<PAGE>
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 No. 33-49869-01
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0739329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2702 North 44th Street, Phoenix, Arizona 85008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(602) 957-7711
(Former name, former address and former fiscal year, if changed since
last report)
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, and (2) has been
subject to such filing requirement for the past 90 days.
YES[ ] NO[ X ] *
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock June 30, 1994
$1.00 par value 1,000
* The Company has only been subject to filing requirements since
registration effective date of October 15, 1993.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheet -
June 30, 1994 and December 31, 1993 1
Consolidated Statement of Earnings -
Three Months and Six Months Ended
June 30, 1994 and 1993 2
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1994 and 1993 3
Consolidated Statement of Changes in Stockholder's
Equity - Six Months Ended June 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis 7-11
Part II Other Information
Legal Proceedings 12
Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
PART I - FINANCIAL INFORMATION
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Balance Sheet
(thousands)
June 30, December 31,
1994 1993
ASSETS
Cash and cash equivalents $ 2,202 $ 6,417
Accounts receivable, net of allowance
for doubtful accounts of $1,153,000
at June 30, 1994 and $1,091,000
at December 31, 1993 53,097 60,376
Inventories, net 66,847 64,808
Deferred income taxes 1,300 900
Prepaid expenses 12,260 9,367
Current assets 135,706 141,868
Long-term receivables 9,579 7,093
Property, plant and equipment, net 47,334 49,489
Intangibles 43,943 44,928
Other assets 8,325 8,465
Total assets $244,887 $251,843
LIABILITIES AND STOCKHOLDER'S EQUITY
Current maturities of long-term debt $ 3,542 $ 2,176
Accounts payable 23,345 23,095
Accrued expenses 31,210 31,652
U.S. & foreign income taxes 430 -
Current liabilities 58,527 56,923
Long-term debt 149,312 160,002
Deferred income taxes 7,115 12,320
Other liabilities 4,307 4,196
Stockholder's equity:
Preferred stock, $1 par value,
authorized 100 shares:
Series A, issued 8 shares - -
Common stock, $1 par value,
authorized 1,000 shares 1 1
Capital in excess of par 18,354 15,753
Foreign currency translation (657) (370)
Retained earnings 7,928 3,018
Total stockholder's equity 25,626 18,402
Total liabilities & stockholder's
equity $244,887 $251,843
The accompanying notes are an integral part of the financial
statements.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Earnings
(thousands, except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
1994 1993 1994 1993
Sales $57,808 $66,708 $113,424 $124,212
Services 15,403 15,622 30,924 30,741
Royalties 4,872 2,895 8,851 4,689
78,083 85,225 153,199 159,642
Cost of sales 43,450 50,660 84,819 92,909
Cost of services 13,410 13,363 26,933 26,387
Selling, general,
and administrative
expenses 13,204 14,134 30,460 27,599
70,064 78,157 142,212 146,895
8,019 7,068 10,987 12,747
Other income, net 526 20 402 140
8,545 7,088 11,389 12,887
Interest expense (4,379) (3,905) (8,594) (7,954)
Earnings (loss)
before income taxes 4,166 3,183 2,795 4,933
Income tax benefit
(provision) (1,849) (1,523) 2,115 (2,480)
Net earnings $ 2,317 $ 1,660 $ 4,910 $ 2,453
The accompanying notes are an integral part of the financial
statements.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Cash Flows
(thousands)
Six Months Ended
June 30,
1994 1993
Cash and cash equivalents at beginning
of period $ 6,417 $10,118
Cash flows from operating activities:
Net earnings 4,910 2,453
Adjustments to reconcile net income
to cash flows from operating activities:
Change in deferred income taxes (5,605) (349)
Depreciation and amortization 4,946 5,163
Gain on sale of property and
equipment (5) (182)
Other 811 2,517
Changes in assets and liabilities,
net of effects from acquired businesses:
(Increase) decrease in accounts
receivable 4,793 (7,454)
(Increase) decrease in inventories (2,039) 6,562
Increase in prepaids (2,893) (4,042)
Decrease in accounts payable 250 1,259
Increase (decrease) in accrued expenses 258 (1,817)
Increase in U.S. & foreign income taxes 430 -
Other, net (709) 629
Cash flows from operating activities 5,147 4,739
Cash flows from investing activities:
Purchases of property and equipment (1,984) (1,861)
Proceeds from sale of property and
equipment 45 309
Cash flows from investing activities (1,939) (1,552)
Cash flows from financing activities:
Decrease in investment by Parent - (4,696)
Increase in investment by Parent 2,601 3,577
Repayment of long term-debt (193,228) (61,100)
Proceeds from new long-term debt 183,204 54,306
Cash flows from financing activities (7,423) (7,913)
Net decrease in cash and cash equivalents (4,215) (4,726)
Total cash and cash equivalents at June 30, $ 2,202 $ 5,392
The accompanying notes are an integral part of the financial
statements.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Consolidated Statement of Changes in Stockholder's Equity
For the Six Months Ended June 30, 1994 and 1993
(thousands)
<TABLE>
<CAPTION>
Capital in
Preferred Common Excess of Retained
Stock Stock Par Value Earnings
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 $ - $ - $10,948 $ -
Net earnings 2,453
Amounts from Parent (1,119)
Decrease in guaranteed debt of ESOP 168
BALANCE AT JUNE 30, 1993 $ - $ - $12,450 $ -
BALANCE AT DECEMBER 31, 1993 $ - $ 1 $15,753 $ 3,018
Net earnings 4,910
Contribution from Parent 2,601
BALANCE AT JUNE 30, 1994 $ - $ 1 $18,354 $ 7,928
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
Note 1 - General
In July 1993, Talley Manufacturing and Technology, Inc. (the
Company), a wholly owned subsidiary of Talley Industries, Inc.,
("Talley") was formed with the issuance of 1,000 shares of common
stock. The formation of the Company was in anticipation of an
offering, in October, 1993, of Senior Notes by the Company and
Senior Discount Debentures by Talley. The Senior Notes are
guaranteed by substantially all of the Company's subsidiaries (the
"Subsidiary Guarantors"). Concurrently with the issuance of these
securities, Talley contributed the capital stock of its operating
subsidiaries (other than its real estate subsidiaries) to the
Company, which also assumed a substantial portion of Talley's
indebtedness and liabilities. At the same time, the Company
entered into a new credit facility with certain institutional
lenders which is also guaranteed by the Subsidiary Guarantors. The
net proceeds from the Senior Notes, the Senior Discount Debentures
and the new credit facility were used to repay substantially all of
the indebtedness of the Company and its subsidiaries, including the
indebtedness assumed from Talley, and substantially all of the
indebtedness remaining with Talley.
Upon completion of the reorganization of entities under the common
control of Talley described above and the new financing, the
Company is a holding company which owns all of the capital stock of
the operating subsidiaries of Talley (other than the real estate
subsidiaries). Accordingly, all corporate costs, assets and
liabilities are included in the Company's financial statements and
interest expense includes the interest on indebtedness of the
operating subsidiaries and all indebtedness assumed by the Company
in connection with the reorganization. In connection with the
reorganization, Talley and the Company entered into a tax sharing
agreement and a cost sharing agreement which require the Company to
reimburse Talley for certain ongoing general and administrative
expenses which will be incurred by Talley and to make certain tax
payments to Talley.
The financial statements of the Company have been prepared using
the historical amounts included in the Talley and subsidiaries
consolidated financial statements giving effect to the
reorganization described above. Although the Subsidiary Guarantors
guaranteed the Senior Notes, separate financial statements of the
Subsidiary Guarantors are not included because the Subsidiary
Guarantors are jointly and severally liable with the Company under
the Senior Notes, the aggregate assets, liabilities, earnings and
equity of the Subsidiary Guarantors are substantially equivalent to
the assets, liabilities, earnings and equity of the Company on a
consolidated basis, and separate financial statements and other
disclosures concerning the Subsidiary Guarantors would not be
material to investors. In addition, with the exception of the net
assets of the real estate operations and certain debt and related
interest expense, the consolidated financial statements of Talley
are substantially identical to those of the Company.
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Although the financial statements of the Company separately report
its assets, liabilities (including contingent liabilities) and
stockholder's equity, legal title to such assets and legal
responsibility for such liabilities was not affected by such
attribution during periods prior to the reorganization.
Accordingly, the Talley consolidated financial statements and
related notes should be read in connection with these financial
statements.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1994 and December 31,
1993 and the results of operations for the six-month periods ended
June 30, 1994 and 1993, and cash flows and changes in stockholder's
equity for the six-month periods ended June 30, 1994 and 1993.
Such results, however, may not be indicative of the results for the
full year.
Note 2 - Inventories
Inventories are summarized as follows (in thousands):
June 30, December 31,
1994 1993
Raw materials and supplies $13,084 $10,293
Work-in-process 10,059 9,584
Finished goods 26,457 26,470
Inventories applicable to
government contracts 17,247 18,461
$66,847 $64,808
Note 3 - Earnings Per Share
The Company is a wholly owned subsidiary of Talley; accordingly,
earnings per share information is not presented.
Note 4 - Sale of Subsidiaries
In July 1993 the Company completed the sale of the net assets of
its precision potentiometer business for a cash purchase price of
$2.8 million, which approximated the book value of the net assets
sold. Sales and pretax earnings of the business sold for the six
months ended June 30, 1993 were $2.3 million and $.4 million,
respectively.
Note 5 - Income Tax Benefit
Pursuant to recent legislation passed in the State of Arizona
regarding the rules for filing consolidated state income tax
returns, the Company has reversed $5.6 million of state income tax
accruals to reflect the change in the law. The new law is
retroactive to the beginning of 1986.
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TALLEY MANUFACTURING AND TECHNOLOGY, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following table summarizes the Company's consolidated revenue
and earnings (loss), by segment for the periods shown:
Three Months Six Months
Ended Ended
(Dollars in Thousands) June 30, June 30,
1994 1993 1994 1993
REVENUES:
Government Products
and Services $35,454 $48,280 $ 71,712 $ 87,706
Airbag Royalty 3,909 1,934 7,805 3,656
Industrial Products 30,835 27,912 60,035 54,001
Specialty Products 7,885 7,099 13,647 14,279
$78,083 $85,225 $153,199 $159,642
OPERATING INCOME:
Government Products
and Services $ 3,231 $ 5,909 $ 7,417 $ 11,593
Airbag Royalty 3,909 1,934 7,805 3,656
Industrial Products 2,323 827 3,043 1,364
Specialty Products 992 1,040 1,602 1,813
Total operating income 10,455 9,710 19,867 18,426
Corporate expense (1,943) (2,693) (8,527) (5,729)
Non-segment interest
income 33 71 49 190
Interest expense (4,379) (3,905) (8,594) (7,954)
Earnings (loss) before
income taxes $ 4,166 $ 3,183 $ 2,795 $ 4,933
Revenues for the six-month period ended June 30, 1994 decreased
$6.4 million from $159.6 million to $153.2 million, compared with
the corresponding period in the prior year. The decrease in the
six-month comparison is primarily the result of decreased revenue
in the Government Products and Services segment due to scheduled
price reductions under certain extended range munitions contracts
and the timing of completion and shipments under other contracts,
offset by increasing revenue in the Airbag Royalties segment and
the Steel Operations in the Industrial Products segment. The
pretax earnings for the six months ended June 30, 1994 was $2.8
million compared with $4.9 million pretax earnings in the first
six months of the previous year. The earnings in the first half
of 1994 includes a $4.5 million provision for litigation costs
related to resolution of claims in connection with the airbag
royalties being received from the licensee, partially offset by
a $1.0 million pretax gain on reversion of surplus funds from two
previously terminated pension plans. Net earnings for the six
months ended June 30, 1994 was $4.9 million, which reflects a tax
benefit resulting from reversal of state income tax accruals of
$5.6 million, pursuant to a retroactive change in tax laws in the
State of Arizona.
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<PAGE>
Earnings from both the Airbag Royalty segment and the Industrial
Products segment improved compared with the prior year.
Royalties in the Airbag Royalty segment increased by $4.1 million
from $3.7 million in the first six months of 1993 to $7.8 million
for the first six months of 1994, while earnings from the
Industrial Products segment improved $1.7 million. Earnings from
the Government Products and Services segment and the Specialty
Products segment for the first six months of 1994, when compared
with the first six months of 1993, were $4.2 million and $.2
million lower, respectively.
The gross profit percentage, excluding airbag royalties, of
22.6%, for the six months ended June 30, 1994 was down slightly
from the gross profit percentage of 23.0% for the comparable
period in 1993. The decrease from the prior year is primarily
due to the mix of contracts.
Government Products and Services. Revenue and earnings in the
first half of 1994 decreased $16.0 million and $4.2 million,
respectively, when compared with the same period in the prior
year. These decreases are primarily due to a scheduled pricing
reduction under the extended range munitions program following
the recovery of the Company's investment in a new production
facility, and also due to the timing of completion and shipments
under other contracts. Revenue and earnings from the Company's
architectural and engineering services company are approximately
equal to the comparable period in the prior year.
Airbag Royalties. Revenue from airbag royalties increased from
$3.7 million in the first six months of 1993 to $7.8 million in
the first six months of 1994. The increased royalty is the
result of the recovering automobile and light truck industry and
increasing airbag implementation rates. (Also see "Other
Matters" as a separate caption within Management's Discussion and
Analysis of Financial Condition and Results of Operations)
Industrial Products. In the first six months of 1994 Industrial
Products sales and earnings increased $6.0 million and $1.7
million, respectively, when compared with the first six months of
1993. Increases in sales resulted from improvement in orders for
stainless steel bars and rods and increased demand for ceramic
insulator products due to harsh winter weather conditions and
improved market share. The improvement in earnings resulted from
the sales increases and cost reduction and streamlining efforts
at the Company's steel and ceramic insulator operations. These
increases partially were offset by lower welder products sales
and earnings.
Specialty Products. During the first six months of 1994, sales
for the Specialty Products segment decreased 4.4%, from $14.3
million to $13.6 million, while earnings decreased slightly from
$1.8 million to $1.6 million, when compared with the same period
in 1993. The decrease in sales and earnings when compared with
the prior year is a result of the timing of sales, which are
expected to improve during the remainder of 1994.
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<PAGE>
Other. Interest expense in the first six months of 1994
increased to $8.6 million, from $8.0 million in the comparable
period in 1993, mainly due to a major portion of the Company's
debt being refinanced from variable rates to higher fixed rates.
Corporate overhead increased from $5.7 million to $8.5 million
over the comparable period in 1993 due primarily to a $4.5
million provision for litigation costs related to resolution of
claims in connection with airbag royalties being received from
the licensee. Income tax benefit for the first six months of
1994 was $2.1 million compared to a tax provision of $2.5 million
in the comparable period in 1993. The tax benefit in 1994 is
primarily the result of a favorable state tax legislation which
resulted in a $5.6 million reversal of state income taxes
previously accrued.
Financial Condition, Liquidity and Capital Resources
At June 30, 1994, the Company had $2.2 million in cash and cash
equivalents and net working capital of $77.2 million. Cash flow
from operating activities for the six months ended June 30, 1994
was $5.1 million, generally the result of the Company's
successful efforts toward collection of trade receivables, offset
in part by increases in inventories and prepaid expenses. Cash
generated from operations during the first six months of 1993 was
$5.1 million. Cash used for investing activities during the six
months ended June 30, 1994 was $1.9 million, substantially all
for capital expenditures. Cash used in financing activities of
$7.4 million reflects a reduction in debt from cash generated
from operations and from cash available at the beginning of the
year.
The Company, along with its parent, Talley, in October 1993,
completed a major refinancing program. This refinancing program
included an offering of $185 million of debt securities,
consisting of $70 million gross proceeds of senior discount
debentures due 2005, issued by Talley to yield 12.25% and $115
million of senior notes due 2003, with an interest rate of 10.75%
issued by the Company, which was newly formed to hold the stock
of all the operating subsidiaries of Talley (except for the
subsidiaries holding Talley's real estate operations). In
connection with this refinancing, the Company obtained a secured
credit facility with institutional lenders, of which
approximately $48 million was initially borrowed in connection
with the refinancing discussed above. Borrowings under the
secured credit facility may not exceed the collateral base as
defined in the governing credit agreement. The facility consists
of a five-year revolving credit facility of up to $40 million and
a five-year $20 million term loan facility. At June 30, 1994
availability under the facility, based primarily on inventory and
receivable levels, was approximately $54 million, of which
approximately $37 million was borrowed. Upon the occurrence of
certain specified events, at any time following the third
anniversary of the secured credit facility, the agent thereunder
may elect to terminate the facility.
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<PAGE>
The proceeds from the offerings described above and the initial
borrowings under the secured credit facility refinanced
substantially all of the debt of the Company and Talley. The
Company anticipates that the new capital structure will support
the long-term growth of its core businesses and permit the
implementation of its strategy to use the portion of airbag
royalties retained by the Company (after certain permitted
distributions to Talley) and other available cash flow to reduce
its total indebtedness.
The Company is permitted (and intends) to distribute cash to its
parent, Talley, for specified purposes and under certain other
circumstances. These distributions will be made using funds
available from operations and the secured credit facility. The
payments include (but are not limited to) certain airbag
royalties in excess of $10 million in any year (or in excess of
such greater amount as would be required for the Company to meet
a specified fixed charge coverage ratio) which will be used to
redeem the Senior Discount Debentures issued by Talley and an
annual distribution of up to $1.3 million ($1.7 million for the
period from the issue date of the new indebtedness through
December 31, 1994) for a period of five years to fund certain
carrying and other costs associated with Talley's real estate
operations. The Company may also redeem $8.0 million in
preferred stock of the Company purchased by Talley from proceeds
of the recent refinancing. In addition, the Company is a party
to a cost sharing agreement and a tax sharing agreement which
will require the Company to reimburse Talley for certain ongoing
general and administrative expenses and to make certain tax
payments to Talley.
The Company believes that the combination of cash flow from
operations, funds available under the credit facility described
above (or any successor facility) and increasing revenue from
airbag royalties (to the extent retained by the Company as
described above) will provide sufficient liquidity to meet its
working capital, debt service and other capital requirements and
to meet its other ongoing business needs.
Other Matters
As more fully explained in the Commitments and Contingencies note
to the December 31, 1993 Consolidated Financial Statements,
litigation between the Company and TRW, Inc. (TRW), the buyer of
the Company's airbag business and licensee of the Company's
technology related thereto, has been pending since 1989. In mid-
February 1994 TRW filed a new declaratory judgment action
asserting claims already made in the existing action and further
claiming the Company, through the actions of a subsidiary,
breached a non-compete provision of the Asset Purchase Agreement
by rendering services to competitors of TRW, and requesting among
other things a court order that a contemporaneous notice and
a $26.5 million one-time payment that TRW sent to the Company was
valid, entitling it to terminate that airbag royalty and obtain
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<PAGE>
a paid up license to use the Company's airbag technology. On
March 1, the Company answered TRW's complaint and also filed
counterclaims alleging that TRW had wrongfully terminated the
license agreement, had intentionally interfered with Talley's
business relationships and had failed to exert reasonable efforts
to exploit the exclusive license granted to TRW by the Company.
On March 14, 1994 the Company filed a Motion for an Order
requiring TRW to make payment of all quarterly royalties until
the lawsuit is finally resolved. The Company sought the Order to
avoid the potential harm from cash flow interruption and/or
potential loan covenant defaults caused by TRW's failure to pay
scheduled royalty payments. A three day hearing on the Company's
Motion was completed on May 3, 1994 and on May 23, 1994 the Court
granted the Company's motion for a preliminary injunction. The
Court ordered TRW to continue paying royalties to the Company
pending conclusion of the lawsuit. The Company believes that a
final hearing will show that TRW's claims are without merit and
that the Court will enter a final Order confirming the Company's
right to continue receiving royalty payments.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As more fully explained in the Commitments and Contingencies note
to the December 31, 1993 Consolidated Financial Statements,
litigation between the Company and TRW, Inc. (TRW), the buyer of
the Company's airbag business and licensee of the Company's
technology related thereto, has been pending since 1989. In mid-
February 1994 TRW filed a new declaratory judgment action
asserting claims already made in the existing action and further
claiming the Company, through the actions of a subsidiary,
breached a non-compete provision of the Asset Purchase Agreement
by rendering services to competitors of TRW, and requesting among
other things a court order that a contemporaneous notice and a
$26.5 million one-time payment that TRW sent to the Company was
valid, entitling it to terminate that airbag royalty and obtain
a paid up license to use the Company's airbag technology. On
March 1, the Company answered TRW's complaint and also filed
counterclaims alleging that TRW had wrongfully terminated the
license agreement, had intentionally interfered with Talley's
business relationships and had failed to exert reasonable efforts
to exploit the exclusive license granted to TRW by the Company.
On March 14, 1994 the Company filed a Motion for an Order
requiring TRW to make payment of all quarterly royalties until
the lawsuit is finally resolved. The Company sought the Order to
avoid the potential harm from cash flow interruption and/or
potential loan covenant defaults caused by TRW's failure to pay
scheduled royalty payments. A three day hearing on the Company's
Motion was completed on May 3, 1994 and on May 23, 1994 the Court
granted the Company's motion for a preliminary injunction. The
Court ordered TRW to continue paying royalties to the Company
pending conclusion of the lawsuit. The Company believes that a
final hearing will show that TRW's claims are without merit and
that the Court will enter a final Order confirming the Company's
right to continue receiving royalty payments.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1* First Amendment to Loan and Security Agreement
by and among Talley Manufacturing and
Technology, Inc. and Transamerica Business
Credit Corporation, as agent.
10.2* Second Amendment to Loan and Security Agreement
by and among Talley Manufacturing and
Technology, Inc. and Transamerica Business
Credit Corporation, as agent.
* Documents marked with an asterisk are filed with this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed for the three
months ended June 30, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
TALLEY MANUFACTURING AND
TECHNOLOGY, INC.
(Registrant)
Date: August 9, 1994 By Kenneth May
Kenneth May
Vice President, Controller
Principal Accounting
Officer
Date: August 9, 1994 By Mark S. Dickerson
Mark S. Dickerson
Vice President, General
Counsel and Secretary
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<PAGE>
EXHIBIT 10.1
EXECUTION
FIRST AMENDMENT
TO LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of the 29th day of April, 1994,
by and among TALLEY MANUFACTURING AND TECHNOLOGY, INC., a Dela-
ware corporation (the "Borrower"), TRANSAMERICA BUSINESS CREDIT
CORPORATION, as agent (the "Agent"), and the lenders parties to
the Loan Agreement referred to below (the "Lenders").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have here-
tofore entered in a Loan and Security Agreement dated October 22,
1993 (the "Loan Agreement");
WHEREAS, the Borrower has requested that the Lenders and the
Agent agree to amend the Fixed Charge Coverage Ratio and Net
Income Before Taxes covenants set forth in Article 18 of the Loan
Agreement in certain respects; and
WHEREAS, the Lenders and the Agent are willing to so agree,
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and intend-
ing to be legally bound hereby, the parties hereto hereby agree
as follows:
1. Definitions. Capitalized terms used herein and not
defined herein shall have the respective meanings given to such
terms in the Loan Agreement.
2. Amendment to Section 18.2. Section 18.2 of the Loan
Agreement is hereby amended to read in its entirety as follows:
18.2 Fixed Charge Coverage Ratio. Borrower shall
cause Borrower's and its Subsidiaries' consolidated Fixed
Charge Coverage Ratio as of the end of each March 31, June
30, September 30 and December 31 for the fiscal year to date
period then ending (commencing with the quarter ending March
31, 1994) to exceed 1.2 to 1, or in the case of each quarter
during the term of this Agreement ending on March 31, to
exceed 1.05 to 1; provided, however, that the Borrower's and
its Subsidiaries' consolidated Fixed Charge Coverage Ratio
as of the end of any such quarter ending in the fiscal year
ending December 31, 1994, shall be computed without taking
into account either (a) the elimination by Borrower of a
reserve in the amount of $5.6 million for potential tax
liability to the State of Arizona in respect of the Arizona
Tax Litigation and (b) the establishment by Borrower of a
reserve in the amount of $4 million for the potential
liability for legal fees and expenses in connection with the
TRW Litigation.
3. Amendment to Section 18.6. Section 18.6 of the Loan
Agreement is hereby amended to read in its entirety as follows:
3.1. Net Income Before Taxes. Borrower will not permit
its Net Income Before Taxes, on a consolidated basis with
the Subsidiaries, (a) for October, November or December 1993
to be less than $0, $500,000 and $1,000,000, respectively,
and (b) at the end of each month thereafter, for the period
from and including the beginning of the fiscal year in which
such month is contained, to the end of such month, to be
less than the amounts indicated below:
Period Cumulative Net Income Before Taxes
January ($250,000)
February $0
March $1,000,000
April $1,000,000
May $1,500,000
June $2,000,000
July $2,000,000
August $2,950,000
September $3,800,000
October $4,400,000
November $5,000,000
December $5,600,000
provided, however, that the amount of such Net Income Before
Taxes as at the end of any such month during the fiscal year
ending December 31, 1994, shall be computed without taking
into account the establishment by Borrower of a reserve in
the amount of $4 million for the potential liability for
legal fees and expenses in connection with the TRW
Litigation.
4. Conditions to Effectiveness. This Amendment shall be
effective as of the date first above written upon satisfaction of
the following conditions precedent:
4.1. Execution of Amendment. The Agent shall have
received counterparts of this Amendment executed by the Borrowers
and the Lenders.
4.2. Confirmation of Loan Documents. Each Subsidiary
shall have executed the Confirmation of Loan Documents set forth
below.
4.3. No Defaults. No Default, Event of Default or
Subsidiary Event of Default shall have occurred and be existing
either before or immediately after giving effect to this
Amendment.
4.4. Representations and Warranties True. The repre-
sentations and warranties contained herein, in the Loan Agreement
and in all other Loan Documents shall be true and correct both as
of the date hereof and immediately after giving effect to this
Amendment.
5. Representations and Warranties. The Borrower hereby
represents and warrants to the Lenders and the Agent that (i) the
execution, delivery and performance of this Amendment and the
other documents and instruments to be executed and delivered in
connection herewith by the Borrower and its Affiliates are within
their respective corporate powers and have been duly authorized
by all necessary corporate action, (ii) no consent, approval,
authorization of, or declaration or filing with, any governmental
or public authority, and no consent of any other Person, is
required in connection with the execution, delivery and per-
formance of this Amendment and the other documents and instru-
ments to be executed and delivered in connection herewith by the
Borrower and its Affiliates, except for those already duly
obtained, (iii) this Amendment has been duly executed by the
Borrower and constitutes the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with its
terms, (iv) the execution, delivery and performance by the Bor-
rower and its Affiliates of this Amendment and the other docu-
ments and instruments to be executed and delivered in connection
herewith by the Borrower and its Affiliates do not and will not
conflict with, or constitute a violation or breach of, or consti-
tute a default under, or result in the creation or imposition of
any Lien upon the property of the Borrower or any of its Affili-
ates by reason of the terms of (a) any contract, mortgage, Lien,
lease, agreement, indenture, or instrument to which the Borrower
or such Affiliate is a party or which is binding upon it, (b) any
requirement of law applicable to the Borrower or such Affiliate,
or (c) the Certificate or Articles of Incorporation or By-Laws of
the Borrower or such Affiliate, (v) no event has occurred and is
continuing which constitutes a Default, an Event of Default or a
Subsidiary Event of Default, and (vi) no change or development or
event involving a prospective change, which in any such case has
had or could reasonably be expected to have a Material Adverse
Effect, has occurred and is continuing.
6. Reference to and Effect on Loan Documents.
6.1. On and after the date hereof, each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the other
Loan Documents to the Loan Agreement, shall mean and be a refer-
ence to the Loan Agreement as amended hereby.
6.2. Except as specifically amended above, all of the
terms of the Loan Agreement shall remain unchanged and in full
force and effect.
6.3. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of any Lender or the Agent under the Loan Agreement or any
of the other Loan Documents, nor constitute a waiver of any pro-
vision of the Loan Agreement or any of the other Loan Documents.
7. Execution in Counterparts. This Amendment may be exe-
cuted in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
8. Governing Law. This Amendment shall be governed by,
and shall be construed and enforced in accordance with, the laws
of the State of New York.
9. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment or be given any substantive
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their proper and duly
authorized officers as of the date set forth above.
BORROWER:
TALLEY MANUFACTURING AND TECHNOLOGY,
INC.
By: Daniel R. Mullen
Name: Daniel R. Mullen
Title: Vice President
By: Kenneth May
Name: Kenneth May
Title: Vice President
AGENT:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: Steven R. Fischer
Name:
Title:
LENDERS:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: Steven R. Fischer
Name:
Title:
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
By: Dennis E. Harrison
Name: Dennis E. Harrison
Title: Vice President
<PAGE>
CONFIRMATION OF LOAN DOCUMENTS
Each of the undersigned hereby acknowledges that the
Loan and Security Agreement, dated October 22, 1993 (as amended
or modified, the "Loan Agreement"), among Talley Manufacturing
and Technology, Inc., a Delaware corporation, Transamerica Busi-
ness Credit Corporation, as agent, and each of the financial
institutions identified on the signature pages thereto is being
amended pursuant to the foregoing First Amendment to Loan and
Security Agreement (the "Amendment"). Each of the undersigned
hereby confirms that each of the Loan Documents to which it is a
party shall remain in full force and effect on the terms provided
therein and that each reference in the Loan Documents to the
"Parent Loan Agreement" shall be a reference to the Loan Agree-
ment as modified or amended by the Amendment. Each of the under-
signed further confirms that it is in full compliance with all of
the obligations under the Loan Documents to which it is a party
and that all representations and warranties made by it in such
Loan Documents are true and correct as though made on and as of
the date hereof.
Dated: As of April 29, 1994
AMCAN SPECIALTY STEELS, INC.;
DIMETRICS, INC.; ELECTRODYNAMICS,
INC.; JOHN J. MCMULLEN ASSOCIATES,
INC.; PORCELAIN PRODUCTS CO.; ROWE
INDUSTRIES, INC.; TALLEY AUTOMOTIVE
PRODUCTS, INC.; TALLEY CANADA,
INC.; TALLEY DEFENSE SYSTEMS, INC.;
TALLEY INTERNATIONAL INVESTMENT
CORPORATION; TALLEY METALS
TECHNOLOGY, INC.; TALLEY
TECHNOLOGY, INC.; UNIVERSAL
PROPULSION COMPANY; WATERBURY
COMPANIES, INC.; WDC, INC.
By: Daniel R. Mullen
Name: Daniel R. Mullen
Title: Treasurer
<PAGE>
EXHIBIT 10.2
EXECUTION
SECOND AMENDMENT
TO LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of the 30th day of June, 1994, by
and among TALLEY MANUFACTURING AND TECHNOLOGY, INC., a Delaware
corporation (the "Borrower"), TRANSAMERICA BUSINESS CREDIT
CORPORATION, as agent (the "Agent"), and the lenders parties to
the Loan Agreement referred to below (the "Lenders").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have
heretofore entered in a Loan and Security Agreement dated October
22, 1993 (as heretofore amended, the "Loan Agreement");
WHEREAS, the Borrower, the Agent and the Lenders wish to
enter into this Amendment to clarify certain provisions of the
Loan Agreement and to make certain other changes thereto.
NOW, THEREFORE, in consideration of the premises and
intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Definitions. Capitalized terms used herein and not
defined herein shall have the respective meanings given to such
terms in the Loan Agreement.
2. Amendments to Section 1.1.
2.1. The definition of "Revolving Notes" set forth in
Section 1.1 of the Loan Agreement is hereby amended to read in
its entirety as follows:
"Revolving Notes" shall mean those certain promissory
notes of Borrower substantially in the form attached hereto
as Exhibit D-1, issued to TBCC and ANB, as Lenders, in
accordance with their respective Percentage Interests, and
any promissory notes issued in addition thereto or in
replacement thereof pursuant to Section 25.2(e) of this
Agreement (each as amended, supplemented or otherwise
modified from time to time).
2.2. The definition of "Term Notes" set forth in
Section 1.1 of the Loan Agreement is hereby amended to read in
its entirety as follows:
"Term Notes" shall mean those certain promissory notes
of Borrower substantially in the form attached hereto as
Exhibit D-2, issued to TBCC and ANB, as Lenders, in
accordance with their respective Percentage Interests, in
the aggregate initial principal sum of Twenty Million
Dollars ($20,000,000), and any promissory notes issued in
addition thereto or in replacement thereof pursuant to
Section 25.2(e) of this Agreement (each as amended,
supplemented or otherwise modified from time to time).
3. Amendments to Section 25.2(e). Subsection (e) of
Section 25.2 of the Loan Agreement is hereby amended to read in
its entirety as follows:
(e) Upon its receipt of an Assignment and Assumption
Agreement executed by an assigning Lender, together with the
Revolving Note or Revolving Notes and Term Note or Term
Notes subject to such assignment, the Agent shall, if such
Assignment and Assumption Agreement has been completed and
is in substantially the form of Exhibit E hereto, (i) accept
such Assignment and Assumption Agreement, (ii) record the
information contained therein in the Register and (iii) give
prompt notice thereof to the Borrower. Within five (5)
Business Days after its receipt of such notice, the Borrower
shall execute and deliver to the Agent in exchange for the
surrendered Revolving Note or Revolving Notes and Term Note
or Term Notes a new Revolving Note or Revolving Notes and
Term Note or Term Notes to the order of the assignee in an
amount equal to the Percentage Interest assumed by it
pursuant to such Assignment and Assumption Agreement and, if
the assigning Lender has retained a Percentage Interest
hereunder, a new Revolving Note or Revolving Notes and Term
Note or Term Notes to the order of the assigning Lender in
an amount equal to the Percentage Interest retained by it
hereunder. Such new Revolving Note or Revolving Notes and
Term Note or Term Notes shall state that it or they re-
evidence a portion of the Obligations outstanding under the
old Revolving Note or Revolving Notes and Term Note or Term
Notes, shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Revolving
Note or Revolving Notes, shall be in the aggregate principal
amount of such surrendered Term Note or Term Notes
outstanding on the Acceptance Date with a proportionate
apportionment of periodic amortization of principal as is
appropriate to reflect the assignment, shall be dated as of
the Acceptance Date, and shall otherwise be in substantially
the form of the Revolving Note or Revolving Notes and Term
Note or Term Notes subject to such assignments.
4. Exhibit E. The Exhibit E referred to Section 25.2(e)
of the Loan Agreement shall be in the form of Exhibit E attached
hereto.
5. Conditions to Effectiveness. This Amendment shall be
effective as of the date first above written upon satisfaction of
the following conditions precedent:
5.1. Execution of this Amendment. The Agent shall
have received a copy of this Amendment executed by a duly
authorized officer of Borrower and by each Lender.
5.2. Confirmation of Loan Documents. Each Subsidiary
shall have executed the Confirmation of Loan Documents set forth
below.
5.3. Corporate Proceedings. The Agent shall have
received a copy of the resolutions (in form and substance
reasonably satisfactory to Agent) of the Board of Directors of
the Borrower authorizing the execution, delivery and performance
of this Amendment and the consummation of the transactions
contemplated hereby, certified by the Secretary or an Assistant
Secretary of the Borrower as of the date hereof. Such
certificate shall state that the resolutions set forth therein
have not been amended, modified, revoked or rescinded as of the
date of such certificate.
5.4. No Defaults. No Default, Event of Default or
Subsidiary Event of Default shall have occurred and be existing
either before or immediately after giving effect to this
Amendment.
5.5. Representations and Warranties True. The
representations and warranties contained herein, in the Loan
Agreement and in all other Loan Documents shall be true and
correct both as of the date hereof and immediately after giving
effect to this Amendment.
5.6. Certificate of Officers. The Agent shall have
received a certificate, in form and substance satisfactory to the
Agent, dated the date of the effectiveness of this Amendment and
signed by the President or a Vice President and the Treasurer or
Controller of the Borrower certifying that the conditions set
forth in this Section 5 have been fulfilled and as to such other
matters as the Agent shall reasonably require.
5.7. Other Conditions. The Agent shall have received
such other agreements, opinions, certificates, representations,
instruments and other documents as it may reasonably require, all
in form and substance satisfactory to the Agent.
6. Representations and Warranties. The Borrower hereby
represents and warrants to the Lenders and the Agent that (i) the
execution, delivery and performance of this Amendment by the
Borrower and its Affiliates are within their respective corporate
powers and have been duly authorized by all necessary corporate
action, (ii) no consent, approval, authorization of, or
declaration or filing with, any governmental or public authority,
and no consent of any other Person, is required in connection
with the execution, delivery and performance of this Amendment by
the Borrower and its Affiliates, except for those already duly
obtained, (iii) this Amendment has been duly executed by the
Borrower and constitutes the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with its
terms, (iv) the execution, delivery and performance by the
Borrower and its Affiliates of this Amendment by the Borrower and
its Affiliates do not and will not conflict with, or constitute a
violation or breach of, or constitute a default under, or result
in the creation or imposition of any Lien upon the property of
the Borrower or any of its Affiliates by reason of the terms of
(a) any contract, mortgage, Lien, lease, agreement, indenture, or
instrument to which the Borrower or such Affiliate is a party or
which is binding upon it, (b) any requirement of law applicable
to the Borrower or such Affiliate, or (c) the Certificate or
Articles of Incorporation or By-Laws of the Borrower or such
Affiliate, (v) no event has occurred and is continuing which
constitutes a Default, an Event of Default or a Subsidiary Event
of Default, and (vi) no change or development or event involving
a prospective change, which in any such case has had or could
reasonably be expected to have a material adverse effect on the
financial condition of the Borrower, the ability of the Borrower
to pay any of the Obligations, or the priority or value of
Agent's and Lenders' security interest in the Collateral or any
collateral under any other Loan Document (including without
limitation, the Airbag Collateral) has occurred and is
continuing.
7. Reference to and Effect on Loan Documents.
7.1. On and after the date hereof, each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference in the other
Loan Documents to the Loan Agreement, shall mean and be a refer-
ence to the Loan Agreement as amended hereby.
7.2. Except as specifically amended above, all of the
terms of the Loan Agreement shall remain unchanged and in full
force and effect.
7.3. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of any Lender or the Agent under the Loan Agreement or any
of the other Loan Documents, nor constitute a waiver of any
Default, Event of Default or Subsidiary Event of Default, or any
provision of the Loan Agreement or any of the other Loan Docu-
ments.
8. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered (including delivery by telecopier) shall be deemed
to be an original and all of which taken together shall
constitute one and the same instrument.
9. Governing Law. This Amendment shall be governed by,
and shall be construed and enforced in accordance with, the laws
of the State of New York.
10. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment or be given any substantive
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their proper and duly
authorized officers as of the date set forth above.
BORROWER:
TALLEY MANUFACTURING AND TECHNOLOGY,
INC.
By: Daniel R. Mullen
Name: Daniel R. Mullen
Title: Treasurer
By: Mark S. Dickerson
Name: Mark S. Dickerson
Title: Secretary
AGENT:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: Stephen K. Goetschius
Name: Stephen K. Goetschius
Title: Vice President
LENDERS:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: Stephen K. Goetschius
Name: Stephen K. Goetschius
Title: Vice President
AMERICAN NATIONAL BANK AND TRUST COMPANY
OF CHICAGO
By: Elizabeth J. Limpert
Name: Elizabeth J. Limpert
Title: Vice President
<PAGE>
CONFIRMATION OF LOAN DOCUMENTS
Each of the undersigned hereby acknowledges that the
Loan and Security Agreement, dated October 22, 1993 (as amended
or modified, the "Loan Agreement"), among Talley Manufacturing
and Technology, Inc., a Delaware corporation, Transamerica
Business Credit Corporation, as agent, and each of the financial
institutions identified on the signature pages thereto is being
amended pursuant to the foregoing Second Amendment to Loan and
Security Agreement (the "Amendment"). Each of the undersigned
hereby confirms that each of the Loan Documents to which it is a
party shall remain in full force and effect on the terms provided
therein and that each reference in the Loan Documents to the
"Parent Loan Agreement" shall be a reference to the Loan
Agreement as modified or amended by the Amendment. Each of the
undersigned further confirms that it is in full compliance with
all of the obligations under the Loan Documents to which it is a
party and that all representations and warranties made by it in
such Loan Documents are true and correct as though made on and as
of the date hereof.
Dated: As of June 30, 1994
AMCAN SPECIALTY STEELS, INC.;
DIMETRICS, INC.; ELECTRODYNAMICS,
INC.; JOHN J. MCMULLEN ASSOCIATES,
INC.; PORCELAIN PRODUCTS CO.; ROWE
INDUSTRIES, INC.; TALLEY AUTOMOTIVE
PRODUCTS, INC.; TALLEY CANADA,
INC.; TALLEY DEFENSE SYSTEMS, INC.;
TALLEY INTERNATIONAL INVESTMENT
CORPORATION; TALLEY METALS
TECHNOLOGY, INC.; TALLEY
TECHNOLOGY, INC.; UNIVERSAL
PROPULSION COMPANY; WATERBURY
COMPANIES, INC.; WDC, INC.
By: Mark S. Dickerson
Name: Mark S. Dickerson
Title: Secretary
<PAGE>
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of ________,
199__, between _________________________, a ______________ (the
"Assignor") and ____________________, a ______________ (the
"Assignee").
PRELIMINARY STATEMENT
Reference is made to the Loan and Security Agreement
dated as of October 22, 1993, as amended (the "Loan Agreement")
among Talley Manufacturing and Technology, Inc., a Delaware
corporation (the "Borrower"), Transamerica Business Credit
Corporation, as agent (the "Agent"), and the lenders party to the
Loan Agreement (the "Lenders"). Terms defined in the Loan
Agreement and not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
NOW, THEREFORE, the Assignor and the Assignee hereby
agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the
Assignor, WITHOUT RECOURSE, as of the Effective Date (as defined
below) a ___% interest in and to all of the Lenders' rights,
obligations and commitments under the Loan Agreement and the other
Loan Documents [, including, without limitation, the Loan as in
effect on the Effective Date, the Revolving Note (the "Original
Revolving Note") held by the Assignor and the Term Note (the
"Original Term Note") held by the Assignor and the Assignor's
commitments and obligations in respect thereof on the Effective
Date)] [with respect to _______________________].
2. The Assignor (i) represents and warrants that as of
the date hereof (and without giving effect to assignments which
have not yet become effective) the aggregate outstanding principal
amount of [Revolving Loans owing to it is $__________, the
aggregate outstanding principal amount of Term Loans owing to it is
$__________, and the aggregate outstanding principal amount of
Letter of Credit Obligations owing to it is $___________]; (ii)
represents and warrants that it is the legal and beneficial owner
of the interest being assigned by it hereunder and that such
interest is being assigned by it hereunder and that such interest
is free and clear of any adverse claim; [(iii) attaches the
Original Revolving Note and requests that the Agent exchange the
Original Revolving Note for new replacement Revolving Notes as
follows: a Revolving Note dated the Effective Date in the
principal amount of $__________, payable to the order of the
Assignor, and a Revolving Note dated the Effective Date in the
principal amount of $__________, payable to the order of the
Assignee;] [and (iv) attaches the Original Term Note and requests
that the Agent exchange the Original Term Note for new replacement
Term Notes as follows: a Term Note dated the Effective Date in the
principal amount of $__________, payable to the order of the
Assignor, and a Term Note dated the Effective Date in the principal
amount of $__________, payable to the order of the Assignee]. [As
used herein, "Letter of Credit Obligations" means, as of the date
hereof in respect of any Letter of Credit, the sum of (i) the
amount available to be drawn under such Letter of Credit plus (ii)
the aggregate unpaid amount of all obligations of the Borrower then
outstanding, or which may thereafter arise in respect of Letters of
Credit then outstanding, under Section 2.3 of the Loan Agreement,
to reimburse the Agent and/or any Lender for payments made by the
Agent or any Lender in connection with the guaranty or facilitation
by the Agent or any Lender of Letters of Credit, to issuers of
Letters of Credit with respect to amounts which have been drawn
under such Letters of Credit.]
3. Upon the execution of this Assignment and Assumption
Agreement by the Assignor and the Assignee and the acceptance
hereof by the Agent, from and after the date specified herein as
the Effective Date (x) the Assignee hereunder shall be a party to
the Loan Agreement and the other Loan Documents, and, to the extent
that rights and obligations under the Loan Agreement and the other
Loan Documents have been assigned to it pursuant to this Assignment
and Assumption Agreement, the Assignee shall have the rights and
obligations of a Lender thereunder and (y) the Assignor hereunder
shall, to the extent that rights and obligations under the Loan
Agreement and the other Loan Documents have been assigned by it
pursuant to this Assignment and Assumption Agreement, relinquish
its rights (other than any rights it may have pursuant to Section
25.17 of the Loan Agreement which will survive) and be released
from its obligations under the Loan Agreement and the other Loan
Documents [(and, in the case of an Assignment and Assumption
Agreement covering all or the remaining portion of an Assignor's
rights and obligations under the Loan Agreement and the other Loan
Documents, such Lender shall cease to be a party thereto)].
Following the execution of this Assignment and Assumption
Agreement, it will be delivered to the Agent for acceptance and
recording in the Register by the Agent. This Assignment and
Assumption Agreement shall become effective on [the date (the
"Effective Date") the same is accepted by the Agent] [_______,
19__ (the "Effective Date"), provided the Agent, in its sole
discretion, shall have consented to and accepted this Assignment
and Assumption Agreement and thereby consented to such Effective
Date].
4. By executing and delivering this Assignment and
Assumption Agreement, the Assignee hereunder confirms and agrees as
follows: (i) other than as provided in this Assignment and
Assumption Agreement, the Assignor makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection
with the Loan Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan
Agreement, the Loan Documents, the Airbag Collateral Security
Agreement, or any instrument or document furnished pursuant
thereto, or the validity, enforceability, perfection, priority,
value, condition or sufficiency of any collateral or security
purporting to secure the Obligations, (ii) the Assignor makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any
Subsidiary or the performance or observance by the Borrower or any
Subsidiary of any of its obligations under the Loan Agreement or
any other instrument or document furnished pursuant thereto, (iii)
the Assignee confirms that it has received a copy of the Loan
Agreement, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Assumption Agreement, (iv) the
Assignee has independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under
the Loan Agreement, (v) the Assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably
incidental thereto and (vi) the Assignee agrees that it will
perform in accordance with their terms all of the obligations which
by the terms of the Loan Agreement are required to be performed by
it as a Lender, (vii) specifies as its address for notices to be
given hereunder, under the Loan Agreement or any other Loan
Document furnished pursuant thereto, the address set forth beneath
its name on the signature page hereof.
5. From and after the Effective Date, the Agent shall
make all payments under the Loan Agreement in respect of the
interest assigned hereunder (including, without limitation, all
payments of principal, interest and fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate
arrangements for payment for the assignment contemplated hereby and
for adjustments in payments under the Loan Agreement for periods
prior to the Effective Date directly between themselves.
6. This Assignment and Assumption Agreement shall be
governed by, and construed in accordance with, the laws of the
State of New York.
7. This Assignment and Assumption Agreement may be
executed in any number of counterparts which, when taken together,
shall be deemed one and the same instrument.
[NAME OF ASSIGNOR]
By: ________________________
Title
[NAME OF ASSIGNEE]
By: _________________________
Title
Address
___________________________
___________________________
___________________________
___________________________
___________________________
Accepted this ____ day
of _____________, 19__
TRANSAMERICA BUSINESS CREDIT CORPORATION,
as Agent
By: _______________________
Title
<PAGE>
