UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(a) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 1999
BRIDGEPORT MACHINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-25102 06-1169678
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
500 Lindley Street, Bridgeport, CT 06606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 367-3651
Not Applicable
(Former name or address if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
After the close of business on Monday, March 15, 1999, a letter dated
March 15, 1999 (the "HTH Letter") was received by Bridgeport Machines, Inc.
("Bridgeport Machines" or the "Company") from High Technology Holding Corp.
("HTH") in which HTH has proposed that Bridgeport Machines make an offer to
purchase up to 50% of the Company's outstanding stock, other than stock held by
HTH. HTH is a privately owned Delaware corporation which has reported that it
owns in excess of ten percent (10%) of the issued and outstanding common stock
of Bridgeport Machines. A copy of the HTH Letter is attached as Exhibit 99.1 and
incorporated herein by reference.
The HTH Letter proposal was not clear as to whether HTH would tender
for the shares of common stock or whether HTH would require the Company to
tender for its own shares. On the morning of March 17, HTH issued a press
release clarifying that the proposal would require the Company to tender for its
own shares and that HTH has not offered to purchase any shares or fund any of
the proposed purchases. Other terms of the proposal from HTH, as understood by
the Company, include, among others, the following:
1. An offer would be made by the Company pursuant to which Bridgeport Machines
stockholders other than HTH could sell back to the Company up to 50% of the
issued and outstanding shares of common stock exclusive of the shares held
by HTH at a price of $10.125 per share.
2. Bridgeport Machines, Inc. would enter into a credit facility with a
financial institution which would provide financing to Bridgeport Machines
for the repurchase and other financing needs.
3. All existing board of director members, other than Dan L. Griffith,
President and CEO, would resign immediately before or upon completion of
the proposed transaction. Nominees of HTH would replace the board of
directors.
4. Bridgeport Machines would agree to pay HTH a fee equal to $1 for each share
of common stock currently owned by HTH in the event the board of directors
determines to recommend an offer or enter into a business combination or
sale or exchange of all or part of its assets or capital stock after
entering into an agreement with HTH.
5. Bridgeport Machines would agree to pay all reasonable legal and closing
expenses associated with the bank financing and other reasonable expenses,
whether or not the offer is completed. The Company believes that such fees
could be substantial.
The HTH Letter states that the proposal is subject to contingencies
including, among other things, completion of certain due diligence in
conjunction with obtaining the credit facility noted above, certain financing
contingencies in relation to obtaining such credit facility, and approval of the
Company's Board of Directors.
The Company's Board of Directors will meet to consider the advisability
of the transaction proposed by HTH.
<PAGE>
Bridgeport Machines, Inc., founded in 1939, is a leading manufacturer
of manual and computer numerically controlled (CNC) metal cutting machine tools
in the United States and United Kingdom. The Company primarily focuses on
standardized, general-purpose machine tools for small-to-medium sized machine
shops throughout the United States and in 60 countries worldwide. The Company
also manufactures and sells surface grinders under the Harig brand name and
sells manual and CNC lathes under the ROMI, EZ-PATH and Power Path brand names.
Safe harbor for forward-looking statements: Except for historical
information contained herein, certain statements in this release are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward- looking
statements involve known and unknown risks and uncertainties which may cause the
Company's actual results in future periods to differ materially from forecasted
results. Factors that could cause actual results to differ materially include,
but are not limited to, the following: economic and other business conditions
that may affect demand in the U.S. and European markets; the mix of products
sold and the profit margins thereon; order cancellations or reduced bookings by
customers or distributors; changes in currency exchange rates; and discounting
necessitated by price competition. Those and other risks are described in the
Company's filings with the Securities and Exchange Commission (SEC) over the
last 12 months, copies of which are available from the SEC or may be obtained
upon request from the Company.
ITEM 7. EXHIBITS
Exhibit
Number
- ------
99.1 Letter addressed to Mr. Dan L. Griffith, President, Bridgeport
Machines, Inc. from High Technology Holding Corp. dated March
15, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed by the undersigned
hereunto duly authorized.
BRIDGEPORT MACHINES, INC.
(Registrant)
March 17, 1999 /s/ Walter C. Lazarcheck
-------------------------
(Date) Walter C. Lazarcheck
Vice President & Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number
99.1 Letter addressed to Mr. Dan L. Griffith, President, Bridgeport
Machines, Inc. from High Technology Holding Corp. dated March
15, 1999
<PAGE>
HIGH TECHNOLOGY HOLDING CORP.
2229 SOUTH YALE STREET
SANTA ANA, CA 02704
March 15, 1999
VIA FACSIMILE: (203) 337-8339
and CERTIFIED MAIL
Dan L. Griffith
President
Bridgeport Machines, Inc.
500 Lindley Street
Bridgeport, CT 06606
Re: Offer to Purchase
Dear Mr. Griffith:
High Technology Holding Corp., a Delaware corporation ("HTH") owns
approximately ten percent (10%) of the issued and outstanding capital stock of
Bridgeport Machines, Inc., a Delaware corporation ("BM") and wishes to increase
its relative holdings in BM and take an active role in endeavoring to improve
the performance and financial condition of the Company.
The Offer
HTH hereby makes an offer (the "Offer"), pursuant to which BM
shareholders other than HTH could sell up to fifty percent (50%) of the issued
and outstanding shares of BM, exclusive of the shares held by HTH,
(approximately 2.5 million shares) at a price of $10.125 per share. The Offer
also contemplates the issuance of a 3-year warrant for every share held by BM
shareholders that do not tender their shares pursuant to the Offer.
Conditions of the Offer
The Offer is conditioned upon the following:
1. Access to the facilities of BM for purpose of completing an
appraisal of BM assets in conjunction with financing of the purchase price.
2. Approval by the BM Board and the waiver of any business combination
or other statutory or legal restrictions that may apply to limit HTH's rights
with respect to its shareholdings of BM. Dan L. Griffith President Bridgeport
Machines, Inc. March 15, 1999 Page 2
3. The tender of resignation of all members of the BM Board except Dan
L. Griffith, President of BM and replacement with nominees of HTH, to take
effect immediately before or upon completion of the Offer.
<PAGE>
Other Matters
1. The agreement by BM to pay to HTH a "bust up" fee equal to $1 for
each share of BM currently held by HTH in the event the BM Board determines to
recommend an offer to enter into a business combination or sale or exchange of
all or part of its assets capital stock after entering into an agreement with
HTH.
2. An agreement by BM to pay all reasonable legal and closing expenses
associated with the bank financing and other reasonable expenses, including
attorney fees and disbursements whether or not the Offer is completed.
Financing
A financing letter relating to financing of the Offer has been received
by HTH from a financial institution. Attached as Exhibit A is a copy of the
letter. The contingencies of such financing are discussed in Exhibit A.
We would like to receive the Board's approval as soon as possible in
order to arrive at a definitive agreement with the Board.
Very truly yours,
/S/Dr. Milton B. Hollander
--------------------------
Dr. Milton B. Hollander
cc: Robert A. Trevisani, Esq.
<PAGE>
Congress Financial Corporation
One Post Office Square, Suite 3600
Boston, Massachusetts 02108
(617) 338-1998
March 15, 1999
Mr. Bernard D. Marren, Jr.
Mr. Ralph Michel
The Penta Group
P.O. Box 4462
Stamford, CT 06907
Re: Bridgeport Machines, Inc.
Gentlemen:
You have provided us with certain information and have discussed with us the
financing of Bridgeport Machines, Inc. and its subsidiaries or affiliates (the
"Company") upon the purchase of certain of the outstanding stock of the Company
by the Company.
In connection therewith, we are pleased to submit our proposal to provide a
secured revolving credit and term loan facility, of an amount to be established
by us, to the Company (the "Credit Facility") to be used to acquire up to 50% of
the eligible outstanding shares of the Company for a price of up to $10.125 per
share, repay certain existing indebtedness of the Company, pay certain
transaction expenses and for future working capital of the Company.
The exact structure and terms of the proposed Credit Facility cannot be
precisely stated until the completion of our field examination and credit
investigations. However, in general, we contemplate that the Credit Facility may
be structured as follows:
Revolving Credit Facility.
a) Amount: Revolving loans, with a limit to be established by us, based upon
the lending formulas, and subject to the sublimits and other terms
described below.
b) Lending Formulas:
(i) Accounts: Up to eighty-five percent (85%) of the net amount of
eligible accounts receivable of the Company. Eligible accounts
receivable and the net amounts thereof will be determined by us
pursuant to general criteria which will be set forth in the loan
documentation. Generally, eligible accounts receivable will exclude
accounts which are unpaid more than ninety (90) days past the
original invoice date thereof, accounts owed by an account debtor
which has more than fifty percent (50%) of the aggregate amount
thereof unpaid more than such number of days past the original
invoice date thereof and/or due date, contra accounts, poor credits,
employee or affiliate accounts receivable, and those other accounts
which do not constitute collateral acceptable for lending purposes
pursuant to criteria established by us. Foreign receivables may be
considered eligible under certain circumstances on a case-by-case
basis.
<PAGE>
(ii) Inventory: Up to sixty percent (60%) of the value of eligible
inventory of the Company, valued at the lower of cost or market, as
determined by us, with cost determined under the first-in-first-out
method. Such advance rate is subject to results satisfactory to us of
an appraisal of the inventory to be conducted at the expense of the
Company by independent appraisers acceptable to us. Eligible
inventory will be determined by us pursuant to general criteria which
will be set forth in the loan documentation. Generally, eligible
inventory will exclude packaging, slow-moving or obsolete inventory,
and those other items which do not constitute collateral acceptable
for lending purposes pursuant to criteria established by us.
c) Inventory Loan Limit: The maximum amount of loans available in respect of
eligible inventory will have a limit to be established by us,
notwithstanding the total value of eligible inventory and including for
this purpose our reliance on eligible inventory to be acquired under
commercial letters of credit opened by or through us under the letter of
credit facility described below.
2. Letter of Credit Facility
a) Amount: Letters of credit arranged through us ("LCs") of up to an aggregate
amount at any time outstanding of $4,000,000. included within the overall
Revolving Credit Facility.
b) LC Reserves Against Availability: Reserves against the revolving loans
otherwise available equal to (i) one hundred percent (100%) minus the
percentage set forth above for the inventory lending formula multiplied by
the cost of the goods being purchased with the LC, plus (ii) duty, freight
and cost of transport within the U.S., will be required when opening LCs
for the purpose of purchasing eligible inventory. LCs which are opened for
other purposes approved by us will require reserves of one hundred percent
(100%) of the amount of such LCs.
c) Letter of Credit Fee: Two percent (2%) per annum on the daily outstanding
balance of the LCs payable monthly in arrears. All applicable bank and
opening charges will be in addition to our fee and charged to the loan
account of the Company.
3. Term Loan A
a) Amount: A term loan of up to the lesser of: an amount to be determined by
us or eighty-five percent (85%) of the forced liquidation value of eligible
equipment (the "Term Loan"). Such value will be as determined by
appraisals, conducted at the expense of the Company by independent
appraisers acceptable to us. Eligible equipment will be determined by us
and, in general, shall exclude fixtures, equipment subject to a security
interest or lien of any other person or entity, leased equipment and
worn-out or obsolete equipment.
Term Loan A will be repaid in consecutive equal monthly installments of
principal commencing on the first day of the month after the closing and on
the first day of each month thereafter. The amount of each monthly
installment will be calculated based on a seventy-two (72) month
amortization, with the final installment to be in the then remaining
balance of the Term Loan (and including principal, interest and other
amounts) due on the earlier of: (i) the first day of the seventy-second
(72nd) month after the closing or (ii) the termination or non-renewal of
the Credit Facility or a default under our financing agreements.
<PAGE>
4. Term Loan B
a) Amount: A term loan of up to the lesser of; an amount to be determined by
us or fifty percent (50%) of the fair market value of real estate located
in Leicester, England. Such value will be as determined by an appraisal,
conducted at the expense of the Company by independent appraisers
acceptable to us. Term Loan B may increase depending on the results of such
appraisal.
Term Loan B will be repaid in consecutive equal monthly installments of
principal commencing on the first day of the month after the closing and on
the first day of each month thereafter. The amount of each monthly
installment will be calculated based on a ninety-six (96) month
amortization, with the final installment to be in the then remaining
balance of the Term Loan (and including principal, interest and other
amounts) due on the earlier of: (iii) the first day of the ninety-sixth
(96th) month after the closing or (iv) the termination or non-renewal of
the Credit Facility or a default under our financing agreements.
5. Collateral. All obligations of the Company and any corporate guarantors to us
will be secured by first and only security interests in and liens upon all
present and future assets of the Company and any corporate guarantors, including
all accounts, contract rights, general intangibles, chattel paper, documents,
instruments, deposit accounts, investment property, inventory, equipment,
fixtures and real property, and all products and proceeds thereof, except such
assets located in Germany.
6. Interest Rate. The interest rate on revolving loans will be one quarter
percent (0.25%) per annum above the rate announced from time to time by First
Union National Bank, as its "prime rate" or at the Company's option, a rate of
two and one half (2.5%) percent per annum above the adjusted Eurodollar rate
used by us, and the interest rates on term loans shall be one half (0.50%) per
annum above the rate announced from time to time by First Union National bank as
its "prime rate" or at the Company's option, a rate of two and three quarters
(2.75%) per annum above the adjusted Eurodollar rate used by us (in each case
subject to a higher rate after default).
The adjusted Eurodollar rate will be calculated based on the average of rates of
interest per annum at which First Union National Bank is offered deposits of
U.S. dollars in the London interbank market adjusted by the reserve percentage
prescribed by governmental authorities as determined by us.
7. Fees. All fees listed below are in addition to interest and other fees and
charges provided for herein and may, at our option, be charged directly to any
loan account(s) of the Company maintained with us.
a) Closing Fee: One percent (1%) of the Credit Facility, earned and payable in
full at closing. If, upon the request of the Company, we elect to issue a
commitment letter, the closing fee will be payable to us upon issuance of
the commitment letter as a non-refundable commitment fee.
b) Servicing Fee: $1,500 for each month or part thereof during the term of the
arrangements, payable monthly in advance.
c) Unused Line Fee: Three eighths percent (0.375%) per annum on the difference
between the average monthly balance of revolving loans and LCs outstanding
under the Credit Facility and the Revolving Credit Facility amount (such
amount to be established), payable monthly.
<PAGE>
d) Early Termination Fee: If the Credit Facility is terminated for any reason
prior to the end of the then current term:
(I) Three percent (3%) of the Credit Facility if terminated on or prior
to the first anniversary of the date of closing:
(ii) Two percent (2%) of the Credit Facility if terminated after the first
anniversary and on or prior to the second anniversary of the date of
closing; and
(iii) One percent (1%) of the Credit Facility if terminated after the
second anniversary and prior to the third anniversary of the date of
closing or at any other time prior to the end of the then current
term.
If the Company were to refinance the Credit Facility after the second
anniversary using financing from First Union National Bank directly,
the Early Termination Fee of 1% would be waived.
8. Term. The Credit Facility will have an initial term of five (5) years from
the date of closing, and automatic annual renewals thereafter unless either
party gives sixty (60) days prior written notice to the other party of the
intention to terminate the Credit Facility.
9. Expenses. The Company agrees to pay all reasonable legal and closing
expenses, including attorneys' fees and disbursements, filing and search fees,
appraisal fees and field examination expenses and per diem field examination
charges, whether or not this transaction closes. We charge $650 per person per
day for our field examiners in the field and in the office, plus travel, hotel
and all other out-of-pocket expenses. All such expenses shall be paid to us upon
demand, together with such advance funds on account of such expenses and charges
as we may from time to time request. This Section shall survive the expiration
or termination of this letter.
10. Deposits. As evidence of our mutual good faith, and in consideration of our
having incurred and continuing to incur certain expenses in the expectation of
establishing the financing arrangements between us and the Company, we request
that the Company deposit with us $50,000. against our expenses. This amount,
together with any other deposits at any time received by us will be:
a) Returned to the Company, less the cost of our field examinations, legal
fees and other expenses directly related to the loan application and credit
review, if our credit approval of the proposed financing is not obtained;
b) Retained by us, and credited to the loan account of the Company, less the
expenses described in paragraph (a) above, if the credit is approved and
booked;
c) Retained by us, as a fee in addition to expenses payable by the Company as
set forth above, if our credit approval of the proposed financing is
obtained and the transaction does not close within forty-five (45) days
from the date of such approval, whether as a result of your election not to
do business with us or a failure to fulfill any of the conditions of the
proposed financing as approved by us; and
d) Retained by us, as a fee in addition to expenses payable by the Company as
set forth above, if at any time during the loan and credit review, the
Company intentionally misleads us or intentionally fails to disclose
material information which, if disclosed, would have had a material adverse
impact on the loan approval.
<PAGE>
11. Other Information and Conditions. This proposal does not represent a
commitment to lend. Our proposal is expressly subject to review of certain other
information, satisfactory completion of our field examinations, credit
investigations and analysis and approval by our credit committee. Such approval,
if obtained at all, shall be contingent upon a closing taking place within
forty-five (45) days thereafter, after which time this proposal will require
reapproval by our credit committee even if we continue to work on this
transaction. Such reapproval, if obtained, may result in different terms or
conditions, or in a determination not to consummate the transaction. No
commitment to lend shall be implied from any action by us or on our behalf.
Communication to you of credit committee approval or reapproval shall not
constitute a commitment to lend, unless expressly so stated in a commitment
letter signed by us and you.
In addition, subject to such conditions as may be established in connection with
the credit approval, we would anticipate that the closing of the Credit Facility
will be subject to the satisfaction, in a manner acceptable to us, of the
following:
a) The Company continuing to furnish us with all financial information,
projections, budgets, business plans, cash flows and such other information
as we reasonably request from time to time. We shall have received current
agings of receivables, current perpetual inventory records and/or
rollforwards of accounts and inventory through the date of closing,
together with supporting documentation, and other documents and information
that will enable us to accurately identify and verify the eligible
collateral at or before closing in a manner satisfactory to us and
including documentation with respect to inventory in transit, goods in
bonded warehouses or at other third-party locations. We may require daily
or weekly reporting of collateral information from the Company and/or may
establish in our records a loan account for the Company prior to closing.
Such actions should not be construed as a commitment to lend or to waive or
modify any conditions to lending.
b) Satisfactory legal review of the terms of the Credit Facility and its
structure by our counsel, and execution and delivery of loan documents, all
in form and substance satisfactory to us. The loan documents will include,
among other documents, a loan agreement, security agreements, UCC financing
statements, intercreditor agreements (if applicable), agreements from
certain third parties, opinion letters of counsel, and the guarantee of the
obligations of the Company to us by its corporate subsidiaries and
affiliates. Such loan documents will contain provisions, representations,
warranties, conditions, covenants and events of default satisfactory to us
and our counsel. With respect to financial covenants, the loan documents
will include only one financial covenant. Such financial covenant will
require the Company to maintain tangible net worth in an amount to be
determined, which amount will be acceptable to us and to the Company.
c) The Company shall deliver, at its expense, environmental audits of its
plants and real estate conducted by an independent environmental
engineering firm acceptable to us and in form, scope and methodology
satisfactory to us, confirming that (i) the Company is in compliance with
all applicable environmental use laws, regulations, codes and ordinances in
all material respects and (ii) there is no material potential or actual
liability of the Company for any remedial action with respect to any
environmental condition or any other significant environmental problems.
<PAGE>
d) The excess availability under the lending formulas provided for above,
subject to sublimits and reserves, shall be in an amount satisfactory to us
at the closing, after the payment of fees and expenses of the transaction
and the application of the proceeds of the initial loans, and after
deduction for past due payables and other obligations. Accounts payable of
the Company must be at a level and in a condition reasonably acceptable to
us.
e) No material adverse change in the business, operations, profits or
prospects of the Company or in the condition of the assets of the Company
shall have occurred since the date of our latest field examinations.
f) This transaction and the events contemplated herein must close by May 31,
1999 or forty-five (45) days from the date of our credit approvals,
whichever is earlier.
The terms and conditions described in this proposal letter are intended as an
outline only and this proposal letter does not purport to include or summarize
all of the terms, conditions, covenants and other provisions which will be
contained in the loan documents.
This letter is delivered to you on the condition that its existence and its
contents will not be disclosed by you without our prior written approval except
(i) as may be required to be disclosed in any legal proceeding or as may other
wise be required by law and (ii) on a confidential and "need to know" basis, to
your directors, officers, employees, advisors and agents.
Unless accepted by you and as so accepted, received by us by the close of
business in Boston on March 19, 1999 with the deposit referred to above, this
proposal shall expire at such time.
This letter is solely for your benefit and is not to relied upon by any third
party.
We look forward to continuing to work with you and your associates in this
transaction.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
Robert A. Kinne
Vice President
/S/Robert A. Kinne
--------------------
Robert A. Kinne
ACCEPTED on this ____ day of _________________, 19 __:
- --------------------------------------------------
By: _______________________________________________
Title: _____________________________________________
cc: Matthew O. Riley - First Union National Bank
Ian G. Morrison - First Union National Bank