- 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 namedPage: 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