- 5 -
possible transactions. Based on cashflow statements and
projections prepared by E&Y, Mr. Gleason ultimately agreed to
participate in a leveraged buyout (LBO) transaction whereby
through exchange of his Excellence shares and the assistance of
outside financing, he purchased all or most of Alofs and Target
from the other investors. The transaction closed in late 1995.
In connection with this transaction, Mr. Gleason as
“Borrower” on December 20, 1995, executed an agreement for a term
loan or loans (hereinafter referred to in the singular) from
Comerica Bank (Comerica) in the aggregate amount of $6 million.
The agreement contained a statement that “The proceeds of the
Loan will be used for the following business purpose or purposes
and no other: TO PURCHASE COMMON STOCK OF ALOFS MANUFACTURING
COMPANY AND TARGET COMPONENTS, INC.” On the same date,
Mr. Gleason as “Pledgor” also executed a pledge agreement in
favor of Comerica to secure the $6 million loan. He therein
pledged as collateral 770.528 shares of Alofs and 350 shares of
Target. The pledge agreement entitled petitioner to receive cash
dividends and distributions arising from the collateral so long
as no default on the attendant loan had occurred. In the event
of a default, the pledge agreement afforded Comerica broad rights
with respect to the collateral and any proceeds thereof.
The previous day, on December 19, 1995, Comerica had issued
an irrevocable standby letter of credit addressed to named
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011