished product constitute facilities directly related
and ancillary to a manufacturing facility. An on-site laboratory whose purpose
is to test the manufactured product for quality or to experiment with different
materials which might be used as raw materials for the product may be directly
related and ancillary to a manufacturing facility. Loading docks or rail spurs
to unload raw materials or load finished products may be directly related and
ancillary. Forklifts or similar equipment are directly related and ancillary to
a manufacturing facility, but trucks or vans to deliver the final product are
not. A showroom staffed with full-time sales personnel is outside the scope of a
manufacturing facility.
(r) Except as is permitted by Code Section 149(b), the Bonds
are not federally guaranteed within these provisions; specifically the payment
of principal or interest with respect to the Bonds is not guaranteed in whole or
in part by the United States or any agency or instrumentality thereof; the Bonds
are not issued as part of an issue a significant portion of the proceeds of
which is to be used in making loans the payment of principal or interest with
respect to which is to be guaranteed in whole or in part by the United States or
any agency or instrumentality thereof, or invested directly or indirectly in
federally insured deposits or accounts; and the payment of principal or interest
on the Bonds is not otherwise indirectly guaranteed in whole or in part by the
United States or an agency or instrumentality thereof.
(s) The sum of the authorized face amount of the Bonds
allocable to each test-period beneficiary (as defined in Code Section
144(a)(10)) plus the respective aggregate face amount of all tax-exempt
facility-related bonds presently outstanding (not including any obligations
which are to be redeemed from the proceeds of the Bonds) which are allocable to
each such test-period beneficiary does not exceed $40,000,000. The Obligor will
not sell, lease or enter any other arrangement having the effect of causing
another person to become a beneficiary of the Bond financed facility during the
test-period which would have the effect of making interest on the Bonds
includable in the gross income for federal income tax purposes of the holder
thereof.
(t) No more than 2% of the proceeds of the Bonds will be
used for any Issuance Costs.
(u) The weighted average maturity of the Bonds does not exceed
120% of the weighted average reasonably expected economic life of the Project
financed with the net proceeds of the Bonds pursuant to Code Section 147(b).
(v) No more than 25% of the net proceeds of the Bonds will be
used to provide a facility the primary purpose of which is one of the following:
retail food and beverage service, automobile sales or service, or the provision
of recreation or entertainment pursuant to Code Section 144(a)(8)(A).
(w) No portion of the proceeds of the Bonds will be used to
provide any of the following: any private or commercial golf course, country
club, massage parlor, tennis club, skating facility (including roller skating,
skateboard, and ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility, or racetrack pursuant to
Code Section 144(a)(8)(B).
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(x) There are no "private activity bonds" as defined in
Section 103 of the Code outstanding on the Effective Date, the proceeds of which
have been or shall be used with respect to any facility located in the
Municipality of which the Obligor or a related person to the Obligor is a
principal user.
(y) The face amount of the Bonds, plus the aggregate amount of
capital expenditures (excluding capital expenditures paid for with proceeds of
the Bonds) by the Obligor, any "related person" thereto, any principal user of
the Project, and any "related person" thereto (all within the meaning ascribed
in Code Section 144(a)(4)) in the Municipality and areas contiguous thereto or
attributed to the Municipality beginning three years before the Effective Date
and ending three years after the Effective Date do not and will not exceed
$10,000,000. In addition, the Obligor will not violate any other provisions of
the Code relating to the foregoing.
(z) No expenditures for the Project were made prior to 60 days
before the Issuer adopted its official intent resolution for the Project on the
Inducement Date.
(aa) The Project has not been "placed in service" more than 18
months prior to the date of issuance of the Bonds and no expenditure to be
reimbursed with proceeds of the Bonds was made more than three years prior to
the date of issuance of the Bonds.
(bb) Other than the Bonds, there are no other tax exempt
obligations issued for the benefit of the Obligor or any "related person" which
were or are to be sold (a) within 15 days of the Effective Date, (b) pursuant to
the same plan of financing as the Bonds, and (c) payable from the same source of
funds as the Bonds.
(cc) All representations and warranties of the Obligor set
forth in the Non-Arbitrage Certificate and the Borrower's Questionnaire of the
Obligor, each dated the Effective Date (including exhibits thereto) will be true
and correct as of that date.
Section 1.2 Additional Covenants. The Obligor hereby covenants that,
unless advised otherwise by Bond Counsel, the Obligor will comply with the
following:
(a) Any proceeds received upon the sale of any of the property
which is included in the Project (i) will be invested at a yield not in excess
of the yield on the Bonds and used for the purpose of redeeming the Bonds at the
first subsequent call date, or (ii) will be used for the purpose of acquiring
property performing the same function as the disposed Project property.
(b) If part or all of the Project wears out or becomes
obsolete so that it is no longer functional to the Obligor and the Obligor deems
it appropriate to dispose of such portion of the Project and, only if, the
Obligor or any related party thereto receives no economic benefit from the
disposal thereof, then the Obligor may dispose of such property other than as
provided in (a) above.
(c) The Obligor will not use accelerated depreciation for
federal income tax purposes for any part of the Project financed with proceeds
of the Bonds.
Section 1.3 Issuer Findings and Representations.
(a) The Issuer has the necessary power under the Act, and has
duly taken all action on its part required to authorize, execute and deliver the
Agreement and to issue the Bonds. The execution and performance by the Issuer of
its obligations under this Agreement will not violate or conflict with any
instrument by which the Issuer or its properties are bound.
(b) All of the proceedings approving the Agreement and the
Indenture relating to the Bonds were conducted by the Issuer at meetings which
complied with Act No. 267, Michigan Public Acts, 1976, as amended.
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(c) No member of the Board of Directors of the Issuer is
directly or indirectly a party to or in any manner whatsoever interested in the
Agreement, the Indenture, the Bonds or the proceedings related thereto.
Section I.4 Additional Bonds. At the request of the Obligor the Issuer
may, but shall not be required to, authorize the issuance of Additional Bonds in
accordance with Section 112 of the Indenture. Additional Bonds shall not be
issued without the prior written consent of the Bank. The terms of any
Additional Bonds shall be approved in writing by the Obligor. Additional Bonds
may be issued only to finance any one or more of the following: (i) the costs of
making Improvements to the Project; (ii) the refunding of all or any part of the
Bonds; and (iii) the Issuance Costs relating to the Additional Bonds and other
costs reasonably related to the financing as shall be agreed upon by the Obligor
and the Issuer. Any Improvements to the Project acquired with the proceeds of
the Additional Bonds shall become a part of the Project and shall be included
under the Agreement. Refusal for any reason by the Issuer to issue Additional
Bonds shall not release the Obligor from any provisions of the Agreement.
ARTICLE II
THE BONDS AND THE PROCEEDS THEREOF
Section II.1 The Bonds. The Issuer has authorized the issuance and sale
of the Bonds. Upon issuance and delivery of the Bonds, the proceeds of the sale
of the Bonds derived by the Issuer shall be deposited with the Trustee as
follows: (a) in the Bond Fund, a sum equal to the accrued interest, if any, on
the Bonds and (b) in the Project Fund, the balance of the proceeds of sale of
the Bonds. The obligations of the Issuer and the Obligor under the Agreement are
expressly conditioned upon delivery of the Bonds and receipt of the proceeds
thereof.
Section II.2 Issuer Action on Redemption. The Issuer shall, at the
request of the Obligor in the case of an optional redemption, or at the request
of the Trustee in the case of a mandatory redemption on expiration of the Credit
Facility, a mandatory redemption on Determination of Taxability or mandatory
redemption from Surplus Bond Proceeds, forthwith take all steps as may be
necessary under the Indenture to effect the earliest practicable redemption, as
provided under the Indenture, of any or all of the Bonds or portions thereof as
may be specified by the Obligor or Trustee, as the case may be.
In the event of an optional redemption, mandatory redemption on
Determination of Taxability or mandatory redemption on expiration of the Credit
Facility, unless such redemption is effected in connection with a refunding, the
Obligor will pay or cause to be paid pursuant to a draw on the Credit Facility
(or, with respect to any premium, if premium is not covered by the Credit
Facility, with Available Moneys) an amount equal to the applicable redemption
price as a prepayment of the principal amount of the Loan corresponding to such
Bonds or portions thereof and interest accrued to the redemption date.
In the case of an extraordinary optional redemption, the Obligor's
direction to the Issuer to redeem shall be given, if at all, within six months
following the occurrence of the event giving rise to such redemption.
In the event the Obligor receives notice under the provisions in the
Bond Forms Appendix entitled Mandatory Redemption on Determination of Taxability
that a proceeding has been instituted which could lead to a determination that
interest on the Bonds is includable in gross income for federal income tax
purposes and the resultant Mandatory Redemption on Determination of Taxability,
the Obligor shall promptly notify the Trustee, the Bank and the Issuer of such
proceeding.
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Section II.3 Investment of Bond Fund and Project Fund; Non-Arbitrage
Covenant. Any moneys held as part of the Bond Fund or Project Fund shall be
invested, reinvested or applied by the Trustee in accordance with and subject to
the conditions of Article VII of the Indenture. The Obligor and the Issuer shall
make no use of the proceeds of the Bonds, or any funds which may be deemed to be
proceeds of the Bonds pursuant to Section 148 of the Code and the applicable
regulations thereunder, which, if such use had been reasonably expected on the
date of issuance of the Bonds, would have caused the Bonds to be "arbitrage
bonds" within the meaning of such Section and such regulations, and the Obligor
shall comply with the requirements of such Section and such regulations
throughout the term of the Bonds as provided by and required in the
Non-Arbitrage Certificate, the terms of which are incorporated herein and made a
part hereof by this reference. The Obligor shall comply, for itself and on
behalf of the Issuer, with all requirements of the Code. In particular, the
Obligor will compute rebate due, if any, under Section 148 of the Code, pay any
rebate due under the Code and retain records as required by the Code.
Section II.4 Credit Facility. The Obligor shall cause the Credit
Facility to be delivered to the Trustee on or before the Effective Date. The
Credit Facility shall (a) be in an amount equal to the aggregate principal
amount of the Bonds outstanding from time to time plus 56 days' (or if required
pursuant to Section 208 of the Indenture, 210 days') interest thereon calculated
at the Maximum Rate; (b) provide for payment to the extent of the amount
specified in the preceding clause (a) in immediately available funds to the
Trustee (upon receipt of the Trustee's request for payment of the principal of,
premium, if any, and/or interest on the Bonds then outstanding on any Bond
Payment Date, proposed Conversion Date, Conversion Date, Substitution Date,
Purchase Date or redemption date pursuant to the Indenture); and (c) provide an
expiration date no earlier than the earliest of (i) the payment in full by the
Bank of funds authorized to be drawn thereunder so that there are no outstanding
Bonds (ii) the honoring by the Bank of a draft on the Credit Facility for all
outstanding Bonds, (iii) a stated expiration date, (iv) the day after any
Conversion Date, or (v) the fifteenth day following an Event of Default pursuant
to Section 801(d) of the Indenture. The Obligor will cause any extension of the
Credit Facility to be deposited by the Bank with the Trustee at least 60 days
prior to the last Interest Payment Date prior to the expiration of the Credit
Facility or Substitute Credit Facility then in effect. Each extension of the
Credit Facility shall be satisfactory in form and substance to the Trustee. Upon
the conversion of the Bonds to Fixed Rate Bonds, the Bonds may, but need not, be
secured by a Credit Facility. The Obligor shall have the right to provide a
Substitute Credit Facility in accordance with Section 210 of the Indenture.
Section II.5 Tender. The Issuer agrees to cause the Trustee in the
Indenture to act as tender agent for the Obligor in connection with certain
tenders of Variable Rate Bonds and as tender agent for the Bank in connection
with certain other tenders of Variable Rate Bonds, all as provided in Article II
of the Indenture.
Section II.6 Remarketing Agent. The Obligor hereby approves of the
appointment of Robert W. Baird & Co. Incorporated as the initial Remarketing
Agent and covenants and agrees that, without prior written notice to the Trustee
and without written approval by the Bank, it will not change the Remarketing
Agent.
Section II.7 Right to Exercise Conversion Option. Subject to the
ability of the Obligor to satisfy certain conditions described in the Indenture,
the right is reserved to the Obligor, upon receipt of prior approval from the
Bank (but only if the existing Credit Facility will remain in effect following
the proposed conversion or, in any event, if a draw may be made on the existing
Credit Facility in connection with the proposed conversion), to exercise the
conversion option in accordance with the Indenture.
Section II.8 Rebate Account. The Obligor covenants and agrees that it
will create and maintain on its books and records a "Rebate Account" as required
to comply and evidence compliance with Section 2.3 hereof.
ARTICLE III
THE LOAN AND LOAN REPAYMENTS
Section III.1 The Loan. Concurrently with the delivery of the Bonds,
the Issuer will, upon the terms and conditions of the Agreement, lend to the
Obligor, by deposit of the proceeds thereof with the Trustee in the Project
Fund, an amount equal to the principal amount of the Bonds for application to
Project Costs. The accrued interest, if any, received by the Issuer upon the
sale of the Bonds shall be deposited into the Bond Fund and shall be applied to
the first interest due on such Bonds.
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Section III.2 Loan Repayments; Credit Facility. Except as hereinafter
provided, the Obligor shall pay or cause to be paid, in immediately available
funds, to the Trustee, for the account of the Issuer, loan repayments
corresponding to the principal, premium, if any, Purchase Price and interest
payments on the Bonds when due (the "Loan Repayments"); in lieu of such
payments, the Trustee shall draw on the Credit Facility, pursuant to Section 209
of the Indenture, amounts equal to such Loan Repayments. So long as the Credit
Facility is in effect, the Loan Repayments representing principal of, premium,
if any (if the Credit Facility then covers such premium), Purchase Price and
interest payments on the Bonds shall be made by deposits of the proceeds of
drawings under the Credit Facility and the Obligor shall reimburse the Bank in
accordance with the Reimbursement Agreement.
Payments of the principal and Purchase Price of, premium, if any, or
interest on the Bonds shall be made solely from the Security, including draws
under the Credit Facility (except with respect to premium unless the Credit
Facility has been amended to cover premium on the Bonds). The Obligor's
obligation to make Loan Repayments is and shall remain unconditional regardless
of the sufficiency and availability of Available Moneys to make such payments.
With the prior written approval of the Bank and written notice to the
Issuer and the Trustee, the Obligor may prepay in whole or in part amounts due
on account of the Loan Repayments or for the redemption of Bonds prior to
maturity or purchase, but such prepayment shall not in any way alter or suspend
any of the obligations of the Obligor under the terms of the Agreement and the
Obligor shall continue to perform and be responsible for the performance of all
other terms and provisions. Such notice shall be given at least 10 Business Days
before the Trustee is to give notice of any related redemption pursuant to
Article IV of the Indenture.
The Issuer agrees that the Trustee may accept such prepayments when the
same are tendered by the Obligor and that such prepayments may be directed by
the Obligor to be used for credit on Loan Repayments or for the redemption or
purchase of Bonds in the manner and to the extent provided herein and in the
Indenture.
In the event the Obligor prepays Loan Repayments in the following
manner and in accordance with the provisions of the Indenture: (a) in Available
Moneys, after delivering the No Act of Bankruptcy Certificate attached hereto as
Exhibit D to the Trustee or (b) by causing the Trustee to draw on the Credit
Facility, for deposit in the Bond Fund an amount of money which, together with
amounts then on deposit in the Bond Fund and available therefor, shall be
sufficient (i) to retire and redeem at the earliest date(s) permitted under the
Indenture all of the then outstanding Bonds and (ii) to pay any interest
accruing on the Bonds to maturity or redemption and shall also make provision
satisfactory to the Issuer and the Trustee for all fees, costs and expenses
specified in Article V hereof accruing through the final payment of the Bonds,
then the Loan shall be deemed fully repaid and canceled, and the lien of the
Indenture shall be discharged, except for the provisions providing for payment
of principal and Purchase Price of, premium, if any, and interest to the
Bondholders.
ARTICLE IV
THE PROJECT
Section IV.1 Project Fund Disbursements. There is established with the
Trustee under the Indenture the Project Fund, the moneys in which, subject to
the terms hereof and of the Indenture, and subject to the security interest
therein granted by the Obligor to the Issuer, shall be the property of the
Obligor. Unless an Event of Default has occurred and is continuing which the
Trustee is required to take notice of or is deemed to have notice of pursuant to
Section 901(h) of the Indenture, the Trustee, as authorized by the Bank pursuant
to the Indenture, shall disburse to or for the benefit of the Obligor out of the
Project Fund the lesser of (a) the Project Costs, or (b) the proceeds of the
Bonds deposited in the Project Fund and investment income in the Project Fund.
Such disbursements shall be made from time to time to pay Project Costs so long
as there are moneys in the Project Fund, upon presentation of Requisition
Certificate(s) executed by the Obligor and approved for payment in writing by
the Bank. The Trustee may also disburse moneys out of the Project Fund to or for
the benefit of the Issuer upon the Obligor's failure to pay the fees, costs and
expenses of the Trustee or Issuance Costs as required by Section 5.2 hereof.
Disbursements from the Project Fund shall be made upon the Trustee's
receipt of an executed and approved Requisition Certificate.
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The Obligor shall also deliver or cause to be delivered to the Trustee
with a Requisition Certificate such other documents and certificates as may be
required by the Bank, it being understood that the Trustee shall have no duty to
review or approve such documents and certificates.
Upon the occurrence of an Event of Default under the Indenture, any
moneys in the Project Fund shall be transferred by the Trustee to the Bond Fund.
Upon request and with reasonable notice, the Obligor shall permit the
Trustee or the Issuer or its authorized agents to audit the records of the
Obligor relating to Project Costs during normal business hours.
Section IV.2 Obligation of the Obligor to Complete the Project. The
Obligor shall proceed with reasonable dispatch to complete the Project
substantially in accordance with the Plans. The Obligor may revise the Plans,
subject to the General Limitations and under the conditions contained in this
section.
The Issuer makes no warranty, either express or implied, and offers no
assurance as to the condition of the Project or that the Project is or will be
suitable for the Obligor's purposes, or that the proceeds derived from the sale
of the Bonds will be sufficient to pay all Project Costs, and the Issuer shall
not be liable to the Obligor if for any reason the Project is not completed. In
the event moneys in the Project Fund are insufficient to pay all Project Costs,
the Obligor will complete the Project and pay the Project Costs in excess of the
sum of moneys available in the Project Fund. By reason of the payment of any
such portion of the Project Costs, the Obligor shall not be entitled to any
reimbursement from the Issuer, the Trustee or the holders of the Bonds in
respect thereof or to any diminution or abatement in the Loan Repayments payable
under the Agreement.
Section IV.3 Completion Certificate. The Obligor shall as promptly as
practicable file with the Trustee, the Issuer and the Bank a certificate
substantially in the form of Exhibit C attached hereto when the Project is
complete. All moneys deposited in the Project Fund and not needed, as of the
Completion Date, to pay or reimburse Project Costs (which moneys shall be used
for such purposes if needed), shall, upon receipt of such certificate, and in
any event on the third anniversary hereof, be deemed Surplus Bond Proceeds and
shall be immediately transferred to the Bond Fund to be applied by the Trustee
in the manner provided in Section 4.4 of this Agreement.
Section IV.4 Use of Surplus Bond Proceeds. All moneys transferred to
the Bond Fund pursuant to the provisions of Section 4.3, Section 6.1 and Article
VII hereof ("Surplus Bond Proceeds") shall be applied by the Trustee for
redemption of the Bonds pursuant to Mandatory Redemption from Surplus Bond
Proceeds as provided in the Bond Forms Appendix to the Indenture or
reimbursement of the Bank for honoring a drawing under the Credit Facility for
such purpose, or may be used for any other purpose approved in writing by the
Bank which is permitted by the Act and which, in the opinion of Bond Counsel,
will not affect the exclusion from gross income for federal income tax purposes
of interest on the Bonds. Prior to such use, such Surplus Bond Proceeds shall
not be invested at a yield in excess of the yield on the Bonds, unless, in the
opinion of Bond Counsel, the investment of Surplus Bond Proceeds at a yield in
excess of the yield on the Bonds will not affect the exclusion from gross income
for federal income tax purposes of the interest on the Bonds.
In no event shall Surplus Bond Proceeds so transferred to the Bond Fund
or the investment income thereon be used to pay interest on the Bonds.
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ARTICLE V
OTHER PECUNIARY OBLIGATIONS OF THE OBLIGOR
Section V.1 Taxes and Other Costs. The Obligor shall promptly pay, as
the same become due, all lawful taxes and governmental charges of any kind
whatsoever, including without limitation income, profits, receipts, business,
property and excise taxes, with respect to any estate or interest in the
Project, the Agreement, the Loan or any payments with respect to the foregoing,
the costs of all building and other permits to be procured, and all utility and
other charges and costs incurred in the operation, maintenance, use, occupancy
and upkeep of the Project. The Obligor shall furnish the Issuer upon request
proof of payment of any such taxes, charges or costs. The Obligor may in good
faith contest, and during such contest not pay, any such taxes, charges and
costs, as provided in the Reimbursement Agreement.
Section V.2 Issuer Fees and Expenses. The Obligor shall pay all
Issuance Costs and other reasonable out-of-pocket costs and expenses of the
Issuer incidental to the performance of its obligations under the Agreement, the
Indenture and with respect to its authorization, sale and delivery of the Bonds,
including without limitation on or before the Effective Date the Issuer's
Issuance Fee, or reasonably incurred by the Issuer in enforcing the provisions
of the Agreement or the Indenture.
Section V.3 Fees and Expenses of the Trustee and Remarketing Agent. The
Obligor shall pay the reasonable fees, costs, expenses and advances of the
Trustee, and the Remarketing Agent under the Indenture for services rendered in
connection with the Bonds, the duties and services of such Trustee being set out
in the Indenture, and it shall pay the Trustee, in addition, all reasonable
out-of-pocket counsel fees, taxes and other fees, costs and expenses reasonably
incurred by the Trustee in performing its duties as Trustee and in entering into
the Indenture. All such payments shall be made as statements are rendered and
shall be made by the Obligor directly to the Trustee except to the extent fees,
costs, expenses and advances of the Trustee incurred in connection with the
issuance of the Bonds are paid from proceeds of sale of the Bonds.
Section V.4 Indemnification of the Issuer.
(a) The Issuer and its members, officers, agents and employees
(hereinafter, the "Indemnified Persons") shall not be liable to the Obligor for
any reason. The Obligor shall indemnify and hold the Issuer and the Indemnified
Persons harmless from any loss, expense (including reasonable counsel fees), or
liability of any nature due to any and all suits, actions legal or
administrative proceedings, or claims arising or resulting from, or in any way
connected with:
(i) the financing, installation, operation, use,
or maintenance of the Project,
(ii) any act, failure to act, or misrepresentation by
any person, firm, corporation or governmental agency,
including the Issuer, in connection with the issuance, sale,
remarketing or delivery of the Bonds,
(iii) any act, failure to act, or misrepresentation
by the Issuer in connection with this Agreement or any other
document involving the Issuer in this matter, or
(iv) the selection and appointment of firms providing
services to the Bond transaction.
If any suit, action or proceeding is brought against the Issuer or any
Indemnified Person, that action or proceeding shall be defended by counsel to
the Issuer or the Obligor, as the Issuer shall determine. If the defense is by
counsel to the Issuer, which is the Attorney General of the State, or may in
some instances be private, retained counsel, the Obligor shall indemnify the
Issuer and Indemnified Persons for the reasonable cost of that defense including
reasonable counsel fees. If the Issuer determines that the Obligor shall defend
the Issuer or Indemnified Person, the Obligor shall immediately assume the
defense at its own cost. The Obligor shall not be liable for any settlement of
any proceedings made without its consent (which consent shall not be
unreasonably withheld).
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(b) The Obligor shall also indemnify the Issuer for all
reasonable costs and expenses, including reasonable counsel fees, incurred in:
(i) enforcing any obligation of the Obligor
under this Agreement or any related agreement,
(ii) taking any action requested by the Obligor,
(iii)taking action required by this Agreement or any
related agreement, or
(iv) taking any action considered necessary by the
Issuer and which is authorized by this Agreement or any
related agreement.
(c) The obligations of the Obligor under this Section shall
survive any assignment or termination of this Agreement.
(d) The Obligor shall not be obligated to indemnify the Issuer
or any Indemnified Person under subsection (a) if a court with competent
jurisdiction finds that the liability in question was caused by the willful
misconduct or sole gross negligence of the Issuer or the involved Indemnified
Person(s), unless the court determines that, despite the adjudication of
liability but in view of all circumstances of the case, the Issuer or the
Indemnified Person(s) is (are) fairly and reasonably entitled to indemnity for
the expenses which the court considers proper.
Section V.5 Indemnification of the Trustee. The Obligor shall indemnify
and hold the Trustee harmless against any loss, liability or expense, including
reasonable attorneys' fees, or settlement costs incurred without breach of the
required standard of care set forth in the Indenture arising out of or in
connection with claims or actions taken under or pursuant to the Indenture,
including the costs and expenses of defense, including counsel selected by the
Trustee, against any such claim or action or liability. Notwithstanding anything
to the contrary in this Agreement, the Obligor expressly acknowledges and agrees
that the obligations and liabilities of the Obligor as set forth in this Section
5.5 shall survive the resignation or removal of the Trustee.
Section V.6 Insurance. The Obligor shall continuously insure against
such risks and in such amounts as are required under the Reimbursement
Agreement.
ARTICLE VI
PROJECT MAINTENANCE
Section VI.1 Maintenance and Operation; Removal from Site. The Obligor,
at its expense, shall maintain the Project in good condition, repair and working
order, and shall make or cause to be made from time to time all necessary
repairs, renewals and replacements, ordinary wear and tear and obsolescence
excepted. Any property comprising a portion of the Project and purchased with
Bond proceeds may not be removed from the site of the Project without the prior
written consent of the Bank and unless (i) other property of equivalent or
greater value and utility is substituted therefor or (ii) the proceeds of the
sale of such property are used in accordance with Section 1.2(a) hereof, subject
to the provisions of Section 1.2(b) hereof or (iii) the Obligor receives an
opinion of Bond Counsel that noncompliance with (i) or (ii) above will not
affect the exclusion of interest on the Bonds for federal income tax purposes
under the Code and the Act.
Section VI.2 Remodeling and Modifications. The Obligor may remodel or
modify the Project as it, in its discretion, may deem to be desirable for its or
any tenant's uses and purposes; provided that such remodeling or modifications
shall not violate the General Limitations. The cost of such remodeling,
modifications or improvements shall be paid by the Obligor.
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ARTICLE VII
DAMAGE TO PROJECT AND CONDEMNATION
In the event (i) the Project is damaged or destroyed, or (ii) failure
of title to all or part of the Project occurs or title to or temporary use of
the Project is taken in condemnation or by the exercise of the power of eminent
domain by any governmental body or by any person, firm or corporation acting
under governmental authority, the Obligor shall promptly give written notice
thereof to the Issuer, the Trustee and, if the Credit Facility is in effect at
the time, the Bank. As soon as practicable the Obligor shall elect in writing to
the Issuer, the Bank and the Trustee, and with the written consent of the Bank
as required by the Reimbursement Agreement, whether to deposit insurance or
condemnation proceeds in the Project Fund or in the Bond Fund. If the Obligor
shall elect to deposit such proceeds in the Project Fund, it shall proceed to
restore the Project with reasonable dispatch, and such moneys shall be disbursed
in accordance with Section 4.1 of this Agreement. If the Obligor shall elect to
deposit such proceeds in the Surplus Bond Proceeds Account in the Bond Fund,
such proceeds shall be used to redeem the Bonds to the extent of such proceeds
in the manner provided in the Indenture and in the Bond Forms Appendix under
Mandatory Redemption from Surplus Bond Proceeds. As long as any of the Bonds are
outstanding, absent an approving opinion of Bond Counsel, all such funds shall
not be invested at a yield in excess of the yield on the Bonds prior to their
expenditure.
ARTICLE VIII
ACTIONS AFFECTING OBLIGOR AND ISSUER
INTERESTS IN THE AGREEMENT AND THE PROJECT
Section VIII.1 Assignment of the Agreement. The Issuer shall assign its
rights under and interest in the Agreement (except Reserved Rights) and in all
moneys deposited in the various Funds under the Agreement and the Indenture to
the Trustee pursuant to the Indenture as security for payment of the principal
of and interest on the Bonds, and such assignment shall entitle the Trustee to
enforce any obligation of the Obligor under the Agreement. The Obligor hereby
consents to any and all assignments described in the preceding sentence or set
forth in the Indenture. The Issuer shall not amend the Indenture without the
written consent of the Obligor, the Trustee and the Bank, as provided in the
Indenture.
Pursuant to the Act, the assignment of the Issuer's rights and
interests pursuant to this Section 8.1 shall be valid and binding from the time
this assignment is made. The money or property pledged and thereafter received
by the Issuer immediately shall be subject to a lien in favor of the Trustee
without a physical delivery, filing, or any further act. The lien of the Trustee
shall be valid or binding as against parties having claims of any kind in tort,
contract, or otherwise, against the Issuer irrespective of whether the parties
have notice. Neither this Agreement, the Indenture, nor any other instrument by
which the assignment is made need be filed or recorded.
Section VIII.2 Obligor's Interest in the Agreement. The Obligor shall
not assign or transfer its rights or obligations under the Agreement, except as
permitted in the Agreement or consented to in writing by the Bank (which consent
may be granted or withheld in the Bank's sole discretion) and as long as the
General Limitations are complied with.
Section VIII.3 Liens by the Obligor. The Obligor shall not create or
permit the creation of any lien, encumbrance or charge upon the Project except
Permitted Encumbrances.
Section VIII.4 Security Interest in the Project Fund. To better secure
its obligations hereunder, including the obligation to pay Loan Repayments as
and when they are due, the Obligor hereby grants a security interest in the
moneys at any time held in the Project Fund, and any proceeds thereof, to the
Issuer and the Bank (to the extent the Trustee is directed to disburse such
moneys to the Bank pursuant to the Indenture) to be perfected by possession of
such moneys in the Project Fund by the Trustee and held therein for the benefit
of the Bondholders and Bank as provided in the Indenture.
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ARTICLE IX
FURTHER OBLIGATIONS OF THE OBLIGOR
Section IX.1 Compliance with Laws. The Obligor shall, throughout the
term of the Agreement and at no expense to the Issuer, promptly comply or cause
compliance with all legal requirements of duly constituted public authorities
which are applicable to the Project or to the repair and alteration thereof, or
to the use or manner of use of the Project. Notwithstanding the foregoing, but
subject to the General Limitations, the Obligor may exercise its rights to
contest the legality of any such legal requirement as applied to the Project
provided that in the opinion of Counsel such contest shall not in any way
materially adversely affect or impair the obligations of the Obligor under the
Agreement or the exclusion of interest on the Bonds from gross income for
federal income tax purposes.
Section IX.2 Maintenance of Assets; Ownership of Project.
(a) The Obligor, unless and until the Project shall be sold
and transferred to a new owner under paragraph (b) or (c) of this Section 9.2,
will do or cause to be done all things necessary to perform its obligations
under this Agreement and the other documents contemplated hereby and by the
Reimbursement Agreement. Except as provided in paragraph (b), the Obligor shall
not cause or permit the Project or any interest therein to be sold, assigned or
transferred.
(b) So long as no Event of Default shall have occurred and be
continuing hereunder, the Project may be conveyed and transferred and this
Agreement assigned to a new owner, which assignment must be in compliance with
the General Limitations and with the prior written consent of the Bank (which
consent may be granted or withheld in the Bank's sole discretion), and without
the consent of the Trustee or any Bondholder; provided that (i) the new owner
shall be a partnership, limited liability company or corporation duly organized
and validly existing in good standing under the laws of any state and qualified
to do business in Michigan and shall assume in writing the obligations of the
Obligor under this Agreement and the other documents contemplated hereby and
(ii) the Obligor shall, at least 30 days prior to any such assignment or
transfer, provide the Issuer and the Trustee with written notice of such
transfer accompanied by a copy of the assumption agreement and an opinion of
nationally recognized bond counsel that such transfer will not cause or result
in interest on the Bonds to be included in gross income for federal income tax
purposes.
(c) The Obligor shall at all times operate the Project or
cause the Project to be operated in strict compliance with the terms of this
Agreement so that it fulfills the public purposes of the Act.
Section IX.3 General Limitations with Respect to Non-Impairment of
Tax-Exempt Status of the Bonds. Notwithstanding any other provisions of the
Agreement or any rights of the Obligor under the Agreement, the Obligor shall
not take or permit to be taken by its agents or assigns any action which, or
fail to take any reasonable action the omission of which, would
(i) impair the exclusion of interest on the Bonds from
gross income for federal income tax purposes; or
(ii) affect the validity of the Bonds under the Act; or
(iii) materially alter the scope, character, value, operation
or utility of the Project.
In addition, the Obligor shall comply, for itself and on behalf of the Issuer,
with all requirements of the Code. The Issuer and the Trustee, upon notification
of action to be taken by the Obligor or prior to taking any action requested by
the Obligor under the Agreement may require at the expense of the Obligor, an
opinion of Counsel or an Engineer or both, as may be appropriate, in writing
with respect to compliance with the foregoing General Limitations.
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Section IX.4 Access to Project and Records. Subject to reasonable
security and safety regulations and reasonable requirements as to notice, the
Issuer, the Trustee, the Bank and their duly authorized agents shall have the
right at all reasonable times to enter and inspect the Project. The Issuer, the
Trustee, the Bank and their duly authorized agents shall also have the right to
inspect the books and records of the Obligor pertaining to the Project and the
Security (as defined in the Indenture), subject to reasonable requirements as to
notice and during regular business hours.
Section IX.5 Requirements of Tenants. If any portion of the Project is
leased to another person, the Obligor shall use its best efforts to require each
of its tenants occupying space in the Project within three years from the
Completion Date in provisions of its lease or by means of a written certificate
(a) to warrant and represent that it will not take or permit to be taken by its
agents or assigns any action which, or fail to take any action the omission of
which, would impair the exclusion of interest on the Bonds from gross income for
federal income tax purposes, including a violation of the capital expenditure
limitation of Section 144(a) of the Code, (b) to warrant and represent that it
will for a period of three years after the date of original issuance of the
Bonds, in the case of any tenant who occupies a sufficient portion of the
Project to be a principal user of the Project under Section 144(a) of the Code,
to file with the Obligor an annual report of its applicable capital
expenditures, (c) to attach to the lease or certificate, a certificate of
applicable capital expenditures within the Municipality for the period of three
years prior to the issuance of the Bonds and any contemplated capital
expenditures for a period of three years after the issuance of the Bonds, and
(d) to attach to the lease or certificate a Prior Issue Certificate in the form
attached hereto as Exhibit E.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section X.1 Events of Default. The term "Event of Default" shall mean,
whenever used in the Agreement, any one or more of the following events:
(a) Failure by the Obligor to pay any Loan Repayments in the
amounts and at the times provided in the Agreement, but if and only if the Bank
has, after demand under the Credit Facility, failed to pay the amount of such
Loan Repayment as and when due.
(b) Failure by the Obligor to observe and perform any other
obligations in this Agreement on its part to be observed or performed for a
period of 30 days after written notice specifying such failure and requesting
that it be remedied, given to the Obligor by the Issuer, the Bank or the
Trustee; provided, however, that if such Default shall be such that it cannot be
corrected within such period, it shall not constitute an Event of Default if the
Default is correctable without material adverse effect on the Bonds and if
corrective action is instituted by the Obligor within such period and is
diligently pursued until the Default is corrected.
(c) Any representation or warranty made by the Obligor in any
document delivered by the Obligor to the initial purchasers, the Trustee, the
Bank or the Issuer in connection with the issuance, sale and delivery of the
Bonds is untrue in any material adverse respect.
(d) The occurrence of an Event of Default under the Indenture.
(e) The occurrence of an Event of Default under the
Reimbursement Agreement.
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<PAGE> 20
The Events of Default described in subsection (b) above are also
subject to the following limitation: If the Obligor by reason of force majeure
is unable to carry out or observe the obligations described in such subsection
(b), the Obligor shall not be deemed to be in breach or violation of this
Agreement or in default during the continuance of such inability. The term
"force majeure" as used herein shall include, without limitation, acts of public
enemies; insurrections; riots; epidemics; landslides; lightning; earthquake;
fire; hurricanes; tornadoes; storms; floods; washouts; droughts; arrests; civil
disturbances; labor disturbances or strikes; explosions; breakage or accident to
machinery, transmission pipes or canals; partial or entire failure of utilities;
or any other cause or event other than financial inability not reasonably within
the control of the Obligor. The Obligor agrees, however, insofar as possible, to
remedy with all reasonable dispatch the causes preventing it from carrying out
its agreement; provided, however, that the settlement of strikes, lockouts and
other industrial disturbances shall be entirely within the exercise of the
reasonable discretion of the Obligor.
Section X.2 Remedies upon Event of Default. Whenever any Event of
Default shall have occurred and be continuing, the Issuer, with the consent of
the Trustee, or the Trustee acting alone, shall have and may exercise any one or
more of the following remedial powers:
(a) If the principal of and interest accrued on the Bonds
shall have been declared immediately due and payable pursuant to the Indenture,
to declare all Loan Repayments payable under Section 3.2 for the remainder of
the term of the Agreement to be immediately due and payable, whereupon the same
shall become immediately due and payable; provided, however, that, if the
Trustee shall annul any such declaration pursuant to the Indenture, the
declaration provided for in this clause (a) shall be deemed annulled;
(b) If the principal of and interest accrued on the Bonds
shall have been declared immediately due and payable pursuant to the Indenture,
to institute any actions or proceedings at law or in equity for the collection
of Loan Repayments or other sums due and unpaid under the Agreement, to
prosecute any such action or proceeding to judgment or final decree, and to
enforce any such judgment or final decree and collect in the manner provided by
law any moneys adjudged or decreed to be payable; and
(c) In case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Obligor under the federal bankruptcy
laws or any other applicable law, or in case a receiver or trustee shall have
been appointed for the property of the Obligor, to file and prove a claim or
claims for the whole amount owing under the Agreement plus interest owing and
unpaid in respect thereof and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee allowed in such judicial proceedings
relative to the Obligor, its creditors, or its property, and to collect and
receive any moneys or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of its charges and expenses.
In case the Trustee or the Issuer shall have proceeded to exercise or
enforce any right or remedy under the Agreement and such proceeding shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely, then and in every such case, the Obligor, the Issuer and the Trustee
shall be restored to their respective rights and positions hereunder and all
rights and remedies of the Obligor, the Issuer and the Trustee shall continue as
though no such proceeding had been taken, but subject to the limitations of any
such adverse determination.
Any amounts collected pursuant to action taken under this Section shall
be paid into the Bond Fund and applied in accordance with the Indenture, except
amounts collected pursuant to Article V for the benefit of the Issuer or the
Issuer's Agents, which shall be paid to and retained by the Issuer.
Section X.3 Payment of Attorneys' Fees and Other Expenses. In the event
the Obligor should default under any of the provisions of the Agreement and the
Issuer and/or the Trustee should employ attorneys or incur other expenses for
the collection of the Loan or for the enforcement of performance or observance
of any obligation of the Obligor in the Agreement or any other document related
to the issuance of and security for the Bonds, the Obligor shall on demand
therefor pay to the Issuer or the Trustee, or both, as the case may be, the
reasonable fees of such attorneys and such other reasonable expenses so
incurred.
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Section X.4 Waivers and Limitation on Waivers. By reason of the
assignment of the Issuer's rights and interest in the Agreement to the Trustee,
the Trustee shall have the power with the consent of the Bank to, and shall if
requested by the Bank, waive or release the Obligor from any Event of Default or
the performance or observance of any obligation or condition of the Obligor
under the Agreement, provided such waiver or release is not prohibited by the
Indenture and the Trustee and the Issuer receive an opinion of Counsel that such
action will not impose any pecuniary obligation or liability or adverse
consequence upon the Issuer or the Trustee and the Issuer and the Trustee shall
have each been provided such indemnification from the Obligor as the Issuer or
the Trustee shall deem necessary, and provided that, with respect to a waiver of
an Event of Default such waiver shall be limited to the particular Event of
Default so waived and shall not be deemed to waive any other Event of Default
hereunder nor a waiver of a similar Event of Default on a future occasion.
No delay or omission to exercise any right occurring upon any Event of
Default shall impair any such right or shall be construed to be a waiver
thereof, but any such right may be exercised from time to time and as often as
may be deemed expedient. In order to exercise any remedy reserved to the Issuer
or the Trustee in this Agreement, it shall not be necessary to give any notice
other than such notice as may be herein expressly required. Notwithstanding
anything to the contrary contained herein, the Obligor does not waive any
statute of limitations under applicable law.
ARTICLE XI
OBLIGATIONS OF OBLIGOR UNCONDITIONAL
Section XI.1 Obligor Obligations. The obligation of the Obligor to make
Loan Repayments and the payments required by Article V hereof and to perform its
other covenants hereunder shall be absolute and unconditional and shall not be
subject to any diminution by right of set-off, counterclaim, recoupment or
otherwise. During the term hereof, the Obligor (i) shall not suspend or
discontinue its Loan Repayments, (ii) shall perform and observe all of its other
obligations contained herein and (iii) except as explicitly permitted herein,
shall not terminate the Agreement for any cause including, without limiting the
generality of the foregoing, defect in title to the Project, failure to complete
the Project, any acts or circumstances that may constitute failure of
consideration, eviction or constructive eviction, destruction or damage to or
condemnation of the Project, commercial frustration of purpose, any change in
the tax or other law by the United States of America or the State or any
political subdivision of either, or any failure of the Issuer to perform and
observe any obligation or condition arising out of or connected with the
Agreement. This shall not be construed to release the Issuer from the
performance of any of its obligations under the Agreement; and in the event the
Issuer shall fail to perform any such obligation, the Obligor may institute such
action against the Issuer as the Obligor may deem necessary to compel
performance; provided, however, that no such action shall violate this Section
or diminish Loan Repayments. The Obligor may at its own cost and expense and in
its own name or in the name of the Issuer, prosecute or defend any action or
proceedings or take any other action involving third persons which the Obligor
deems reasonably necessary in order to secure or protect its rights under the
Agreement, and in such event the Issuer shall cooperate fully with the Obligor.
ARTICLE XII
MISCELLANEOUS
Section XII.1 Amounts Remaining in Funds. Any amounts remaining in the
Bond Fund, the Purchase Fund or the Project Fund upon expiration or sooner
termination of the Agreement as herein provided, after payment in full of the
Bonds (or provision therefor) in accordance with the Indenture, and all other
costs and expenses of the Obligor specified under Article V, and all amounts
owing the Issuer, the Trustee, the Bank, and the Remarketing Agent under the
Agreement, the Indenture and the Reimbursement Agreement, shall be paid to the
Obligor.
Section XII.2 Obligor Bound by Indenture. The Obligor, by execution of
this Agreement, acknowledges and agrees that it has participated in the drafting
of the Indenture and agrees that it has approved the Indenture and agrees that
it is bound by and shall have the rights set forth by the terms and conditions
thereof and covenants and agrees to perform all obligations required of the
Obligor pursuant to the terms of the Indenture.
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<PAGE> 22
Section XII.3 Consents Under the Agreement. Unless otherwise expressly
provided herein, all consents permitted or required to be given under the
Agreement by the Issuer or the Trustee shall be reasonable and shall not be
unreasonably withheld or delayed.
Section XII.4 Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
on the date shown as delivered when mailed by registered or certified mail,
postage prepaid, return receipt requested, addressed to the Issuer, the Obligor,
the Bank, the Remarketing Agent or the Trustee, as the case may be, at the
Issuer's Address, the Obligor's Address, the Bank's Address, the Remarketing
Agent's Address or the Trustee's Address, respectively, or hand delivered to the
above at their respective addresses. A duplicate copy of each such notice,
certificate or other communication given hereunder to the Issuer, the Obligor,
the Bank, the Remarketing Agent or the Trustee shall also be given to the
others.
The Issuer, the Obligor, the Bank, the Remarketing Agent and the
Trustee may, by written notice to the other parties, designate any further or
different addresses to which subsequent notices, certificates or communications
shall be sent.
Section XII.5 Amendment. The Agreement may be amended only as provided
in the Indenture, and no amendment to the Agreement shall be binding upon either
party hereto until such amendment is reduced to writing and executed by the
parties hereto.
Section XII.6 Binding Effect. The Agreement shall be binding upon the
parties hereto and upon its respective successors and assigns, and the words
"Issuer" and "Obligor" shall include the parties hereto and their respective
successors and assigns and include any gender, singular and plural, any
individuals, partnerships, limited liability companies or corporations.
Section XII.7 Severability. If any clause, provision or section of the
Agreement be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any of the remaining clauses, provisions or sections.
Section XII.8 Execution in Counterparts. The Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
Section XII.9 Captions and Table of Contents. The captions or headings
and the Table of Contents in the Agreement are for convenience only and in no
way define, limit or describe the scope or intent of any provisions of the
Agreement.
Section XII.10 Applicable Law. The Agreement shall be governed in all
respects, whether as to validity, construction, performance or otherwise, by the
laws of the State.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
duly executed as of the day and year first above written.
MICHIGAN STRATEGIC FUND
(Issuer)
By:____________________________
Its: Authorized Officer
AUTOCAM CORPORATION
(Obligor)
By:____________________________
Its: Chief Financial Officer
E-110
<PAGE> 24
EXHIBIT APROJECT DESCRIPTION
The Project consists of the acquisition of land, the construction of an
approximately 56,000 square foot manufacturing facility and the acquisition and
installation of machinery and equipment in the City of Marshall, County of
Calhoun, Michigan.
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<PAGE> 25
EXHIBIT B
REQUISITION CERTIFICATE
TO: Norwest Bank Wisconsin, N.A., as Trustee
FROM: Autocam Corporation (the "Obligor")
SUBJECT: $9,000,000 Michigan Strategic Fund Variable Rate Demand
Limited Obligation Revenue Bonds, Series 1997
(Autocam Corporation Project)
This represents Requisition Certificate No. ________ in the total
amount of $___________ to pay those costs of the Project detailed in the
schedule attached.
The undersigned does certify that:
1. The expenditures for which moneys are requisitioned hereby
represent proper charges against the Project Fund of the
subject bond issue, have not been included in a previous
requisition and have been properly recorded on the Obligor's
books.
2. The moneys requisitioned hereby are not greater than those
necessary to meet obligations due and payable or to reimburse
the Obligor for its funds actually advanced for costs of the
Project and do not represent a reimbursement to the Obligor
for working capital.
3. The Obligor is not in default under the Agreement and nothing
has occurred to the knowledge of the Obligor that would
prevent the performance of its obligations under the
Agreement.
4. In the event moneys in the Project Fund after payment of
moneys herein requested are insufficient to pay Project Costs,
the Obligor will pay such additional Project Costs as are
incurred from such other funds which are available for such
purpose.
5. All of the property acquired with the moneys hereby requested
will be owned by the Obligor.
6. The sum of (A) moneys requisitioned hereby to pay (or
reimburse the Obligor of its prior payment of) issuance costs
of the Bonds (within the meaning of Section 147(g) of the
Internal Revenue Code of 1986, as amended), plus (B) the total
moneys previously disbursed from the Project Fund and
similarly applied, does not exceed $180,000 (which is 2% of
the face amount of the Bonds).
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<PAGE> 26
7. Delivered herewith are the following requested certificates,
sworn statements, waivers of lien, surveys, invoices,
architect's certificates and other documents:
Executed this _______ day of ____________, 199____.
AUTOCAM CORPORATION,
(Obligor)
By:_______________________________________
Authorized Obligor Representative
Approved By:
COMERICA BANK, as Issuer of the Credit Facility
By:________________________________________
Its:_______________________________________
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<PAGE> 27
SCHEDULE TO REQUISITION CERTIFICATE NO. ______________
Payee and Address Description of Property or Services Provided Amount
- ----------------- -------------------------------------------- ------
E-114
<PAGE> 28
EXHIBIT C
COMPLETION CERTIFICATE
TO: Michigan Strategic Fund (the "Issuer"),
Comerica Bank (the "Bank") and
Norwest Bank Wisconsin, N.A., as Trustee (the "Trustee")
FROM: Autocam Corporation (the "Obligor")
SUBJECT: $9,000,000 Michigan Strategic Fund Variable Rate Demand
Limited Obligation Revenue Bonds, Series 1997
(Autocam Corporation Project)
The undersigned does hereby certify:
1. The Project has been completed in accordance with the Plans
and in such manner as to conform with all applicable zoning,
planning and building regulations of the governmental
authorities having jurisdiction of the Project, as of the date
of this Certificate (the "Completion Date").
2. The Costs of the Project have been paid in full except for
those not yet due and payable, which are described below and
for which moneys for payment thereof are being held in the
Project Fund:
(a) Cost of the Project not yet due and payable:
<TABLE>
<CAPTION>
Description Amount
<S> <C> <C>
$__________
TOTAL $_____________
(b) Payments being contested:
<CAPTION>
Description Amount
<S> <C> <C>
TOTAL $_____________
</TABLE>
3. The moneys in the Project Fund in excess of the totals set
forth in 2(a) and (b) above represent Surplus Bond Proceeds
and the Trustee is hereby authorized and directed to apply
such moneys pursuant to Section 4.4 of the Agreement.
4. No Event of Default has occurred under the Agreement or the
Reimbursement Agreement nor has any event occurred which with
the giving of notice or lapse of time or both shall become
such an Event of Default. Nothing has occurred to the
knowledge of the Obligor that would prevent the performance of
its obligations under the Agreement or the Reimbursement
Agreement.
This certificate is given without prejudice to any rights against third
parties which exist at the date hereof or which may subsequently come into
being.
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<PAGE> 29
Capitalized terms used herein have the meanings given them in the Trust
Indenture for the Bonds.
Executed this ______ day of ___________________, 19____
AUTOCAM CORPORATION
(Obligor)
By:______________________________________
Authorized Obligor Representative
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<PAGE> 30
EXHIBIT D
NO ACT OF BANKRUPTCY CERTIFICATE
TO: Comerica Bank, as issuer of the Credit Facility (the "Bank")
and Norwest Bank Wisconsin, N.A., as Trustee (the "Trustee")
FROM: Autocam Corporation (the "Obligor")
SUBJECT: $9,000,000 Michigan Strategic Fund Variable Rate Demand
Limited Obligation Revenue Bonds, Series 1997
(Autocam Corporation Project)
The undersigned does hereby certify to the Trustee and the Bank that,
during and prior to the period beginning _____________________________ and
continuing until the date hereof, no Act of Bankruptcy (as defined in that
certain Loan Agreement, dated as of December 1, 1997, between the undersigned
and the Michigan Strategic Fund) shall have occurred.
The Obligor acknowledges that the Trustee and the Bank may conclusively
rely on this Certificate.
Under penalties of perjury, this certificate has been executed this
_____ day of __________________, 19______, by the Obligor.
AUTOCAM CORPORATION
(Obligor)
By:_______________________________________
Authorized Obligor Representative
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<PAGE> 31
EXHIBIT E
PRIOR ISSUE CERTIFICATE
(To be attached as an addendum to any
sale, assignment, or lease of the Project)
The undersigned hereby executes this Prior Issue Certificate for the
purposes of enabling Autocam Corporation, a Michigan corporation (the
"Obligor"), as obligor on an issue of $9,000,000 Michigan Strategic Fund
Variable Rate Demand Limited Obligation Revenue Bonds, Series 1997 (Autocam
Corporation Project) (the "Bonds"), to comply with a provision of a Loan
Agreement, dated as of December 1, 1997 (the "Agreement"), by and between the
Obligor and the Michigan Strategic Fund, such provision being intended to
prevent the loss of the exclusion from gross income for Federal income tax
purposes of the interest on the Bonds by reason of Code Section 144. The
undersigned undertakes and confirms that the Obligor is relying upon the
information and representations contained herein, and that such information and
representations are correct and complete. Failure to supply the correct
information on this Certificate, notwithstanding anything in the Loan Agreement
to the contrary, constitutes a breach of the Loan Agreement.
The undersigned hereby certifies that the face amount of all
outstanding tax-exempt facility-related bonds ("IDBs") allocated to the
undersigned at the time the Bonds were issued pursuant to Code ss. 144(a)(10)
was $______________. This is an amount which bears the same relationship to the
face amount of the outstanding tax-exempt IDBs as the portion of the facilities
financed by such IDBs used by the undersigned bears to all such facilities
financed, or as the portion of the facilities owned by the undersigned bears to
all such financed facilities.
The undersigned hereby certifies that the face amount of the Bonds
allocated to the undersigned, based upon the percentage of use or the percentage
of ownership or use by the undersigned in the Bond-financed facility, is
$______________________.
The undersigned does hereby certify that he or she is a duly authorized
officer of the proposed _____________________________, as indicated under his or
her signature, and that he or she has been authorized to furnish the information
and representations contained herein for use by the Obligor.
__________________________________________
(Purchaser, Lessee, Sublessee, or Assignee)
By:_____________________________
Dated:_________________________ Its:____________________________
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<PAGE> 32
REIMBURSEMENT AGREEMENT
BETWEEN
COMERICA BANK
AND
AUTOCAM CORPORATION
Relating to:
$9,000,000 Michigan Strategic Fund,
Variable Rate Demand Limited Obligation Revenue Bonds
(Autocam Corporation Project), Series 1997
Dated as of December 1, 1997
E-119
<PAGE> 33
TABLE OF CONTENTS
Page
<TABLE>
<S> <C> <C>
SECTION 1. Reimbursement and Other Payments -1-
SECTION 2. Issuance of Letter of Credit -3-
SECTION 3. Conditions Precedent to the Issuance of the Letter of Credit -4-
SECTION 4. Obligations Absolute -6-
SECTION 5. Representations and Warranties -6-
SECTION 6. Affirmative Covenants -9-
SECTION 7. Negative Covenants of the Obligor -11-
SECTION 8. Events of Default -11-
SECTION 9. Collateral Security -12-
SECTION 10. Amendments, Waivers, Etc -12-
SECTION 11. Addresses for Notices -12-
SECTION 12. No Waiver; Remedies -13-
SECTION 13. Indemnification -13-
SECTION 14. Continuing Obligation -14-
SECTION 15. Transfer of Letter of Credit -14-
SECTION 16. Liability of the Bank -14-
SECTION 17. Costs, Expenses and Taxes -15-
SECTION 18. Disbursements -15-
SECTION 19. Insurance -16-
SECTION 20. Condemnation -17-
SECTION 21. Severability -17-
SECTION 22. Governing Law -17-
SECTION 23. Authorized Signers -17-
SECTION 24. Headings -17-
SECTION 25. Waiver of Jury Trial -17-
EXHIBIT A IRREVOCABLE LETTER OF CREDIT A-1
EXHIBIT B AMORTIZATION SCHEDULE B-1
EXHIBIT C REDEMPTION NOTICE C-1
</TABLE>
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<PAGE> 34
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT (the "Agreement"), dated as of December 1, 1997 (the
"Execution Date") by and between Autocam Corporation, a Michigan corporation,
whose address is 4070 East Paris Avenue, S.E., Kentwood, MI 49512 (the
"Obligor") and COMERICA BANK, a Michigan banking corporation, whose address is
1000 Campau Square Plaza, 99 Monroe Avenue, N.W., Grand Rapids, MI 49503 (the
"Bank").
WITNESSETH:
WHEREAS, the Obligor has requested the Michigan Strategic Fund (the
"Issuer") to finance a part of the cost of the acquisition, construction and
equipping of new production facilities (including machinery and equipment) to be
located in the L. ALTA Brooks Industrial Park in the City of Marshall, Michigan
(the "Project"), by the issuance and sale, pursuant to a Trust Indenture, dated
as of December 1, 1997 (the "Indenture"), naming Norwest Bank Wisconsin, N.A. as
trustee (the "Trustee"), of $9,000,000 principal amount of the Issuer's Variable
Rate Demand Limited Obligation Revenue Bonds, Series 1997 (Autocam Corporation
Project) (the "Bonds") to the purchaser or purchasers thereof (the "Bond
Purchasers"); and
WHEREAS, in order to induce the Bond Purchasers to purchase the Bonds, the
Obligor has requested that the Bank issue an irrevocable letter of credit (such
letter of credit and any successor letter of credit as described in Section 2 of
this Agreement being herein called the "Letter of Credit"), in an amount not to
exceed $9,138,082.19 (such amount being herein called the "Letter of Credit
Amount") to secure payment of the principal of, purchase price of, and interest
on, the Bonds.
NOW, THEREFORE, in consideration of the premises, the Obligor and the Bank
hereby agree as follows:
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<PAGE> 35
SECTION 1. Reimbursement and Other Payments.
(a) The Obligor hereby agrees with the Bank as follows: (i) to pay the
Bank, following payment by the Bank of any draft presented under a
Letter of Credit other than a "Purchase Draft" (as defined in the
Letter of Credit), and on the same day on which such draft is so paid,
a sum (and interest on such sum as provided in clause (iii) below)
equal to the amount so paid under the Letter of Credit plus any and all
reasonable charges and expenses which the Bank may pay or incur
relative to such Letter of Credit; (ii) to pay the Bank, following
payment by the Bank of a Purchase Draft, and on the same day on which a
Purchase Draft is paid, an amount equal to the accrued interest paid by
such payment, plus sums from time to time in installments sufficient to
maintain the amortization schedule for the Bonds, which schedule is
attached hereto as Exhibit B, together with interest on such moneys
outstanding at a fluctuating interest rate per annum (computed on the
basis of a 360 day year for the actual number of days elapsed) as shall
be in effect from time to time, which rate per annum shall be equal to
the rate publicly announced by the Bank as its "Prime Rate" (the "Prime
Rate"), but such interest rate shall in no event be higher than the
maximum rate permitted by law, which interest shall be payable monthly;
and (iii) to pay the Bank, interest on any and all amounts remaining
unpaid by the Obligor hereunder, other than the principal portion of a
Purchase Draft following a Purchase Draft, at any time from the date
any such amount becomes payable until payment in full, payable on
demand, at a fluctuating interest rate per annum (computed on the basis
of a 360 day year for the actual number of days elapsed) as shall be in
effect from time to time, which rate per annum shall be equal to three
percent (3%) above its Prime Rate, provided that such fluctuating
interest rate shall in no event be higher than the maximum rate
permitted by law and, in addition, upon demand by the Bank any and all
reasonable expenses including but not limited to legal expenses
incurred by the Bank in enforcing any rights under this Agreement or
any other collateral agreement entered into in conjunction herewith.
(b) In addition, the Obligor hereby agrees to pay to the Bank a commission
with respect to the Letter of Credit, computed (on the basis of a year
of 360 days for the actual number of days elapsed) at the rate of
five-eighths percent (5/8%) per annum on the Letter of Credit Amount
(or, in the event, and effective the date, of any reduction in the
maximum amount available under the Letter of Credit in accordance with
the terms thereof, on such smaller amount to which the maximum amount
available under the Letter of Credit may have been so reduced from time
to time) from and including the date of issuance of the Letter of
Credit to but excluding the last day a drawing is available under the
Letter of Credit (the "Expiration Date"), payable in advance in annual
installments, on the first day of December of each year until the
Expiration Date; provided, that the first installment shall be payable
on the date of issuance of the Letter of Credit for the period from and
including such date of issuance until December 1, 1998. If the
Expiration Date occurs on a day before the date to which commission has
been prepaid under this Section 1(b), the Bank agrees to repay to the
Obligor, promptly after the Expiration Date, such portion of such
commission as is allocable to the period from and including the
Expiration Date until the day to which such commission has been
prepaid; provided, that the Bank shall not be obligated to repay any
portion of such commission at any time if at the close of the Bank's
business on the Expiration Date there exists an Event of Default under
this Agreement.
(c) In addition, a $100 fee shall be payable by the Obligor at the time of
each drawing on the Letter of Credit and a fee of $1,500 shall be paid
by the Obligor upon the transfer of the Letter of Credit to a new
trustee, except for a transfer at the request of the Bank.
(d) If any change in any law or regulation or in the interpretation thereof
by any court or administrative or governmental authority charged with
the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit, limitation or similar
requirement against letters of credit issued by, or assets held by, or
deposits in or for the account of, the Bank or (ii) impose on the Bank
any other condition regarding this Agreement or the Letter of Credit,
and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost to the Bank of issuing or maintaining the
Letter of Credit (which increase in cost shall be determined by the
Bank's reasonable allocation of the aggregate of such cost increases
resulting from such events), then, upon demand by the Bank, the Obligor
shall immediately pay to the Bank, from time to time as specified by
the Bank, additional amounts which shall be sufficient to compensate
the Bank for such increased cost, together with interest on each such
amount from the date demanded until payment in full thereof at the rate
provided in subsection (a) above. A certificate as to such increased
cost incurred by the Bank as a result of any event mentioned in clause
(i) or (ii) above, submitted by the Bank to the Obligor, shall be
conclusive as to the amount thereof.
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<PAGE> 36
(e) All payments by the Obligor to the Bank hereunder shall be made in
lawful money of the United States and in immediately available funds at
the Bank's office at the address set forth above or in another matter
acceptable to the Bank. All such payments shall be charged when due to
account at the Bank, No. 1840378044 (or any other deposit or other
account of the Obligor maintained with the Bank and designated as a
replacement therefor); provided, however, this authorization shall not
affect Obligor's obligation to pay, when due, any indebtedness
hereunder whether or not account balances are sufficient to pay amounts
due.
SECTION 2. Issuance of Letter of Credit. On or before December 31, 1997,
upon written notice from the Obligor to the Bank and subject to the satisfaction
of the conditions precedent specified in Section 3 below, the Bank will issue
the Letter of Credit in substantially the form of Exhibit A hereto, in favor of
the Trustee and expiring no later than December 16, 2000 (the "Expiration
Date"). So long as no Event of Default has occurred and is continuing, on
December 1 of each year (the "Anniversary Date"), beginning December 1, 1998,
the Expiration Date shall automatically be extended for an additional year,
unless the Bank has notified the Obligor in writing on or before such
Anniversary Date of the Bank's intention not to extend the Expiration Date. The
Bank agrees to process an amendment to the Letter of Credit extending the
Expiration Date promptly upon each extension. This procedure for the automatic
extension of the Letter of Credit shall be applicable to successive Anniversary
Dates, so long as the Letter of Credit shall not have been terminated as
provided therein; provided, however, that the Expiration Date shall not be
extended beyond December 16, 2012.
SECTION 3. Conditions Precedent to the Issuance of the Letter of Credit. The
obligation of the Bank to issue the Letter of Credit is subject to the
satisfaction of the following conditions precedent:
(a) On or before the date of issuance of the Letter of Credit, the Obligor
shall have paid to the Bank the commission payable on such date of
issuance under Section 1(b) above.
(b) On or before the date of issuance of the Letter of Credit, the Bank
shall have received the following, each dated contemporaneous with the
date of issuance of the Letter of Credit and in form and substance
satisfactory to the Bank:
(i) certified copies of resolutions of the Board of Directors of
the Obligor approving this Agreement, the form and content of
the Letter of Credit and the other matters and documents
contemplated hereby.
(ii) a certificate of the Secretary or an Assistant Secretary (or
other authorized officer or representative) of the Obligor,
certifying the names and true signatures and incumbency of the
officers of the Obligor authorized to sign this Agreement and
the other documents to be delivered by it hereunder.
(iii) a certified copy of the Articles of Incorporation of the
Obligor and a certificate of good standing for the Obligor from
each jurisdiction in which its conduct or activities require it
to be licensed to do business.
(iv) a full set of the Obligor's Bylaws duly certified by the
Secretary or an Assistant Secretary (or other authorized
officer) of the Obligor.
(v) a favorable opinion of Dickinson, Wright, Moon, VanDusen &
Freeman, counsel for the Obligor, in form and substance
satisfactory to the Bank.
(vi) a favorable opinion of Howard & Howard Attorneys, P.C., as
Bond Counsel, in form and substance satisfactory to the Bank.
(vii) a favorable opinion of Miller, Canfield, Paddock and Stone,
P.L.C. as counsel for the Bank, in form and substance
satisfactory to the Bank.
(viii) an executed copy of the Indenture (or a copy thereof
certified as to authenticity by the Trustee).
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<PAGE> 37
(ix) an executed copy of that certain Loan Agreement dated as of
the Execution Date between the Issuer and the Obligor (the "Loan
Agreement") (or a copy thereof certified as to authenticity by
Counsel for or an agent of the Issuer).
(x) counterpart originals of the mortgages, security agreements,
guarantees and other documents constituting the Collateral
Documents (as defined in Section 9 of this Agreement) together
with evidence of such recordings, filings of financing
statements or of other actions necessary or desirable to
establish the priority of lien in the Collateral Security (as
defined in Section 9 of this Agreement) as the Bank may require.
(xi) a copy of the preliminary Offering Circular and the final
Offering Circular (together with the documents incorporated
therein by reference, herein called the "Offering Circular") of
the Issuer relating to the Bonds.
(xii) an executed original of that certain Pledge and Security
Agreement dated as of the Execution Date between the Obligor,
the Bank and the Trustee.
(xiii) a revocable redemption notice to the Trustee with respect to
redemptions required by Section 6(c) hereof in the form of
Exhibit C hereto.
(xiv) such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies
thereof) or opinions as the Bank may reasonably request.
(c) The following statements shall be true and correct on and as of the
date of issuance of the Letter of Credit, and the execution of this
Agreement by a duly authorized officer of the Obligor shall be a
confirmation of the following:
(i) the representations and warranties contained in Section 5 of
this Agreement are correct on and as of the date of such
issuance as though made on and as of such date; and
(ii) no event has occurred which constitutes an Event of Default
(as defined in Section 8 hereof) or which would constitute an
Event of Default but for the requirement that notice be given
or time elapse or both, nor will the issuance of the Letter of
Credit give rise to the occurrence of an Event of Default.
(d) On or before the day of the issuance of the Letter of Credit:
(i) the Issuer and the Trustee shall have duly authorized and
executed the Indenture and the Indenture shall continue to be in
full force and effect;
(ii) the Issuer and the Obligor shall have duly authorized and
executed the Loan Agreement and the Loan Agreement shall
continue to be in full force and effect;
(iii) the Obligor, or any other entity or person required to
deliver the same, shall have duly authorized and executed the
Collateral Documents and the Collateral Documents shall
continue to be in full force and effect; and
(iv) the Issuer and the Underwriter shall have duly authorized and
executed the Bond Purchase Agreement (the "Bond Purchase
Agreement") relating to the Bonds, which shall continue to be in
full force and effect, and the Issuer shall have issued and
delivered the Bonds under the Bond Purchase Agreement.
SECTION 4. Obligations Absolute. The payment obligations of the Obligor
under this Agreement shall be absolute, unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances, either alleged or established:
(a) any lack of validity or enforceability of the Letter of Credit, the
Bonds, the Indenture, the Loan Agreement or any other agreement or
instrument relating thereto;
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<PAGE> 38
(b) any amendment or waiver of or any consent to departure from all or any
of the foregoing;
(c) the existence of any claim, set-off, defense or other right which the
Obligor may have at any time against the Trustee, any beneficiary or
any transferee of the Letter of Credit (or any persons or entities for
whom the Trustee, any such beneficiary or any such transferee may be
acting), the Bank or any other person or entity, whether in connection
with this Agreement, the transactions contemplated herein or any
unrelated transaction;
(d) any statement or any other document presented under the Letter of
Credit proving to be erroneous, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) payment by the Bank in good faith under the Letter of Credit against
presentation of a draft or certificate under circumstances where the
draft or certificate is noncomplying in one or more respects; or
(f) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
SECTION 5. Representations and Warranties. The Obligor represents and
warrants as of the Execution Date, as follows:
(a) It is a legal entity duly created, validly existing and
in good standing under the laws of the State of Michigan and is
qualified and in good standing in every jurisdiction in which its
business or activities requires qualification.
(b) The execution, delivery and performance by the Obligor of this
Agreement, the Loan Agreement, the Pledge and Security Agreement, and
the Collateral Documents, as the case may be, are within the Obligor's
legal powers, have been duly authorized by all necessary legal action,
do not contravene or violate (i) the Articles of Incorporation or
Bylaws of the Obligor, (ii) any law, order, rule or regulation
applicable to the Obligor, (iii) any contract or agreement to which the
Obligor is a party or by which it is bound and does not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant to the Collateral Documents, this
Agreement, the Indenture, the Pledge and Security Agreement or the Loan
Agreement) upon or with respect to any of its properties.
(c) All registration with, authorizations by, or approvals of any
governmental body required to be obtained by the Obligor for the
execution, delivery and performance of this Agreement, the Loan
Agreement, the Pledge and Security Agreement and the Collateral
Documents have been obtained and remain in full force and effect.
(d) This Agreement, the Loan Agreement, the Pledge and Security
Agreement, and the Collateral Documents are legal, valid and binding
obligations of the Obligor, enforceable against it in accordance with
their respective terms, except as enforceability may be subject, to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally.
(e) There is not pending or, to the knowledge of the Obligor,
threatened any action or proceeding before any court, governmental
agency or arbitrator against or affecting the Obligor which, if
determined adversely to the Obligor, would materially and adversely
affect the financial condition or operations of the Obligor, except as
previously disclosed to the Bank in writing or as set forth in the
annual financial statements of the Obligor for the fiscal year ending
June 30, 1997 and, and as to any actions and proceedings set forth in
such financial statements, there has been no materially adverse
development regarding any such action or proceedings.
(f) The financial statements referred to in Section 5(e) above fairly
present the financial position of the Obligor, as at such dates all in
accordance with generally accepted accounting principles consistently
applied, and since the dates of such statements, there has been no
material adverse change in such condition or operations.
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<PAGE> 39
(g) The Obligor has not incurred any material accumulated funding
deficiency within the meaning of the Employment Retirement Income
Security Act of 1974 ("ERISA") and has not incurred any material
liability to the Pension Benefit Guaranty Corporation ("PBGC") in
connection with any employee benefit plan established or maintained by
the Obligor.
(h) The Obligor has good and marketable fee simple absolute title to
the real property upon which the Project will be constructed (the
"Premises") free from all liens and encumbrances except Permitted
Encumbrances (as defined in the Revolving Credit Loan Agreement dated
June 27, 1997, between Obligor and the Bank (the "Credit Agreement")).
(i) he Obligor is not in default in the payment of any indebtedness
for borrowed money or under the terms and provisions of any agreement
or instrument evidencing any such indebtedness.
(j) The Project has adequate rights of access to all water, sanitary
sewer and storm drain facilities and access to utilities necessary or
convenient to the full use and enjoyment of the Project are available
at the boundaries of the Premises, and if not now installed the same
shall be constructed and installed to service the Project in a timely
fashion.
(k) The Project has adequate rights of access to public ways and all
roads necessary for the full utilization of the Project for its
intended purposes have either been completed or the necessary rights of
way therefor have either been acquired by the appropriate governmental
authorities or have been dedicated to public use and accepted by said
governmental authorities, and all necessary steps have been taken by
the Obligor and said governmental authorities to assure the complete
construction and installation thereof.
(l) The Obligor acknowledges that the Bank makes no representation or
warranty as to the adequacy or accuracy of the environmental surveys
and reports that have been procured by the Obligor and presented to the
Bank in conjunction with the Project. The Obligor confirms the
indemnification of the Bank with respect to environmental matters
contained in the Collateral Documents and/or related documents or
instruments. The Bank assumes no liability whatsoever with respect to
such environmental surveys or reports.
(m) The Obligor will employ the proceeds of the Bonds solely for the
purpose of paying the costs of the Project.
(n) No representation or warranty of the Obligor contained in this
Agreement or in any of the Collateral Documents, and no statement
contained in any certificate, schedule, list, financial statement or
other instrument furnished to the Bank by or on behalf of the Obligor
contains, or will contain, any untrue statement of a material fact, or
omits, or will omit, to state a material fact necessary to make the
statements contained herein or therein not misleading in any material
respect when made.
(o) The Obligor has obtained or will obtain all licenses, permits,
authorizations, consents or approvals from each governmental authority
necessary for the operation of the Project; and all such licenses,
permits, authorizations, consents or approvals are or will be in full
force and effect.
SECTION 6. Affirmative Covenants. So long as a drawing is available under
the Letter of Credit, the Obligor will, unless the Bank gives its prior consent
in writing:
(a) Comply with Credit Agreement. Comply with all of the terms and
conditions contained in Section 7 of the Credit Agreement, which
Section 7 as it may be amended from time to time, is hereby
incorporated by reference. This reference to and incorporation of
Section 7 of the Credit Agreement shall survive termination of the
Credit Agreement and shall continue until termination of the Letter of
Credit and fulfillment of all of Obligor's obligations under this
Agreement.
(b) Certain Covenants Relating to the Project. The Obligor covenants
to:
(i) Operate the Project in accordance with applicable
lawful ordinances, rules and regulations and requirements of all
governmental authorities having jurisdiction over the Project.
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<PAGE> 40
(ii) Maintain, preserve and keep the Project and the
grounds and structure, improvements and equipment appurtenant
thereto or used therewith, and each and every part and parcel
thereof, in good repair and working order, reasonable wear and
tear excepted, and in safe condition at all times.
(iii) During normal business hours, upon reasonable
notice, permit the Bank or its duly authorized agents free access
to the Project and make available for audit and inspection, at any
reasonable time, with reasonable notice, by the Bank or its duly
authorized agents, all property, equipment, books, contracts,
records and other papers relating to the Project. All inspections
shall be made to keep interference with production to the minimum
amount possible. The Obligor shall keep the books and accounts of
all operations relating to the Project at the Premises or at its
principal office as shown on the first page hereof, in accordance
with generally accepted accounting principles.
(iv) Promptly respond to any reasonable inquiry from
the Bank for information with respect to the Project, which
information may be verified by the Bank; provided, however, that
the Bank shall at all times be entitled to rely upon any
statements or representations made by the Obligor, or its
authorized representative.
(v) Within thirty (30) days of written notification
by Bank to the Obligor, the Obligor shall contribute to the
Project (but not the Project Fund itself) such funds which when
added to the remaining balance in the Project Fund (as defined in
the Indenture) and moneys available to the Obligor from the
Issuer, in the sole reasonable opinion of Bank, be sufficient to
pay in full the remaining cost of the Project.
(vi) Notify the Bank of any loss or damage to the
Project in a single occurrence exceeding $100,000 in value within
fifteen (15) days of the date the Obligor shall learn of said loss
or damage.
(vii) Keep valid and unimpaired the Collateral
Documents, and to that end execute at any future time and as often
as may be deemed necessary, on demand of the Bank, all further
instruments, assignments and other acts in due form and effect as
may be deemed proper by the Bank to the better carrying out of the
true intent and meaning of this Agreement, and especially, at
Obligor's sole cost, do all other things that may be reasonably
required by the Bank to make and keep valid the liens on, and
security interests in, the property described in the various
Collateral Documents and to maintain the priority of the said
mortgages and security interests.
(viii) Notify the Bank in writing within ten (10) days
thereof, should any mortgage or lien or any other security
instrument whatsoever, including mechanics liens, be filed against
the Premises or the Project claiming or securing an amount in
excess of $50,000 in aggregate, other than those filed pursuant to
the Collateral Documents.
(ix) Upon the request of the Bank, bond off under the
provisions of applicable law any lien or claim of lien filed for
record, or insure over or deposit with the issuer of title
insurance on the Project an amount of cash sufficient to satisfy
said lien or claim, within ten (10)days of the date of filing of
said claim, unless such lien or claim is being contested as
hereinabove permitted.
(x) Receive those advances made from the Project Fund
and hold the right to receive the same as a trust fund for the
purpose of paying the costs of the Project and apply the same
first to such payment before using any part thereof for any other
purpose.
(c) Redemption Obligations. Through optional redemption or other
means of payment permitted under the Indenture, to amortize the Bonds,
including Bonds held by the Trustee under the Pledge and Security
Agreement, on the basis required by Exhibit B hereof.
SECTION 7. Negative Covenants of the Obligor. So long as a drawing is
available under the Letter of Credit, the Obligor agrees that it will not,
without the prior written consent of the Bank:
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<PAGE> 41
(a) Amendment of Indenture or Loan Agreement. Enter into or agree to
any amendment, change or modification of, or any waiver of any
provision of, the Indenture, the Loan Agreement or the Collateral
Documents.
(b) Violate Provisions of Credit Agreement. Violate any of the terms
and conditions contained in Section 8 of the Credit Agreement, which
Section 8, as it may be amended from time to time, is hereby
incorporated by reference. This reference to and incorporation of
Section 8 of the Credit Agreement shall survive the termination of the
Credit Agreement and shall continue until termination of the Letter of
Credit and fulfillment of all of Obligor's obligations under this
Agreement.
(c) Notice of Conversion. Give notice to the Trustee of a Conversion
to a Fixed Rate (as provided in the Indenture) without the prior
written consent of the Bank, which consent will not be unreasonably
withheld.
SECTION 8. Events of Default.
(a) The occurrence of any of the following events shall be an "Event of
Default" hereunder unless waived by the Bank pursuant to Section 10
hereof:
(i) Any representation or warranty made by the Obligor pursuant
to Section 5 hereof shall prove to have been incorrect in any
material respect when made; or
(ii) The Obligor shall fail to pay when due any amount specified
in Section 1 or Section 3 hereof; or
(iii) The Obligor shall fail to perform or observe any other term,
covenant or agreement herein contained, or in any other agreement
with the Bank to which it may be a party; and such failure shall
continue for a period of thirty (30) days after written notice to
the Obligor from the Bank; or
(iv) Any material provision of this Agreement shall at any time
for any reason cease to be valid and binding on the Obligor, or
shall be declared to be null and void, or the validity or
enforceability thereof against the Obligor shall be contested by
the Obligor or any governmental agency or authority, or the
Obligor shall deny that it has any or further liability or
obligation under this Agreement; or
(v) If any of the Collateral Documents shall for any reason cease
to create valid and enforceable obligations or a perfected lien on
the property described therein, subject only to Permitted
Encumbrances; or
(vi) An Event of Default under and as defined in the Loan
Agreement, the Indenture, the Pledge and Security Agreement, the
Credit Agreement or the Collateral Documents shall have occurred
and be continuing without the same being cured or waived pursuant
to the terms thereof.
(b) If any of the Events of Default specified in subsection (a) above shall
have occurred and be continuing, in addition to the Bank's other
remedies available under the Loan Agreement, the Indenture, the Pledge
and Security Agreement, the Collateral Documents, or such other
documents executed in connection herewith, or any other remedy
available hereunder or at law or in equity, then the Bank may, at any
time and in its sole discretion, but shall not be obligated to,
terminate its commitment to issue the Letter of Credit or, if the
Letter of Credit shall have been issued, may elect to give notice to
the Trustee pursuant to the Indenture thereby requiring the Trustee to
declare the principal of all Bonds then outstanding and the interest
accrued thereon and any premium thereon and thereby owing to be
immediately due and payable.
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SECTION 9. Collateral Security. To secure full and timely performance of
the Obligor's covenants set out in this Agreement and to secure the repayment of
all other moneys owing by the Obligor to the Bank whensoever arising and whether
associated with this Agreement or otherwise, (i) the Obligor agrees to grant to
the Bank a first perfected security interest and a first mortgage in the Project
property located in Marshall, Michigan, (ii) Obligor and each subsidiary will
grant to the Bank a first perfected security interest (if not previously
provided) in all their machinery and equipment pursuant to security agreements
acceptable to the Bank, and (iii) the Obligor will pledge to the Bank any and
all of its interest in and to the trust account established by the Remarketing
Agent in connection with the issuance of the Bonds. The mortgages and security
agreements creating such rights in favor of the Bank shall be granted pursuant
to documentation satisfactory in form and substance to the Bank (and are herein
collectively with related documents called the "Collateral Documents").
SECTION 10. Amendments, Waivers, Etc. No amendments or waiver of any
provision of this Agreement nor consent to any departure by the Obligor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank and the Obligor, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment, waiver or consent with respect to any
provision of this Agreement shall affect any other provision of this Agreement.
SECTION 11. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and mailed or delivered as follows:
if to the Obligor:
4070 East Paris Avenue, S.E.
Kentwood, MI 49512
Attention: Warren Veltman
if to the Bank:
1000 Campau Square Plaza
99 Monroe Avenue, N.W.
Grand Rapids, MI 49503
Attention: Corporate Banking
if to the Trustee:
Norwest Bank Wisconsin, N.A.
100 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Corporate Trust Department
or as to any party or the Trustee, at such other address as shall be
designated by such party or the Trustee, as the case may be, in a written notice
to the other party and the Trustee or the parties, as the case may be. All such
notices and other communications shall, when mailed, be effective three days
after the date of deposit in the mails, addressed as aforesaid.
SECTION 12. No Waiver; Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and exclusive of any remedies
provided by law.
SECTION 13. Indemnification. The Obligor hereby indemnifies and holds the
Bank harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be claimed
against the Bank by any person or entity whatsoever):
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(a) by reason of any untrue statement or alleged untrue statement of fact
contained in the Offering Circular or any amendment or supplement
thereto or the Preliminary Offering Circular, or the omission or
alleged omission to state therein facts necessary to make such
statements, in the light of the circumstances under which they were
made, not misleading; provided, however, that, the Obligor shall not be
required to indemnify the Bank with respect to information concerning
the Bank in Appendix A to the Offering Circular or in Appendix A to the
Preliminary Offering Circular (the "Bank Information") which is finally
determined to contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements in the Bank
Information, in the light of the circumstances under which they were
made, not misleading; or
(b) by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to pay under, the Letter of Credit;
provided, however, that the Obligor shall not be required to indemnify
the Bank pursuant to this clause for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the Bank,
or (ii) the Bank's willful or grossly negligent failure to pay under
the Letter of Credit after the presentation to it by the Trustee of a
draft and certificates strictly complying with the terms and conditions
of the Letter of Credit.
Nothing in this Section 13 is intended, nor shall be deemed, to limit the
Obligor's reimbursement obligation contained in Section 1 hereof.
SECTION 14. Continuing Obligation. This Agreement is a continuing
obligation and shall (i) be binding upon the Obligor, its successors and
assigns, and (ii) inure to the benefit of and be binding upon and be enforceable
by the Bank and its successors, transferees and assigns; provided, however, that
the Obligor may not assign all or any part of this Agreement without the prior
written consent of the Bank. The Obligor's warranties and representations made
in Section 5 of this Agreement shall survive the delivery and performance of all
documents and agreements contemplated by this Agreement.
SECTION 15. Transfer of Letter of Credit. The Letter of Credit first issued
by the Bank pursuant to Section 2 hereof may be transferred and each successor
Letter of Credit may be successively transferred, all in accordance with the
terms of such first Letter of Credit.
SECTION 16. Liability of the Bank. The Obligor assumes all risks of the
acts or omissions of the Trustee and any beneficiary or transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers or directors shall be liable or responsible for: (a) the use
which may be made of the Letter of Credit or for any acts or omissions of the
Trustee and any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement(s)
thereof, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Bank in
good faith made against presentation of documents which do not comply fully with
the terms of the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under the Letter of Credit, except only that
the Obligor shall have a claim against the Bank, and the Bank shall be liable to
the Obligor, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Obligor which the Obligor proves were
caused by (i) the Bank's willful misconduct or gross negligence or (ii) the
Bank's willful or grossly negligent failure to pay under the Letter of Credit
after the presentation to it by the Trustee or a successor trustee under the
Indenture of a sight draft and certificate strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in limitation of the
foregoing, the Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary. This paragraph shall not diminish or act
to exonerate the Trustee from the performance of its obligations and
responsibilities established under the Trust Indenture.
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SECTION 17. Costs, Expenses and Taxes. The Obligor agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of this Agreement, any other
documents which may be delivered in connection with this Agreement and any
transfer of the Letter of Credit including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the Bank, with respect thereto
and with respect to advising the Bank as to its rights and responsibilities
under this Agreement and all costs and expenses, if any, in connection with the
enforcement of this Agreement and such other documents which may be delivered in
connection with this Agreement, including, but not limited to the Collateral
Documents. In addition, the Obligor shall pay any and all stamp and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement and such other documents and
agrees to save the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 18. Disbursements. The Trustee shall be authorized to disburse the
proceeds of the Bonds pursuant to the terms of the Indenture upon presentation
by the Obligor of a requisition certificate conforming to the requirements
therefor set forth in the Loan Agreement and herein, including endorsement of
each requisition certificate by the Bank. The Obligor acknowledges and agrees
that the Bank shall only be required to execute requisition certificates and
thereby authorize disbursements to the Obligor upon satisfaction of the
following conditions:
(a) no Event of Default has occurred under this Agreement, the Pledge
and Security Agreement, the Credit Agreement or the Collateral
Documents and no event which with notice an/or the passage of time
would become an Event of Default under this Agreement, the Pledge and
Security Agreement, the Credit Agreement or the Collateral Documents
has occurred,
(b) the Project shall not have been materially damaged by fire or
other casualty, or if so damaged the Obligor has complied with all
insurance requirements hereunder,
(c) in the case of disbursements to finance the purchase of machinery
and equipment, the Obligor shall have complied with the Bank's usual
requirements for equipment lending, including but not limited to: (i)
approval of disbursements by Bank; and (ii) the amount of such
requisition shall not exceed 100% of the cost of such machinery and
equipment (exclusive of freight, taxes and installation),
(d) in the case of disbursements to finance the construction of
improvements to the Project real estate, the Obligor shall have
complied with the Bank's usual requirements for construction lending,
including but not limited to: (i) an ALTA Loan policy without standard
exceptions insuring the first lien interests of the Bank in the Project
real estate in the amount of $2,200,000, subject only to liens
acceptable to the Bank, with such endorsements as the Bank may require,
(ii) surveys showing the improvements situated on all such property to
be within all lot lines and set-back lines, showing all easements
(identified by recording information), showing no encroachments and
showing such other information as the Bank may request, said surveys to
be certified to the Bank and the title insurance company, (iii) an
appraisal showing a net value of the Project real estate on an "as
built" basis of at least $2,200,000 (using an appraiser and a
methodology acceptable to the Bank), (iv) the Phase I environmental
survey provided to the Bank and a Four Step Transaction Screen shall
have been reviewed and approved by the Bank's environmental risk
department, (v) submission of sworn statements and waivers of lien,
(vi) endorsement of the title policy by the title insurance company,
(vii) approval of the disbursement request by the Bank's architect as
to the work and materials in place, and (viii) such other information
as the Bank may request related thereto, all of which shall be in form
and content satisfactory to the Bank in its sole discretion.
At the time of each disbursement of the proceeds of the Bonds, the amount
of the requested disbursement of Bond proceeds together with Bond proceeds
previously advanced shall not exceed 100% of the net fair market value of the
Project real estate securing the Bank (based on the appraisal provided to and
satisfactory to the Bank), plus 100% of the cost of new machinery and equipment
acquired with the proceeds of the Bonds (the "Available Collateral
Requirement"). Each requisition shall be supported by presentation to the Bank
of such documents, instruments or opinions as the Bank may reasonably require.
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<PAGE> 45
SECTION 19. Insurance. In the event of any loss or damage to the Project
resulting in a right accruing in favor of any party or the parties hereto for
any payment of insurance proceeds occasioned by such loss or damage, all such
payments of insurance proceeds shall be made in accordance with the terms and
conditions set forth in the Credit Agreement. If the loss or damage is
reasonably expected to result in insurance proceeds of less than $100,000, then
the Bank shall permit the Obligor to make such use thereof as the Obligor shall
direct. If such proceeds are reasonably expected to be $100,000 or more, then
they shall be used only with the prior concurrence of the Bank, which the Bank
shall provide to rebuild if insurance proceeds and other moneys are available to
pay for rebuilding or restoring the Project in full.
SECTION 20. Condemnation. In the event that by, or pursuant to, proper
authority, the Premises, or any part thereof, is taken or condemned, under power
of eminent domain exercised by any actual or quasi governmental authority or
public utility, the provisions of the mortgage relating thereto shall govern
with respect to any awards which may be made.
SECTION 21. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 22. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Michigan.
SECTION 23. Authorized Signers. The following officer of the Obligor is
authorized on behalf of the Obligor to execute and deliver to the Bank all
documents and instruments related to any amendment or extension of the Agreement
or the Letter of Credit:
<TABLE>
<S> <C> <C>
Name Title Signature
Warren A. Veltman see signature see signature
page page
</TABLE>
SECTION 24. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
SECTION 25. Waiver of Jury Trial. The Obligor and the Bank after consulting
with their respective legal counsel hereby irrevocably waive the right to trial
by jury with respect to any and all actions or proceedings at any time in which
the Obligor and the Bank are parties arising out of this Agreement or the other
documents referenced hereunder.
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<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
AUTOCAM CORPORATION
By_________________________________
Warren A. Veltman
Its: Chief Financial Officer
COMERICA BANK
By_________________________________
Its: Vice President
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<PAGE> 47
EXHIBIT A
Telex: 3772134 MNB INTL DET Comerica Bank
Swift: MNBD US 33 One Detroit Center
Fax: (313) 222-9324 500 Woodward Avenue
24th Floor, MC 3341
Detroit, MI 48226-3341
Beneficiary: Date of Issue: December 23, 1997
Norwest Bank Wisconsin, N.A.
100 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Corporate Trust Department
Dear Sirs:
We hereby establish, at the request and for the account of Autocam
Corporation, a Michigan corporation, whose address is 4070 East Paris Avenue,
S.E., Kentwood, MI 49519 (the "Obligor"), in your favor, as Trustee under the
Trust Indenture, dated as of December 1, 1997 (the "Indenture") between the
Michigan Strategic Fund (the "Issuer") and you, pursuant to which $9,000,000 in
aggregate principal amount of the Issuer's Variable Rate Demand Limited
Obligation Revenue Bonds, Series 1997 (Autocam Corporation Project) (the
"Bonds"), are being issued, our Irrevocable Letter of Credit No. _____________,
in the total amount of $9,138,082.19 (Nine Million One Hundred Thirty-Eight
Thousand Eighty-Two and 19/100 U.S. Dollars) effective immediately and expiring
on December 16, 2000 (the "Expiration Date") or earlier terminating as
hereinafter provided.
We hereby irrevocably authorize you to draw on us upon presentation of the
certificate(s) in the forms of Annex A, B and C, as appropriate, attached
hereto, as provided below:
A. One or more drawings, each an "Interest Drawing" under Annex A, with
respect to payment of interest on the Bonds, such Interest Drawing to
be in an amount not exceeding $138,082.19 [56 days interest on the
Bonds assuming an annual rate of 10% for a year of 365 days]; and
B. One or more drawings, each a "Principal Drawing" under Annex B, with
respect to payment of principal payments on the Bonds, whether by
maturity, acceleration, optional redemption, or mandatory redemption,
such Principal Drawing to be in an amount not exceeding $9,000,000; and
C. One or more drawings, each a "Purchase Drawing" under Annex C, with
respect to payment of the purchase price of the Bonds (based on a
purchase at par plus accrued interest to the date of purchase), such
Purchase Drawing to be in an amount not exceeding $9,138,082.19
[principal plus 56 days interest on the Bonds assuming an annual rate
of 10% for a year of 365 days].
The amount available for payments with respect to Interest Drawings shall
be automatically reinstated by the amount of any payment made by us of an
Interest Drawing, unless you have received notice from us that we will not
reinstate such amount, and thereupon you shall again be irrevocably authorized
to draw on us Interest Drawings in the amount and in accordance with the terms
and conditions set forth herein. This procedure for the automatic reinstatement
of the amount available with respect to Interest Drawings shall be applicable to
successive Interest Drawings, so long as this Letter of Credit shall not have
been terminated as set forth below.
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<PAGE> 48
The amount available under this Letter of Credit shall be automatically and
immediately reduced by the amount of payment of a Principal Drawing or the
principal portion of a Purchase Drawing. The amount of such reduction in the
case of the payment of a Purchase Drawing shall be subject to reinstatement as
set forth in the next paragraph.
Reinstatement of amounts by which this Letter of Credit was reduced in
connection with drawings made by presentation of Purchase Drawings shall be
effective after you have been notified by the Bank in writing under the Pledge
and Security Agreement, dated as of December 1, 1997, by and among the Obligor,
the Bank and you (the "Pledge and Security Agreement"), that the conditions
precedent to release of the Bonds as to which the Letter of Credit is to be
reinstated (the "Bonds to be Released") have been satisfied. Prior to such
notification and release you shall not draw on the Letter of Credit with respect
to Bonds held by you under the Pledge and Security Agreement. After you have
been notified of the satisfaction of such conditions, the reinstatement of the
Letter of Credit shall be effective and irrevocable in the amount of the face
amount of the Bonds to be Released.
If we receive your Interest Drawing or Principal Drawing certificate(s) at
such office, all in strict conformity with the terms and conditions of this
Letter of Credit, we will honor the same by 11:30 a.m., Detroit time on the next
business day with respect to such Drawings presented prior to 12:00 noon Detroit
time (with respect to such Drawings presented after such time, we shall honor
the same by 11:30 a.m. on the second business day after presentation thereof) in
accordance with your payment instructions. Similarly, if we receive your
Purchase Drawing certificate at such office, in strict conformity with the terms
and conditions of this Letter of Credit, we will honor the same by 11:30 a.m.,
Detroit time on the same business day with respect to such Drawing presented
prior to 9:30 a.m., Detroit time (with respect to such Drawing presented after
such time, we will honor the same by 11:30 a.m. on the next business day after
presentation thereof) in accordance with your payment instructions. Payment
under this Letter of Credit shall be made by transfer or deposit of immediately
available funds to your account as provided in the respective certificate. We
agree that all payments made by us hereunder will be made with our own funds and
not with any funds which could be deemed to belong to the Obligor or the Issuer,
and will be made by us prior to any reimbursement thereof.
As used herein "business day" means any day other than (i) a Saturday, (ii)
a Sunday, (iii) a day on which banking institutions in the city in which your
corporate trust office (or its bond registrar, paying agent or tender agent
offices) designated for payment of the principal, interest and Purchase Price of
the Bonds is located or the principal office of the Remarketing Agent (as
defined in the Indenture) is located or the office of the undersigned at which
action is to be taken to realize moneys under the Letter of Credit are required
or authorized by law or executive order to be closed, or (iv) a day on which the
New York Stock Exchange is closed.
Presentation of any certificate (other than a certificate to instruct the
Bank to transfer this Letter of Credit) shall be deemed effected for all
purposes under this Letter of Credit upon presentation in person, or upon
receipt by the Bank of facsimile transmission, telephone number (313) 222-9324,
setting forth in full the contents of such certificate, and such original
certificate shall be deposited in the United States mail, postage prepaid, and
addressed to the Bank at the place provided herein for the presentation of
certificates, prior to the sending of such facsimile.
Upon the earliest of (i) your surrendering this Letter of Credit to us for
cancellation, (ii) there being no Outstanding Bonds (as defined in the
Indenture), (iii) the Expiration Date, (iv) our honoring Principal and Interest
Drawings for all outstanding Bonds, or (v) the fifteenth calendar day following
delivery to you of a direction under Section 801(d) of the Indenture to declare
the Bonds immediately due and payable, this Letter of Credit automatically shall
expire and terminate.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). This Letter of Credit shall be
deemed to be made under the laws of the State of Michigan, including Article 5
of the Uniform Commercial Code as now in effect in the State of Michigan, and
shall be governed by and construed in accordance with the laws of the State of
Michigan. As to any matter of conflict between the provisions of the Uniform
Customs and the laws of the State of Michigan, the Uniform Customs shall govern
this Letter of Credit.
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<PAGE> 49
Notwithstanding anything in Article 48 of the Uniform Customs to the
contrary, this Letter of Credit is transferable in its entirety (but not in
part) to any transferee who has succeeded you as Trustee under the Indenture.
Each letter of credit issued upon any such transfer may be successively
transferred. Transfer of the available drawing(s) under this Letter of Credit to
such transferee shall be effected by the presentation to us of this Letter of
Credit accompanied by a certificate in the form of Annex D attached hereto. Upon
such presentation we shall forthwith transfer the same to your transferee or, if
so requested by your transferee, issue an irrevocable letter of credit to your
transferee with provisions therein consistent with this Letter of Credit.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein, except
only the certificate(s) referred to herein; and any such reference shall not be
deemed to incorporate herein by reference any document, instrument or agreement
except for such certificate(s).
Very truly yours,
COMERICA BANK
By________________________________
Its: Vice President
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<PAGE> 50
ANNEX A
CERTIFICATE FOR INTEREST DRAWING
To: Comerica Bank
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Standby-Letter of Credit Group
The undersigned, a duly authorized officer of Norwest Bank Wisconsin N.A.,
hereby certifies as of the date hereof to you (the "Bank"), with reference to
Irrevocable Letter of Credit No. ______________ (the "Letter of Credit"), the
defined terms therein and herein used having the same meaning) issued by the
Bank in favor of the Trustee and as Trustee under the Indenture, that:
(1) It is hereby making a drawing under the Letter of Credit with respect
to a payment of interest on the Bonds, either on a scheduled interest
payment date or on a date of redemption or maturity of Bonds (whether
stated or by acceleration) in the amount of $______________, which
amount is (i) not greater than the amount available for Interest
Drawings under the Letter of Credit, (ii) was computed in accordance
with the terms and conditions of the Bonds and the Indenture, and (iii)
does not include any amount of interest on the Bonds which is included
in any other drawing presented on or prior to the date of this
Certificate.
(2) This Certificate is and is being presented to the Bank prior to 12:00
noon, Detroit time, on ______________, a date that is one business day
prior to the date on which interest on the Bonds with respect to which
the drawing is being made is due and payable under the terms of the
Bonds and the Indenture.
(3) Please pay the requested amount on ___________ (requested payment date)
in the following manner:_______________________________________.
Dated _______________ NORWEST BANK WISCONSIN, N.A.
By_________________________________
[Name and Title]
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<PAGE> 51
ANNEX B
CERTIFICATE FOR PRINCIPAL DRAWING
To: Comerica Bank
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Standby-Letter of Credit Group
The undersigned, a duly authorized officer of ___________________, hereby
certifies as of the date hereof to you (the "Bank"), with reference to
Irrevocable Letter of Credit No. _____________ (the "Letter of Credit", the
defined terms therein and herein used having the same meaning) issued by the
Bank in favor of the Trustee and as Trustee under the Indenture that:
(1) It is making a drawing under the Letter of Credit with respect to a
principal payment on the Bonds, either at maturity (whether stated or
accelerated) or by mandatory or optional redemption in the amount of
$____________, which amount is (i) not greater than amounts available
to be drawn as principal under the Letter of Credit, (ii) was computed
in accordance with the terms and conditions of the Bonds and the
Indenture, and (iii) does not include any amount of principal on the
Bonds which is included in any other drawing presented on or prior to
the date of this Certificate.
(2) This Certificate is presented to the Bank prior to 12:00 noon, Detroit
time, on _____________, a date that is one business day prior to the
date on which an unpaid principal amount on the Bonds is due and
payable under the terms of the Bonds and the Indenture.
(3) We hereby authorize a reduction in the interest coverage included in
the Letter of Credit to a new total interest coverage of $_____________
[56 days interest on the Bonds assuming an annual rate of 10% for a
year of 365 days] with a new total Letter of Credit Amount of
$--------------.
(4) Please pay the requested amount on ___________ (requested payment date)
in the following manner:__________________________________________.
Dated _______________ NORWEST BANK WISCONSIN, N.A.
By_________________________________
[Name and Title]
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<PAGE> 52
ANNEX C
CERTIFICATE FOR PURCHASE DRAWING
To: Comerica Bank
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Standby-Letter of Credit Group
The undersigned, a duly authorized officer of _________________, hereby
certifies as of the date hereof to you (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________________ (the "Letter of Credit", the
defined terms therein and herein used having the same meaning) issued by the
Bank in favor of the Trustee and as Trustee under the Indenture, that:
(1) It is making a drawing under the Letter of Credit with respect to a
payment of the purchase price of Bonds being purchased by the Obligor
and pledged to the Bank pursuant to the Pledge and Security Agreement,
in the amount of $__________, representing $_________ principal amount
of the Bonds at par and $_____________ accrued interest on the Bonds to
the date of purchase, the foregoing amounts being the purchase price of
the Bonds.
(2) The undersigned or its agent received $_________ principal amount of
Bonds, being all the Bonds being purchased with the proceeds of this
Purchase Drawing, in such form as to enable the undersigned to
reregister said Bonds in the name of the Obligor.
(3) This Certificate is dated and is being presented to the Bank prior to
9:30 a.m., Detroit time, on _______________, the date on which the
purchase price on the Bonds is due and payable.
(4) Please pay the requested amount on ___________ (requested payment date)
in the following manner:____________________________________.
Dated _______________ NORWEST BANK WISCONSIN, N.A.
By_________________________________
[Name and Title]
E-139
<PAGE> 53
ANNEX D
CERTIFICATE FOR TRANSFER*
To: Comerica Bank
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Standby-Letter of Credit Group
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
______________________________________
[Name of Transferee]
______________________________________
[Address]
all rights of the undersigned beneficiary to draw under Irrevocable Letter of
Credit No. ____________. The undersigned represents that the transferee is the
successor to the undersigned as Trustee under the Indenture, as defined in the
Letter of Credit. By this transfer, all rights of the undersigned beneficiary in
such Letter of Credit are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof; provided, however, that
no rights shall be deemed to have been transferred to the transferee until such
transfer complies with the requirements of such Letter of Credit pertaining to
transfers.
The Letter of Credit is returned herewith and in accordance with the
Indenture we ask you to transfer the same to the transferee or, if so requested
by the transferee, to issue a new irrevocable letter of credit in favor of the
transferee with provisions consistent with the Letter of Credit.
Very truly yours,
NORWEST BANK WISCONSIN, N.A.
By ___________________________
[Name and Title]
*This certificate may not be presented by facsimile
E-140
<PAGE> 54
EXHIBIT B
AMORTIZATION SCHEDULE
Sufficient payments shall be made or actions taken by the Obligor so that
the principal amount of Bonds outstanding is not greater than the specified
amounts on the corresponding dates:
<TABLE>
<CAPTION>
Dates (December 1) Outstanding
Principal Amounts
<S> <C>
12/01/1998 $9,000,000
12/01/1999 8,615,000
12/01/2000 8,205,000
12/01/2001 7,770,000
12/01/2002 7,310,000
12/01/2003 6,820,000
12/01/2004 6,305,000
12/01/2005 5,755,000
12/01/2006 5,175,000
12/01/2007 4,560,000
12/01/2008 3,905,000
12/01/2009 3,215,000
12/01/2010 2,480,000
12/01/2011 1,700,000
12/01/2012 875,000
12/01/2013 0
</TABLE>
E-141
<PAGE> 55
EXHIBIT C
REDEMPTION NOTICE
To: Norwest Bank Wisconsin, N.A., as Trustee
Re: $9,000,000 Michigan Strategic Fund Variable Rate Demand Limited
Obligation Revenue Bonds, Series 1997 (Autocam Corporation Project) (the
"Bonds")
Date: December 23, 1997
The undersigned, the Obligor (as defined in the Trust Indenture, dated as
of December 1, 1997, pursuant to which the Bonds were issued (the "Indenture"))
hereby gives notice of redemption to you as Trustee with respect to the Bonds
pursuant to Section 401 of the Indenture. You are hereby directed to redeem the
Bonds in the following amounts on the following dates (or on the first Business
Day thereafter, if such dates are not in any case Business Days) in accordance
with the provisions of the Indenture:
<TABLE>
<CAPTION>
Dates (December 1) Amounts
<S> <C>
12/01/1998 $385,000
12/01/1999 410,000
12/01/2000 435,000
12/01/2001 460,000
12/01/2002 490,000
12/01/2003 515,000
12/01/2004 550,000
12/01/2005 580,000
12/01/2006 615,000
12/01/2007 655,000
12/01/2008 690,000
12/01/2009 735,000
12/01/2010 780,000
12/01/2011 825,000
12/01/2012 875,000
</TABLE>
This notice may only be revoked at the written direction of the
undersigned, with the written concurrence of Comerica Bank and shall be of no
further force and effect on and after the Conversion Date (as defined in the
Indenture).
AUTOCAM CORPORATION
By_________________________________
Warren A. Veltman
Its: Chief Financial Officer
The Above Notice is Hereby Accepted:
NORWEST BANK WISCONSIN, N.A., as Trustee
By_______________________________________
Its Authorized Officer
E-142
<PAGE> 56
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of December 1, 1997, made by Autocam
Corporation, a Michigan corporation (the "Pledgor"), Norwest Bank Wisconsin,
N.A., which is Trustee under the Indenture (as hereinafter defined) and as
custodian hereunder (the "Agent"), and Comerica Bank, a Michigan banking
corporation (the "Bank"), pursuant to the Reimbursement Agreement, dated as of
December 1, 1997, between the Pledgor and the Bank (hereinafter, as the same may
from time to time be amended or supplemented, called the "Reimbursement
Agreement"):
WITNESSETH:
WHEREAS, the Michigan Strategic Fund (the "Issuer") has agreed with the
Pledgor to issue its Variable Rate Demand Limited Obligation Revenue Bonds,
Series 1997 (Autocam Corporation Project) (the "Bonds"), under the Trust
Indenture, dated as of December 1, 1997 (the "Indenture"), between the Issuer
and the Agent, as Trustee;
WHEREAS, the Indenture requires the Pledgor under the circumstances provided
therein to purchase Bonds duly tendered for purchase by the holders thereof and
to register the Bonds so purchased in the name of the Pledgor in accordance with
the Indenture (the "Tendered Bonds");
WHEREAS, in the Indenture the Issuer and the Trustee have agreed to certain
remarketing provisions for the Bonds pursuant to which Comerica Securities or
its successor remarketing agent (the "Remarketing Agent") has agreed to the
remarketing of certain Bonds;
WHEREAS, in connection with the issuance of the Bonds, the Pledgor and
certain other persons and entities have agreed to enter into the Reimbursement
Agreement in order to cause the Bank to issue an irrevocable letter of credit in
favor of the Trustee (the "Letter of Credit") which may be used, inter alia, to
pay all or a portion of the purchase price of the Tendered Bonds in the event
the same are not remarketed prior to the date for purchase of the Tendered Bonds
(any of such Tendered Bonds so purchased from a draw under the Letter of Credit
being hereinafter referred to as the "Pledged Bonds");
WHEREAS, it is a condition precedent to the obligation of the Bank to enter
into the Reimbursement Agreement and to issue the Letter of Credit that the
Pledgor and the Agent shall have executed and delivered this Agreement to the
Bank;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to enter into the Reimbursement Agreement and issue the Letter of Credit
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the Pledgor and Agent hereby agree with the Bank as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Reimbursement Agreement shall have such defined meanings when used
herein.
2. Pledge. The Pledgor hereby pledges, assigns, hypothecates, transfers,
and delivers to the Bank or its designee all its right, title and
interest in the Pledged Bonds as the same may be from time to time
delivered to the Agent, by the holders thereof or by the Remarketing
Agent and held by the Agent as agent for the Bank, and hereby grants to
the Bank, a first lien on, and security interest in, its right, title
and interest in and to the Pledged Bonds, together with all payments of
principal, premium and interest thereon and all proceeds thereof,
including without limitation remarketing proceeds (collectively, the
"Collateral"), as collateral security for (a) the prompt and complete
payment of all amounts payable to the Bank under the Reimbursement
Agreement, (b) performance and observance of all covenants, terms and
conditions upon which the Letter of Credit is issued, including without
limitation the covenants, terms and conditions set forth in the
Reimbursement Agreement, and (c) the performance of the covenants
herein contained and any monies expended by the Bank in connection
therewith (collectively, the "Obligations").
E-143
<PAGE> 57
3. Payments on the Pledged Bonds. Payments received by the Agent in
respect of the Pledged Bonds shall be held by the Agent in trust for
the benefit of the Bank, and the Agent shall pay the same forthwith to
the Bank. Upon receipt by the Bank, such amounts shall be credited
against the Obligations to the Bank.
4. Release of Pledged Bonds. Upon reinstatement of the amount available
under the Letter of Credit to be drawn as a Purchase Draft following
payment by the Bank of a Purchase Draft under such Letter of Credit
(which would occur following repayment to the Bank of all amounts owed
by the Pledgor to the Bank in connection with payment by the Bank of
such Purchase Draft or upon satisfaction of such other requirements as
may be agreed to by Pledgor and the Bank), the Agent automatically
shall release and deliver to the Pledgor or its designee Pledged Bonds
(of the Bonds secured by such Letter of Credit) in a principal amount
up to but not exceeding the amount by which the stated amount of the
applicable Letter of Credit shall have been so increased; provided,
however, that in any event, if all existing and future liabilities and
obligations of Pledgor to the Bank under the Reimbursement Agreement
are fully paid and fully secured, all Pledged Bonds shall be released
and delivered to the Pledgor or its designee. The foregoing
notwithstanding, all Pledged Bonds shall be released and delivered to
the Trustee for cancellation at redemption or maturity.
5. Rights of the Bank. The Bank shall not be liable for failure to collect
the Obligations or for failure to realize upon any collateral security
or guarantee therefor, or any part thereof, or for any delay in so
doing nor shall the Bank be under any obligation to take any action
whatsoever with regard thereto. If an Event of Default under the
Reimbursement Agreement has occurred and is continuing, the Bank may
thereafter without notice exercise all rights, privileges or options
pertaining to any Pledged Bonds as if it were the absolute owner
thereof, upon such terms and conditions as it may determine, including,
without limitation, the right to direct the agent as Trustee to cancel
said Pledged Bond under the Indenture, all without liability except to
account for property actually received by it, but the Bank shall have
no duty to exercise any of the aforesaid rights, privileges or options
and shall not be responsible for any failure to do so or delay in so
doing.
6. Remedies. In the event that any portion of the Obligations has been
declared due and payable, the Bank, without demand of performance or
other demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon
the Pledgor or any other person (all and each of which demands,
advertisements and notices are hereby expressly waived), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or at any of the
Bank's offices, or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk,
with the right to the Bank, upon any such sale or sales, public or
private, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in the Pledgor, which right
or equity is hereby expressly waived or released. The Bank shall apply
the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the
care, safekeeping or otherwise of any and all of the Collateral or in
any way relating to the rights of the Bank hereunder, including
reasonable attorney's fees and legal expenses, to the payment in whole
or in part of the Obligations in such order as the Bank may elect, the
Pledgor remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after
the payment by the Bank of any other amount required by any provision
of law, including, without limitation, Section 9504(1)(c) of the
Uniform Commercial Code of the State of Michigan, and after expiration
of the Letter of Credit, need the Bank account for the surplus, if any,
to the Pledgor. The Bank agrees to give the Pledgor, the Agent and the
Issuer not less than ten days' written notice of the time and place of
any public sale and of the time after which a private sale or other
intended disposition is to take place. The Pledgor agrees that such
notice is reasonable notification of such matters. No notification need
be given to the Pledgor if it has signed after default a statement
renouncing or modifying any right to notification of sale or other
intended disposition. In addition to the rights and remedies granted to
it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Obligations, the Bank shall have
all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Michigan. The Pledgor further agrees to
waive and agrees not to assert any rights or privileges which it may
acquire under Section 9112 of the Uniform Commercial Code and the
Pledgor shall be liable for the deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all
amounts to which the Bank is entitled, and the fees of any attorneys
employed by the Bank to collect such deficiency.
E-144
<PAGE> 58
7. Representations, Warranties and Covenants of the Pledgor. The Pledgor
represents and warrants that: (a) on the date of delivery to the Bank
or its designee of any Pledged Bonds in accordance with Section 2
hereof, neither the Issuer, the Remarketing Agent nor the Agent will
have any right, title or interest in and to the Pledged Bonds; (b) it
has, and on the date of delivery to the Bank or its designee of any
Pledged Bonds will have, full power, authority and legal right to
pledge all of its right, title and interest in and to the Pledged Bonds
pursuant to this Agreement; (c) this Agreement has been duly
authorized, executed and delivered by the Pledgor and constitutes a
legal, valid and binding obligation of the Pledgor enforceable in
accordance with its terms; (d) no consent of any other party
(including, without limitation, any creditors of the Pledgor) and no
consent, license, permit, approval or authorization of exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority, domestic or foreign, is required to be obtained
by the Pledgor in connection with the execution, delivery or
performance of this Agreement; (e) the execution, delivery and
performance of this Agreement will not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or
foreign, or of the charter documents of the Pledgor or of any
securities issued by the Pledgor, or of any mortgage, indenture, lease,
contract, or other agreement, instrument or undertaking to which the
Pledgor is a party or which purports to be binding upon the Pledgor or
upon any of its assets and will not result in the creation or
imposition of any lien, charge or encumbrance on or security interest
in any of the assets of the Pledgor except as contemplated by this
Agreement; and (f) the pledge, assignment and delivery of such Pledged
Bonds pursuant to this Agreement will create a valid first lien on, and
a first perfected security interest in, all right, title or interest of
the Pledgor in or to such Pledged Bonds, and the proceeds thereof,
subject to no prior pledge, lien, mortgage, hypothecation, security
interest, charge, option or encumbrance or to any agreement purporting
to grant to any third party a security interest in the property or
assets of the Pledgor which would include the Pledged Bonds. The
Pledgor covenants and agrees that it will defend the Bank's right,
title and security interest in and to the Pledged Bonds and the
proceeds thereof against the claims and demands of all persons
whomsoever; and covenants and agrees that it will have like title to
and right to pledge any other property at any time hereafter pledged to
the Bank as Collateral hereunder and will likewise defend the Bank's
right thereto and security interest therein.
8. No Disposition, etc. Except as otherwise provided in the Remarketing
Agreement with respect to Pledged Bonds sold to or by the Remarketing
Agent, the Pledgor agrees that it will not, without the prior written
consent of the Bank sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, nor
will it create, incur or permit to exist any pledge, lien, mortgage,
hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Collateral, or any interest
therein, or any proceeds thereof, except for the lien and security
interest provided for by this Agreement.
9. Sale of Collateral. (a) The Pledgor recognizes that the Bank may be
unable to effect a public sale of any or all of the ledged Bonds by
reason of certain prohibitions contained in the Securities Act of 1933,
as amended, and applicable state securities laws, but may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a
view to the distribution or resale thereof. The Pledgor acknowledges
and agrees that any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale
and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Bank shall be under no obligation to delay a sale of any of
the Pledged Bonds for the period of time necessary to permit the issuer
of such securities to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if
the issuer would agree to do so.
(b) The Pledgor further agrees to do or cause to be done all such other
acts and things as may be necessary to make such sale or sales of any
portion or all of the Pledged Bonds valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Pledgor's expense.
E-145
<PAGE> 59
10. Further Assurances. The Pledgor agrees that at any time and from time
to time upon the written request of the Bank, it will execute and
deliver such further documents and do such further acts and things as
the Bank may reasonably request in order to effect the purposes of this
Agreement.
11. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
12. No Waiver; Cumulative Remedies. The Bank shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing,
signed by the Bank, and then only to the extent therein set forth. A
waiver by the Bank of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Bank
would otherwise have on any future occasion. No failure to exercise nor
any delay in exercising on the part of the Bank, any right, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights or remedies provided by law.
13. Waivers, Amendments; Applicable Law. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by all parties hereto. This
Agreement and all obligations of the Pledgor hereunder shall be binding
upon the successors and assigns of the Pledgor, and shall, together
with the rights and remedies of the Bank hereunder, inure to the
benefit of the Bank and its successors and assigns. This Agreement
shall be governed by, and be construed and interpreted in accordance
with, the laws of the State of Michigan.
14. Fees and Expenses. Pledgor agrees to pay and reimburse the Agent and
the Bank for and indemnify and hold them harmless against all costs,
expenses, taxes and fees (including reasonable attorneys' fees and
disbursements) and any liability incurred in connection with the
administration and enforcement of this Agreement. Such undertaking of
Pledgor shall survive the termination of this Agreement.
15. Termination. This Agreement shall terminate upon the expiration of the
Letter of Credit and payment in full and the performance and
satisfaction of all Obligations, and upon such termination the Bank and
the Trustee shall assign, transfer and deliver without recourse and
without warranty the Collateral to Pledgor (and any property received
in respect thereof) as has not theretofore been sold or otherwise
applied pursuant to the provisions of this Agreement.
16. Waiver. The Bank hereby agrees to waive any and all claims, liabilities
and causes of action against the Agent which may arise by reason of or
in connection with any and all of the Agent's obligations, duties and
responsibilities set forth in this Pledge Agreement, including but not
limited to holding the Pledged Bonds and any payments with respect
thereto as agent for the Bank and the release and delivery of the
Pledged Bonds to the Pledgor or its designee; provided, however, that
the Bank shall not be required to waive any claim, liability or cause
of action against the Agent to the extent, but only to the extent,
arising as a result of the willful and wrongful failure or willful and
wrongful misconduct or gross negligence of the Agent.
17. Captions/Counterparts. Captions in this Agreement are included herein
for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose. This Agreement may be executed in
any number of counterparts and if so executed shall be read and
interpreted as a single agreement.
E-146
<PAGE> 60
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement or have caused this Agreement to be duly executed and delivered
by their duly authorized officers on the day and year first above written.
AUTOCAM CORPORATION
By: \s\ Warren A. Veltman
-----------------------------
Warren A. Veltman
Its: Chief Financial Officer
NORWEST BANK WISCONSIN, N.A.,
Trustee
By: \s\ Wendy M. DeToro
-----------------------------
Wendy M. DeToro
Its: Corporate Trust Officer
COMERICA BANK
By: \s\ Thomas Hammer
-----------------------------
Thomas Hammer
Its: Vice President
E-147
<PAGE> 61
REMARKETING AGREEMENT
between
AUTOCAM CORPORATION
(the "Obligor")
and
ROBERT W. BAIRD & CO. INCORPORATED
(the "Remarketing Agent")
Dated as of December 1, 1997
Relating to
$9,000,000
MICHIGAN STRATEGIC FUND
Variable Rate Demand Limited Obligation
Revenue Bonds, Series 1997
(Autocam Corporation Project)
<PAGE> 62
REMARKETING AGREEMENT
THIS REMARKETING AGREEMENT (the "Agreement") dated as of December 1, 1997
by and between AUTOCAM CORPORATION, a Michigan corporation (the "Obligor") and
ROBERT W. BAIRD & CO. INCORPORATED (the "Remarketing Agent").
WHEREAS, the Michigan Strategic Fund (the "Issuer") has appointed the
Remarketing Agent (and the Remarketing Agent hereby accepts the appointment) as
Remarketing Agent under the Trust Indenture dated as of the date of this
Agreement (the "Indenture") between the Issuer and Norwest Bank Wisconsin, N.A.,
as trustee (the "Trustee"), relating to the Issuer's $9,000,000 principal amount
Variable Rate Demand Limited Obligation Revenue Bonds, Series 1997 (Autocam
Corporation Project) (the "Bonds"); and
WHEREAS, the Obligor has entered into a Loan Agreement dated as of the date
of this Agreement (the "Loan Agreement") between the Issuer and the Obligor; and
WHEREAS, the Remarketing Agent has been appointed by the Issuer to use its
best efforts to remarket the Bonds subject to optional or mandatory purchase and
to determine the interest rate necessary to remarket the Bonds at par; and
WHEREAS, the Obligor and Remarketing Agent desire to make additional
provisions regarding the Remarketing Agent's role as Remarketing Agent for the
Bonds with respect to its obligations described in Section 203 of the Indenture.
Terms used in this Agreement without being defined have the meanings given them
in the Indenture.
NOW, THEREFORE, the Obligor and Remarketing Agent hereby agrees as follows:
Section 1. Duties.
(a) The Remarketing Agent will perform the duties specified as
Remarketing Agent under the Indenture, including, but not limited to, the
determination of interest rates as set forth in Section 110 of the Indenture and
the remarketing of the Bonds as set forth in Section 203 of the Indenture.
Unless the Remarketing Agent is otherwise directed in writing by the Obligor and
except as provided in the next paragraph, the Remarketing Agent shall use its
best efforts to remarket Bonds subject to optional or mandatory purchase under
Sections 201 and 202 of the Indenture, respectively. Bonds which are subject to
mandatory purchase on the Conversion Date, a proposed Conversion Date or a
Substitution Date shall be remarketed by the Remarketing Agent only to a buyer
to whom the Remarketing Agent has delivered, at the time of such remarketing, a
copy of the notice of conversion or notice of delivery of a Substitute Credit
Facility, as applicable, pursuant to Section 113(b) of the Indenture. In the
event the Bonds are remarketed pursuant to a mandatory purchase on the
Conversion Date, a proposed Conversion Date or a Substitution Date, the
Remarketing Agent shall be entitled to a fee (mutually agreed upon with the
Obligor prior to the commencement of the remarketing) in addition to the annual
remarketing fee received pursuant to Section 4 hereof. In acting as Remarketing
Agent, the Remarketing Agent will act as agent and not as principal except as
expressly provided in this Section 1.
(b) The Remarketing Agent may, if it determines to do so in its sole
discretion, buy as principal, but it will not in any event be obligated to do
so, and if it buys Bonds it will have the same rights as would any other person
holding the Bonds.
E-149
<PAGE> 63
Section 2. Disclosure Statement. If the Remarketing Agent determines
that it is necessary or desirable to use a disclosure statement in connection
with its offering of Bonds (a "Disclosure Statement"), and in any event upon
conversion of the interest rate on the Bonds to a Fixed Rate, the Remarketing
Agent will notify the Obligor and the Obligor will provide the Remarketing Agent
with a Disclosure Statement satisfactory to the Remarketing Agent and its
Counsel in respect of the Bonds. The Obligor will supply the Remarketing Agent,
at the Obligor's expense, with such number of copies of the Disclosure Statement
as the Remarketing Agent requests from time to time and will amend the document
with respect to the Obligor and any summary of documents the amendment of which
was approved by the Obligor (and/or the documents incorporated by reference in
it) so that at all times the document will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
in the document, in light of the circumstances under which they were made, not
misleading.
Section 3. Indemnification and Contribution.
(a) The Obligor will indemnify and hold harmless the Remarketing
Agent, each of its directors, officers, employees and agents and each person
who controls the Remarketing Agent within the meaning of Section 15 of the
Securities Act of 1933, as amended (such Act being herein called the "Act" and
any such person being herein sometimes called for purposes of this paragraph
(a) an "Indemnified Party"), against any and all losses, claims, damages or
liabilities, joint or several, to which such Indemnified Party may become
subject under any statute or at law or in equity or otherwise, and will
reimburse any such Indemnified Party for any legal or other expenses incurred
by it in connection with investigating any claims against it and defending any
actions, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statements, or alleged untrue statement, of
a material fact with respect to the Obligor contained in any Disclosure
Statement referred to in Section 2 hereof or any amendment or supplement
thereto, or any portion of the Disclosure Statement under the headings
"Introductory Statement," "The Obligor and the Use of Proceeds," "The Bonds"
(other than the information under the sub-heading "Book-Entry System"),
"Sources of Payment and Security," "The Letter of Credit," "The Loan
Agreement," "The Trust Indenture," "The Reimbursement Agreement," and "The
Pledge and Security Agreement," or the omission or alleged omission to state
therein a material fact necessary to make the statements therein with respect
to the Obligor or under such headings not misleading. This indemnity agreement
will not be construed as a limitation on any other liability which the Obligor
may otherwise have to any Indemnified Party, but in no event shall the Obligor
be obligated for double indemnification. The duty of the Obligor to indemnify
and hold the Issuer and its directors, officers, employees and agents harmless
shall be governed by Section 5.4 of the Loan Agreement, the provisions of which
are incorporated herein by this reference.
(b) The Remarketing Agent will indemnify and hold harmless the
Obligor, each of its directors, officers, partners, employees and agents and
each person who controls the Obligor within the meaning of Section 15 of
the Act (for purposes of this paragraph (b), an "Indemnified Party") to the
same extent as the foregoing indemnity in paragraph (a) from the Obligor to the
Remarketing Agent, but only with reference to written information, if any,
relating to the Remarketing Agent furnished to the Obligor by the Remarketing
Agent specifically for use in the preparation of a Disclosure Statement. This
indemnity agreement shall not be construed as a limitation on any other
liability which the Remarketing Agent may otherwise have to any Indemnified
Party, but in no event shall the Remarketing Agent be obligated for double
indemnification.
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<PAGE> 64
(c) An Indemnified Party (as defined in paragraph (a) or paragraph
(b) of this Section 3) will, promptly after receiving notice of the
commencement of any action against such Indemnified Party in respect of which
indemnification may be sought against the Obligor or the Remarketing Agent, as
the case may be (the "Indemnifying Party"), notify the Indemnifying Party in
writing of the commencement of the action. Failure of the Indemnified Party to
give such notice will reduce the liability of the Indemnifying Party under this
Agreement by the amount of the damages attributable to the failure to give the
notice; but the failure will not relieve the Indemnifying Party from any
liability which it may have to such Indemnified Party otherwise than under the
indemnity agreement in this Section 3. If such action is brought against an
Indemnified Party and such Indemnified Party notifies the Indemnifying Party of
the commencement of the action, the Indemnifying Party may, or if so requested
by the Indemnified Party shall, participate in it or assume its defense, with
counsel reasonably satisfactory to the Indemnified Party, and after notice from
the Indemnifying Party to the Indemnified Party of an election so to assume the
defense, the Indemnifying Party will not be liable to the Indemnified Party
under this Section 3 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense other than reasonable
costs of investigation. If the Indemnifying Party does not employ counsel to
take charge of the defense or if any Indemnified Party reasonably concludes
that there may be defenses available to it which are different from or in
addition to those available to the Indemnifying Party (in which case the
Indemnifying Party will not have the right to direct the defense of such action
on behalf of such Indemnified Party), legal and other expenses reasonably
incurred by such Indemnified Party will be paid by the Indemnifying Party.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
Section 3 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Obligor on grounds of policy or otherwise, the
Obligor and Remarketing Agent shall contribute to the total losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending the same) to which the Obligor and
Remarketing Agent may be subject in such proportion so that the Remarketing
Agent is responsible for that portion represented by the percentage that the fee
to be paid to the Remarketing Agent under Section 4 hereof bears to the
principal amount of the Bonds remarketed under this Agreement and the Obligor is
responsible for the balance; but (i) in no case will the Remarketing Agent be
responsible for any amount in excess of the fee applicable to the Bonds
remarketed by the Remarketing Agent under this Agreement and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of section 11(f) of
the Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 3(d), each
person who controls the Remarketing Agent within the meaning of Section 15 of
the Act will have the same rights to contribution as the Remarketing Agent and
each person who controls the Obligor within the meaning of Section 15 of the Act
and each officer, each director and each partner of the Obligor will have the
same rights to contribute as the Obligor, subject in each case to clause (i) and
(ii) of this Section 3(d). Any party entitled to contribution will, promptly
after receiving notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made under this
Section 3(d), notify each party from whom contribution may be sought, but the
failure to notify such party shall not relieve any party from whom contribution
may be sought from any other obligation it may have under this Agreement or
otherwise than under this Section 3(d).
Section 4. Fees and Expenses. In consideration of the Remarketing Agent's
services under this Agreement, the Obligor will pay the Remarketing Agent a fee
of 1/8 of 1% of the aggregate principal amount of Bonds at closing. Thereafter,
the Obligor will pay a non-refundable fee of 1/8 of 1% per annum of the
aggregate principal amount of the Bonds outstanding payable on December 1 of
each year commencing December 1, 1998. The Obligor will also pay all expenses in
connection with the delivery of remarketed Bonds and with preparing a disclosure
document under Section 2 hereof and will reimburse the Remarketing Agent for all
of its direct out-of-pocket expenses incurred by it as Remarketing Agent or
otherwise under this Agreement, including reasonable Counsel fees and
disbursements.
Section 5. Remarketing Agent Not Liable for Failures by Purchasers of
Bonds. The Remarketing Agent will not be liable to the Obligor on account of the
failure of any person to whom the Remarketing Agent has sold a Bond to pay for
it or to deliver any document in respect of the sale.
Section 6. Representations and Warranties of the Obligor. The Obligor
represents, warrants and covenants to and with the Remarketing Agent as follows:
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<PAGE> 65
(a) All representations and warranties of the Obligor in the Bond
Purchase Agreement dated December 15, 1997, among Robert W. Baird & Co.
Incorporated, as underwriter, the Issuer and the Obligor (the "Bond Purchase
Agreement") are true and correct as though made at and as of the date hereof.
(b) The Obligor is fully empowered to enter into and perform all
agreements on its part herein contained; the Obligor has been authorized to
enter into and deliver this Agreement (by all necessary and proper legal
action); and the execution and delivery by it of this Agreement and the
performance of the agreements herein contained do not contravene or constitute a
default under any agreement, indenture, mortgage, loan agreement, commitment,
provision of its charter documents, or other existing requirements of law or
regulation or any other agreement of any kind to which it is a party or by which
it is or may be bound.
Section 7. Termination. This Agreement will terminate upon the effective
resignation or removal of the Remarketing Agent as Remarketing Agent in
accordance with Section 912 of the Indenture. The Remarketing Agent may
voluntarily resign as Remarketing Agent under this Agreement, and shall resign
as Remarketing Agent under this Agreement if requested by the Obligor in
writing, in each case upon 30 days' prior written notice. Following termination,
the provisions of Section 3 will continue in effect, and each party will pay the
other any amounts owing at the time of termination.
Section 8. Miscellaneous.
(a) This Agreement will be governed by the laws of the State of
Michigan.
(b) Notices will be given to the following addresses until a party
designates a new address in writing:
If to the Obligor:
Autocam Corporation
4070 East Paris Avenue
Kentwood, MI 49512
Attn:Warren A. Veltman, Chief Financial Officer
If to the Remarketing Agent:
Robert W. Baird & Co. Incorporated
777 East Wisconsin Avenue
Milwaukee, WI 53202
Attn: Municipal Note Trading
(c) Nothing contained in this Agreement shall be deemed to create any
employment relationship between the parties hereto or to create any fiduciary
obligations of the Remarketing Agent to the Obligor except as expressly provided
herein.
(d) This Agreement may be amended from time to time by an instrument
in writing executed by the parties hereto.
(e) Section headings are included herein for convenience of reference
only and shall not be considered a part of this Agreement for any purpose.
(f) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating any
other provision hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
E-152
<PAGE> 66
(g) The Remarketing Agent, in its individual capacity, may in good
faith buy, sell, own, hold or deal in any of the Bonds, including Bonds which
are remarketed, and may join in any action which any Bondholder may be entitled
to take with like effect as if it did not act in any capacity hereunder. The
Remarketing Agent, in its individual capacity, either as principal or agent, may
also engage or be interested in any financial or other transaction with the
Issuer or Obligor but it is understood and agreed that funds for the purchase of
Bonds which are remarketed shall come only from the purchasers of Bonds which
are remarketed or from the Obligor (including pursuant to any Credit Facility or
Substitute Credit Facility) and not from the Remarketing Agent.
(h) This Agreement may be executed in any number of counterparts, all
of which shall be deemed originals hereof.
ROBERT W. BAIRD & CO. INCORPORATED
"Remarketing Agent"
By:_______________________________
Its: Senior Vice President
AUTOCAM CORPORATION
"Obligor"
By:_______________________________
Its: Chief Financial Officer
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<PAGE> 1
Exhibit 21
==========
SUBSIDIARIES OF REGISTRANT
--------------------------
Autocam International Sales Corporation
Autocam Acquisition, Inc.
Autocam Laser Technologies, Inc.
Autocam-Pax, Inc.
Autocam South Carolina, Inc.
Autocam do Brasil Usinagem, Ltda.
Autocam Foreign Sales Corporation
<PAGE> 1
Exhibit 23
==========
INDEPENDENT AUDITORS' CONSENT
Autocam Corporation
Grand Rapids, Michigan
We consent to the incorporation by reference in Registration Statement No.
33-72816 and Registration Statement No. 33-80933 of Autocam Corporation on Forms
S-8 of our report dated July 29, 1998, incorporated by reference in this Annual
Report on Form 10-K of Autocam Corporation for the year ended June 30, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Grand Rapids, Michigan
September 23, 1998
E-155
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 1,643,539
<SECURITIES> 0
<RECEIVABLES> 11,679,824
<ALLOWANCES> 0
<INVENTORY> 6,389,448
<CURRENT-ASSETS> 20,801,354
<PP&E> 88,606,403
<DEPRECIATION> 24,184,933
<TOTAL-ASSETS> 113,449,371
<CURRENT-LIABILITIES> 17,675,347
<BONDS> 37,850,874
0
0
<COMMON> 31,840,086
<OTHER-SE> 13,220,823
<TOTAL-LIABILITY-AND-EQUITY> 113,449,371
<SALES> 90,361,063
<TOTAL-REVENUES> 90,361,063
<CGS> 69,435,961
<TOTAL-COSTS> 69,435,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,718,720
<INCOME-PRETAX> 11,953,962
<INCOME-TAX> 4,212,582
<INCOME-CONTINUING> 7,741,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,741,380
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.24
</TABLE>
