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Confidential
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March 14, 2000
Xx Xxxx Xxxxxxxx
Chicago River & Machine Co.
000 Xxxxxxxxx Xxxx
P.O. Box 3061
Naperville, IL 60566-7061
Dear Xxxx:
I am pleased to inform you that Bank of America, N.A. (the "Bank") has approved
a committed term credit facility subject to the following terms and conditions.
These terms and conditions are based on our analysis of your financial
information and the information you have provided.
LENDER: Bank of America N.A. ("Lender" or "Bank")
FACILITIES: Term Loan up to $9,000,000 ("Facility")
MATURITY: 60 months
PURPOSE: To refinance $2,650,000 current loan outstandings, with the
balance available to finance proposed stock buy-back.
AVAILABILITY: Fully available upon closing in a single draw.
SECURITY: The Facility will be unsecured.
GUARANTY: None.
CLOSING FEES: $15,000
PRICING: At the Borrow's option-
- LIBOR, available for interest periods of 1, 2, 3, or
6 months, plus applicable margin below.
- Bank of America's Reference Rate minus applicable
margin below.
Reference Letters
Funded Debt LIBOR Rate Of
Ratio Margin- Margin Credit
-------------- ------- --------- -------
1.75-2.25 1.30% -0.25% 1.25%
1.00-1.75* 1.00% -0.50% 1.00%
0.50-1.00 0.80% -0.50% 1.00%
Less than 0.50 0.70% -0.50% 1.00%
INTEREST RATE Interest rate risk protection, in the form of a fixed rate
PROTECTION: swap, cap collar, or other derivative contract, is
recommended for a portion of the outstandings under the
Facility.
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Bank of America
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Confidential
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PREPAYMENTS: Facility may be prepaid at any time on one business day's
notice (subject to applicable funding less indemnification
for LIBOR or other fixed rate borrowing).
AMORTIZATION: $450,000 per quarter beginning June 1, 2000.
REPRESENTATIONS Standard for a facility of this type including corporate
AND WARRANTIES: standing, authorization/non conflict, legality and validity
of agreement, financial statements, no material adverse
change, no material litigation, ownership of properties,
existing subsidiaries, status of pension and welfare plans,
type of business, payment of taxes, solvency, environmental
status, absence of default, representation of validity of
information.
CONDITIONS TO Receipt of documents, including but not limited to a note,
CLOSING: corporate resolutions, consents, incumbency certificate,
opinion of counsel and other information reasonably requested,
receipt of financial statements for the Borrower as of
December 31, 1999.
REPORTING The Borrower will be required to deliver the following to
REQUIREMENTS: the Lender:
(i) Annual audited consolidated financial statements
within 120 days of each fiscal year end.
(ii) Quarterly financial statements of borrower within
45 days of each quarter end.
(iii) Quarterly compliance certificate to be delivered
within 45 days of the close of each fiscal quarter.
(iv) Other information as reasonably requested by the
Lender.
FINANCIAL The borrower shall maintain financial covenants including,
COVENANTS: but not necessarily limited to, the following (all financial
terms shall be defined in accordance with generally accepted
accounting principles applied on a basis consistent with the
most recently audited financial statements delivered prior
to closing):
o Maximum Funded Debt(1) to EBITDA(2) ratio of 2.25:1
o Minimum Debt Service Coverage ratio (EBITDA plus cash
equivalents less capital expenditures less dividend
payments/required principal and interest payments,
measured on a rolling four-quarter basis) of 1.5X
o Minimum Tangible Net Worth of $22,500,000 less actual
reduction through stock repurchase transaction up to
$7,500,000.
(1) Funded Debt includes all interest-bearing liabilities.
(2) EBITDA means net income before taxes, plus interest
expense, depreciation, and amortization, minus (plus)
gains (losses) on disposition of long-term assets. For
purposes of this ratio, EBITDA will be measured on a
rolling four-quarter basis.
OTHER COVENANTS: Standard for a transaction of this type including
limitations on other indebtedness, liens, guaranties,
advances to affiliates (intercompany loans), dispositions,
mergers, consolidations and acquisitions.
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other covenants will also include, but not be limited to the
following: maintenance of books and records, maintenance of
insurance, compliance with laws, payment of taxes, maintenance
of corporate existence, maintenance of employee benefit plans,
compliance with environmental laws, landlord consents, use of
proceeds, and type of business.
EVENTS OF The Events of Default will include, but not limited to, the
DEFAULT: following:
(i) Failure to pay principal when due, or failure to pay
interest, fees or other amounts within three days of
when due,
(ii) Any representation or warranty made in connection with
this transaction (both prior to and after Closing) which
proves to have been false or incorrect in any material
respect on or as of the date made.
(iii) Default in performance or observance of any of the
covenants, agreements or conditions in the agreement and
such defaults shall have continued, and a specified
grace period shall have elapsed, after knowledge by an
officer of the Borrower.
(iv) Cross default of any nature (after expiration of any
grace period) of any indebtedness, or any other material
obligation, of the Borrower or any Subsidiary, which in
the aggregate is in excess of $100,000, or an event
occurs with respect to such indebtedness which after the
expiration of any grace period would allow for the
acceleration of such indebtedness.
(v) Voluntary or involuntary commencement of insolvency
proceedings.
(vi) An ERISA event shall have occurred with respect to a
pension plan or multiemployer plan which has resulted or
could reasonably be expected to result in liability of
the Borrower under Title IV of ERISA.
(vii) One or more monetary judgments or settlements in excess
of $1,000,000 are rendered against the Borrower or its
Subsidiaries and any such judgment(s) is not discharged
or stayed within 30 days.
(viii) Invalidity of collateral documents.
EXPENSES: Costs and expenses, including (if any) real estate and
equipment appraisals, environmental surveys, field exams and
attorney's fees (including costs and expenses of outside
counsel and allocated cost of in-house legal), incurred at any
time by BofA in the negotiation, documentation and closing of
the Facilities, regardless of whether the Facilities close. The
Company shall pay all costs and expenses incurred by BofA in
enforcing any loan document.
AUDITS: To be performed at the Lender's reasonable discretion. All
audits shall be at the expense of the Borrower.
BANKING: Borrower will maintain all principal accounts with the Lender.
DOCUMENTATION: Closing is subject to (among other conditions precedent) the
receipt by the Lender of loan documentation in form and
substance satisfactory to it.
GOVERNING LAW: State of Illinois.
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Confidential
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If you wish to accept this commitment, please sign and return a copy of this
letter no later than March 31, 2000. If you do not respond by that time, or if
you respond but the credit does not close by April 30, 2000 for any reason, this
commitment will expire.
Bank of America, N.A.:
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Vice President
Accepted and approved this 14th day of March, 2000.
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Chicago River & Machine Co.
By: /s/ Xxxx X. Xxxxxxxx
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Its: President
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