General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D Brown & Sharpe Manufacturing Company 12 42K
2: EX-1 Underwriting Agreement 1 7K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 75 242K
Liquidation or Succession
4: EX-3 Articles of Incorporation/Organization or By-Laws 30 114K
5: EX-4 Instrument Defining the Rights of Security Holders 3 11K
6: EX-5 Opinion re: Legality 11 39K
7: EX-6 Opinion re: Discount on Capital Shares 10 34K
EX-5 — Opinion re: Legality
| EX-5 | 1st Page of 11 | TOC | ↑Top | Previous | Next | ↓Bottom | Just 1st |
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Exhibit 5
EXECUTION COPY
CREDIT SUPPORT AGREEMENT
This Credit Support Agreement is entered into as of
September 28, 1994 by and between Brown & Sharpe Manufacturing
Company, a Delaware corporation (the "Company"), and
Finmeccanica S.p.A., an Italian corporation ("Finmeccanica").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Finmeccanica have entered into an
Acquisition Agreement dated as of June 10, 1994, as amended by an
Amendment No. 1 to Acquisition Agreement dated as of July 31,
1994 (collectively, the "Acquisition Agreement"), pursuant to
which the Company shall acquire all of the issued and outstanding
capital stock of Finmeccanica's subsidiary DEA S.p.A. ("DEA") in
consideration of the issuance by the Company of 3,450,000 shares
of its Class A Common Stock to Finmeccanica; and
WHEREAS, the Company has obtained commitments from Banca
Commerciale Italiana S.p.A., New York Branch ("BCI"), and Banca
San Paolo di Torino, New York Branch ("San Paolo", and
collectively with BCI, the "Lenders"), to provide three-year term
loan financing to the Company in the principal amounts of US$18.3
million and US$6.7 million, respectively, with no principal
payments due until maturity (each a "Term Loan" and,
collectively, the "Term Loans");
WHEREAS, it is a condition precedent to the obligations of
the Lenders to advance the Term Loans that Finmeccanica issue to
such Lenders the Finmeccanica Guarantees (as defined herein);
WHEREAS, Finmeccanica is prepared to provide on the terms
and conditions set forth herein, the Finmeccanica Guarantees to
the Lenders in order to facilitate the issuance of the Term Loans
to the Company;
WHEREAS, the Company, in order to induce Finmeccanica to
enter this Agreement, shall cause DEA, upon the closing of the
transactions contemplated by the Acquisition Agreement, to
guarantee the obligations of the Company under this Agreement,
which guarantee shall be subordinated as provided herein;
WHEREAS, upon the Closing of the transactions contemplated
by the Acquisition Agreement, DEA will be a wholly owned
subsidiary of the Company and will derive substantial benefit
from the making of advances to the Company under the Term Loans;
WHEREAS, the Company is prepared to pay to DEA, in
consideration of DEA issuing its guarantee to Finmeccanica, a fee
consistent with normal commercial practices;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Definition
----------
"Business Day" shall mean any day on which commercial banks
are open for dealings in foreign exchange and foreign currency
deposits in New York and Rome.
"Change of Control" shall mean an acquisition by a third
party of such number of shares of capital stock of the Company as
represent 25% or more of the total number of votes which may be
cast in the election of directors of the Company at any meeting
of its shareholders if all securities entitled to vote thereon
were present and voted at such meeting.
"Collateral" shall have the meaning set forth in Section 7
below.
"Credit Enhancement" shall mean an unconditional and
irrevocable guaranty of payment (and not of collectibility) of
principal and interest due under a Term Loan (and all fees and
other charges payable in connection therewith).
"Credit Enhancement Fee" shall have the meaning set forth
in Section 3 below.
"DEA Guarantee" shall have the meaning set forth in Section
5 below.
"Disbursement Date" shall mean, with respect to each Term
Loan, the date on which the proceeds thereof are disbursed by the
relevant Lender to the Company.
"Finmeccanica Guarantee" shall mean a guarantee entered
into between Finmeccanica and a Lender evidencing the Credit
Enhancement extended by Finmeccanica to such Lender pursuant to
the terms of this Agreement, on terms and conditions mutually
satisfactory to the parties thereto.
"Indebtedness" means, as to any Person, the sum of the
following (without duplication): (i) all obligations of such
Person for borrowed money, all obligations evidenced by bonds,
debentures, notes or other similar instruments and all securities
issued by such Person providing for mandatory payments of money,
whether or not contingent; (ii) the discounting or other sale
prior to maturity of accounts receivable or financial
instruments, until the scheduled maturity thereof, or if later,
the termination of any contingent liability of the seller with
respect thereto; (iii) all obligations of such Person to pay the
deferred purchase price of property or services; (iv) all
obligations of such Person as lessee under capital leases; (v)
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all obligations of such Person to purchase securities (or other
property) which arise out of or in connection with the sale of
the same or substantially similar securities or property; (vi)
all obligations whether contingent or not of such Person to
reimburse any Person in respect of amounts paid under a
guarantee, letter of credit or similar instrument; (vii) all
interest rate and currency swap and similar agreements obligating
such Person to make payments, whether periodically or upon the
happening of a contingency, (viii) all Indebtedness of others
secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person; and (ix) all
guarantees by such Person of or with respect to the Indebtedness
of another Person.
"Lien" means, with respect to any asset of any Person, any
mortgage, deed of trust, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, including
without limitation, any right or arrangement with any creditor to
have its claim satisfied out of such asset, or the proceeds
therefrom, prior to the general creditors of the owner thereof.
For the purposes of this Agreement, such Person shall be deemed
to own subject to a Lien any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Person" means an individual, estate, unincorporated
association, a corporation, company, partnership, trust, joint
stock company, voluntary association, joint venture, governmental
authority, juridical entity or any other entity of whatever
nature.
"Prime Rate" means the interest rate per annum quoted by
Citibank, N.A. from time to time at its principal office in New
York City as its prime lending rate for U.S. Dollars.
"Senior Indebtedness" shall mean the principal of, interest
on and any other amounts that may be due and payable from time to
time in respect of (i) Indebtedness of the Company or DEAC (as
defined herein) (in an aggregate principal amount at any one time
of up to US$25,000,000) under or in connection with that certain
Loan and Security Agreement dated as of June 30, 1993 between the
Company and Foothill Capital Corporation, as the same may be
amended, supplemented, extended, renewed, refinanced (with the
same or a different lender(s)) or otherwise modified from time to
time and (ii) the countervalue in Italian Lire (or other relevant
currency), at the US Dollar/Italian Lire (or other relevant
currency) exchange rate as published in Sole 24 Ore on the
relevant Disbursement Date(s), of up to US$25 million of
Indebtedness of DEA outstanding from time to time under its
existing and future unsubordinated short-term lines of credit.
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"Term Loan Agreement" shall mean, with respect to each Term
Loan, the definitive loan agreement entered into by the Company
with the Lender in respect of such Term Loan.
2. Provision of Credit Enhancement
-------------------------------
Finmeccanica hereby agrees to provide, or cause to be
provided by one or more of its affiliates, and the Company agrees
to accept, subject to the terms and conditions set forth herein,
Credit Enhancement in connection with the Term Loans; provided,
however, that the aggregate principal amount of indebtedness for
which Credit Enhancement shall be provided hereunder shall at no
time exceed US$25,000,000. It is agreed that the Credit
Enhancement should include enhancement of new financing to repay
the Company's existing short-term line of credit of US$8,741,000
referred to in Section 1.3A of the Acquisition Agreement.
3. Consideration; Expenses.
-----------------------
(a) In consideration of the provision by Finmeccanica or
any of its affiliates of Credit Enhancement hereunder, the
Company shall pay Finmeccanica, or its affiliates, as the case
may be, with respect to the Term Loans for which Credit
Enhancement has been provided, a lump sum fee in the amount of
US$800,000 (the "Credit Enhancement Fee"). The Credit
Enhancement Fee shall be payable within seven (7) Business Days
after the disbursement by the Lenders to the Company of the
proceeds of the Term Loans. No amount of the Credit Enhancement
Fee shall be reimbursable to the Company in the event of a
prepayment of either of the Term Loans prior to their respective
maturity dates.
(b) In the event of late payment by the Company, the
Credit Enhancement Fee shall bear interest, payable on demand,
for each day from and including the date payment thereof was due
to but excluding the actual date of payment, at a rate per annum
equal to the Prime Rate plus 0.40%.
(c) In addition to the foregoing, the Company agrees to
reimburse to Finmeccanica or its affiliates, as the case may be,
on demand, for all reasonable out of pocket costs and expenses
(including reasonable attorney's fees and expenses) paid or
incurred by Finmeccanica or its affiliates (i) in performing its
obligations under a Finmeccanica Guarantee, but excluding any
costs of funding incurred by Finmeccanica (other than
administrative fees and other charges, in amounts consistent with
customary Italian banking practices) which may be imposed by
banks or credit institutions providing liquidity to Finmeccanica
to enable it to pay any amounts required to be paid to a Lender
pursuant to the relevant Finmeccanica Guarantee, (ii) in
connection with any amendment to or waiver of this Agreement or a
Term Loan Agreement which is requested by the Company or the
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applicable Lender, and (iii) in connection with the enforcement,
protection, preservation or exercise of any right or claim of
Finmeccanica under this Agreement. If the Company, for any
reason whatsoever, makes any payment of principal with respect to
a Loan on any day later than a required payment date as provided
under the applicable Term Loan Agreement, the Company shall
reimburse Finmeccanica on demand for any resulting loss or
expense incurred by Finmeccanica (including without limitation
breakage costs charged by its lender) by virtue of funding under
this Agreement, provided that Finmeccanica shall have delivered
to the Company a statement setting forth in reasonable detail the
calculations used to determine such loss or expense, which
statement shall be conclusive. The Company acknowledges that
Finmeccanica or its affiliates, as the case may be, shall be
entitled to be fully subrogated to the rights of a Lender in the
event that Finmeccanica or such affiliate is required to make any
payment to such Lender pursuant to the Finmeccanica Guarantee
extended to such Lender.
(d) The Company shall pay directly to the Lenders all
interest, commitment fees, other fees, charges, costs and
expenses payable to or for the account of the Lenders in
connection with the extension of the Term Loans.
(e) All invoices shall be issued and payments made in U.S.
dollars. Expenses reimbursable in accordance with Section 3(c)
hereof shall be paid within thirty (30) days of receipt by the
Company of a statement from Finmeccanica or its affiliates, as
the case may be, which statement shall be rendered on a
semiannual basis and shall provide sufficient detail to enable
the Company to determine the nature of expenses for which
reimbursement is sought. Payment of the Credit Enhancement Fee
and of any other amounts due hereunder shall be made in
immediately available funds by wire transfer for credit to
Finmeccanica's account at Banca Commerciale Italiana, Genova
Sestri Ponente Branch, Account No. 460862/01/17.
(f) The Company shall keep appropriate books and records
which reflect all dealings and transactions in relation to the
provision of Credit Enhancement by Finmeccanica and its
affiliates, which shall be sufficient to enable such dealings and
transactions to be audited. All such books and records shall be
and remain the property of the Company, and upon reasonable prior
notice to the Company all such books and records shall be made
available for inspection by Finmeccanica or its affiliates, as
relevant, or any person designated by them, which shall be
entitled to make copies or extracts from such books and records
for their proper business purposes. All such books and records
shall be preserved and made available by the Company for at least
six (6) years.
(g) All sums payable by the Company under this Agreement
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shall be paid in full, free and clear of all United States
taxes, deductions, withholdings or other charges of any kind that
may be assessed, levied or imposed by any governmental authority
of the United States of America or any political subdivision
thereof, together with any interest, penalties or other charges
thereon provided that Finmeccanica furnishes the Company with
Form 1001 (or other appropriate documentation) entitling
Finmeccanica to the benefits of protection under the United
States/Italy Tax Treaty.
4. Reimbursement Obligations. In order to induce
--------------------------
Finmeccanica to enter into this Agreement and provide Credit
Enhancement to each of the Lenders with respect to the Term Loan
provided by it, the Company hereby unconditionally and
irrevocably agrees (a) with respect to each Term Loan, to
reimburse Finmeccanica or its affiliates, as the case may be,
immediately upon demand for all amounts paid by Finmeccanica or
any such affiliate under and pursuant to the terms of the
Finmeccanica Guarantee issued to the Lender in respect of such
Term Loan, (b) to indemnify Finmeccanica or its affiliates, as
the case may be, on demand against all claims, actions,
proceedings, demands, costs, charges, losses and expenses
(including reasonable attorney's fees and expenses) made against
or incurred by Finmeccanica or any such affiliate by virtue of
the Company's failure to fulfill the terms of any Term Loan
except to the extent arising by reason of Finmeccanica's or such
affiliate's gross negligence or willful misconduct, and (c) to
pay interest on any amounts (other than the Credit Enhancement
for which interest shall be payable as provided in Section 3(b))
due and owing by the Company pursuant to this Agreement and not
paid in full when due from and including the date such payments
became due and payable to but not including the date of payment
at a fluctuating rate of interest per annum (computed on the
basis of a year of 360 days and the actual number of days
elapsed) equal to the Prime Rate plus 1.50%.
5. DEA Guarantee. (a) In order to induce Finmeccanica
-------------
to enter into this Agreement and provide Credit Enhancement to
each of the Lenders with respect to each Term Loan, the Company
hereby agrees that it shall cause DEA to guarantee, from and
after the issuance of the Finmeccanica Guarantees to the Lenders,
the obligations of the Company under this Agreement to
Finmeccanica and any of its affiliates providing Credit
Enhancement hereunder on terms reasonably acceptable to
Finmeccanica (the "DEA Guarantee").
(b) Notwithstanding any other provision of this
Agreement, Finmeccanica may not (whether in a bankruptcy
proceeding, other proceeding or otherwise) accept or receive any
funds in payment of any obligations of the Company hereunder, or
exercise any rights under the DEA Guarantee, or make any demand
or claim upon, accept, sue against or take any other action or
6
exercise any right, remedy, power or privilege with respect to,
or execute, foreclose or seek to execute or foreclose upon, (i)
any assets of DEA's wholly owned subsidiary, Digital Electronic
Automation Company ("DEAC") (whether before or after the
contemplated merger of DEAC with and into the Company), or (ii)
the assets of DEA (including, without limitation, the capital
stock, debt or other securities of DEAC) in respect of any
obligations of the Company arising under this Agreement unless
and until the Senior Indebtedness shall have indefeasibly been
paid in full in cash or cash equivalents or the various lenders
holding the Senior Indebtedness shall have consented in writing
to such action. In furtherance of the foregoing, Finmeccanica
agrees to enter into subordination agreements from time to time
with the various lenders holding the Senior Indebtedness (or in
lieu thereof to incorporate a subordination clause in the DEA
Guarantee) on terms and conditions reasonably acceptable to such
lenders.
6. Conditions Precedent. The obligation of the parties
--------------------
hereunder shall be subject to (i) the closing of the
transactions contemplated by the Acquisition Agreement, (ii) the
disbursement to the Company by the Lenders of the proceeds of the
Term Loans, (iii) the execution and delivery by DEA to
Finmeccanica of the DEA Guarantee and (iv) the delivery of an
opinion of the Company's Italian counsel as to the due
authorization, execution, delivery and enforceability of the DEA
Guarantee under Italian law.
7. Covenants. The Company hereby covenants and agrees
---------
that, so long as the Finmeccanica Guarantees remain outstanding
or any amount owing to Finmeccanica under this Agreement has not
been paid or reimbursed:
(a) the Company will not create, incur, assume or
suffer to exist any Lien upon any receivables or inventory, as
existing from time to time, of DEA and its subsidiaries (the
"Collateral") except (i) Liens in support of Senior Indebtedness
or Liens existing immediately prior to the closing under the
Acquisition Agreement, (ii) Liens in favor of Finmeccanica, and
(iii) Liens arising by operation of law, which the Company shall
(A) discharge in the ordinary course of business or (B) contest
in good faith by appropriate proceedings, adequate reserves
having been set aside for the payment thereof.
(b) the Company will cause DEA and its subsidiaries
not to incur any Indebtedness to banks or other financial
institutions other than the countervalue in Italian Lire of up to
US$25 million included in the definition of Senior Indebtedness
plus an amount equal to the amount of DEA's and its subsidiaries'
----
long-term debt at the DEA Acquisition Closing plus any
----
Indebtedness (up to a maximum of US$10 million at any one time
outstanding, or its equivalent in other currencies, at the time
7
of incurring any such new Indebtedness) incurred after the date
hereof to or qualified and subsidized by the Italian Government
(or an agency thereof) in connection with research projects and
any purchase money Indebtedness for equipment or machinery
(whether so qualified or subsidized or otherwise). In addition,
DEA and its subsidiaries may incur Indebtedness which is
subordinated, on terms reasonably satisfactory to Finmeccanica,
to DEA's obligations to Finmeccanica under this Agreement. It is
also understood that any Foothill Debt incurred by DEAC which
constitutes Senior Indebtedness shall not be deemed a breach of
the provisions of this Section 7(b).
8. Obligations Absolute. The obligations of the Company
--------------------
under this Agreement shall be absolute, unconditional and
irrevocable, and shall be paid and performed strictly in
accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the
following circumstances:
(a) any lack of validity or enforceability of this
Agreement or either of the Term Loan Agreements;
(b) any waiver of, or any consent to departure from,
this Agreement, the Finmeccanica Guarantees or either of the Term
Loan Agreements; or
(c) the existence of any claim, set-off, defense or
other rights which the Company may have at any time against
either of the Lenders, whether in connection with the Term Loan
Agreements or any unrelated transactions.
9. Term
----
(a) The term of this Agreement shall be for three years
and 90 days commencing on the date of disbursement of the
proceeds of the Term Loans and ending 90 days after the earlier
of the third year anniversary thereof or the maturity dates under
the Term Loans. Notwithstanding the foregoing, Finmeccanica may
terminate the Credit Enhancement provided by it pursuant to this
Agreement (i) in the event of the prepayment in whole or in part
of a Term Loan, to the extent of the amount of principal prepaid
in respect of such Term Loan, and (ii) in the event of a Change
of Control of the Company (other than immediately following a
sale by Finmeccanica of part of its holding of shares of the
Company's stock and other than as contemplated under (iii)
below), in each case upon sixty (60) days' prior written notice
of termination to the Company and, further, (iii) in the event
Finmeccanica ceases to own 20% or more of the Company's issued
and outstanding shares of capital stock by virtue of a sale of
its shares to a third party, upon such third party's agreement to
issue its guarantees to the Lenders in substitution of the
Finmeccanica Guarantees and the Lenders' acceptance of such
8
substitute guarantees and release of the Finmeccanica Guarantees;
provided that, with respect to (ii) above, Finmeccanica agrees to
any modification that may be reasonably required in order not to
impede the Company from obtaining, on terms satisfactory to the
Company and Finmeccanica, the Term Loans from the Lenders and the
financing represented by the Senior Indebtedness. Once
terminated with respect to all or part of the principal amount
repaid in respect of a Term Loan, Finmeccanica shall have no
obligation to provide any further Credit Enhancement to the
Company in respect of new financing in such principal amount
extended by the Lender of such repaid Term Loan or any other bank
or credit institution. Notwithstanding any termination of this
Agreement by Finmeccanica or any of its affiliates providing
Credit Enhancement pursuant to this Section 4 the Company shall
remain liable for payment of fees, reimbursement of expenses,
payments to the Lenders in respect of the Term Loans and
indemnification with respect to such Credit Enhancement in
accordance with Section 3 hereof.
(b) In the event that either the Company or a Lender,
without Finmeccanica's prior written consent, agrees to a
material amendment or deviation in the definitive agreement with
respect to the Term Loan extended by such Lender, including
without limitation, any change in the amount of principal
thereunder, the interest rate, the maturity date, the dates of
payment or any other payment terms of such Term Loan,
Finmeccanica's obligation to provide Credit Enhancement hereunder
in respect of such Term Loan shall automatically terminate thirty
(30) calendar days after written notice from Finmeccanica to the
Company and such Lender, unless prior to such date such material
amendment or deviation is rescinded or otherwise remedied to the
satisfaction of Finmeccanica.
10. Finmeccanica Affiliates. It is understood that the
-----------------------
Credit Enhancement may be given by one or more affiliates of
Finmeccanica, and not by Finmeccanica itself, only if each of the
Lenders agree to treat such Credit Enhancement of the affiliates
as the economic equivalent of Credit Enhancement by Finmeccanica
itself.
11. Notices
-------
All notices required or permitted by this Agreement shall be
in writing and in English and may be sent by certified or
registered mail as follows:
If to Finmeccanica:
Elsag Bailey
Via G. Puccini, 2
16154 Genoa, Italy
Fax: 011-39-10-658-2781
9
Attention: Chief Financial Officer
If to the Company:
Brown & Sharpe Manufacturing Company
200 Frenchtown Road
Precision Park
North Kingstown, Rhode Island 02852
Fax: (401) 886-2214
Attention:Vice President and
Chief Financial Officer
If sent by telegram, telex, cable or facsimile, a confirmed copy
of such notice shall be sent by regular mail to the addressee.
Any notice shall be deemed to have been received by the party to
whom it is addressed (a) if by mail, ten (10) days following the
date dispatched, and (b) if by telegram, telex, cable or
facsimile, twenty-four (24) hours following transmission.
12. Miscellaneous
-------------
(a) This Agreement shall be governed by the internal laws
of the State of New York.
(b) Each of the parties hereto represents and warrants that
it has duly and validly executed and delivered this Agreement and
that this Agreement is enforceable against it in accordance with
the terms hereof. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors and
assigns, but may not be assigned by any party without the prior
written consent of the others.
(c) This Agreement embodies the entire understanding of the
parties with respect to the subject matter hereof and supersedes
any and all prior agreements. This Agreement may not be changed,
modified or amended, in whole or in part, except by an instrument
in writing signed by the parties hereto.
(d) In the event that any provision or provisions of this
Agreement which do not affect the scope of this Agreement are
subsequently determined or held to be illegal or unenforceable,
the remainder of the Agreement shall nevertheless be valid and
enforceable subject to an equitable revision to be negotiated by
the parties with the objective of maintaining the original
balance between their respective rights and obligations.
(e) Any failure of either party hereto to comply with any
of the obligations or agreements set forth in this Agreement or
to fulfill any condition set forth herein may be waived only by a
written instrument signed by the other party. No failure by
either party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver of such right, nor shall any
single or partial exercise of any right hereunder by either party
preclude any other or future exercise of that right or any other
right hereunder by that party.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective duly authorized officers as of
the date first above written.
FINMECCANICA S.p.A., BROWN & SHARPE MANUFACTURING
through its Elsag Bailey division COMPANY
By: /s/ Paolo Caron By: /s/ C.A. Junkunc
-------------------- --------------------
Name: Paolo Caron Name: C.A. Junkunc
Title: Attorney-in-Fact Title: Vice President and
Chief Financial
Officer
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Dates Referenced Herein and Documents Incorporated by Reference
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