Exhibit 10.5


 


NOTE MODIFICATION
AGREEMENT


 


This Note Modification Agreement (the “Agreement”) is dated as of December 9,
2008 and is made by and between BRAD FOOTE GEAR WORKS, INC., f/k/a BFG
Acquisition Corp., an Illinois corporation (“Borrower”) and BANK OF AMERICA,
N.A., a national banking association, as successor by merger to LaSalle Bank
National Association f/k/a LaSalle National Bank f/k/a LaSalle Bank NI (the “Bank”).


 


R E C I T A
L S


 


A.                                   Borrower has previously delivered to the Bank
its Equipment Line Note dated June 30, 2007 in the principal amount of $9,000,000.00
(the “Note”), evidencing a non-revolving line of credit loan with term
conversion feature extended by the Bank to the Borrower; and


 


B.                                     The Note previously converted to a Term Note
in accordance with its terms and is currently bearing interest at a variable
rate equal to the Variable Interest Rate (as defined in the Note); and


 


C.                                     The Borrower and Bank have agreed to modify
the interest rate charged on the Note;


 


NOW, THEREFORE, in consideration of the foregoing, and for
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


 


1.                                                       Effective December 9, 2008 and for the
balance of the term of this Note, the interest rate charged on this Note shall
be Adjusted LIBOR (as hereinafter defined).   
To effect such change, the Note is hereby amended to add the following
additional provisions thereto:


 


“The term “LIBOR Loan” as used herein shall
mean the outstanding principal balance of this Note at the beginning of each
Interest Period (as hereinafter defined) or any other applicable time.   “Adjusted LIBOR” means a rate of interest
equal to two and one-half percent (2.5%) per annum in excess of the per annum
rate of interest at which U.S. dollar deposits in an amount comparable to the
amount of the relevant LIBOR Loan and for a period equal to the relevant “Interest
Period” (as hereinafter defined) are offered generally to the Bank  in the London Interbank Eurodollar market at
11.00 a.m. (London time) two Banking Days prior to the commencement of
each Interest Period, as displayed in the Bloomberg Financial Markets system,
or other authoritative source selected by the Bank in its sole discretion,
divided by a number determined by subtracting from 1.00 the maximum reserve
percentage for determining reserves to be maintained by member banks of the
Federal Reserve System for Eurocurrency liabilities, such rate to remain fixed
for such Interest Period.  “Interest
Period” shall mean successive 30 day periods commencing on December 9,
2008; provided that: (i) each such 30 day period occurring after such
initial period shall commence on the day on which the next preceding period
expires; (ii) the final Interest Period shall be such that its expiration
occurs on or before the Maturity Date; (iii) any Interest Period which
commences on the last Banking Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Banking Day of the appropriate subsequent
calendar month; (iv) if the final Interest Period before the Maturity Date
is less then 30 days, this Note shall 


 


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continue
to bear interest at Adjusted LIBOR for such final Interest Period; and (v) 
each Interest Period which would otherwise end on a day which is not a Banking
Day shall end on the next succeeding Banking Day, or, if such next succeeding
Banking Day falls in the next succeeding calendar month, on the next preceding
Banking Day.  Interest on each LIBOR Loan
shall be payable on the last Banking Day of each Interest Period, at maturity,
after maturity on demand, and on the date of 
any payment hereon on the amount paid. 
The Borrower hereby further promises to pay to the order of the Bank, on
demand, interest on the unpaid principal amount of each LIBOR Loan after
maturity (whether by acceleration or otherwise) at the Default Rate (as defined
in this Note).  As used herein, “Banking
Day(s)” shall mean each and all days other than a Saturday, Sunday or a legal
holiday on which national banks are authorized or required to be closed for the
conduct of commercial banking business in Chicago, Illinois.


 


The Bank’s determination of Adjusted LIBOR as
provided above shall be conclusive, absent manifest error.  Furthermore, if the Bank determines, in good
faith (which determination shall be conclusive, absent manifest error) prior to
the commencement of any Interest Period that: (a) U.S. dollar deposits of
sufficient amount and maturity for funding any LIBOR Loan are not available to
the Bank in the London Interbank Eurodollar market in the ordinary course of
business, or (b) by reason of circumstances affecting the London Interbank
Eurodollar market, adequate and fair means do not exist for ascertaining the
rate of interest to be applicable to the relevant LIBOR Loan, the Bank shall
promptly notify the Borrower and such LIBOR Loan shall automatically convert on
the last day of its then-current Interest Period to a loan bearing interest at
the Prime Rate plus two and one-half percent (2.5%) per annum.


 


If, after the date hereof, the introduction
of, or any change in, any applicable law, treaty, rule,  regulation, or guideline, or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending office (a “Regulatory Change”) shall, in the
opinion of counsel to the Bank, make it 
unlawful or impossible for the Bank to make or maintain any LIBOR Loan
evidenced hereby, then the Bank shall promptly notify the Borrower and such
LIBOR Loan shall automatically convert on the last day of its then-current
Interest Period (or earlier if required by such Regulatory Change) to a loan
bearing interest at the Prime Rate plus two and one-half percent (2.5%) per
annum.


 


If, for any reason, any LIBOR Loan is paid
prior to the last Banking Day of its then-current Interest Period, the Borrower
agrees to indemnify the Bank against any loss (including any loss on
redeployment of the funds repaid), cost or expense incurred by the Bank as a
result of such prepayment.


 


If any Regulatory Change (whether or not
having the force of law) shall (a)  impose, modify or deem applicable any
assessment, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, or any other acquisition
of funds or disbursements by, the Bank; (b) subject the Bank or any LIBOR
Loan to any tax, duty, charge, stamp tax or fee or change in the basis of
taxation of payments to the Bank of principal or interest due from the Borrower
to the Bank hereunder (other than a change in the taxation of the overall net
income of the Bank); or (c) impose on the Bank any other condition
regarding such LIBOR Loan or the Bank’s funding thereof, and the Bank shall
determine (which determination shall be conclusive, absent manifest error) that
the result of the foregoing is to increase the cost 


 


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to
the Bank of making or maintaining such LIBOR Loan or to reduce the amount of
principal or interest received by the Bank hereunder, then the Borrower shall
pay to the Bank, on demand, such additional amounts as the Bank shall, from
time to time, determine are sufficient to compensate and indemnify the Bank for
such increased cost or reduced amount.


 


The outstanding principal balance of this
Note, the applicable interest rate for each Interest Period, each applicable Interest
Period, and the amount and date of any repayment shall be noted on Bank’s
records, which records shall be conclusive evidence thereof, absent manifest
error; provided, however, any failure by Bank to make any such notation, or any
error in any such notation, shall not relieve Borrower of its obligations to
repay Bank the outstanding principal balance of this Note, all accrued and
unpaid interest thereon, and all other amounts payable by Borrower to Bank
under or pursuant to this Note.”


 


2.                                       In the event of any conflict between the
terms of this Agreement and the Note, the terms of this Agreement shall govern.


 


3.                                       Borrower acknowledges and irrevocably agrees
that the payment and performance of the Note, as modified hereby, shall
continue to be secured by Collateral Documents (as such term is defined in the
Loan and Security Agreement dated January 17, 1997 between the Borrower
and the Bank, as amended from time to time).


 


4.                                       Except as expressly modified by this
Agreement, all terms and provisions of the Note shall stand and remain in full
force and effect.


 


(The
signature page follows.)


 


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IN WITNESS
WHEREOF, the
undersigned have executed this Agreement as of the day and  year first above written.


 


BORROWER:


 


	
  BRAD FOOTE GEAR WORKS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Ralph Placzek

  	
   

  
	
   

  	
  Ralph Placzek

  
	
  Title:

  	
  Vice President of Finance

  
	
   

  	
   

  
	
  BANK:

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A.

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Katherine Novey

  	
   

  
	
   

  	
  Katherine Novey

  
	
  Title:

  	
  Senior Vice President

  



 


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