<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6719 36-4062412
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
935 WEST 175TH STREET
HOMEWOOD, ILLINOIS 60430-2028
(708) 799-4990
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RICHARD P. DICKSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
935 WEST 175TH STREET
HOMEWOOD, ILLINOIS 60430-2028
(708) 799-4990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL A. KELLY ROBERT J. JOSEPH, ESQ. SCOTT N. GIERKE, ESQ.
CHIEF FINANCIAL OFFICER GARDNER, CARTON & DOUGLAS MCDERMOTT, WILL & EMERY
ALTERNATIVE DISTRIBUTION 321 NORTH CLARK STREET, 227 WEST MONROE STREET
SYSTEMS, INC. SUITE 3200 CHICAGO, ILLINOIS 60606
935 WEST 175TH STREET CHICAGO, ILLINOIS 60610 (312) 984-7521
HOMEWOOD, ILLINOIS 60430- (312) 245-8754
2028
(708) 799-4990
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,840,000
Common Stock, par value $.01 per share..... shares $12.00 $22,080,000 $6,691
- ------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes 240,000 shares which may be purchased by the Underwriters to
cover over-allotments, if any. See "Underwriting."
(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(a) of the Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1997
PROSPECTUS
1,600,000 SHARES
ALTERNATIVE DISTRIBUTION
SYSTEMS, INC.
LOGO
COMMON STOCK
All the shares of Common Stock being offered hereby are being sold by
Alternative Distribution Systems, Inc. (the "Company"). Prior to the offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price. Approximately $3.8 million
of the net proceeds to the Company will be used to fund a distribution to the
Company's current stockholders related to the termination of the Company's S
corporation status. See "Use of Proceeds" and "S Corporation Status--Related
Distribution."
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "ADSX."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total (3)................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and its current stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $500,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 240,000 shares of Common Stock solely to cover over-
allotments, if any. See "Underwriting." If all such shares are purchased,
the total Price to Public, Underwriting Discount and Proceeds to Company
will be $ , $ and $ , respectively.
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by them and subject to their right to reject
orders in whole or in part. It is expected that delivery of the certificates
for the shares of Common Stock will be made on or about , 1997.
WILLIAM BLAIR & COMPANY A.G. EDWARDS & SONS, INC.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
[MAP]
TO COME
(PHOTOS TO COME)
The Company's Quality Delivery The Company's sophisticated and
System (consisting of specialized computerized inventory management
trailers designed to safely and se- systems, together with electronic
curely deliver metal products), com- data interchange links to customers,
bined with its heat and humidity- enable producers and end-users to
controlled warehouse and distribu- monitor inventories in the Company's
tion centers equipped with pull- warehouses, plan and schedule pro-
through truck bays utilizing air- duction, and transmit shipment re-
locks, enables the Company to effi- quirements.
ciently load, transport, unload and
store metals with minimal risk of
damage or condensation in almost any
weather condition.
----------------
The Company intends to furnish annual reports to stockholders which will
contain audited consolidated financial statements and quarterly reports
containing unaudited consolidated financial information for the first three
quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements, including the related notes thereto, included elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus (i)
has been adjusted to reflect a reorganization of the Company described under
the caption "Company Background," (ii) assumes the Underwriters' over-allotment
option is not exercised and (iii) assumes the effectiveness of the Company's
Amended and Restated Certificate of Incorporation which will, among other
things, effect a reclassification of each share of the Company's Common Stock
into 3,349 shares of Common Stock prior to the consummation of the offering.
See "Underwriting." Unless otherwise specified, references to the "Company"
include Alternative Distribution Systems, Inc., its five wholly-owned
subsidiaries and the historical business and operations undertaken by the six
companies formerly comprising the Alternative Transportation Systems Group (the
"ATS Group"). See "Company Background."
THE COMPANY
The Company believes it is the leading national provider to the metals
industry of fully integrated distribution services, including transportation,
warehousing and third-party logistics services. Over the course of more than 15
years in the metals distribution business, the Company has developed
specialized systems, equipment and expertise which enable it to handle,
warehouse and transport high-value metals (primarily steel and aluminum)
requiring time-sensitive delivery in coordination with end-users' increasingly
sophisticated inventory management requirements. The Company's capabilities
allow it to offer integrated, turn-key solutions to the distribution demands of
steel and other metals producers. These distribution demands are increasingly
complex, as producers increase their outsourcing of metals processing while
their customers (metals-consuming manufacturers) embrace just-in-time inventory
systems and higher raw materials quality standards.
The Company serves metals producers, traders, processors and consumers (such
as manufacturers of automobiles, appliances, construction and agricultural
equipment, metal buildings components and food and beverage packaging) through
a network of 16 warehousing and distribution centers and an approximately 285
tractor, primarily short-haul truck fleet operating in the Midwest, East and
West Coast markets. The Company's intermodal operations combine and package
rail, truck, barge and ship transportation to provide various materials
movement management services between distant and intermediate markets. As a
logistics manager, the Company integrates these services to provide seamless
"door-to-door" transportation and distribution services to its customers. The
Company's sophisticated and computerized inventory management systems, together
with electronic data interchange links to customers, enable producers and end-
users to monitor inventories in the Company's warehouses, plan and schedule
production and transmit shipment requirements.
Demand for the Company's services is driven by several industry trends.
Metals-consuming manufacturers and others in the metals supply chain
increasingly rely on "just-in-time" inventory delivery systems to reduce
inventory carrying costs and to improve customer service. As a result, a need
has arisen for increasingly sophisticated inventory management and information
systems. Metals-consuming manufacturers' increasing emphasis on input quality
has created a demand for controlled-environment warehousing and transportation
of processed metals to prevent damage in storage and in transit. A majority of
the Company's warehouse capacity affords a pressurized, dust-free, heat and
humidity-controlled environment for metals storage. Moreover, in an effort to
reduce overhead costs, many metals producers and end-users have begun to focus
primarily on production and, as a result, have outsourced their in-house
transportation, warehousing and logistics functions to third-party providers.
The increasingly complex and demanding distribution requirements arising from
these trends have led to growth in demand for the Company's services.
3
<PAGE>
The Company commenced operations in the mid-1970s as a trucking firm serving
Midwest-based metals producers. In 1986, the Company incurred significant
indebtedness to purchase the ownership interest of a majority stockholder, and
during the next several years the Company focused on reducing its indebtedness
and strengthening its existing operations. Responding to the changes in the
metals supply chain, in 1991, the Company implemented its growth strategy and
began to make significant capital investments to open additional metals
warehouse and distribution centers, and since the beginning of 1991, the
Company has opened 10 such facilities with an aggregate capacity of
approximately 925,000 square feet. As a result of start-up expenses and initial
build up of through-put, new warehouse and distribution facilities typically do
not achieve positive pre-tax income until 12 to 18 months following the
commencement of operations. From 1993 to 1996, the Company's net operating
revenues have increased from approximately $44.9 million to approximately $67.5
million, and the Company's operating income has grown from approximately $2.3
million to approximately $5.6 million.
The Company believes that the ongoing proliferation of just-in-time delivery
systems, the increasing emphasis on input quality, the continued outsourcing of
distribution and logistics capabilities and the resulting changes in the metals
supply and distribution chain pose significant opportunities for future growth.
As part of its growth strategy, the Company is scheduled to open two new
warehouse and distribution centers with an aggregate capacity of approximately
212,000 square feet by the summer of 1997. In addition, the Company intends to
further expand its warehouse and distribution capacity by 25% to 40% over the
next five years by identifying three to five new geographic locations for
additional warehouse and distribution centers and/or by expanding the capacity
of its existing centers. In addition to generating warehousing revenues,
warehouse and distribution facilities promote growth in the Company's trucking,
intermodal and logistics operations. Furthermore, the Company intends to market
its just-in-time and total quality management expertise to new customer
segments, and to increase its import-export, "core-carrier" regional trucking
and intermodal businesses.
THE OFFERING
<TABLE>
<C> <S>
Common Stock Offered by the Company............... 1,600,000 shares
Common Stock to be Outstanding After the Offering. 4,949,000 shares (1)
Use of Proceeds................................... For repayment of outstand-
ing indebtedness, to fund a
capital distribution (re-
lated to termination of the
Company's S Corporation
status) to the Company's
current stockholders, and
for other general corporate
purposes. See "Use of Pro-
ceeds."
Proposed Nasdaq National Market Symbol............ ADSX
</TABLE>
- --------------------
(1) Excludes 400,000 shares of Common Stock reserved for issuance under the
Company's 1997 Stock Option Plan (including 150,000 shares issuable upon
the exercise of outstanding options to be granted under the Company's 1997
Stock Option Plan, none of which will be exercisable prior to December 31,
1997). See "Management--Employee Benefit Plans--1997 Stock Option Plan."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1992 1993 1994 1995 1996
------- ------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net operating revenues......... $42,874 $44,915 $ 53,498 $ 59,421 $ 67,473
Gross profit................... 6,700 8,119 9,876 11,128 13,364
Operating income............... 1,260 2,339 3,312 3,760 5,612
Interest expense............... 388 390 544 835 1,089
Interest income and other, net. 24 23 114 131 182
Income before S Corp
Stockholder
Compensation and income taxes
(1)........................... 896 1,972 2,882 3,056 4,705
Pro forma net income (1)(2).... $ 2,826
SUPPLEMENTAL PRO FORMA INCOME
STATEMENT DATA (3):
Net income..................... $ 3,362
=========
Net income per share (4)....... $ 0.68
=========
SELECTED OPERATING DATA:
Number of warehouse facilities
(at period end)............... 13 13 14 15 16
Warehouse square footage (at
period end)................... 711,000 864,000 841,000 1,213,000 1,358,000
Number of truck tractors (at
period end)................... 222 219 243 286 286
Warehouse "through-put" (in
tons) (5)..................... 705,000 820,000 1,049,000 1,317,000 1,777,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
AS
ACTUAL ADJUSTED (6)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................ $(9,705) $ 515
Total assets............................................. 38,321 38,321
Total debt............................................... 22,042 9,935
Stockholders' equity..................................... 3,116 18,984
</TABLE>
- --------------------
(1) For all periods shown prior to February 1, 1996, the Company elected to be
treated as an S Corporation and, as a result, the income of the Company was
taxed for federal and state income tax purposes directly to the Company's
stockholders rather than to the Company. S Corp Stockholder Compensation
represents additional compensation paid to the Company's stockholders in
the amounts of $923,590, $1,971,875, $2,882,359 and $3,055,695 in 1992,
1993, 1994 and 1995, respectively, and $309,762 for the period from January
1, 1996 to February 1, 1996, when the Company's S Corporation status was
terminated. Amounts not utilized by the stockholders to pay or provide for
the stockholders' applicable current and deferred federal and state income
taxes attributable to such additional compensation were reinvested in the
Company as capital. See "S Corporation Status--Related Distribution,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General" and Notes 6 and 7 of Notes to Consolidated Financial
Statements.
(2) Pro forma income statement data have been computed by adjusting historical
net income for the year ended December 31, 1996, as if the Company had been
a C corporation for the entire period and had not recorded any S Corp
Stockholder Compensation during such period. See "S Corporation Status--
Related Distribution" and Notes 6, 7 and 12 of Notes to Consolidated
Financial Statements.
(3) Supplemental pro forma income statement data have been computed by (i)
adjusting historical net income for the year ended December 31, 1996, as if
the Company had been a C corporation for the entire period and had not
recorded any S Corp Stockholder Compensation during such period and (ii)
giving effect to the offering of 1,600,000 shares of Common Stock made
hereby and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds," as if the offering had occurred on January
1, 1996. See "Use of Proceeds," "S Corporation Status--Related
Distribution" and Notes 6, 7 and 12 of Notes to Consolidated Financial
Statements.
5
<PAGE>
(4) Supplemental pro forma net income per share has been calculated by dividing
supplemental pro forma net income by pro forma weighted average shares
assumed to be outstanding, after giving effect to the issuance of the
number of shares of Common Stock to be issued in the offering made hereby
(1,600,000 shares). See "Use of Proceeds" and "S Corporation Status--
Related Distribution."
(5) Warehouse "through-put" in any period represents the aggregate amount of
metals (measured in tons) that were shipped from the Company's warehouses
(excluding intermodal warehouses) during the specified period.
(6) Adjusted to give effect to the offering of 1,600,000 shares at an assumed
offering price of $11.00, and the application of the net proceeds therefrom
to repay existing indebtedness of $12.1 million and to fund $3.8 million of
the S Corp Related Distribution to the Company's current stockholders. See
"Use of Proceeds," "S Corporation Status--Related Distribution" and
"Capitalization."
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully by prospective investors in evaluating
the Company and its business before purchasing shares of Common Stock offered
hereby. This Prospectus contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, the
words "anticipate," "believe," "estimate," "intend" and "expect" and similar
expressions are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in or implied by these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed below.
COMPETITION
The metals distribution services industry is extremely competitive and
fragmented. The Company competes against other warehouse providers, integrated
logistics companies, third-party brokers and other companies offering
warehousing, logistics and transportation services. The Company's trucking
operations compete with trucking companies and other alternative forms of
surface transportation, including intermodal transportation and railroads. The
trucking industry is highly competitive and includes numerous regional, inter-
regional and national truckload carriers, none of which dominates the market.
The Company's intermodal operations compete with over-the-road trucks, various
intermodal marketing companies, transloaders and other third-party logistics
suppliers. The Company's warehousing operations compete with various regional
and local warehouses and, to some extent, with internal storage capacity at
metals producers and processors who may also offer warehousing at certain
locations. Some companies with which the Company competes have greater
financial resources, operate more equipment and store and transport more
material.
EXPANSION PLANS; EARNINGS FLUCTUATIONS
The Company currently has a network of 16 warehouse and distribution centers
located across the country. The Company is scheduled to open two new warehouse
and distribution centers with an aggregate capacity of approximately 212,000
square feet by the summer of 1997. In addition, the Company currently plans to
further expand its warehouse and distribution capacity by 25% to 40% over the
next five years by identifying three to five new geographic locations for
additional warehouse and distribution centers and/or by expanding the capacity
of its existing centers. The timing of any such additional capacity expansion
and the location of any other such new facilities have not yet been determined,
and are subject to a number of factors, including the ability to identify and
obtain acceptable sites at or near points of concentrated metals consumption
and/or production and availability of financing. The Company may expand its
warehouse and distribution capacity to a lesser or greater extent, and there
can be no assurance that any additional warehouse and distribution centers will
become profitable. Due to start-up operating expenses and initial build-up of
through-put associated with new facilities, new warehouse and distribution
facilities typically do not achieve positive pre-tax income until 12 to 18
months following the commencement of operations.
The Company's earnings may fluctuate from year to year or quarter to quarter
due to, among other things, the timing of the opening of additional warehouse
and distribution facilities and the related construction and operating expenses
and the seasonality of the Company's business.
CUSTOMER CONCENTRATION
The Company's ten, five and two largest customers accounted for 58.2%, 43.3%
and 21.3%, respectively, of the Company's operating revenues during 1996. The
loss of one or more of these large customers could have a material adverse
effect on the Company's operating results. Although metals-consuming
manufacturers typically do not directly pay for the Company's services (such
services are usually paid for by the producers or processors), such
manufacturers may influence a customer's decision as to which company will
provide the distribution services. The loss of the ability of the Company to
provide distribution services to one or more of these large manufacturers could
have a material adverse effect on the Company's financial condition or results
of operations. See "Business--Customers."
7
<PAGE>
INDUSTRY CYCLICALITY
The Company provides its distribution services primarily to participants in
the metals industry. While the Company believes that its business is less
cyclical than those of the businesses it serves, a sustained downturn in
consumer and capital goods spending could have a material adverse effect on the
Company's results of operations or financial condition.
ECONOMIC FACTORS
Changes in the railroad industry (including railroad mergers and changes in
rail rates and services), changes in fuel prices and the supply of fuel,
increases in fuel or energy taxes, shortages of intermodal containers, interest
rate fluctuations, economic recessions and customers' business cycles are
economic factors affecting the Company's operations over which the Company has
little or no control. In addition, the ability to attract and retain qualified
drivers is an important factor in the Company's ability to serve its trucking
customers. Although the truckload industry is subject to periodic driver
shortages, the Company to date has not experienced protracted periods of driver
shortages. Although the Company currently has an adequate number of drivers,
there can be no assurance that it will not be affected by a shortage of
qualified drivers in the future. A reduction in the number of available drivers
and independent contractor drivers, whether due to capital requirements related
to the expense of obtaining, operating and maintaining equipment or for other
reasons, could materially adversely affect the Company's results of operations
and financial condition. A sustained work stoppage at one or more of the
Company's significant customers or the major metals-consuming manufacturers
served by the Company could have a material adverse effect on the Company's
results of operations or financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the efforts and
abilities of Richard P. Dickson (the Company's Chairman of the Board, President
and Chief Executive Officer), Michael A. Kelly (the Company's Chief Financial
Officer, Secretary and Treasurer) and George P. Trainer (the Company's
Executive Vice President), and the continued service of its other key
management personnel. See "Management." The Company does not have employment
agreements with any of its executive officers.
INDEPENDENT CONTRACTORS
The Company engages independent contractors to provide certain of its
trucking services. From time to time, tax authorities have sought to assert
that independent contractors in the trucking industry are employees rather than
independent contractors. No tax claim has been successfully made with respect
to independent contractors of the Company, and management is confident that the
independent contractors of the Company are not employees of the Company under
existing interpretations of federal and state tax laws. However, there can be
no assurance that tax authorities will not successfully challenge this position
or that such interpretations will not change, or that tax laws will not change.
If the independent contractors were determined to be employees, such
determination could materially increase the Company's tax and workers'
compensation exposure.
REGULATION
The Company is subject to regulation by various federal, state and foreign
agencies, including the United States Department of Transportation ("DOT").
These regulatory agencies have broad powers, generally governing activities
such as authority to engage in motor carrier operations, operational safety,
accounting systems and financial reporting. Although compliance with these
regulations has not had a material effect on the Company's results of
operations or financial condition to date, there can be no assurance that
additions or changes to current regulations will not have a material adverse
effect on the Company's results of operations or financial condition. See
"Business--Regulation."
CARGO LIABILITY AND INSURANCE
The Company assumes responsibility to its customers for the safe storage and
delivery of high-value cargo, the timing and quality of delivery of which is
critical. While the Company maintains insurance in amounts,
8
<PAGE>
subject to certain deductibles, that management believes are adequate for its
purposes, there can be no assurance that the Company's results of operations
will not be adversely affected by poor claims experiences, increases in
insurance premiums or the inability to obtain insurance at economical rates.
CONTROL OF THE COMPANY
Upon completion of the offering made hereby, Richard P. Dickson (the
Company's Chairman of the Board, President and Chief Executive Officer) will
own approximately 50.8% of the outstanding shares of Common Stock, and Mr.
Dickson, Michael A. Kelly (the Company's Chief Financial Officer, Secretary and
Treasurer) and George P. Trainer (the Company's Executive Vice President) will
together own approximately 67.7% of the outstanding shares of Common Stock. As
long as Mr. Dickson controls a majority of the voting stock of the Company, he
will be able, acting alone, to elect the entire board of directors of the
Company and to determine the outcome of substantially all matters involving a
stockholder vote. As long as Messrs. Dickson, Kelly and Trainer together
control a majority of the voting stock of the Company they will be able, to the
extent they act in concert, to elect the entire board of directors of the
Company and to determine the outcome of substantially all matters involving a
stockholder vote. See "Management" and "Principal Stockholders."
DISTRIBUTION RELATED TO PRIOR S CORPORATION STATUS
The Company will utilize approximately $3.8 million of the proceeds of the
offering made hereby to fund a distribution of contributed capital to the three
current stockholders of the Company. See "S Corporation Status--Related
Distribution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock, or the perception that such
sales might occur, in the public market after the offering could adversely
affect the prevailing market price for the Common Stock. In addition to the
1,600,000 shares offered hereby, a total of 3,349,000 shares held by the
current stockholders of the Company will become eligible for sale in the public
market 180 days after the date of this Prospectus upon the expiration of lock-
up agreements entered into between such stockholders and the Underwriters,
subject to the provisions of Rule 144 of the Securities Act of 1933, as amended
(the "Securities Act"). In addition, the Company intends to file a registration
statement under the Securities Act to register an aggregate of 400,000 shares
of Common Stock reserved for issuance under the Company's 1997 Stock Option
Plan. See "Management--Employee Benefit Plans," "Shares Eligible for Future
Sale" and "Underwriting."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; SHARE PRICE VOLATILITY
There has been no prior public market for the Common Stock and there can be
no assurance that an active public market for the Common Stock will develop or
be sustained after the offering. The initial public offering price has been
determined by negotiations between representatives of the Company and the
representatives of the Underwriters and may not be indicative of future market
prices. See "Underwriting" for information related to the method of determining
the initial public offering price. The trading price of the Common Stock could
be subject to wide fluctuations in response to quarter-to-quarter variations in
operating results, changes in earnings estimates by analysts, general
conditions in the metals industry and other events or factors. In addition, in
recent years the stock market has experienced extreme price fluctuations. This
volatility has had a substantial effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
the specific companies. These broad market fluctuations may adversely affect
the market price of the Common Stock. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
The Certificate of Incorporation, By-laws and Delaware law contain provisions
that may have the effect of delaying, deferring or preventing a tender offer,
proxy contest or non-negotiated merger or other business combination involving
the Company. These provisions are intended to encourage any person interested
in
9
<PAGE>
acquiring the Company to negotiate with and obtain the approval of the Board
in connection with the transaction. Certain of these provisions may, however,
discourage a future acquisition of the Company not approved by the Board in
which stockholders might receive an attractive value for their shares or that
a substantial number or even a majority of the Company's stockholders might
believe to be in their best interest. As a result, stockholders who desire to
participate in such a transaction may not have the opportunity to do so. Such
provisions could also discourage bids for the shares of Common Stock at a
premium, as well as create a depressive effect on the market price of the
shares of Common Stock. In addition to the Common Stock, the Certificate of
Incorporation authorizes the issuance of up to 500,000 shares of preferred
stock. The Company has no current plans to issue any shares of preferred
stock. However, because the rights and preferences for any series of preferred
stock may be set by the Board in its sole discretion, the Company may issue
preferred stock which has rights and preferences superior to the rights of
holders of shares of the Common Stock and thus may adversely affect the rights
of holders of shares of the Common Stock. See "Description of Capital Stock--
Preferred Stock" and "--Certain Limited Liability, Indemnification and Anti-
takeover Provisions."
DILUTION
Purchasers of shares of Common Stock (at an assumed initial public offering
price of $11.00 per share) will experience immediate and substantial dilution
of $7.16 per share in net tangible book value. See "Dilution."
DIVIDENDS
Following the offering, the Company intends to retain any future earnings
for use in its business and, other than the S Corp Related Distribution (as
defined herein), does not anticipate paying cash dividends in the foreseeable
future. There can be no assurance that the Company will ever pay a cash
dividend. See "Dividend Policy."
COMPANY BACKGROUND
Alternative Distribution Systems, Inc. (the "Company") was incorporated in
Delaware on January 30, 1996. Prior to February 1, 1996, the shares of capital
stock of the six companies formerly comprising the Alternative Transportation
Systems Group (consisting of Alternative Transportation Systems, Inc.; Area
Transportation Company; Freight Connections International, Ltd.; Independent
Contractor Services, Inc.; Roll & Hold Warehousing & Distribution Corp.; and
Western Intermodal Services, Ltd.) were owned by three individual stockholders
(the "Current Stockholders"). Effective February 1, 1996, the Company
exchanged shares of its newly-issued Common Stock for shares of each of the
six companies. Accordingly, upon consummation of the share exchange the
Current Stockholders became the sole stockholders of the Company and each of
the six companies became a wholly-owned subsidiary of the Company. Following
the share exchange, Alternative Transportation Systems, Inc. was merged with
and into the Company, with the Company being the surviving corporation in the
merger. Unless otherwise indicated, all information in this Prospectus has
been adjusted to reflect and give effect to the share exchange and merger as
herein described.
The predecessor operations of the Company began in the mid-1970s as a
trucking firm serving Midwest-based metals producers. During the 1980s, the
ATS Group began offering warehousing and intermodal services, and has since
evolved into a full service distribution company specializing in providing
services to the metals industry.
The Company's principal executive offices are located at 935 West 175th
Street, Homewood, Illinois 60430. Its telephone number is (708) 799-4990.
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $15.9 million, assuming an initial public offering price of
$11.00 per share, after deducting the underwriting discounts and offering
expenses payable by the Company.
10
<PAGE>
The net proceeds of the offering will be used to repay $12.1 million of
outstanding indebtedness of the Company (which indebtedness bears interest at a
composite rate of 8.1% per annum and is otherwise due from 1997 to 2005), to
fund the distribution described under the caption "S Corporation Status--
Related Distribution" in the amount of $3.8 million and for other general
corporate purposes. Of the $12.1 million of indebtedness to be repaid from the
proceeds of the offering, approximately $6.9 million is term debt secured by
equipment, warehouses and an office building, and approximately $5.2 million
are short-term borrowings incurred to fund construction of the Company's
Hammond, Indiana warehouse ($2.8 million) and to fund a portion of the S Corp
Related Distribution ($2.4 million). Pending application of the net proceeds as
described above, the Company intends to invest the net proceeds in short-term
investment grade securities.
S CORPORATION STATUS -- RELATED DISTRIBUTION
For taxable periods beginning on and after January 1, 1987 and ending
February 1, 1996, each of the six companies formerly comprising the ATS Group
was a corporation subject to taxation under Subchapter S (an "S Corporation")
of the Internal Revenue Code of 1986, as amended (the "Code"). As a result, the
taxable income of such companies, if any, during these periods was taxed for
federal (and most state) income tax purposes directly to such companies'
stockholders rather than to the Company. Each of such companies terminated its
S Corporation status effective February 1, 1996, at which date the Company
became subject to income taxation. See Notes 6, 7 and 12 of Notes to
Consolidated Financial Statements.
During the periods when taxed as S Corporations, the companies annually paid
additional compensation ("S Corp Stockholder Compensation") to each of the
Current Stockholders. The portion of S Corp Stockholder Compensation not
utilized by the Current Stockholders to pay or provide for applicable current
and deferred federal and state income taxes attributable to such S Corp
Stockholder Compensation was reinvested in and contributed to the companies by
each of the Current Stockholders as capital. The aggregate amount of capital so
contributed by the Current Stockholders during the period January 1, 1987 to
January 31, 1996 was approximately $8.7 million.
Subsequent to January 31, 1996, the Company declared a capital distribution
with respect to its Common Stock in an amount equal to the amount of capital
that the Current Stockholders had reinvested in the companies formerly
comprising the ATS Group (the "S Corp Related Distribution"). Of the $8.7
million S Corp Related Distribution, $4.9 million was paid prior to December
31, 1996. Payment of the remaining $3.8 million of the S Corp Related
Distribution will be paid out of the net proceeds of the offering made hereby.
Purchasers of the Common Stock in this offering will not receive any portion of
the above-described S Corp Related Distribution.
DIVIDEND POLICY
Other than the S Corp Related Distribution described above under the caption
"S Corporation Status--Related Distribution," the Company has not declared or
paid any cash dividends on, or made any other distribution with respect to, its
Common Stock since its formation and does not currently intend to declare or
pay any cash dividends on its Common Stock, but intends to retain future
earnings for reinvestment in its business. Any future determination by the
Company to pay cash dividends on its Common Stock will be at the discretion of
the Board of Directors of the Company and will be dependent upon the Company's
results of operations, financial condition, contractual restrictions and other
factors deemed relevant by the Board of Directors.
11
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company (i) at December 31, 1996, and (ii) as adjusted to give effect to the
sale by the Company of 1,600,000 shares of Common Stock offered hereby and the
application of the remaining net proceeds from the offering at an assumed
initial public offering price of $11.00 per share, net of underwriting
discounts and estimated offering expenses. See "Use of Proceeds" and "S
Corporation Status--Related Distribution."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt, including current portion
of long term debt......................................... $ 8,373 $ 1,914
======= =======
Long-term debt, less current portion (1)................... $13,669 $ 8,021
Stockholders' equity:
Preferred Stock, $0.01 par value; 500,000 shares
authorized,
no shares outstanding.................................... -- --
Common Stock, $0.01 par value;
10,000,000 shares authorized; 3,349,000 shares
outstanding;
4,949,000 shares outstanding, as adjusted (2)............ 33 49
Additional paid-in capital................................ -0- 15,852
Retained earnings......................................... 3,083 3,083
------- -------
Total stockholders' equity............................... 3,116 18,984
------- -------
Total capitalization.................................... $16,785 $27,005
======= =======
</TABLE>
- ---------------------
(1) See Note 5 of Notes to Consolidated Financial Statements for information
regarding the Company's long-term indebtedness.
(2) Excludes 400,000 shares of Common Stock reserved for issuance under the
Company's 1997 Stock Option Plan (including 150,000 shares issuable upon
the exercise of outstanding options to be granted under the Company's 1997
Stock Option Plan, none of which will be exercisable prior to December 31,
1997). See "Management--Employee Benefit Plans--1997 Stock Option Plan."
DILUTION
As of December 31, 1996, the Company had a net tangible book value of
approximately $3.1 million, or approximately $0.93 per share. "Net tangible
book value" per share represents the amount of total tangible assets of the
Company reduced by the amount of its total liabilities and divided by the
number of shares of Common Stock outstanding. After giving effect to (i) the
sale of 1,600,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $11.00 per share and (ii) the
deduction of underwriting discounts and estimated expenses of the offering, the
pro forma net tangible book value of the Company as of December 31, 1996 would
have been $19.0 million, or $3.84 per share. This represents an immediate
increase in net tangible book value of $2.91 per share to the existing
stockholders and an immediate dilution of $7.16 per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Net tangible book value per share before the offering...... $0.93
Increase in net tangible book value per share attributable
to new investors.......................................... 2.91
-----
Pro forma net tangible book value per share after the
offering................................................... 3.84
------
Dilution per share to new investors......................... $ 7.16
======
</TABLE>
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated financial data of the Company shown below should
be read in conjunction with the consolidated financial statements, including
the related notes thereto, included elsewhere in this Prospectus and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The income statement data for each of the three years in the
period ended December 31, 1996 and the balance sheet data as of December 31,
1995 and 1996 have been derived from the audited financial statements
appearing elsewhere in this Prospectus. The selected income statement data for
the years ended December 31, 1992 and 1993 and the balance sheet data as of
December 31, 1992, 1993 and 1994 have been derived from audited financial
statements of the Company not included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1992 1993 1994 1995 1996
------- ------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net operating revenues. $42,874 $44,915 $ 53,498 $ 59,421 $ 67,473
Cost of sales.......... 36,174 36,796 43,622 48,293 54,109
------- ------- --------- --------- ---------
Gross profit........... 6,700 8,119 9,876 11,128 13,364
Operating expenses..... 5,440 5,780 6,564 7,368 7,752
------- ------- --------- --------- ---------
Operating income....... 1,260 2,339 3,312 3,760 5,612
Interest expense....... 388 390 544 835 1,089
Interest income and
other, net............ 24 23 114 131 182
------- ------- --------- --------- ---------
Income before S Corp
Stockholder
Compensation and
income taxes.......... 896 1,972 2,882 3,056 4,705
S Corp Stockholder
Compensation (1)...... 924 1,972 2,882 3,056 310
------- ------- --------- --------- ---------
Income before income
taxes................. (28) -- -- -- 4,395
Income taxes........... -- -- -- -- 1,755
------- ------- --------- --------- ---------
Net income............. $ (28) $ -0- $ -0- $ -0- $ 2,640
======= ======= ========= ========= =========
Pro forma income before
income taxes (2)...... $ 4,705
Pro forma income taxes. 1,879
Pro forma net income... 2,826
SUPPLEMENTAL PRO FORMA
INCOME STATEMENT DATA
(3):
Net income............. $ 3,362
=========
Net income per share
(4)................... $ 0.68
=========
SELECTED OPERATING DATA:
Number of warehouse
facilities (at period
end).................. 13 13 14 15 16
Warehouse square
footage (at period
end).................. 711,000 864,000 841,000 1,213,000 1,358,000
Number of truck
tractors (at period
end).................. 222 219 243 286 286
Warehouse "through-put"
(in tons) (5)......... 705,000 820,000 1,049,000 1,317,000 1,777,000
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1996
1992 1993 1994 1995 1996 AS ADJUSTED (6)
------- ------- ------- ------- ------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............. $ (306) $ (377) $ 957 $(1,420) $(9,705) $ 515
Total assets........... 12,104 17,917 21,980 30,986 38,321 38,321
Total debt............. 3,409 6,860 7,850 14,062 22,042 9,935
Stockholders' equity... 5,261 6,176 7,797 8,870 3,116 18,984
</TABLE>
13
<PAGE>
- ---------------------
(1) For all periods shown prior to February 1, 1996, the Company elected to be
treated as an S Corporation and, as a result, the income of the Company,
if any, was taxed for federal and state income tax purposes directly to
the Company's stockholders rather than to the Company. S Corp Stockholder
Compensation represents additional compensation paid to the Company's
stockholders in each year. The portion of S Corp Stockholder Compensation
not utilized by the stockholders to pay or provide for the stockholders'
applicable current and deferred federal and state income taxes
attributable to such S Corp Stockholder Compensation was reinvested in the
Company as capital. See "S Corporation Status--Related Distribution" and
Notes 6, 7 and 12 of Notes to Consolidated Financial Statements.
(2) Pro forma income statement data have been computed by adjusting historical
net income for the year ended December 31, 1996 as if the Company had been
a C corporation for the entire period and had not recorded any S Corp
Stockholder Compensation during such period. See "S Corporation Status--
Related Distribution" and Notes 6, 7 and 12 of Notes to Consolidated
Financial Statements.
(3) Supplemental pro forma income statement data have been computed by (i)
adjusting historical net income for the year ended December 31, 1996 as if
the Company had been a C corporation for the entire period and had not
recorded any S Corp Stockholder Compensation during such period and (ii)
giving effect to the offering of 1,600,000 shares of Common Stock made
hereby and the use of the estimated net proceeds therefrom to repay
interest-bearing indebtedness and to fund the payment of the S Corp
Related Distribution, as if the offering had occurred on January 1, 1996.
See "Use of Proceeds," "S Corporation Status--Related Distribution" and
Notes 6, 7 and 12 of Notes to Consolidated Financial Statements.
(4) Supplemental pro forma net income per share has been calculated by
dividing supplemental pro forma net income by pro forma weighted average
shares assumed to be outstanding, after giving effect to the issuance of
the number of shares of Common Stock to be issued in the offering made
hereby (1,600,000 shares). See "Use of Proceeds" and "S Corporation
Status--Related Distribution."
(5) Warehouse "through-put" in any period represents the aggregate amount of
metals (measured in tons) that were shipped from the Company's warehouses
(excluding intermodal warehouses) during the specified period.
(6) Adjusted to give effect to the offering of 1,600,000 shares at an assumed
offering price of $11.00, and the application of the net proceeds
therefrom to repay existing indebtedness of $12.1 million and to fund $3.8
million of the S Corp Related Distribution to the Current Stockholders.
See "Use of Proceeds," "S Corporation Status--Related Distribution" and
"Capitalization."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with "Selected Consolidated Financial
Data" and the notes thereto and the consolidated financial statements and notes
thereto of the Company included elsewhere in this Prospectus.
GENERAL
The Company believes it is the leading national provider to the metals
industry of fully integrated distribution services. Key components of its
distribution services include the Company's warehousing, trucking and
intermodal operations. The Company derives revenues from its warehousing,
trucking and intermodal operations either on a "bundled" or stand-alone basis.
As a logistics manager, the Company integrates these services to provide
seamless "door-to-door" transportation and distribution services to its
customers. For example, during 1996, approximately 75% of the Company's top 50
customers (measured in terms of total dollar revenues) purchased two or more of
the distribution services offered by the Company. The Company does not acquire
ownership of any of the metals it ships or warehouses. The Company derives
warehousing revenues by collecting handling charges upon metals' entering and
leaving a Company warehouse, together with a periodic storage fee and fees for
other miscellaneous value-added services.
Through its intermodal operations, the Company purchases a significant amount
of transportation services (rail, truck and barge) from unaffiliated third-
party providers. As a result, the cost of purchased transportation is included
in both the Company's revenues and cost of sales.
History
The Company's predecessor operations began in the mid-1970s as a trucking
firm serving Midwest-based metals producers. In the 1980s, the Company began
offering warehousing and intermodal services to the metals industry. In 1986,
the Company incurred significant indebtedness to purchase the ownership
interest of a majority stockholder, and during the period from 1986 to 1991 the
Company focused on reducing its indebtedness and strengthening its existing
operations.
Responding to changes in the metals supply chain, in 1991 the Company began
to make significant capital investments to open additional metals warehouse and
distribution centers and expand the capacity of existing facilities and
locations. Substantially all of these facilities are operated under long-term
lease arrangements or, in the case of the Indianapolis, Indiana and Macedonia,
Ohio (Cleveland) warehouses, owned by the Company. From the beginning of 1991
through 1996, the Company added approximately 925,000 square feet of additional
net warehouse capacity. During 1995, the Company made capital expenditures in
the amount of $7.7 million to construct and equip its Macedonia warehouse and
distribution center, which was opened in May 1995, and to expand its warehouse
capacity at its existing Indianapolis facility. In July 1996 the Company
committed to construct a new 102,000 square feet warehouse and distribution
center adjacent to its existing Hammond, Indiana facility at a cost of
approximately $4.0 million. The Company currently expects this new facility to
be completed and in operation by the summer of 1997. In November 1996, the
Company also committed to construct a new 110,000 square feet warehouse and
distribution center at Indiana's International Port/Burns Harbor, located in
Portage, Indiana, at a cost of approximately $4.2 million. This facility, which
the Company currently expects to be completed and in operation in the summer of
1997, is being built as part of a joint venture between the Company and Fednav
Limited, the largest operator of ocean vessels using the Great Lakes/St.
Lawrence Seaway system. Due to start-up operating expenses and initial build up
of through-put associated with new facilities, new warehouse and distribution
facilities typically do not achieve positive pre-tax income until 12 to 18
months following the commencement of operations.
Prior S Corp Status
For taxable periods beginning on and after January 1, 1987 and ending
February 1, 1996, each of the six companies formerly comprising the ATS Group
was an S Corporation. As a result, the taxable income of such
15
<PAGE>
companies, if any, during this period was taxed for federal (and most state)
income tax purposes directly to such companies' stockholders rather than to the
Company. Each of such companies terminated its S Corporation status effective
February 1, 1996, at which date the Company became subject to income taxation.
See Notes 6, 7 and 12 of Notes to Consolidated Financial Statements.
During the periods when taxed as S Corporations, the companies annually paid
S Corp Stockholder Compensation to each of the Current Stockholders. The
portion of S Corp Stockholder Compensation not utilized by the Current
Stockholders to pay or provide for applicable current and deferred federal and
state income taxes attributable to such S Corp Stockholder Compensation was
reinvested in and contributed to the companies by each of the Current
Stockholders as capital. The aggregate amount of capital so contributed by the
Current Stockholders during the period January 1, 1987 to January 31, 1996 was
approximately $8.7 million. Subsequent to January 31, 1996, the Company
declared an S Corp Related Distribution to the Current Stockholders in an
amount equal to the amount that the Current Stockholders had reinvested in the
companies as described above. Of this $8.7 million S Corp Related Distribution,
$4.9 million was paid prior to December 31, 1996. The remaining $3.8 million of
the S Corp Related Distribution will be paid upon the consummation of the
offering. See "Use of Proceeds" and "S Corporation Status--Related
Distribution."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
information derived from the Company's consolidated statements of income,
expressed as a percentage of net operating revenues, and the percentage change
in such items compared to the same period in the prior year.
<TABLE>
<CAPTION>
PERCENTAGE OF NET PERCENTAGE
OPERATING REVENUES INCREASE
-------------------------- ----------------
YEARS ENDED DECEMBER
31, 1994 1995 1996
-------------------------- TO TO TO
1993 1994 1995 1996 1993 1994 1995
----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating revenues........... 100.0% 100.0% 100.0% 100.0% 19.1% 11.1% 13.6%
Cost of sales.................... 81.9 81.5 81.3 80.2 18.6 10.7 12.0
----- ----- ----- -----
Gross profit.................... 18.1 18.5 18.7 19.8 21.6 12.7 20.1
Operating expenses............... 12.9 12.3 12.4 11.5 13.6 12.2 5.2
----- ----- ----- -----
Operating income................ 5.2 6.2 6.3 8.3 41.6 13.5 49.3
Interest expense................. 0.9 1.0 1.4 1.6 39.5 53.5 30.4
Interest income and other, net... 0.1 0.2 0.2 0.3 NM 14.9 38.9
----- ----- ----- -----
Income before S Corp Stockholder
Compensation................... 4.4 5.4 5.1 7.0 46.1 6.0 54.0
Pro forma tax expense............ NA NA NA 2.8 NA NA NA
----- ----- ----- -----
Pro forma net income (1)........ NA NA NA 4.2% NA NA NA
===== ===== ===== =====
</TABLE>
- ---------------------
NA=Not applicable
NM=Not meaningful
(1) For the periods shown prior to February 1, 1996, the Company operated as an
S Corporation and was not subject to federal and state income taxes. Pro
forma tax expense has been computed by applying the estimated income tax
rates that would have applied to income before S Corp Stockholder
Compensation if the Company had been operating as a C Corporation. See Note
12 of Notes to Consolidated Financial Statements.
Fiscal 1996 Compared to Fiscal 1995
Net operating revenues increased by $8.1 million, or 13.6%, to $67.5 million
in 1996 from $59.4 million in 1995. During 1996 the Company benefitted from the
expansion of its existing facilities in Indianapolis, Indiana and Davenport,
Iowa (which expansions were completed during 1995 and 1996, respectively), as
well as its new warehouse facility in Macedonia, Ohio (which was completed
during 1995). These capacity expansions generated growth in regional short-haul
trucking revenues and increased warehousing revenues. The Company also
benefitted from better utilization of existing warehouse facilities--i.e., the
Company experienced higher inventory levels and improved inventory turns at
these facilities. The Company also experienced growth in dedicated on-site
dispatch and logistics services.
16
<PAGE>
Cost of sales increased by $5.8 million, or 12.0%, to $54.1 million in 1996
from $48.3 million in 1995, primarily as a result of increased labor and
related expenses, increased fuel costs and warehouse rent associated with the
increased volume of trucking and warehouse activity.
Gross profit increased by $2.3 million, or 20.1%, to $13.4 million in 1996
from $11.1 million in 1995. As a percentage of net operating revenues, gross
profit increased from 18.7% in 1995 to 19.8% in 1996. This increase in gross
margin was primarily attributable to increased utilization realized at the
Company's new and expanded warehouses and increased use of higher-margin
Company-owned trucks with specialized equipment in short-haul and logistics
management operations.
Operating expenses increased by $0.4 million, or 5.2%, to $7.8 million in
1996. As a percentage of net operating revenues, operating expenses decreased
from 12.4% in 1995 to 11.5% in 1996. The decrease in operating expenses as a
percentage of revenues was primarily a result of the spreading of relatively
fixed costs, including staffing, over a larger revenue base.
Operating income increased by $1.9 million, or 49.3%, to $5.6 million in 1996
from $3.8 million in 1995. Operating income as a percentage of net operating
revenues increased to 8.3% in 1996 from 6.3% for the corresponding period in
the prior year.
Interest expense increased by $254,000, or 30.4%, from $835,000 in 1995 to
$1.1 million in 1996. This increase was primarily attributable to increased
borrowings incurred in connection with the addition of warehouse capacity in
Macedonia, Ohio and Indianapolis, Indiana, as well as the replacement of 70
tractors in the Company-owned tractor fleet and the acquisition of 25
additional specialized trailers. As a percentage of net operating revenues,
interest expense increased from 1.4% in 1995 to 1.6% in 1996.
The Company's income tax provision for 1996 was $1.8 million, reflecting an
effective rate of 40.0%. Prior to February 1, 1996, the Company operated as an
S Corporation and was not subject to federal and state income taxes.
Fiscal 1995 Compared to Fiscal 1994
Net operating revenues increased by $5.9 million, or 11.1%, to $59.4 million
in 1995 from $53.5 million in 1994. The majority of this increase was
attributable to increased warehousing revenues. Warehousing revenues increased
primarily from increased utilization of warehouse capacity at the Company's
Gary, Indiana warehouse location, as well as from expanded capacity at four
other warehouse locations during the year. This increase in warehouse
utilization, in turn, generated increased trucking revenues. Trucking revenues
also increased as a result of increased dedicated trucking services at certain
customer locations. Increased trucking revenues accounted for the balance of
the growth in net operating revenues for the year. The growth in warehousing
and trucking revenues was negatively impacted by a significant restructuring of
purchasing operations by one of the Company's major end-users. This
restructuring caused a slower than normal build-up of through-put at one of the
Company's new facilities.
Cost of sales increased by $4.7 million, or 10.7%, to $48.3 million in 1995
from $43.6 million in 1994, primarily as a result of increases in variable
labor expense associated with the increased warehousing and trucking
activities.
Gross profit increased by $1.3 million, or 12.7%, to $11.1 million in 1995
from $9.9 million in 1994. As a percentage of net operating revenues, gross
profit increased slightly from 18.5% in 1994 to 18.7% in 1995. This increase in
gross margin was primarily attributable to the growth in warehousing revenues
as well as increased Company-owned truck revenues due to the focus on short-
haul, dedicated operations.
Operating expenses increased by $0.8 million, or 12.2%, to $7.4 million in
1995 from $6.6 million in 1994. Incremental labor and related benefit expenses,
together with information system expenses, accounted for the majority of the
dollar increase, primarily due to facility growth. As a percentage of net
operating revenues, operating expenses remained relatively constant.
17
<PAGE>
Operating income increased by $448,000, or 13.5%, to $3.8 million in 1995
from $3.3 million in 1994. Operating income as a percentage of net operating
revenues was 6.3%, up slightly from 6.2% in 1994.
Interest expense increased $291,000, or 53.5%, from $544,000 in 1994 to
$835,000 in 1995. This increase was primarily attributable to increased
average borrowings outstanding incurred to finance the construction of the
Company's Macedonia, Ohio warehouse facility and the expansion of the
Company's warehouse capacity at its existing Indianapolis, Indiana facility,
and to increase the number of Company-owned truck units by approximately 15.
As a percentage of net operating revenues, interest expense increased from
1.0% in 1994 to 1.4% in 1995.
QUARTERLY RESULTS; SEASONALITY
The following table sets forth certain summary unaudited quarterly financial
information of the Company for each quarter in 1995 and 1996. In the opinion
of management, this quarterly information has been prepared on a basis
consistent with the Company's audited financial statements appearing elsewhere
in this Prospectus and reflects adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of such unaudited quarterly
results when read in conjunction with the audited financial statements and
notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period, and there can be no assurance
that any trends reflected in such results will continue in the future.
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net operating revenues.. $14,349 $14,830 $14,801 $15,441 $16,978 $16,751 $16,748 $16,996
Gross profit............ 2,678 2,748 2,690 3,012 3,146 3,553 3,245 3,420
Operating income........ 884 870 806 1,200 1,221 1,727 1,304 1,360
</TABLE>
Revenues from the Company's trucking and intermodal operations generally
reflect a seasonal pattern, because various customers reduce shipments during
and after the winter holiday season and during a portion of the summer when
certain metals-consuming manufacturers temporarily shut down. However, in
recent periods this seasonality has been offset by substantial growth in the
Company's warehousing revenues.
The Company's quarterly results of operations also may fluctuate materially
depending on the timing of the opening of new warehouse and distribution
centers and related start-up expenses and initial build up of through-put.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements to date have been for acquisition
and expansion of warehouse and distribution centers, equipment purchases
(primarily tractors and truck trailers) and working capital to fund operations
associated with these expansions. Over the past three fiscal years, the
Company has invested an aggregate of approximately $13.8 million in Company-
owned warehouse and distribution center facilities. The Company's primary
sources of funds for its business activities during this period have been cash
flow from operations and bank borrowings under its revolving lines of credit
and term loans.
Net cash provided by operating activities was $3.5 million in 1994, $3.4
million in 1995 and $5.5 million in 1996. Net cash used in investing
activities was $3.3 million in 1994, $11.4 million in 1995 and $9.5 million in
1996. Principal uses of cash in 1994 were purchases of property, plant and
equipment in the amount of $3.4 million (principally associated with the
Company's tractor fleet operations). Principal uses of cash in 1995 were
purchases of property and equipment in the amount of $11.3 million
(principally associated with the Company's Indianapolis, Indiana and
Macedonia, Ohio warehouse and distribution centers). Principal uses of cash in
1996 were purchases of equipment in the amount of $7.1 million (principally
associated with the Company's tractor and trailer fleet operations), and
construction of the Hammond, Indiana facility in the amount of $2.8 million.
18
<PAGE>
The Company has budgeted 1997 capital expenditures in the amount of
approximately $14.8 million, including approximately $1.2 million in
connection with the completion of construction of a new 102,000 square feet
warehouse facility adjacent to its existing Hammond, Indiana facility,
approximately $4.2 million in connection with the construction of a new
110,000 square feet warehouse facility at Indiana's International Port/Burns
Harbor in Portage, Indiana, and approximately $4.9 million in connection with
the purchase of approximately 50 tractors (of which 25 are a net addition to
the Company's fleet) and 30 additional truck trailers. The Company has
historically financed substantially all of the purchase price of truck
tractors and trailers through installment notes payable to lenders.
Net cash provided by financing activities was $2.6 million in 1994, $6.5
million in 1995, and $3.3 million in 1996. The cash provided in 1994, 1995 and
1996 was the result of increased short-term and long-term borrowings and the
payment in 1996 of a portion of the S Corp Related Distribution in the amount
of $4.9 million.
At December 31, 1996, the Company had a working capital deficit in the
amount of $9.7 million, which was primarily attributable to $5.2 million of
short-term borrowings outstanding under the Company's revolving credit
facilities and a $3.8 million current liability recorded to reflect the
balance payable of the S Corp Related Distribution. The short-term borrowings
were incurred to fund construction of the Company's new Hammond, Indiana
warehouse and to fund a portion of the S Corp Related Distribution. The
Company expects to repay those borrowings with a portion of the proceeds of
the offering made hereby. The $3.8 million current liability associated with
the S Corp Related Distribution will also be discharged with a portion of the
proceeds of the offering made hereby.
As of December 31, 1996, the Company had outstanding borrowings of $5.2
million under its three revolving lines of credit, under which the Company may
borrow up to an aggregate of $11.0 million for working capital. Borrowings
under these agreements bear interest at the lender's prime rate or a rate
equal to a spread over LIBOR (which rate at December 31, 1996 averaged 7.9%)
and are due upon demand. These borrowings are collateralized by the Company's
trade accounts receivable, equipment and warehouse construction in progress
assets.
In addition, at December 31, 1996, the Company had term loans collateralized
by warehouses, an office building and land in the aggregate principal amount
of $8.0 million. These term loans bear interest, payable monthly, at a
composite rate of 8.2% per annum and are due between 1997 and 2000. At
December 31, 1996, the Company also had outstanding $8.8 million in principal
amount of installment notes collateralized by equipment. These notes bear
interest at both fixed and floating rates (based upon the lender's prime rate
or LIBOR) (a composite rate of 7.0% at December 31, 1996). Interest is payable
monthly and the notes are due through 2005. It is currently anticipated that
future expansion of warehouse capacity will be financed with term loans
collateralized by the warehouse property.
The Company believes that existing cash and cash flow from operations,
borrowings to be available under its current bank agreements and additional
term loans collateralized by any new or existing warehouse properties will be
sufficient to fund operating needs as well as anticipated capital
expenditures, for at least the next 18 to 24 months. See "Use of Proceeds."
INFLATION
Inflation has not had a material impact on the Company's results of
operations or financial condition during the past five years. However,
inflation higher than experienced in the past five years could have an adverse
effect on the Company's future financial condition or results of operations.
19
<PAGE>
BUSINESS
GENERAL
The Company believes it is the leading national provider to the metals
industry of fully integrated distribution services, including transportation,
warehousing and third-party logistics services. Over the course of more than
fifteen years in the metals distribution business, the Company has developed
specialized systems, equipment and expertise which enable it to handle,
warehouse and transport high-value metals (primarily steel and aluminum)
requiring time-sensitive delivery in coordination with end-users' increasingly
sophisticated inventory management requirements. The Company's capabilities
allow it to offer integrated, turn-key solutions to the distribution demands
of steel and other metals producers. These distribution demands are
increasingly complex, as producers increase their outsourcing of metals
processing while their customers (metals-consuming manufacturers) embrace
just-in-time inventory systems and higher raw materials quality standards.
INDUSTRY OVERVIEW AND KEY INDUSTRY TRENDS
The effective delivery of metals from primary producers and processors to
metals-consuming manufacturers poses unique distribution challenges,
particularly in a just-in-time delivery environment. In order to maximize
production efficiencies, steel is produced in large quantities, typically in
100 plus ton "heats," or lot sizes. These production requirements must
necessarily be balanced against the consumption and scheduling requirements of
processors and end-users (which typically consume steel in much smaller
quantities, with delivery in many cases required to be made within minutes of
a prescribed delivery time at manufacturing facilities removed from production
sites). As a result, the metals supply chain is complex, requiring
coordination and communication among a varied group of metals producers,
processors, distributors, service centers, transporters and end-users, all in
an effort to maximize production efficiencies and reduce total costs.
Participants in the metals supply chain include: (i) primary producers,
which produce steel and aluminum in large quantities from basic ingredients,
and which include the major domestic integrated producers, the so-called
"mini-mills" and foreign producers of steel and aluminum; (ii) metals
processors, which add value to steel and aluminum by changing its physical
characteristics; (iii) distributors and service centers, which typically buy
and hold in inventory large "mill lot size" quantities of steel and aluminum
and resell smaller quantities to end-users; (iv) transporters, including
trucking companies, intermodal specialists, barge companies, railroads and
ocean shipping companies; (v) warehouse and distribution centers, which store
metals until they are utilized in processing or manufacturing operations and
which may include regional and local warehouses operated by independent
owners, as well as internal storage capacity at metals producers and
processors; (vi) brokers and international trading companies, which buy, sell,
distribute and transport products; and (vii) end-users of processed steel and
aluminum, which include manufacturers of automobiles, appliances, agricultural
and construction equipment, metal buildings components, food and beverage
metal packaging and other metals-consuming industries.
Demand for distribution services in the metals supply chain is driven by
several recent industry trends:
Just-in-Time Delivery Systems. During the 1980s, the major U.S. auto
manufacturers began to adopt "pull-through" production techniques to
minimize inventory and other carrying costs by reducing waste generated as
a result of lost machine time, reducing inefficient labor and/or facility
utilization and minimizing scrap and the production of excess inventories.
A critical element of these production techniques is the "just-in-time"
inventory delivery system, which provides for the cost-efficient production
and delivery by suppliers to manufacturers of necessary parts in smaller,
more frequent shipments just prior to their use in the manufacturing
process. In recent years, just-in-time inventory management has continued
to be embraced by auto manufacturers and has begun to achieve acceptance
among other metals consuming manufacturers, a trend the Company expects to
continue.
The adoption of just-in-time inventory delivery systems has forced
inventories of metals and other component parts "upstream" in the metals
supply chain to producers, processors and distributors. End-users
increasingly measure raw material stock-on-hand in hours rather than in
days or weeks of supply. In
20
<PAGE>
addition, manufacturers still demand control of their production inputs,
creating a need for precise coordination, sophisticated information
systems, mutual production forecasting and rapid communication among metals
producers, processors, distributors and end-users.
Total Quality Management. As a result of increased global competition,
manufacturers have dramatically increased the quality demands they place on
their suppliers. For example, producers of flat-rolled steel strive to
deliver 100% usable steel within close tolerances and without damage. These
higher quality standards have created a demand for controlled-environment,
high quality transportation and warehousing services of the type supplied
by the Company. Like just-in-time inventory methods, total quality
management is a growing priority among manufacturers of all kinds. For
example, within the last several years the U.S. auto manufacturers have
required their primary steel suppliers to achieve QS 9000 designation,
which is an array of special quality standards promulgated by the
Automotive Industry Action Group, an industry group comprised of the major
U.S. auto manufacturers and suppliers.
Outsourcing. The metals supply chain is characterized by increased
outsourcing of specialized processing, warehousing, distribution and
transportation functions. Striving to improve quality and reduce total
costs, primary steel producers have found it more cost-effective to focus
on the production and sale of standard size and tolerance steel to large
volume purchasers. On the other hand, metals-consuming manufacturers seek
to purchase further processed (e.g., slit, cut to length, blanked, coated,
etc.) steel, free from defects, within close tolerances, on shorter lead
times and with more reliable and more frequent delivery than the primary
steel producers can effectively provide. Furthermore, many metals-consuming
manufacturers that formerly processed steel "in-house" for use in their
manufacturing operations are increasingly electing to focus on their core
manufacturing/assembly businesses and are outsourcing their processing
requirements. As a result, there is an increasing trend by both producers
and end-users toward outsourcing processing, distribution, warehousing,
logistics and transport functions to third-party providers.
Segmentation of Metals Supply Chain. Due to increased outsourcing, the
number of links in the metals supply chain continues to increase. As a
result of this increase, the velocity of "through-put" in the chain is
increased between and among participants, promoting demand and creating
additional opportunities for fully integrated distribution service
providers such as the Company.
Supplier Concentration. To achieve scale economies, to increase quality
and to better manage and coordinate among the increasing number of
specialized participants in the metals supply chain, steel and aluminum
producers and processors are increasingly committed to reducing the number
of distribution service suppliers with which they do business and to "sole-
sourcing" transportation, distribution and warehousing services. In such an
environment, metals producers and processors place a premium on full-
service providers with specialized experience and expertise in the metals
industry.
Growth in Intermodal Transportation. The U.S. intermodal industry has
experienced significant growth since 1990. Following deregulation of the
railroad industry in the 1980s and bolstered by consolidation of the
industry in the 1990s, improved rail service and substantial advancements
in equipment and technology have reduced the cost and increased the
reliability of intermodal transportation. At the same time, driver
shortages and higher operating costs in both the long-haul for hire and
private trucking markets have made intermodal transportation more cost-
effective, particularly for shipments traveling long distances.
Increased Globalization of Metals Supply. The market for raw and
processed steel and aluminum is increasingly global in scope. Historically,
domestic consumers, producers and processors utilized "spot" purchases from
foreign producers on an opportunistic basis to meet temporary periods of
excess domestic demand. Today, however, there is an increasing trend toward
planned import-export purchase decisions to balance global supply and
demand for metals. As metals move in international markets, demand for
sophisticated intermodal transportation and distribution systems has
increased.
In 1995, total shipments to or within the U.S. by domestic and foreign steel
producers were approximately 115 million tons. In 1995 (the most recent year
for which industry data are available) domestic aluminum producers shipped
approximately 10.5 million tons. While difficult to estimate, the Company
believes that the
21
<PAGE>
actual tonnage of steel and aluminum carried by all transporters was much
higher than the amount of such metals produced, due to the segmentation of the
metals industry described above and the multiple shipment of the same material
to and through various specialty metals finishing operations, distributors and
service centers. During 1996, the Company transported approximately 3.6
million tons of steel and aluminum, and approximately 1.8 million tons of
steel and aluminum were shipped from the Company's warehouses.
OPERATING STRATEGY
Set forth below are the principal elements of the Company's operating
strategy:
. Focus on the Metals Industry. Metals distribution is characterized by
demanding quality and product management requirements within an environment of
complex distribution demands. These distribution demands are driven by the
need to balance steel producers' bulk production requirements against the
just-in-time inventory systems increasingly employed by processors and end-
users. The Company has provided transportation and distribution services to
the metals industry for over 15 years, and has gained credibility with and
expertise serving producers, processors, transporters and end-users. The
Company's sophisticated and computerized inventory management systems,
together with electronic data interchange links to customers, enable producers
and end-users to monitor inventories in the Company's warehouses, plan and
schedule production and transmit shipment requirements.
. Development of Innovative Distribution Solutions. The Company has
developed a variety of customized and innovative distribution solutions
designed to accommodate the demanding input quality and timing requirements of
its end-users, while maximizing safety and cost effectiveness to the Company,
its employees and customers. For example, the Company's Sliding Load
Equalization Device ("SLED") has been designed to distribute the weight of a
steel coil evenly throughout a shipping container in order to maximize safety
and transport efficiency during intermodal shipment. In addition, a SLED
allows the Company to utilize standard non-Company owned shipping containers,
minimizing the risk of business lost due to equipment location imbalance. The
Company's Quality Delivery System (consisting of specialized trailers designed
to safely and securely deliver a wide range of metals products, including
steel coils), combined with its heat and humidity-controlled warehouse and
distribution centers equipped with pull-through truck bays utilizing airlocks,
enables the Company to efficiently load, transport, unload and store metals
with minimal risk of damage or condensation in almost any weather condition.
. Provide a Full Range of Distribution Services. The Company seeks to be a
full range provider of distribution, transportation, warehousing and third-
party logistics services to the metals industry. The Company's warehousing and
distribution services include sophisticated inventory tracking and management
services, just-in-time delivery capability, electronic data interchange
(including advance shipping notices), packaging services, and heat and
humidity-controlled warehouses. Through its trucking and intermodal
operations, the Company offers its customers short-haul, cross-country and
dedicated transportation service. The Company regularly provides third-party
logistics services as an integral part of its distribution solutions or on a
stand-alone basis. The Company has employees on-site at certain key customer
locations, providing dedicated third-party dispatch and other logistics
management services for such customers.
. Provide Integrated, "Seamless" Distribution Services. By combining or
"bundling" the Company's transportation, warehousing and distribution
services, the Company is able to provide total solutions to its customers'
distribution needs. Integration not only allows the Company to provide
distribution services individually tailored to meet its customers' needs, but
also allows the Company to offer "one-stop shopping" to its customers. This
includes common marketing, customer service and billing for all services
provided.
. Focus on Regional and Dedicated Trucking Services. The Company believes
that anticipated growth of just-in-time delivery and intermodal programs,
coupled with the increased use of warehousing at points nearer manufacturing
facilities, will create additional opportunity and demand for the Company's
regional and dedicated trucking services. The Company also believes that
regional and dedicated trucking services are more attractive to drivers and,
therefore, enable the Company to recruit and retain more highly qualified and
experienced drivers.
22
<PAGE>
GROWTH STRATEGY
The Company believes that the ongoing proliferation of just-in-time delivery
systems, the increasing emphasis on input quality, the continued outsourcing of
processing, distribution and logistics capabilities and the resulting changes
in the metals supply and distribution chain pose significant opportunities for
future growth. Specific elements of the Company's growth strategy include the
following:
. Expansion of Warehousing and Distribution Centers. Since the beginning of
1991, the Company has added 10 warehouse and distribution locations. In
addition to generating warehousing revenues, these facilities promote growth in
the Company's trucking, intermodal and logistics operations. The Company is
scheduled to open two new warehouse and distribution centers with an aggregate
capacity of approximately 212,000 square feet by the summer of 1997. In
addition, the Company intends to further expand its warehouse and distribution
capacity by 25% to 40% over the next five years by identifying three to five
new geographic locations for additional warehouse and distribution centers
and/or by expanding the capacity of its existing centers. The Company seeks to
build, purchase or lease additional warehouse and distribution facilities at
points of concentrated metals consumption or production.
. Marketing of Just-in-Time and Total Quality Management Expertise to New
Customer Segments. The Company has developed expertise in just-in-time delivery
and total quality management programs primarily through serving the major U.S.
automobile manufacturers, which continue to embrace just-in-time delivery and
total quality management principles. The Company is also marketing this
expertise to foreign auto manufacturers with production facilities in the
United States and to the other major metals-consuming manufacturers it serves.
For example, companies in the major appliance, construction and agricultural
equipment and building materials industries have recently begun adopting these
principles in their own production facilities, enabling the Company to market
its specialized expertise to a broader customer base.
. Focus on Import-Export Distribution Business. As the sourcing of metals
continues to become more global in scope, the Company is expanding its
marketing efforts to provide its specialized services to international
producers, processors and trading companies requiring reliable distribution
services throughout the United States and to domestic producers seeking access
to foreign markets. The Company intends to utilize joint ventures and other
strategic alliances with international partners to advance these import-export
efforts. For example, in November 1996, the Company formed a joint venture with
Fednav Limited, the largest operator of ocean vessels in the Great Lakes/St.
Lawrence Seaway system. Under the terms of the contract awarded to the joint
venture by the Indiana Port Commission, the Company will construct and operate
a 110,000 square feet metals warehouse and distribution center and Fednav
Limited will serve as general cargo terminal operator and stevedore at
Indiana's International Port/Burns Harbor, located in Portage, Indiana. It is
currently expected that the Burns Harbor warehouse facility will begin
operations in the summer of 1997, and the terminal operations and stevedoring
will commence in 1999.
. Expand "Core-Carrier" Regional Trucking Business. The Company's trucking
operations serve as one of a select group of pre-qualified "core-carriers" to
numerous steel and aluminum producers and processors, and the Company seeks to
expand that business to new customers in the metals industry. The Company is
leveraging its unique equipment, technology and handling capabilities to gain
market share in the metals industry from non-specialized carriers who are
unable to provide the service commensurate with that provided by the Company.
. Increase Intermodal Business. Improved rail service and substantial
advancements in equipment and technology have reduced the cost and increased
the reliability of intermodal transportation. At the same time, driver
shortages and higher operating costs in both the long-haul for hire and private
trucking markets have made intermodal transportation more attractive,
particularly for shipments traveling long distances. The Company will expand
the scope of its intermodal operations as it adds additional rail and/or water-
served warehouse and distribution centers to its current network of 16
warehouse and distribution centers.
OPERATIONS
The Company provides integrated distribution services to the metals industry.
Key components of its distribution services include the Company's warehousing,
intermodal and trucking operations. These services
23
<PAGE>
may be marketed and sold separately, or marketed, sold and packaged in
combination, to provide a full range of door-to-door transportation and
distribution services. For example, during 1996, approximately 75% of the
Company's top 50 customers (measured in terms of total dollar revenues)
purchased two or more of the distribution services offered by the Company.
Warehousing and Distribution Operations
As of December 31, 1996, the Company had a network of 16 warehouse and
distribution centers in California, Illinois, Indiana, Iowa, Ohio, North
Carolina, Texas and Washington that specialize in the storage, consolidation
and distribution of metals, primarily flat rolled steel and aluminum, tin
plate, steel pipe and bars. The Company's warehouse and distribution facilities
range in size from approximately 18,000 square feet to 270,000 square feet and
are generally located at or near points of concentration for the production
and/or consumption of metals. The Company's warehousing and distribution
services are utilized by metals producers and processors, as well as several
major railroads which may package door-to-door transportation and warehousing
programs. The Company may sell its warehousing services independently or as a
part of a complete transportation package involving door-to-door transportation
service. Customers utilizing the Company's complete transportation package are
not billed separately for the transportation and warehousing, but receive a
single invoice. Metals typically remain at the Company's warehouse and
distribution facilities as little as several hours or as long as several
months.
In response to end-users' increasingly stringent demands with respect to the
quality of the metals they receive, a majority of the Company's warehouse
capacity is temperature and humidity controlled and provides a pressurized,
dust-free environment for the storage of metals, utilizing air-locked pull-
through truck bays where the driver will prepare a shipment for loading or
unloading. These measures enable the metals to be stored in a warehouse that is
free of condensation and other contaminants. Protecting the metals from
contaminants is important because they can cause such metals to be unfit for
the manufacturing process for which they were originally intended, thereby
resulting in economic loss to the producer/processor or end-user and, in turn,
a potential reduction in business for the warehouser/distributor. To ensure
quality material handling, the Company's facilities are equipped with a system
of overhead cranes and/or forklifts for loading and unloading the metals from
the trucks and railcars. The majority of the Company's warehouse capacity also
features automated coil grabs with electronic eyes which promote efficient
loading and protect the metals against damage as they are being loaded.
The Company's warehouse and distribution facilities utilize sophisticated
computerized inventory tracking systems, which enable the Company to meet the
demands of an end-user requiring access to inventory information as metals move
through the metals supply chain. These systems enable the Company to receive
electronic data interchange ("EDI") advance shipping notices from the steel
mills and processors, which notices provide the warehousing staff with the
specifications of the products to be delivered. At its major warehouse and
distribution facilities, the Company's staff utilizes bar code scanners to read
the milltags of the incoming products and compares that information to that
which is on the advance shipping notice in order to ensure inventory matching
and to reduce the possibility of human error. At the request of the
producer/processor, the Company can send, via EDI, up-to-the-minute inventory
information regarding the producer/processor's metals stored at the Company's
warehouse and distribution facilities. In addition, the Company's software
systems have the capability to send advance shipping notices to both the
producer/processor and the end-user upon the initiation of a shipment from the
warehouse to the end-user. In addition, the EDI links between the Company and
the end-user provide the end-user instant access to the Company's inventory
records, and enable the end-user to more easily plan its production schedule
and delivery requirements.
The computerized and automated nature of the Company's warehousing and
distribution operations promotes labor efficiency and permits the Company to
handle large volumes of inventory while staffing its warehouse and distribution
centers with a relatively small number of employees.
Intermodal Operations
The Company's intermodal operations utilize its third-party logistics
expertise to coordinate, purchase, combine and package rail, truck, barge and
ship transportation of metals to provide various levels of materials
24
<PAGE>
movement management service to distant and intermediate markets. The Company's
metals-handling expertise and specialized equipment enable it to orchestrate
the loading and unloading of railcars, trucks, barges and ships in a multi-mode
transit operation without compromising the demanding product quality and
delivery sequencing requirements of its end-users. Historically, the Company's
intermodal operations have focused on transporting metals from Midwestern or
Eastern producers or processors to West Coast consumers of metals. The Company
also has provided such intermodal services to the import-export market and
expects that services to that market, particularly to and through international
trading companies or other similar alliances of multinational companies, may
become a larger part of the Company's intermodal business in the future.
The Company has the ability to customize intermediate to long-haul
transportation service to meet the particular needs of its customers, based on
shipment size, transit time and distribution service requirements, in a cost-
effective manner. To achieve this objective, the Company frequently mixes
various modes of transportation and, when needed, offers just-in-time
distribution capability in collaboration with its warehousing and trucking
operations. The Company believes that its intermodal operations offer
competitive advantages over typical intermediate to long-haul transportation
service. In particular, the Company believes that the regional nature of its
trucking operations allows it to manage its fleet so as to have trucks in
position to respond quickly to requests for pick-up. This permits the Company
to be more flexible and responsive than a typical cross-country trucking
service, which may be subject to delay while awaiting return of its trucks from
a cross-country haul. By utilizing its specialized stackable flat rack
containers on the rail portion of an intermodal move, the Company is able to
avoid the inefficiencies and repositioning costs that might otherwise be
associated with intermediate and long-haul transportation service. The Company
also believes that intermodal transportation, particularly that which includes
rail and short-haul trucking, is more reliable than long-haul trucking and
facilitates just-in-time distribution service.
A typical intermodal assignment for the Company would involve truck
transportation (frequently utilizing the Company's trucks) from a metals
producer to the Company's Chicago load preparation facility. At this facility,
the products are unloaded from trucks and prepared and secured for loading on
intermodal railcars at adjacent or nearby rail yards. The products then travel
by rail, either in enclosed containers or on specialized stackable flat rack
containers, from Chicago to the Southwest, the West Coast or the Pacific
Northwest. Upon arrival at the final rail destination, the products are off-
loaded onto trucks and either delivered straight to their ultimate destination
or taken to a nearby Company facility for warehousing prior to a just-in-time
delivery by truck. Although this type of "truck-rail-truck" transportation
represents a majority of the intermodal service conducted by the Company, it is
not the only intermodal service offered by the Company. The Company also
frequently participates in the shipment of metal by rail from Canadian
producers to the Company's Indianapolis warehouse facility, where it is stored
prior to just-in-time delivery by truck to nearby end-users. In addition, the
Company has shipped metals from an Indiana producer by truck to the Ohio River,
where they were loaded onto barges and transported to Brownsville, Texas, where
the Company operates a warehouse and distribution center. Upon arrival at
Brownsville, these metals were loaded onto trucks for just-in-time delivery
into Mexico. The Company has the ability to provide a single invoice for these
"multi-modal" cross-country transportation, warehousing and delivery services.
The Company's intermodal operations provide for computer-assisted control of
all operations that concern the transportation and warehousing of the Company's
customers' products across the country. This includes general operations,
rates, shipment analysis (including online inquiry with the railroads on the
status of the Company's shipments), EDI invoicing and remote site operations.
Trucking Operations
The Company provides safe, reliable, efficient and high quality trucking
services to the metals industry, primarily in that portion of the United States
that is located east of the Mississippi River on the one hand and on the West
Coast (from San Diego to Vancouver, British Columbia) on the other hand.
Although the Company is authorized to operate as a common and contract carrier
in forty-eight states and in certain parts of Canada, the Company increasingly
concentrates on short-haul, regional and dedicated trucking services,
frequently in
25
<PAGE>
collaboration with its warehousing and intermodal operations. Although the
Company has the capability to provide cross-country trucking service, it
typically does not focus on such service, preferring instead to utilize its
intermodal operations to provide cross-country intermodal (truck, rail, truck)
transportation service for its customers.
The Company's trucking operations serve a broad customer base, including both
the large primary steel and aluminum producers and smaller producers,
processors and service centers. The Company frequently serves as a pre-
qualified "core carrier" to such producers and processors. In addition, the
Company also provides trucking services in conjunction with the Company's
warehousing and intermodal operations. The Company's focus on quality of
service is exemplified by its Quality Delivery System that incorporates
specialized trailers for safely and securely delivering a wide range of metals
products, including steel coils. The specialized trailers utilize load
distribution techniques that permit the Company to safely transport larger and
heavier products.
The Company's trucking operations have a complete real time dispatch system
that tracks customer orders and matches them to tractor status for quick and
efficient pickup and delivery. All orders are rated and billed using this
system and all drivers and independent contractors are paid using driver
payroll and settlement systems. Freight bills frequently are sent
electronically using the EDI system directly to the Company's customers.
In addition, the Company regularly provides third-party logistics services as
an integral part of its distribution solutions or on a stand-alone basis. For
example, the Company has employees on-site at certain key customer locations,
providing dedicated third-party dispatch and other logistics management
services for such customers.
MARKETING
The Company's integrated marketing and sales efforts are nationwide in scope.
In addition to its corporate headquarters in Homewood, Illinois, the Company
has regional sales offices in Los Angeles, California, Pittsburgh, Pennsylvania
and Vancouver, Washington. The marketing and sales efforts are headed by three
vice presidents--general managers, two vice presidents of business development
and five other full-time salespeople. Approximately 35 employees have some
direct marketing and sales responsibilities, including the maintaining and
servicing of customer accounts. The Company's full-time sales force, located
over a broad geographical region, have regular contact with metals producers,
metals processors and end-users, and work collaboratively with customers to
develop solutions for the particular needs found in each link in the metals
supply chain. By covering different geographical areas, the Company's sales
force is able to be responsive to all of the Company's customers, regardless of
location. The Company believes that a marketing-oriented and customer-focused
mind-set exists at all levels of the Company's operations.
The Company's management and sales and marketing staff have access to a
comprehensive and continuously updated marketing and sales database. This
database enables the Company to track the status of ongoing marketing
initiatives and also provides historical sales information broken down by a
variety of categories, including customers, market segment and geographic area.
The Company markets its services under the names Roll & Hold Warehousing &
Distribution Corp., Western Intermodal Services, Ltd. and Area Transportation
Company.
CUSTOMERS
The Company's major customers include steel and aluminum producers, such as
AK Steel Corporation, Alcan Aluminum Corporation, Aluminum Company of America,
Allegheny Ludlum Corporation, Bethlehem Steel Corporation, Inland Steel
Company, J&L Specialty Products Corp., LTV Steel Company, Inc., National Steel
Corporation, Ravenswood Aluminum Corp., Republic Engineered Steels, Inc.,
Reynolds Metals Company, and U.S. Steel (a division of USX Corp.); steel
processors, such as Liverpool Coil Processing, Inc. and
26
<PAGE>
Worthington Industries, Inc.; and railroads, such as the Burlington Northern
Santa Fe Corporation, Conrail, Inc. and Norfolk Southern Railway Company.
Sales to LTV Steel Company, Inc. accounted for 10.9% of the Company's net
operating revenues in 1996, and sales to Bethlehem Steel Corporation accounted
for 10.4% of the Company's net operating revenues in 1996. No other customer
or group of customers under common control accounted for more than 10% of the
Company's net operating revenues in 1996. The Company's ten, five and two
largest customers accounted for approximately 58.2%, 43.3% and 21.3%,
respectively, of the Company's net operating revenues in 1996.
Because metals-consuming manufacturers typically do not pay directly for the
Company's services (such services are usually paid for by the producers or
processors), such manufacturers are technically not customers of the Company.
However, because such manufacturers also may influence a customer's decisions
as to which company will provide distribution service and because of the
importance of coordination and communication among participants in the metals
supply chain, the Company maintains close customer-like relationships with a
number of such manufacturers, particularly in the automotive and appliance
industries. For example, the Company has frequent and direct contact with many
manufacturers in order to better understand their production schedule; this
knowledge is critical to the Company's ability to meet the manufacturers'
expectations of quality and narrow time constraints for inventory delivery.
Among the major recipients of the metals transported, warehoused and
distributed by the Company are Chrysler Corporation, Ford Motor Company,
General Motors Corporation, Honda Motor Co., Ltd., Nissan Motor Corp., Ltd.,
Toyota Auto Body Co., Ltd., Amana Refrigeration, Inc., Whirlpool Corporation,
John Deere Company, J.I. Case, Varco Pruden Buildings, American National Can
Company and Crown Cork & Seal, Inc.
MANAGEMENT INFORMATION SYSTEMS
The Company employs information technologies through a wide area network
that includes IBM AS400 midrange computers, Microsoft Windows NT and Novell
local area networks utilizing personal computers. The Company's 25 locations
and certain customer sites around the country communicate by high speed data
lines forming a wide area network to share computer resources and information
in a distributed environment. The wide area network provides a configuration
which permits the latest software and hardware technologies to be deployed in
the most efficient manner, providing productivity and low cost service to the
Company's customers.
The Company's information system allows it to tie together additional
technologies, such as bar coding and EDI, which are required to service
customers in the metals market. As a distribution company, the Company must be
able to accommodate the just-in-time manufacturing process in the management
of the supply chain. To accomplish this, the Company generally utilizes bar
code scanners to read customer inventory data into the Company's system, both
at the time of receipt at a Company warehouse and at the time of shipment.
This data provides the Company with the necessary inventory information to
track the products throughout the Company's distribution system and to
transmit the appropriate information electronically in the format required by
the Company's customers. The EDI service that the Company provides to its
customers utilizes Premenos Mapping and Translation software, which is
customized using in-house proprietary programs, which supports Compord, TDCC
and ANSI X.12 transaction sets. These technologies provide transparency to
each of the Company's operating software systems so that any format of EDI can
be used, including advance shipping notices, shipment details and invoices.
REVENUE PRODUCING EQUIPMENT
As of December 31, 1996, the Company's truck fleet consisted of 286
tractors, of which 160 tractor-trailer combinations are owned and operated by
independent contractors and 126 tractors are operated by the Company.
Approximately 95% of the Company-operated tractors are owned, the remainder
are leased. All of the Company's tractors are premium tractors manufactured to
the Company's specifications by the Kenworth division of Paccar Inc. The
Company believes that the high quality of its tractors helps it to attract and
retain drivers, minimize maintenance and repair costs and maximize trade-in
value. Generally, the Company's practice is to trade in its tractors after
three to four years. During 1997, the Company currently plans to replace 25
tractors
27
<PAGE>
and to add an additional 25 tractors to the Company-owned fleet, and to
increase the number of independent contractors by approximately 35 (resulting
in a net driver increase of 60, or 21%). The Company's purchase agreements
generally provide for repurchase of the tractors by a Kenworth dealer at
predetermined prices. Routine maintenance for the tractors and trailers is
provided at the Company's Hammond, Indiana and Richfield, Ohio maintenance
facilities. Most major repairs and component failures are covered through
comprehensive new tractor warranties.
The Company's owned trailer fleet consists of approximately 122 removable-
sided flatbeds and 60 Company-owned specialized trailers. The specialized
trailers, which are designed and built for hauling coiled sheet steel, or
other metals, in an enclosed and secure environment, supplement the more
conventional flatbed trailers and allow the Company to develop delivery
systems that are tailored to meet individual customer's needs.
The Company's intermodal operations utilize approximately 195 stackable flat
rack containers, 32 container chassis and 100 sliding load equalization
devices (SLEDs).
28
<PAGE>
PROPERTIES
As of December 31, 1996, the principal properties used in the Company's
operations consisted of 25 separate facilities comprising in the aggregate
approximately 1.4 million square feet. The principal properties, which are
leased by the Company unless otherwise indicated, are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SIZE IN
LOCATION PRINCIPAL USE SQUARE FEET
-------- ------------- -----------
<S> <C> <C>
Corporate Offices
Homewood, IL (1) Corporate headquarters;
(Chicago) general offices of intermodal operations 18,000
Munster, IN General office of trucking operations 7,000
Los Angeles, CA Sales/administrative 500
Pittsburgh, PA Sales/administrative 500
Auburn, WA Sales/administrative 500
Vancouver, WA Sales/administrative 500
(Portland, OR)
Warehouse, Distribution, Terminal and Maintenance Facilities
Brownsville, TX
(2) Warehouse 50,000
Charlotte, NC Warehouse 65,000
Chicago, IL (1) Warehouse; load preparation center 50,000
Commerce, CA Warehouse; load preparation center;
(Los Angeles) terminal facility for trucking operations 43,000
Davenport, IA Warehouse 48,000
Davenport, IA Warehouse 122,000
Detroit, MI Terminal facility for trucking operations 1,000
Gary, IN Warehouse; general offices of warehouse
operations; trucking
operations terminal facility 270,000
Hammond, IN (3) Warehouse 102,000
Hammond, IN Warehouse 150,000
Hammond, IN Maintenance facility for trucking
operations 10,000
Houston, TX (2) Distribution facility (open area)
Indianapolis, IN Warehouse; terminal facility
(1) for trucking operations 140,000
Kent, WA Warehouse; load preparation center 21,000
(Seattle)
Kent, WA Warehouse; load preparation center 18,000
Laredo, TX (2) Warehouse; load preparation center 150,000
Macedonia, OH (1) Warehouse; terminal facility for trucking
(Cleveland) operations 143,000
Portage, IN (4)
(Burns Harbor) Warehouse 110,000
Richfield, OH Terminal facility; maintenance facility for
(Cleveland) trucking operations 11,000
Richmond, CA Warehouse; load preparation center;
(San Francisco) terminal facility for trucking operations 47,000
Twinsburg, OH Warehouse 41,000
(Cleveland)
</TABLE>
- ---------------------
(1) Owned by Company.
(2) Neither owned nor leased by the Company, but Company has access through
operating or marketing arrangements.
(3) Expected to be opened in the summer of 1997.
(4) Expected to be opened in the summer of 1997. Warehouse facility will be
owned by the Company and constructed on leased land.
29
<PAGE>
The Company's leased facilities operate under leases expiring at various
times through 2001. The Company believes that as current leases expire it will
be able to renew them or find comparable facilities without any material
adverse effect on service to its customers or its operating results.
COMPETITION
The distribution services industry is extremely competitive and fragmented.
The Company competes against other warehouse providers, integrated logistics
companies, third-party brokers and companies offering warehousing, logistics
and transportation services. The Company's operations compete with numerous
trucking companies and other alternative forms of surface transportation,
including intermodal transportation, and railroads, in each of its short-haul
and regional markets. The trucking industry is highly competitive and includes
numerous regional, inter-regional and national truckload carriers, none of
which dominates the market. The Company's intermodal operations compete with
over-the-road truck, various intermodal marketing companies, transloaders and
other third-party logistics suppliers. The Company's warehousing operations
compete with various regional and local warehouses and, to some extent, with
internal storage capacity at metals producers and processors who may also
offer warehousing at certain locations. Service and price are the principal
means of competition in the distribution industry. The Company's principal
competitive strength is its ability to provide a fully integrated array of
reliable services at a competitive price. Many of the Company's customers are
high-volume shippers that require a flexible and dependable distribution
service tailored to their specific needs. Some companies with which the
Company competes have greater financial resources, operate more equipment and
transport more material. The Company knows of no single competitor who
competes with it across all of its markets or who offers the full range and
scope of services available through the Company.
EMPLOYEES AND DRIVERS
As of December 31, 1996, the Company employed 390 individuals, of whom 126
were drivers, 159 were warehouse, maintenance, operations and safety
personnel, 38 were customer service and sales personnel, 51 were accounting
and clerical personnel and 16 were executive personnel. In addition to the 126
Company-employed drivers, at December 31, 1996, the Company also had contracts
with 160 independent contractors. The Company is not a party to any collective
bargaining agreement; however, the United Steel Workers of America was
certified on November 30, 1987 as the collective bargaining representative of
approximately 20 warehouse employees at one of the Company's facilities. In
the opinion of management, the Company's relationship with its employees and
independent contractor drivers is good.
Drivers are selected in accordance with the Company's strict guidelines
relating to safety records, driving experience (minimum two years experience
hauling metals) and personal evaluations. Drivers attend orientation training
programs and ongoing driver efficiency and safety programs.
The Company is committed to driver safety. The Company has an active safety
program and has established a minimum driver qualification policy that is more
stringent than required by applicable government regulation. Drivers who do
not maintain an acceptable driving record are disqualified from driving for
the Company. The Company instituted mandatory drug testing of its drivers long
before such testing was mandated by DOT. Similarly, the Company utilizes a
safety bonus program to reward drivers for maintaining safe driving records.
Although the Company believes that it has high standards for its drivers,
the Company believes that it has been able to avoid severe driver shortages
that generally effect the trucking industry because of its emphasis on safety,
use of high-quality, well-maintained late model trucks and its concentration
on short-haul, regional and dedicated service that reduces the length of hauls
and allows drivers to be home more frequently.
REGULATION
The Company is subject to regulation by various federal, state and foreign
agencies. These regulatory agencies generally have broad powers governing
activities such as authority to engage in motor carrier operations,
operational safety, accounting systems and financial reporting. In particular,
the Company's interstate
30
<PAGE>
trucking operations are subject to safety requirements prescribed by DOT. Such
matters as weight and dimension of equipment are also subject to federal and
state regulations. The Company's Canadian operations are subject to similar
requirements imposed by the laws and regulations of the Dominion of Canada and
the various provincial laws and regulations. Certain of the intrastate trucking
operations of the Company are subject to the licensing requirements and
financial reporting requirements of state public utility commissions and
similar authorities. The Company also is subject to various federal, state and
local environmental laws and regulations.
Management believes that the Company is in compliance with applicable
regulatory requirements relating to its operations. Failure of the Company to
comply with the applicable regulations could result in substantial fines or
revocation of the Company's operating permits.
LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the
normal course of its business, most of which involve claims for personal injury
and property damage incurred in connection with the transportation of material.
Management believes that none of these actions, individually or in the
aggregate, will have an adverse effect on the financial condition or results of
operations of the Company.
31
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of January 31, 1997
were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard P. Dickson...... 49 Chairman of the Board, President and Chief Executive
Officer
Michael A. Kelly........ 43 Director, Chief Financial Officer, Secretary and Treasurer
George P. Trainer....... 59 Director, Executive Vice President
Thomas J. Fitzgerald.... 55 Director
Thomas E. Eatinger...... 49 Vice President-General Manager, Area Transportation
Company
Gordon D. Gustafson..... 47 Vice President-General Manager, Western Intermodal
Services
W. Kent Robbins......... 54 Vice President-General Manager, Roll & Hold
Warehousing & Distribution Corp.
Alfred R. Hudson........ 61 Vice President
Kurt W. Sandstrom....... 48 Vice President
Stephen H. Vogt......... 52 Corporate Controller
</TABLE>
RICHARD P. DICKSON is the Chairman of the Board, President and Chief
Executive Officer of the Company and has served in such capacities since 1985.
From 1978 to 1985, Mr. Dickson served as Vice President. Mr. Dickson has been
active in the transportation and distribution business for more than 25 years.
MICHAEL A. KELLY is the Chief Financial Officer, Secretary and Treasurer and
a director of the Company. Mr. Kelly has served as a director since 1986 and as
Chief Financial Officer since 1984. From 1982 to 1984, he served as Controller
of the Company. Mr. Kelly has more than 24 years of experience in the finance
and electronic data processing fields, having served with Beatrice Foods
Corporation, Leaseway Transportation Corporation and Maryland Cup Corporation
prior to joining the Company.
GEORGE P. TRAINER is an Executive Vice President and a director of the
Company. Mr. Trainer has been a director since 1986 and has served as Executive
Vice President since 1989. From 1984 to 1989, he served as Executive Vice
President of Western Intermodal Services, Ltd., a subsidiary of the Company.
Prior to joining the Company, Mr. Trainer worked for Minnesota, Mining &
Manufacturing Company, U.S. Steel Corporation, Booz, Allen & Hamilton, Inc. and
Republic Steel Corp.
THOMAS J. FITZGERALD is a director of the Company. Mr. Fitzgerald has been a
director since June 1996. Mr. Fitzgerald has a legal and transportation
consulting business, in which he has been engaged since 1990. From 1967 to
1990, Mr. Fitzgerald was employed by Santa Fe Railway and its affiliates where
he served in a number of legal and managerial capacities, including Senior Vice
President--Executive Department and Senior Vice President--Traffic. Mr.
Fitzgerald also is a director of Mark VII, Inc., a transportation services
provider.
THOMAS E. EATINGER is Vice President-General Manager of Area Transportation
Company, a subsidiary of the Company, and has served in such capacity since
1993. From 1991 to 1993, Mr. Eatinger served as General Manager of Area
Transportation Company. Mr. Eatinger has more than 25 years of experience in
the trucking and transportation industries.
32
<PAGE>
GORDON D. GUSTAFSON is Vice President-General Manager of Western Intermodal
Services, Ltd., a subsidiary of the Company, and has served in such capacity
since 1989. He served as General Manager-Marketing and Midwestern Sales of
Western Intermodal Services, Ltd. from 1987 to 1989 and was its Regional
Manager of Midwestern Sales from 1986 to 1987. Mr. Gustafson has an extensive
background in sales and metals marketing in the railroad industry, including
four years with Duluth, Messabe & Iron Range Railway and eight years with the
Elgin, Joliet & Eastern Railway.
W. KENT ROBBINS is Vice President-General Manager of Roll & Hold Warehousing
& Distribution Corp., a subsidiary of the Company, and has served in such
capacity since 1988. He served as General Manager of Roll & Hold Warehousing &
Distribution Corp. in 1987 and as Director of Operations-Warehousing from 1984
to 1987. From 1981 to 1984, he served as a terminal manager of Area
Transportation Company. Mr. Robbins has more than 20 years of experience in
the transportation and material handling business.
ALFRED R. HUDSON is a Vice President-Business Development and Sales of the
Company and has served in such capacity since 1987. During his 40-year career,
Mr. Hudson has held executive marketing and management positions in the
stevedoring, marine terminal, port authority and international trade areas.
KURT W. SANDSTROM is a Vice President of the Company and has served in such
capacity since 1989. From 1987 to 1989, he served as director of intermodal
marketing for Western Intermodal Services, Ltd. Mr. Sandstrom has more than 20
years of experience in the transportation industry.
STEPHEN H. VOGT is Corporate Controller of the Company and has served in
such capacity since 1991. During his 30-year career, Mr. Vogt has held various
financial management positions, including chief financial officer at National
Castings Incorporated immediately prior to joining the Company.
Each member of the Board of Directors is elected annually. All officers
serve at the pleasure of the Board of Directors. There are no family
relationships among any of the directors or officers of the Company. The
Company has undertaken to have at least one independent, unaffiliated person
added to the Board of Directors within 60 days after the closing of the
offering. Prior to the consummation of the offering, the Board of Directors
will establish two standing committees: the Audit Committee and the
Compensation Committee. The Audit Committee will recommend the appointment of
auditors and oversee the accounting and audit functions of the Company, and
will be composed of outside directors. The Compensation Committee will
determine executive officers' salaries, bonuses and other compensation and
administer the 1997 Stock Option Plan.
DIRECTOR COMPENSATION
Following the consummation of the offering, directors who are not currently
receiving compensation as officers or employees of the Company will be
entitled to (i) a monthly retainer fee of $1,000, with an additional $250 per
month for each chairman of a committee, (ii) meeting fees of $1,500 for each
meeting of the Board of Directors attended and $1,000 for each committee
meeting attended, and (iii) reimbursement of expenses for attendance at such
meetings.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the fiscal year ended December 31, 1996 paid by the Company for services to
the Company of the Company's Chief Executive Officer and the Company's four
other most highly compensated executive officers (collectively, the "Named
Executive Officers").
33
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
---------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (2)
- --------------------------- -------- ------- ----------------
<S> <C> <C> <C>
Richard P. Dickson, Chairman of the Board,
President and Chief Executive Officer.... $200,625 $ -0- (1) $4,750
George P. Trainer, Executive Vice
President................................ 150,895 -0- (1) 3,761
Michael A. Kelly, Chief Financial Officer,
Secretary and Treasurer.................. 131,261 -0- (1) 3,264
Kurt W. Sandstrom, Vice President......... 130,000 46,000 4,400
Alfred R. Hudson, Vice President.......... 125,000 30,000 3,875
</TABLE>
- ---------------------
(1) During the fiscal year ended December 31, 1996, the Company paid S Corp
Stockholder Compensation to Messrs. Dickson, Trainer and Kelly of $232,322,
$30,976 and $46,464, respectively. Amounts not utilized by the stockholders
to pay or provide for the stockholders' applicable current and deferred
federal and state income taxes attributable to such S Corp Stockholder
Compensation were reinvested in the Company as capital as follows: $132,423
by Mr. Dickson, $17,657 by Mr. Trainer and $26,485 by Mr. Kelly. See
"Certain Transactions."
(2) Represents the Company's contribution under the Company's 401(k) defined
contribution plan.
EMPLOYEE BENEFIT PLANS
1997 Stock Option Plan. The 1997 Stock Option Plan will be adopted by the
Company's Board of Directors prior to consummation of the offering. The Company
will reserve 400,000 shares of Common Stock for issuance under the 1997 Stock
Option Plan. The 1997 Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors. The Committee has the
authority and discretion, subject to the provisions of the 1997 Stock Option
Plan, to select persons to whom options will be granted, to designate the
number of shares to be covered by options, to specify the type of consideration
to be paid to the Company, and to establish all other terms and conditions of
each stock option.
The 1997 Stock Option Plan provides for the grant of stock options to
directors, officers and employees of the Company or its subsidiaries. Options
granted under the 1997 Stock Option Plan may be qualified or non-qualified
stock options. The exercise price for a qualified stock option may not be less
than the fair market value of the Company's Common Stock on the date of grant.
Stock options granted under the 1997 Stock Option Plan may not be transferred
other than by will or by the laws of descent and distribution.
Stock options with respect to 150,000 shares of Common Stock will be granted
to certain employees pursuant to the 1997 Stock Option Plan effective on the
date the offering is consummated. The exercise price for such options will be
equal to the initial public offering price of the Common Stock offered hereby.
401(k) Plan. The Company sponsors a voluntary contribution plan qualified
under Section 401(k) of the Code (the "401(k) Plan"). All full-time employees
of the Company and its subsidiaries are eligible to participate in the 401(k)
Plan. Under the 401(k) Plan, each employee may elect to contribute, through
payroll deduction, a specific percentage of his or her compensation up to the
statutory limitation. The Company makes a matching contribution equal to 50% of
the employee's contribution not in excess of 6% of such employee's
compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not currently have a compensation committee. During the last
fiscal year, Mr. Richard Dickson, the Chairman of the Board, President and
Chief Executive Officer, was responsible for determining executive officer
compensation.
34
<PAGE>
CERTAIN TRANSACTIONS
From time to time, the Company has advanced funds to the Current
Stockholders. All of such advances were payable upon demand. During the
preceding three years, the largest aggregate amount of indebtedness outstanding
under such advances to Messrs. Dickson, Kelly and Trainer was $143,607,
$102,033 and $49,113, respectively. Amounts owing from Mr. Dickson at December
31, 1996, December 31, 1995 and December 31, 1994 were $-0-, $109,460 and
$132,850, respectively. Amounts owing from Mr. Kelly at December 31, 1996,
December 31, 1995 and December 31, 1994 were $-0-, $88,578 and $93,300,
respectively. Amounts owing from Mr. Trainer at December 31, 1996, December 31,
1995 and December 31, 1994 were $-0-, $34,744 and $49,113, respectively. Of
these amounts, at December 31, 1996, December 31, 1995 and December 31, 1994,
the following portions were non-interest bearing: for Mr. Dickson, $-0-,
$16,500 and $76,500; for Mr. Kelly $-0-, $3,300 and $15,300; and for Mr.
Trainer, $-0-, $2,200 and $10,200. The balance of these advances bore interest
at the prevailing prime rate. The Company has adopted a policy that it will no
longer advance funds to its stockholders or officers.
The Current Stockholders have a minority interest in a company formerly
engaged in providing cartage services within the Chicago metropolitan area. The
Company had from time to time advanced funds to such company to fund working
capital requirements. The outstanding advances totaled $-0-, $-0- and $74,000
at December 31, 1996, December 31, 1995 and 1994, respectively. These advances
were payable upon demand and bore interest at the prevailing prime rate. The
cartage company paid management fees to the Company of $-0-, $75,000 and
$78,000, during 1996, 1995 and 1994, respectively. The cartage company has
discontinued its operations, and the Company does not anticipate any future
business transactions therewith.
From January 1, 1987 to January 31, 1996, each of the companies formerly
comprising the ATS Group was taxed as an S Corporation. As a result, the
taxable income of the companies, if any, during this period was taxed for
federal (and most state) income tax purposes directly to the stockholders of
such companies rather than to the companies. During this time period, the
companies paid S Corp Stockholder Compensation aggregating $11,931,214,
$2,386,243 and $1,590,828 to Messrs. Dickson, Kelly and Trainer, respectively.
Amounts not utilized by such stockholders to pay or provide for applicable
current and deferred state and federal income taxes were reinvested in and
contributed to the companies as capital. The aggregate amount of capital so
contributed by Messrs. Dickson, Kelly and Trainer during the period January 1,
1987 to January 31, 1996 was $6,487,500, $1,297,500 and $865,000, respectively.
Such amounts are being distributed to Messrs. Dickson, Kelly and Trainer as an
S Corp Related Distribution, a portion of which will be funded from the
proceeds of the offering made hereby. See "Use of Proceeds" and "S Corporation
Status--Related Distribution."
The Company has adopted a policy that future transactions with affiliated
persons or companies will be on terms no less favorable to the Company than
could be obtained from unrelated parties.
35
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth ownership of the Company's Common Stock,
immediately prior to and immediately following completion of the offering, by
(i) each person who is known to the Company to own beneficially more than 5% of
the outstanding Common Stock, (ii) each director, (iii) the Named Executive
Officers and (iv) all directors and officers as a group. The address of each of
the stockholders named below is the Company's principal executive office.
<TABLE>
<CAPTION>
PERCENT
SHARES OWNED PRIOR PERCENT
BENEFICIALLY TO OWNED AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING (1) OFFERING (1)
------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Richard P. Dickson............... 2,511,750(2) 75.0% 50.8%(2)
Michael A. Kelly................. 502,350 15.0% 10.2%
George P. Trainer................ 334,900 10.0% 6.8%
Thomas J. Fitzgerald............. -- -- --
Kurt W. Sandstrom................ -- -- --
Alfred R. Hudson................. -- -- --
All directors and officers as a
group
(10 persons).................... 3,349,000 100.0% 67.7%
</TABLE>
- ---------------------
(1) Assumes 3,349,000 shares outstanding prior to the offering and 4,949,000
shares outstanding after the offering. The persons named in this table have
sole voting and investment power with respect to all shares beneficially
owned by them. All information assumes no exercises of the Underwriters'
overallotment option. See "Underwriting."
(2) Excludes 50,000 shares which Mr. Dickson intends to purchase from the
Underwriters in the offering at the public offering price set forth on the
cover page of this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock, $.01 par value (the "Common Stock"), and 500,000 shares of
Preferred Stock, $.01 par value (the "Preferred Stock"). As of the date of this
Prospectus, there were 3,349,000 shares of Common Stock outstanding and no
shares of Preferred Stock outstanding. As of the date of this Prospectus, there
were three holders of record of Common Stock. All shares of Common Stock are,
and the Common Stock offered hereby will be, when issued, fully paid and non-
assessable.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters voted upon by stockholders and may not use cumulative
voting for the election of directors. Thus, the owners of a majority of the
Common Stock outstanding are able to elect all of the directors. Each
outstanding share of Common Stock is entitled to participate equally in any
distribution of net assets made to the stockholders in liquidation, dissolution
or winding up of the Company and is entitled to participate equally in
dividends and other distributions, if, as and when declared by the Board of
Directors. There are no redemption, sinking fund, conversion or preemptive
rights with respect to the Common Stock. All shares of Common Stock have equal
rights and preferences.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Company is
authorized to issue 500,000 shares of Preferred Stock, which may be issued from
time to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the
stockholders, is
36
<PAGE>
authorized to fix the number of shares constituting any series, dividend
rights and terms, conversion rights and terms, voting rights and terms,
redemption rights and terms, liquidation preferences and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of the Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes could, among other things, adversely affect the voting power of the
holders of the Common Stock and, under certain circumstances, have the effect
of making it more difficult for a third party to acquire, or discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company, or otherwise adversely affect the market price for the Common Stock.
The Company is not aware of any plans by a third party to seek control of the
Company. The Company has no current plans to issue any Preferred Stock.
CERTAIN LIMITED LIABILITY, INDEMNIFICATION AND ANTI-TAKEOVER PROVISIONS
Indemnification and Limitation of Liability
The Company's Certificate of Incorporation and By-laws, in conjunction with
Section 145 of the Delaware General Corporation Law ("DGCL"), provide that the
Company shall, subject to certain limitations, indemnify its directors and
officers against expenses (including attorneys' fees, judgments, fines and
certain settlements) actually and reasonably incurred by them in connection
with any suit or proceeding to which they are a party so long as they acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to a criminal action or
proceeding, so long as they had no reasonable cause to believe their conduct
to have been unlawful.
Section 102 of the DGCL permits a Delaware corporation to include in its
certificate of incorporation a provision eliminating or limiting a director's
liability to a corporation or its stockholders for monetary damages for
breaches of fiduciary duty. DGCL Section 102 provides, however, that liability
for breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct, or knowing violation of the law, and the
unlawful purchase or redemption of stock or payment of unlawful dividends or
the receipt of improper personal benefits cannot be eliminated or limited in
this manner. The Company's Certificate of Incorporation includes a provision
which eliminates, to the fullest extent permitted, director liability for
monetary damages for breaches of fiduciary duty.
Section 203 of Delaware General Corporation Law
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder," which is defined as a person who,
together with any affiliates or associates of such person, beneficially owns,
directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other
dispositions of such assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period
of three years after the date the interested stockholder becomes an interested
stockholder, unless (i) the business combination, or the transaction in which
the interested stockholder became an interested stockholder, is approved by
the corporation's board of directors prior to the date the interested
stockholder becomes an interested stockholder, (ii) the interested stockholder
acquired at least 85% of the voting stock of the corporation (other than stock
held by directors who are also officers or by certain employee stock plan) in
the transaction in which it becomes an interested stockholder or (iii) the
business combination is approved by a majority of the board of directors and
by the affirmative vote of 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder.
Special Meetings of Stockholders; No Stockholder Action By Written Consent
The Company's Certificate of Incorporation provides that special meetings of
stockholders of the Company may be called only by a majority of the Board of
Directors, the Chairman or the President. In addition, the Certificate of
Incorporation provides that, following the consummation of the offering, the
stockholders of the
37
<PAGE>
Company may only take actions at a duly called annual or special meeting of
stockholders and may not take action by written consent.
Advance Notice Requirements for Stockholder Proposals and Nomination of
Directors
The By-laws provide that stockholders seeking to bring business before or
nominate directors at any annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be given
in writing to the Secretary of the Company not less than 120 days prior to the
meeting. The By-laws also specify certain requirements for a stockholder's
notice to be in proper written form.
Number of Directors; Removal; Vacancies
The By-Laws provide that there shall be at least three directors, with the
exact number fixed by the Board of Directors. Vacancies on the Board of
Directors may be filled only by the affirmative vote of the remaining Directors
then in office. The Certificate of Incorporation provides that directors may be
removed only for cause and only by the holders of at least 80% of the
outstanding shares of stock entitled to vote generally in the election of
Directors, voting together as a single class.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock will be LaSalle
National Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the offering, the Company will have outstanding
4,949,000 shares of Common Stock. Of these shares, the 1,600,000 shares to be
sold in the offering will be freely tradable without restriction under the
Securities Act by persons other than "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
3,349,000 shares of Common Stock (the "Restricted Shares") were acquired in
transactions exempt from registration under the Securities Act and,
accordingly, are "restricted securities" as that term is defined in Rule 144.
Restricted Shares may not be resold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from such
registration, such as is contained in Rule 144.
The Company and the Current Stockholders have agreed not to sell or otherwise
dispose of any shares of Common Stock in the public market for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. Upon expiration of the 180-day lock-up
period, 3,349,000 Restricted Shares will be eligible for sale by the Current
Stockholders subject to compliance with the volume and other limitations of
Rule 144 described below.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned Restricted Shares for at least two years, and any person who
may be deemed an "affiliate" of the Company and who owns Common Stock, is
entitled, subject to certain conditions, to sell within any three-month period
a number of those shares which does not exceed the greater of (i) 1% of the
Company's then outstanding Common Stock (49,490 shares immediately after the
offering) or (ii) the average weekly trading volume of the Common Stock during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain manner-of-sale and notice requirements and requirements
concerning the availability of public information about the Company. If three
years have elapsed since the later of the date of acquisition of Restricted
Shares from the Company or any "affiliate" of the Company, and such person is
deemed not to have been an "affiliate" of the Company for at least three months
preceding a sale, such person would be entitled to sell such shares in the
public market under Rule 144(k) without regard to the requirements mentioned
above. A proposed amendment to Rule 144 would, if adopted, lower the two and
three year holding periods referred to above to one and two years respectively.
38
<PAGE>
The Company intends to file a registration statement under the Act to
register for offer and sale 400,000 shares of Common Stock reserved for
issuance pursuant to the exercise of stock options that may be granted under
the Company's 1997 Stock Option Plan. See "Management -- Employee Benefit Plans
- -- 1997 Stock Option Plan." Shares issued after the effective date of such
registration statement upon exercise of stock options issued under the
Company's 1997 Stock Option Plan generally will be eligible for sale in the
public market, subject to the lock-up agreements discussed above.
39
<PAGE>
UNDERWRITING
The Company has entered into an underwriting agreement (the "Underwriting
Agreement") with certain underwriters listed in the table below (the
"Underwriters"), for whom William Blair & Company, L.L.C. and A.G. Edwards &
Sons, Inc. are acting as Representatives (the "Representatives"). Subject to
the terms and conditions set forth in the Underwriting Agreement, the Company
has agreed to sell to each of the Underwriters, and each of the Underwriters
has severally agreed to purchase from the Company, the number of shares of
Common Stock set forth opposite each Underwriter's name in the table below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
William Blair & Company, L.L.C. ................................
A.G. Edwards & Sons, Inc. ......................................
---------
Total....................................................... 1,600,000
=========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Common Stock
being sold pursuant to the Underwriting Agreement if any of the Common Stock
being sold pursuant to the Underwriting Agreement (excluding shares covered by
the over-allotment option granted therein) is purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, purchase commitments of the non-defaulting Underwriters
will be increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
to offer the Common Stock to the public initially at the public offering price
set forth on the cover page of this Prospectus and to selected dealers at such
price less a concession of not more than $ per share. The Underwriters may
allow, and such dealers may re-allow, a concession of not more than $ per
share to certain other dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
240,000 shares of Common Stock at the same price per share to be paid by the
Underwriters for the other shares offered hereby. If the Underwriters purchase
any such additional shares pursuant to this option, each of the Underwriters
will be committed to purchase such additional shares in approximately the same
proportion as set forth in the table above. The Underwriters may exercise the
option only for the purpose of covering over-allotments, if any, made in
connection with the distribution of the Common Stock offered hereby.
The Company and the Current Stockholders have agreed that they will not
sell, contract to sell or otherwise dispose of any Common Stock or securities
convertible into Common Stock or any interest therein for a period of 180 days
after the date of this Prospectus without the prior written consent of the
Representatives, except for the Common Stock offered hereby.
There has been no public market for the shares of Common Stock prior to the
offering. The initial public offering price for the Common Stock was
determined by negotiation between the Company and the
40
<PAGE>
Representatives of the Underwriters. Among the factors considered in
determining the initial public offering price were prevailing market
conditions, revenues and earnings of the Company, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, an assessment of the Company's management and the
consideration of the above factors in relation to the market valuation of
certain publicly traded companies.
The Company and the Current Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the Underwriters may be required to make in respect thereof.
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Gardner, Carton & Douglas, Chicago, Illinois. Certain legal matters
will be passed upon for the Underwriters by McDermott, Will & Emery, Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996
included in this Prospectus have been audited by Crowe, Chizek and Company
LLP, independent auditors. These consolidated financial statements, audited by
Crowe, Chizek and Company LLP, are included herein in reliance upon their
report given upon the authority of that firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement under the Securities
Act with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is made to such Registration
Statement, including the exhibits and schedules thereto, a copy of which may
be obtained from the Commission. The statements contained in this Prospectus
as to the contents of any document filed as an exhibit are of necessity brief
descriptions thereof and are not necessarily complete; each such statement is
qualified in its entirety by reference to such document. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of the materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York, and Chicago, Illinois, at prescribed rates. The
Registration Statement, including exhibits and schedules thereto, is also
available on the Commission's Web site (http://www.sec.gov).
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering, the Company will become subject to the informational
requirements of the Exchange Act. The Company will fulfill its obligations
with respect to the requirements of the Exchange Act by filing periodic
reports and other information with the Commission.
41
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996...................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Alternative Distribution Systems, Inc.
Homewood, Illinois
We have audited the accompanying consolidated balance sheets of Alternative
Distribution Systems, Inc. as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Alternative Distribution Systems, Inc. as of December 31, 1995 and 1996, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Oak Brook, Illinois
January 27, 1997, except as to
Note 13 for which the date is
, 1997
- -------------------------------------------------------------------------------
The above represents the form of report we expect to issue upon completion
of the transaction discussed in Note 13 to the financial statements.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
February 4, 1997
F-2
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
ASSETS
- ------
<S> <C> <C>
Current assets
Cash......................................................... $ 1,536 $ 840
Accounts receivable, less allowance for doubtful accounts of
$48 and $71 in 1995 and 1996, respectively.................. 5,898 6,077
Delivery supplies and maintenance parts...................... 336 479
Refundable income taxes...................................... -- 471
Other current assets......................................... 643 948
Deferred income taxes (Note 7)............................... -- 418
------- -------
Total current assets....................................... 8,413 9,233
Property, plant and equipment, net (Notes 3 and 5)............. 21,571 28,568
Other assets
Due from stockholders (Note 8)............................... 233 --
Other assets................................................. 769 520
------- -------
$30,986 $38,321
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current liabilities
Current portion of long-term debt (Note 5)................... $ 1,779 $ 3,173
Borrowings under line of credit (Note 4)..................... -- 5,200
Accounts payable............................................. 2,903 3,380
Deferred revenue............................................. 298 384
Accrued revenue equipment expenses........................... 454 464
Accrued compensation......................................... 1,061 1,021
Accrued S corp stockholder compensation (Note 6)............. 2,263 428
Other accrued liabilities.................................... 1,075 1,128
Accrued distributions (Note 14).............................. -- 3,760
------- -------
Total current liabilities.................................. 9,833 18,938
Long-term debt, less current portion (Note 5).................. 12,283 13,669
Deferred income taxes (Note 7)................................. -- 2,598
------- -------
22,116 35,205
Commitments and contingencies (Note 10)
Stockholders' equity (Notes 6 and 14)
Common stock--$ .01 par value, 10,000,000 shares authorized,
3,349,000 shares issued and outstanding..................... -- 33
Additional paid-in capital................................... 7,482 --
Retained earnings............................................ 1,388 3,083
------- -------
8,870 3,116
------- -------
$30,986 $38,321
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net operating revenues............................... $53,498 $59,421 $67,473
Cost of sales........................................ 43,622 48,293 54,109
------- ------- -------
Gross profit......................................... 9,876 11,128 13,364
Operating expenses................................... 6,564 7,368 7,752
------- ------- -------
Operating income..................................... 3,312 3,760 5,612
Other income (expense)
Interest expense................................... (544) (835) (1,089)
Interest income and other, net..................... 114 131 182
------- ------- -------
(430) (704) (907)
------- ------- -------
Income before S corp stockholder compensation and
income taxes........................................ 2,882 3,056 4,705
S corp stockholder compensation (Note 6)............. 2,882 3,056 310
------- ------- -------
Income before income taxes........................... -- -- 4,395
Income taxes (Notes 6 and 7)......................... -- -- 1,755
------- ------- -------
Net income........................................... $ -- $ -- $ 2,640
======= ======= =======
Net income per common share (Note 13)................ $ -- $ -- $ 0.79
======= ======= =======
Pro forma information (unaudited) (Note 12)
Income before income taxes.......................... $ 4,705
Pro forma income taxes............................. 1,879
Pro forma net income............................... 2,826
-------
Pro forma net income per common share (Notes 12 and
13)................................................. $ 0.84
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at January 1,
1994................... $-- $ 4,788 $1,388 $ 6,176
Capital contributions
(Note 6)............... -- 1,621 -- 1,621
---- ------- ------ -------
Balance at December 31,
1994................... -- 6,409 1,388 7,797
Capital contributions
(Note 6)............... -- 1,073 -- 1,073
---- ------- ------ -------
Balance at December 31,
1995................... -- 7,482 1,388 8,870
Capital contributions
(Note 6)............... -- 256 -- 256
Net income.............. -- -- 2,640 2,640
S Corp Related
Distribution (Note 14). -- (7,738) (912) (8,650)
3,349-for-1 stock split
(Note 13).............. 33 -- (33) --
---- ------- ------ -------
Balance at December 31,
1996................... $ 33 $ -- $3,083 $ 3,116
==== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------------
1994 1995 1996
-------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income....................................... $ -- $ -- $ 2,640
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization................... 1,870 2,582 2,902
Deferred taxes.................................. -- -- 741
Provision for doubtful accounts................. 46 14 23
Gain on sale of equipment....................... (5) (44) (126)
Changes in operating assets and liabilities
Decrease (increase) in assets
Accounts receivable........................... 130 (1,195) (203)
Other current assets.......................... (232) 170 (918)
Other assets.................................. 219 200 249
Increase (decrease) in liabilities
Accounts payable.............................. (28) 825 477
Accrued compensation, other accrued
liabilities, and S Corp stockholder
compensation................................. 1,480 853 (287)
-------- -------- -------
Net cash provided by operating activities... 3,480 3,405 5,498
Cash flows from investing activities
Purchases of property, plant, and equipment...... (3,358) (11,317) (9,938)
Purchase of office building net of liabilities
assumed ($823).................................. -- (401) --
Proceeds from sale of equipment.................. 75 296 165
Payments from stockholders....................... 19 42 233
-------- -------- -------
Net cash used in investing activities....... (3,264) (11,380) (9,540)
Cash flows from financing activities
Net borrowings under line of credit agreements... -- -- 5,200
Proceeds from long-term debt..................... 4,460 8,035 6,698
Payments of long-term debt....................... (3,470) (2,604) (3,918)
Distributions.................................... -- -- (4,890)
Contribution of additional paid-in capital....... 1,621 1,073 256
-------- -------- -------
Net cash provided by financing activities... 2,611 6,504 3,346
-------- -------- -------
Net increase (decrease) in cash................... 2,827 (1,471) (696)
Cash at beginning of period....................... 180 3,007 1,536
-------- -------- -------
Cash at end of period............................. $ 3,007 $ 1,536 $ 840
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1--NATURE OF BUSINESS AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Alternative
Distribution Systems, Inc. and its subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated.
Alternative Distribution Systems, Inc. was formed on January 31, 1996. On
February 1, 1996, Alternative Distribution Systems, Inc. exchanged shares of
its newly-issued common stock for shares of the companies which formerly
comprised the Alternative Transportation Systems Group (consisting of Western
Intermodal Services, Ltd.; Roll & Hold Warehousing & Distribution Corp.; Area
Transportation Company; Alternative Transportation Systems, Inc.; Freight
Connections International, Ltd.; and Independent Contractor Services, Inc.,
all owned by three individual stockholders). Following the exchange,
Alternative Distribution Systems, Inc. merged with Alternative Transportation
Systems, Inc. This internal reorganization was accounted for in a manner
similar to a pooling of interests and, accordingly, all financial statements
have been restated as if the transaction had been effected as of the beginning
of the earliest period presented.
The Company is a national provider to the metals industry of fully
integrated distribution services, the industry segment in which the Company
currently operates, which includes transportation, warehousing, and third
party logistics management services.
Net operating revenues include amounts attributed to two customers, in the
metals industry, aggregating approximately 21.8%, 17.5% and 21.3% of operating
revenue for the years ended 1994, 1995 and 1996, respectively. Accounts
receivable from these customers approximated 20.6%, 27.5% and 19.3% of total
accounts receivable at December 31, 1994, 1995 and 1996, respectively.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Delivery Supplies and Maintenance Parts: Maintenance parts are carried at
the lower of cost (first-in, first-out method) or market. Delivery supplies
are expensed when used. Maintenance parts are used in the maintenance of
revenue equipment.
Property, Plant and Equipment: Property, plant, and equipment are stated at
cost. Buildings, equipment, furniture, and fixtures are depreciated over the
estimated useful lives of the assets, ranging from three to thirty-nine years,
using the straight-line method. Amortization of leasehold improvements is
based on the shorter of the lease term or the useful life, using the straight-
line method.
F-7
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenue Recognition: The Company's integrated transportation and
distribution service revenues are recognized when the transportation and
distribution services are provided.
Accrued Revenue Equipment Expenses: The Company accrues for revenue
equipment maintenance. Maintenance costs are charged to operations based on
historical and actual usage.
Accrued Claims Cost: The Company provides for uninsured costs of medical
casualty, liability, vehicular cargo, and workers' compensation claims. Such
costs are estimated each year based on reported claims incurred and an
estimate of incurred but unreported claims relating to operations conducted
through December 31 of each year.
Income Taxes: Prior to February 1, 1996, the Company was an S corporation
for federal and state income tax purposes. Under S corporation rules, the
taxable income (loss) of the corporations is reported on the individual tax
return of the stockholders. Concurrent with the internal reorganization
described in Note 1, the S corporation status of the Company terminated and
the Company became subject to federal and state corporate income taxes.
Deferred tax assets and liabilities are computed by applying enacted income
tax rates to the expected reversals of temporary differences in the bases of
assets and liabilities for financial reporting purposes and income tax
reporting purposes.
NOTE 3--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
-------- -------
<S> <C> <C>
Land and buildings...................................... $ 12,391 $12,299
Revenue equipment....................................... 15,939 19,544
Other equipment......................................... 1,808 2,221
Office furniture and fixtures........................... 693 845
Leasehold improvements.................................. 452 701
Construction in progress................................ 239 3,463
-------- -------
31,522 39,073
Less accumulated depreciation and amortization.......... 9,951 10,505
-------- -------
$ 21,571 $28,568
======== =======
</TABLE>
Certain items of property, plant and equipment are collateral for the
Company's term loans and installment notes described in Note 5.
NOTE 4--BANK LINE OF CREDIT AGREEMENTS
At December 31, 1996, three of the Company's subsidiaries maintained
separate revolving line of credit agreements (the "Credit Agreements"). Two of
the subsidiaries may borrow up to 80% of eligible accounts receivable at the
lender's prime rate of interest (8.25% at December 31, 1996). Borrowings under
these Credit Agreements are due on May 31, 1997 and are collateralized by the
trade accounts receivable of each company. Borrowings are limited to $3,000
for Western Intermodal Services, Ltd. and $3,000 for Area Transportation
Company. Roll & Hold's $5,000 line of credit is collateralized by all of its
assets, and amounts outstanding thereunder bear interest per annum at the
LIBOR rate plus 2.25%. Borrowings outstanding under this Credit Agreement are
due on December 8, 1997. In 1995, the Company's subsidiaries maintained three
separate lines of credit aggregating $8,000. The borrowings under the Credit
Agreements are also guaranteed by Alternative
F-8
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Distribution Systems, Inc. At December 31, 1995 and 1996, the Company had
outstanding borrowings under the Credit Agreements of $-0- and $5,200,
respectively. Borrowings under the Credit Agreements averaged approximately
$808 and $665 for the years ended December 31, 1995 and 1996, respectively.
Maximum borrowings were approximately $3,300 and $5,200 for the year ended
December 31, 1995 and 1996, respectively.
NOTE 5--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
------- -------
<S> <C> <C>
Term loans, collateralized by warehouses and an office building
and the land on which they are located, bearing interest at
rates between 7.79% and 10.75%................................ $ 8,569 $ 8,016
Installment notes, collateralized by equipment, bearing
interest at both fixed and floating rates (based upon the
prime or the LIBOR rate) from 6.79% to 9% at December 31,
1996. Monthly principal payments range from approximately $1
to $40........................................................ 5,493 8,826
------- -------
14,062 16,842
Less: Current maturities....................................... 1,779 3,173
------- -------
$12,283 $13,669
======= =======
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 3,173
1998.............................................................. 3,120
1999.............................................................. 5,318
2000.............................................................. 4,647
2001.............................................................. 173
Thereafter........................................................ 411
-------
$16,842
=======
</TABLE>
Interest paid during the years ended 1994, 1995 and 1996 was approximately
$547, $827 and $1,098, respectively.
The Company's loan agreements with one lender require that the Company meet
certain restrictive covenants. The Company was in compliance with these
covenants during 1995 and 1996. The Company's borrowings are jointly and
severally guaranteed by the subsidiaries.
The fair value of the Company's long-term debt was approximately $14,037 and
$16,816 at December 31, 1995 and 1996, respectively.
NOTE 6--S CORP STOCKHOLDER COMPENSATION
The stockholders receive annual base salaries and incentives as compensation
for their services as employees of the Company. This compensation is included
in operating expenses in the statement of operations. Prior to February 1,
1996, the stockholders also received additional subchapter S stockholders'
compensation ("S Corp Stockholder Compensation") in the amount of income before
S Corp Stockholder Compensation. The S Corp Stockholder Compensation was paid
on the basis that, as an S corporation for federal and state income tax
purposes, the Company's taxable income is reported by the stockholders on their
individual income tax returns and was considered by the Company as additional
compensation expense to the stockholders.
F-9
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The S Corp Stockholder Compensation was used by the stockholders to fund
their current income tax liabilities and to provide for deferred income tax
liabilities due to the use of accelerated depreciation methods for tax
purposes and other book to tax temporary differences related to S Corp
Stockholder Compensation. The portion of S Corp Stockholder Compensation not
utilized by the stockholders to pay or provide for applicable current and
deferred federal and state income taxes attributable to such S Corp
Stockholder Compensation was reinvested in and contributed to the companies by
each of the stockholders as capital. On February 1, 1996, upon termination of
the Company's S corporation status, the S Corp Stockholder Compensation
liability recorded in excess of the deferred taxes computed under SFAS No.
109, as well as the liability for current shareholder taxes due of
approximately $79, was contributed to additional paid-in capital (see Note 7).
NOTE 7--INCOME TAXES
The S corporation status of the operating companies was terminated in
connection with the corporate reorganization on February 1, 1996, as described
in Note 1. Subsequent to January 31, 1996, the companies are subject to
federal and state income taxes at statutory rates.
The provision for income taxes under SFAS No. 109 for the period February 1,
1996 through December 31, 1996 is as follows:
<TABLE>
<S> <C>
Current
Federal.......................................................... $ 810
State............................................................ 205
------
1,015
Deferred
Federal.......................................................... 629
State............................................................ 111
------
740
------
$1,755
======
</TABLE>
A reconciliation of income taxes provided in the statements of operations
and amounts determined by applying the federal statutory tax rate to income
before income taxes for the period February 1, 1996 through December 31, 1996
is as follows:
<TABLE>
<S> <C>
Income tax expense at statutory rates............................... 34.0%
Permanent differences............................................... 1.5
State income taxes net of federal benefit........................... 4.5
----
40.0%
====
</TABLE>
Deferred income taxes result from temporary differences in the recognition
of certain expenses for financial statement and income tax reporting purposes
and consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Deferred tax assets
Allowance for doubtful accounts................................. $ 29
Accrued expenses................................................ 389
------
418
Deferred tax liabilities
Partnership interest............................................ 32
Depreciation.................................................... 2,566
------
2,598
------
$2,180
======
</TABLE>
F-10
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company had previously accrued additional S Corp Stockholder
Compensation (see Note 6) equaling the stockholders' current tax liabilities
and deferred tax liabilities calculated using financial statement income. Upon
converting to a C corporation on February 1, 1996, the amount of S Corp
Stockholder Compensation which represented deferred income tax liabilities and
not paid to the stockholders was converted to the Company's deferred tax
liability. The difference between amounts previously recorded as S Corp
Stockholder Compensation for the stockholders' deferred income tax liabilities
and the deferred income tax liability computed, in accordance with SFAS No.
109, in the amount of $79, at February 1, 1996, was contributed to the Company
as additional contributed capital.
NOTE 8--RELATED PARTY TRANSACTIONS
The Company's stockholders had a minority interest in a company engaged in
providing cartage services within the Chicago metropolitan area until October
1995 when that operation was discontinued. This affiliate is not included in
these consolidated financial statements. Management fees paid by this
affiliate were $78, $75 and $-0- during the years ended December 31, 1994,
1995 and 1996, respectively.
Amounts due from stockholders of $233 and $-0- at December 31, 1995 and
1996, respectively, represent advances made to stockholders which are due upon
demand. The advances bear interest at the prevailing prime rate.
The Company leased office and storage space from entities of which
Alternative Transportation Systems, Inc. was a partner. In August 1995, the
Company purchased the remaining partnership interest. Rent expense to the
partnership, including real estate taxes, was approximately $166, $111 and $-
0- in 1994, 1995 and 1996, respectively.
NOTE 9--EMPLOYEE BENEFIT PLANS
The Company has a defined contribution plan under Section 401(k) of the
Internal Revenue Code, which covers substantially all employees who have
completed one year of service. Each eligible employee may elect to voluntarily
contribute from 2% to 15% of their annual compensation. The Company has agreed
to contribute an amount equal to 50% of each employee's contribution up to 6%
of annual eligible compensation. In addition, the Company may elect to make
additional discretionary contributions. The Company made contributions to the
plan of approximately $153, $169 and $216 during the years ended December 31,
1994, 1995 and 1996, respectively.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Stock Purchase Agreement: The stockholders have entered into a stockholder
agreement which, upon the death of a stockholder, obligates the Company to
purchase all of the respective common stock held by that stockholder at a pre-
determined agreed-upon value. The agreement terminates upon the Company
completing an initial public offering of its Common Stock.
The Company has maintained life insurance policies on each stockholder which
approximate $16,000 in the aggregate. In the event that the Company is
required to repurchase the stock under the agreement, proceeds from these
policies will be utilized to repurchase such stock. If the Company is required
to repurchase the stock, the repurchase is not expected to materially affect
the Company's financial position or results of operations.
Contingencies: The Company is a defendant in certain legal actions or claims
arising from normal business activities. Management believes that those
actions are without merit or that the ultimate liability, if any, resulting
from them will not materially affect the Company's financial position or
results of operations.
F-11
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Roll & Hold Warehousing & Distribution Corp. Warehouse Facilities: The
Company has committed to building a warehouse facility in Hammond, Indiana at
an estimated cost of $4,000, expected to be completed on or about March 31,
1997, and a warehouse facility at Indiana's International Port/Burns Harbor,
at an estimated cost of $4,200, expected to be completed on or about June 30,
1997. In addition, subject to certain economic conditions, the Company has
committed to construct additional warehouse facilities at Indiana's
International Port/Burns Harbor in 2001.
NOTE 11--OPERATING LEASES
The Company rents facilities and certain revenue and operating equipment
under various operating leases, which expire through 2001. Certain lease
arrangements require the payment of real estate taxes, insurance, and other
expenses, and have penalty provisions for early termination under certain
circumstances. A portion of the rentals escalate with defined changes in the
Consumer Price Index. Rent expense under operating leases was approximately
$2,890, $3,280 and $3,695, for the years ended December 31, 1994, 1995 and
1996, respectively.
Future minimum rental payments approximate the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
<S> <C>
1997............................................................... $2,303
1998............................................................... 1,446
1999............................................................... 875
2000............................................................... 665
2001............................................................... 306
Thereafter......................................................... 626
------
$6,221
======
</TABLE>
NOTE 12--UNAUDITED PRO FORMA INFORMATION
In connection with the corporate reorganization on February 1, 1996, as
described in Note 1, the S corporation status of the companies formerly
comprising the Alternative Transportation Systems Group was terminated.
Beginning February 1, 1996, the companies became subject to federal and state
income taxes at statutory rates.
The Company has calculated the pro forma provision for income taxes under
Statement of Financial Accounting Standards No. 109 (SFAS 109) as if each of
the companies was a C corporation, excluding additional shareholder
compensation (see Note 6) for the full year ended December 31, 1996. Pro forma
net income per common share is based on historical net income per common share
adjusted for the pro forma provision for income taxes. The pro forma income
tax provision is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Current
Federal.................................................... $ 915
State...................................................... 224
------
1,139
Deferred
Federal.................................................... 629
State...................................................... 111
------
740
------
$1,879
======
</TABLE>
F-12
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A reconciliation of pro forma income taxes and amounts determined by
applying the federal statutory tax rate to income before income taxes is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
Computed expected pro forma income taxes..................... 34.0%
Permanent differences........................................ 1.5
State income taxes net of federal benefit.................... 4.5
----
40.0%
====
</TABLE>
NOTE 13--WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
As discussed in Note 1, the Company effected a recapitalization on February
1, 1996. Accordingly, the historical presentation of net income per common
share is based on the number of shares issued after the recapitalization and a
3,349-for-one stock reclassification effected on , 1997, as if the
shares had been outstanding during all periods presented.
NOTE 14--CAPITAL DISTRIBUTIONS
Subsequent to termination of the S corporation status of the companies
formerly comprising the Alternative Transportation Systems Group (see Note 6),
the Company declared a capital distribution, primarily as a return of paid-in-
capital, to the current stockholders in the amount of $8,650. The Company paid
$4,890 of this distribution through December 31, 1996. The balance of the
distribution ($3,760) will be payable from the proceeds of the Company's
initial public offering of 1,600,000 shares of Common Stock, which offering is
expected to be completed during the first six months of fiscal 1997.
F-13
<PAGE>
[PHOTOS TO COME]
The Company's metals-handling expertise and specialized equipment enable it
to orchestrate the loading and unloading of railcars, trucks, barges and ships
in a multi-mode transit operation without compromising the demanding product
quality and delivery sequencing requirements of its end-users.
[PHOTOS TO COME]
The Company has developed a vari- The Company has the ability to
ety of customized and innovative customize intermediate to long-haul
distribution solutions designed to transportation service to meet the
accommodate the demanding input particular needs of its customers,
quality and timing requirements of based on shipment size, transit time
its end-users, while maximizing and distribution service require-
safety and cost effectiveness. ments, in a cost-effective manner.
To achieve this objective, the Com-
pany frequently mixes various modes
of transportation and, when needed,
offers just-in-time distribution ca-
pability in collaboration with its
warehousing and trucking operations.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY COMMON STOCK OFFERED HEREBY BY AN-
YONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO
DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICI-
TATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS PROSPEC-
TUS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Company Background........................................................ 10
Use of Proceeds........................................................... 10
S Corporation Status--Related Distribution................................ 11
Dividend Policy........................................................... 11
Capitalization............................................................ 12
Dilution.................................................................. 12
Selected Consolidated Financial and Operating Data........................ 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 20
Management................................................................ 32
Certain Transactions...................................................... 35
Principal Stockholders.................................................... 36
Description of Capital Stock.............................................. 36
Shares Eligible for Future Sale........................................... 38
Underwriting.............................................................. 40
Legal Matters............................................................. 41
Experts................................................................... 41
Additional Information.................................................... 41
Index to Consolidated Financial Statements................................ F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIRE-
MENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,600,000 SHARES
ALTERNATIVE DISTRIBUTION
SYSTEMS, INC.
LOGO
COMMON STOCK
------------------------
PROSPECTUS
, 1997
--------------
WILLIAM BLAIR & COMPANY
A.G. EDWARDS & SONS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and
compensation, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $6,691
National Association of Securities Dealers, Inc. filing fee...... 2,708
Nasdaq National Market entry fee................................. *
Blue Sky fees and expenses....................................... *
Legal fees and expenses.......................................... *
Accountants' fees and expenses................................... *
Printing and engraving expenses.................................. *
Transfer Agent and Registrar fees and expenses................... *
Miscellaneous.................................................... *
------
Total........................................................ $ *
======
</TABLE>
- ---------------------
*To be supplied by amendment.
The Company will bear all of the foregoing fees and expenses.
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the Nasdaq National Market entry fee, are estimates.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Depending upon the character of the proceeding, under Delaware law, the
Registrant may indemnify officers and directors against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with any action, suit or
proceeding brought or threatened to be brought against such person by reason
of the fact that such person served as an officer or director; provided that
such person indemnified acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
Registrant and with respect to any criminal action or proceeding, had no cause
to believe his or her conduct was unlawful. To the extent that a director or
officer of the Registrant has been successful in the defense of any action,
suit or proceeding referred to above, the Registrant will be obligated to
indemnify him or her against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith. The Registrant's Certificate of
Incorporation and By-Laws provide that the Registrant shall, to the fullest
extent authorized by Delaware law, indemnify its officers and directors
against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred by such person.
Section 102 of the Delaware General Corporation Law permits a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to a corporation or its
stockholders for monetary damages for breaches of fiduciary duty. The enabling
statute provides, however, that liability for breaches of the duty of loyalty,
acts or omissions not in good faith or involving intentional misconduct, or
knowing violation of the law, and the unlawful purchase or redemption of stock
or payment of unlawful dividends or the receipt of improper personal benefits
cannot be eliminated or limited in this manner. The Registrant's Certificate
of Incorporation includes a provision which eliminates, to the fullest extent
permitted, director liability for monetary damages for breaches of fiduciary
duty.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Company sold the following securities that were not registered under the Act:
On February 1, 1996, the Registrant issued an aggregate of 1,000 shares
of Common Stock to Mr. Richard P. Dickson, Mr. Michael A. Kelly and Mr.
George P. Trainer in exchange for their shares of Common Stock of
Alternative Transportation Systems, Inc., Area Transportation Company,
Freight Connections International, Ltd., Independent Contractors Services,
Inc., Roll & Hold Warehousing & Distribution Corp. and Western Intermodal
Services, Ltd. Exemption from registration is claimed pursuant to Section
4(2) of the Act, no public sale having been involved.
Immediately prior to the consummation of the offering, the Registrant
will effect a stock split. Exemption from registration is claimed on the
basis of no "sale" having been involved within the meaning of Section 2(3)
of the Act.
No underwriters were involved in any of the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits--See Index to Exhibits.
(b) Financial Statement Schedule.
None
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions specified in Item 14 of this Registration
Statement, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOMEWOOD,
ILLINOIS, ON THE 4TH DAY OF FEBRUARY, 1997.
ALTERNATIVE DISTRIBUTION SYSTEMS,
INC.
/s/ Richard P. Dickson
By:__________________________________
Richard P. Dickson
Chairman, Chief Executive Officer,
President and Director
POWER OF ATTORNEY
WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF ALTERNATIVE DISTRIBUTION
SYSTEMS, INC., HEREBY SEVERALLY CONSTITUTE AND APPOINT RICHARD P. DICKSON AND
MICHAEL A. KELLY, AND EACH OF THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS, WITH
FULL POWER TO THEM AND EACH OF THEM SINGLY, TO SIGN FOR US IN OUR NAMES IN THE
CAPACITIES INDICATED BELOW, ALL PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO
THIS REGISTRATION STATEMENT, INCLUDING ANY FILINGS PURSUANT TO RULE 462(B)
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND GENERALLY TO DO ALL THINGS
IN OUR NAMES AND ON OUR BEHALF IN SUCH CAPACITIES TO ENABLE ALTERNATIVE
DISTRIBUTION SYSTEMS, INC. TO COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND ALL REQUIREMENTS OF THE SECURITIES AND EXCHANGE
COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON FEBRUARY 4, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Richard P. Dickson Chairman, President, Chief Executive
___________________________________________ Officer and Director (Principal Executive
Richard P. Dickson Officer)
/s/ Michael A. Kelly Chief Financial Officer, Secretary and
___________________________________________ Treasurer and Director (Principal
Michael A. Kelly Financial Officer)
/s/ George P. Trainer Executive Vice President and Director
___________________________________________
George P. Trainer
/s/ Thomas J. Fitzgerald Director
___________________________________________
Thomas J. Fitzgerald
/s/ Stephen H. Vogt Corporate Controller
___________________________________________ (Principal Accounting Officer)
Stephen H. Vogt
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTIONS
------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement
3.1* Form of Amended and Restated Certificate of Incorporation
3.2* Form of Amended and Restated By-laws
4.1* Specimen Common Stock Certificate
5.1* Opinion of Gardner, Carton & Douglas
10.1* 1997 Stock Option Plan
10.2 Lease dated June 17, 1994 by and between Caterpillar Inc. and
Roll & Hold Warehousing & Distribution Corp., relating to
property in Davenport, Iowa.
10.3 Lease dated March 20, 1991 and amended April 1, 1994 and March
11, 1996, between Sharon Rankin and Roll & Hold Warehousing &
Distribution Corp., relating to property at 1745 165th Street
in Hammond, Indiana.
10.4 Lease dated May 1, 1992, and amended August 2, 1993, by and
between Great Lakes Investors I and Roll & Hold Warehouse &
Distribution Corp., relating to property at 201 Mississippi
Street in Gary, Indiana
10.5 Loan and Security agreement dated as of July 12, 1993, between
Area Transportation Company and American National Bank and
Trust Company of Chicago, including Amendment No. One thereto
dated April 28, 1995, and Promissory Note dated May 31, 1996.
10.6 Amended and Restated Loan and Security Agreement dated as of
November 20, 1992, between Western Intermodal Services, Ltd.
and American National Bank and Trust Company of Chicago, in-
cluding Amendment No. One thereto dated April 28, 1995, and
Promissory Note dated May 31, 1996.
10.7 Guaranty of Alternative Distribution Systems, Inc., dated June
26, 1996, in favor of American National Bank and Trust Company
of Chicago guaranteeing certain obligations of Area Transpor-
tation Company.
10.8 Guaranty of Alternative Distribution Systems, Inc., dated June
26, 1996, in favor of American National Bank and Trust Company
of Chicago guaranteeing certain obligations of Western
Intermodal Services, Ltd.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTIONS
------- ------------
<C> <S> <C>
11.1* Computation of pro forma net income per share
21.1 Subsidiaries of the Registrant.
23.1 Consent of Crowe, Chizek and Company LLP
23.2* Consent of Gardner, Carton & Douglas (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
27.1 Financial Data Schedule.
</TABLE>
- ----------------------------
*To be filed by amendment.
E-2
<PAGE>
EXHIBIT 10.2
LEASE
-----
This Lease made and entered into as of this 17th day of June, 1994, by and
between Caterpillar Inc., a Delaware corporation, (hereinafter referred to as
"Lessor"), and Roll & Hold Warehousing & Distribution Corp., an Illinois
corporation (hereinafter referred to as "Lessee").
WITNESSETH:
1. PREMISES - Lessor, for and in consideration of the rent and covenants,
conditions and agreements hereinafter described to be kept and performed by
Lessee, does hereby rent, demise and lease to Lessee, and Lessee does
hereby rent and lease from Lessor, 15,000 square feet commencing June 27,
1994, and an additional 15,000 square feet commencing August 1, 1994, in a
building known as Unit 3 in the Caterpillar Davenport Plant in Scott
County, Iowa, being more particularly shown on Exhibit "A" attached hereto
and incorporated herein by reference (the "Minimum Space"). Lessee shall
also have the option of renting the additional space shown on Exhibit A
(the "Additional Space"). Such Additional Space may be rented in increments
of not less than 2,000 square feet, and shall not exceed in the aggregate
12,000 square feet. The Minimum Space and the Additional Space are
hereinafter referred to as the "Premises". Lessee shall have access rights
to the Premises as shown on Exhibit B and the non-exclusive use of the
parking lot designated on Exhibit B for parking of Lessee's employees'
personal vehicles only.
<PAGE>
-2-
2. TERM - The term of the Lease shall commence on the date shown first above
and shall continue until terminated by either party upon sixty (60) days'
written notice to the other party.
3. RENT - Rent on the Minimum Space shall be $6,375 for the period June 27,
1994 through July 31, 1994 and $11,250 for each monthly period thereafter
commencing on the 1st day of each month. Each installment of rent shall be
paid in advance on the 1st day of each month at the offices of the Lessor
shown in Section 20.
Rent for Additional Space shall be paid at the rate of $0.375 per square
foot per month in advance on the basis of the measurement made by
representatives of the Lessor and Lessee on the date that such Additional
Space is first utilized by Lessor. Payment for Additional Space shall be
made by Lessee within five days of Lessee's receipt of an invoice from
Lessor.
4. USE OF PREMISES - Premises are to be used by Lessee as a general warehouse
facility with 24-hour access. Any change in use will be only with the
consent of Lessor, which consent shall not be unreasonably withheld,
conditioned or delayed. Lessee shall not handle or store any toxic or
hazardous materials.
The Lessee shall have exclusive use of the 25 ton crane, identified as
#20HC1002, located in the area shown on Exhibit A. Lessee may modify the
controls on the crane at its own expense but shall
<PAGE>
-3-
return it to its present condition at the termination of the term hereof.
Inspection and routine maintenance as well as repair of any damage caused
by Lessee is the responsibility of Lessee. At the end of the term
hereof, Lessee shall return the crane to the condition in which it was in
at the beginning of the term, ordinary wear and tear excepted.
Lessee hereby agrees to defend, indemnify and hold harmless Lessor from and
against any and all claims and demands of any nature arising out of (i) its
failure to warn, instruct or train employees in the operation of the crane
or (ii) use of the crane in any manner whatsoever.
Lessee shall comply, at the cost and expense of Lessee, with any and all
ordinances, statutes or other laws relating to Lessee's use of the
Premises, and will observe and comply with requests of fire insurance
companies respecting the use of the Premises.
Lessee shall not perform any activity on the Premises which will violate
any environmental laws or regulations. Lessee shall defend, indemnify and
hold harmless Lessor from and against all claims and demands of any nature
which are a result of (i) Lessee's or Lessee's employees', agents' or
invitees' violation of such environmental laws or regulations; (ii) any
environmental contamination caused by Lessee, its employees, agents or
invitees; or (iii) Lessee's occupancy of the Premises.
<PAGE>
-4-
Lessor represents and warrants to the best of its knowledge that the
Premises are free from environmental contamination from hazardous wastes
and toxic substances, as such terms are defined in applicable federal,
state or local laws and regulations and are in compliance with all
applicable federal, state and local laws and regulations. Lessor shall
defend, indemnify and hold harmless Lessee from and against all claims and
demands of any nature which are a result of (i) the violation of such
environmental laws or regulations by Lessor or Lessor's employees, agents
or invitees, or (ii) environmental contamination in existence on or about
the Premises prior to Lessee's occupancy of the Premises.
Lessee's employees, agents and invitees shall remain within the Premises.
5. ALTERATIONS, IMPROVEMENTS AND SIGNS - During the term of the Lease, Lessee
at its sole expense may, with the prior consent of Lessor, make non-
structural alterations and improvements to the Premises for use by Lessee
as provided herein, including but not limited to, installation of signs,
equipment, fixtures, partitions and shelving. Lessor's consent shall not be
unreasonably withheld, conditioned or delayed.
With Lessor's prior consent, Lessee shall be entitled to post signs at the
entrance to the Caterpillar Plant and at other locations in the
Caterpillar Plant for purposes of directing traffic to the Premises.
Lessor's consent shall not be unreasonably withheld, conditioned or
delayed.
<PAGE>
-5-
Upon termination of this Lease, Lessee shall remove all items installed by
Lessee during the term of this Lease and restore the Premises to as good a
condition as existed at the commencement of the term, ordinary wear and
tear excepted. Improvements to the Premises made by Lessee and other
property of Lessee left in place with the consent of Lessor become the
property of Lessor.
If Lessee has not removed its improvements (except as Lessor has
otherwise agreed), at the termination of this Lease, Lessor may remove them
and all charges therefor will be paid immediately by Lessee.
6. HEAT AND UTILITIES - Lessor represents that all existing utilities,
including, without limitation, heating, ventilation and air conditioning
systems, lights, electrical service, water, sewer service, gas lines and
telephone service are in good condition and repair at the commencement of
the term. The existing heating equipment shall be capable of providing a
minimum 60-degree interior environment during winter months.
Lessor shall supply utility connections to the Premises, including, without
limitation, gas, electricity, heat, water, telephone and sanitary sewer.
Lessor shall pay, when due and payable, all bills for gas, electricity,
heat, water and sanitary sewer supplied to or for the Premises for the use
of Lessee during the term of this Lease.
<PAGE>
-6-
7. TAXES, INSURANCE, AND SNOW REMOVAL
----------------------------------
a. Taxes - Lessor shall pay when due all real estate taxes levied against
the property which includes the Premises. Lessee will be responsible to
Lessor for any increase in taxes resulting solely from improvements made
by Lessee.
Lessee shall pay when due all personal property taxes assessed against
property, owned by or placed in, upon or about the Premises by Lessee.
b. Insurance - Lessee at its expense shall procure and maintain during the
Lease term:
i) casualty insurance on improvements and personal property of Lessee
on the Premises including, without limitation, fire, extended
coverage and all-risk hazard insurance.
ii) commercial general liability insurance covering bodily injury and
property damage arising out of Lessee's occupancy and use of the
Premises, in minimum limits of $1,000,000 each occurrence.
iii) Workman's Compensation and employer's liability insurance coverage
for all employees of Lessee employed on or about the Premises or
shall be a qualified self-insurer, as required by the laws of the
State of Iowa.
<PAGE>
-7-
Upon request, Lessee shall provide to Lessor certificates evidencing
the existence of said coverages and providing that Lessor shall
receive not less than ten (10) days prior notice of any change in or
cancellation of the policies or coverage hereunder.
c. Snow-Removal - Lessor shall be responsible for snow removal from the
outside dock areas of the Premises as required for its use. Lessor
shall be responsible for reasonably prompt snow removal for access to
Unit 3, the automobile parking lot and the perimeter of Unit 3 to
allow for access for emergency vehicles.
8. REPAIRS AND MAINTENANCE - Lessor, at its expense, shall maintain the roof,
foundations and exterior walls of Unit 3 in good repair. The term "walls"
as used herein shall include windows, glass, doors and office entries. The
term "roof" as used herein shall include skylights, smoke hatches and roof
vents. Lessor, at its expense, shall also maintain and repair all parking
areas, driveways, and all building equipment located on or in the Premises
including, but not limited to, fire sprinkler systems, sanitary and storm
sewer lines, utility services, exterior lighting, heating, ventilation and
air conditioning systems, and truck doors. The Lessee shall be responsible
at its expense to maintain and repair the building installations not
otherwise specifically identified as Lessor's responsibility within the
Premises. The Lessee shall maintain and repair lighting fixtures and lamps,
water connections and fixtures, floor cover, etc.
<PAGE>
-8-
Lessee shall maintain and repair the improvements installed by Lessee.
Lessee, at its expense, shall clean the Premises and arrange for regular
removal from Caterpillar's Davenport Plant of its trash and debris. Lessee
shall repair any damage to the Premises caused by Lessee.
9. ACCESS BY LESSOR - Upon reasonable notice, except in emergencies where no
such notice shall be required, Lessor's representatives shall have the
right to enter the Premises to inspect the same, and to perform such work
as may be permitted or required hereunder, to make repairs or alterations,
to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Lessor's
interest in the Premises or to exhibit the Premises to prospective tenants,
purchasers, or others, or for any other purposes Lessor may deem necessary
or desirable; provided, however, that Lessor shall not unreasonably
interfere with Lessee's operations. Lessee shall not be entitled to any
abatement of rent by reason of the exercise of any such right of entry.
Lessee shall give notice to Lessor at least thirty (30) days prior to
vacating the Premises and shall meet with Lessor for a joint inspection of
the Premises at the time of vacating.
10. INDEMNIFICATION - Lessee hereby agrees to defend, indemnify and hold
harmless Lessor, its officers, employees and agents, from and against all
claims and demands of any nature whatsoever arising out of the injury to or
death of any person or damage to property, to the extent caused by the
acts or omissions of Lessee, its employees, agents, guests, licensees or
invitees during the term of
<PAGE>
-9-
this Lease or resulting from possession or use of the Premises by Lessee.
Lessor hereby agrees to defend, indemnify and hold harmless Lessee, its
officers, employees and agents, from and against all claims and demands of
any nature whatsoever arising out of the injury to or death of any person
or damage to property, to the extent caused by the acts or omissions of
Lessor, its employees, agents, guests, licensees or invitees during the
term of this Lease, or resulting from Lessor's ownership of the Premises.
11. LOSS OR DESTRUCTION OF PREMISES - In the event that the Premises are
damaged by fire or other casualty or taken by condemnation of public
authority in such a way that the Premises are rendered partially or
substantially unsuitable to Lessee for the carrying out of its business,
and if Lessor does not restore the Premises within thirty (30) days
following any such casualty or taking, then either party shall have the
option of terminating this Lease. To the extent that the Premises become
untenantable, rent shall be abated.
12. LESSEE SHALL DISCHARGE ALL LIENS - Lessee shall promptly pay all its
contractors and materialmen. Should any lien be filed against the Premises
or Lessor as a result of Lessee's act or forbearance, Lessee shall promptly
furnish Lessor security in an amount sufficient to protect Lessor from loss
or make provisions for discharge of the lien within five (5) days after
written request by Lessor.
<PAGE>
-10-
13. DEFAULT BY LESSEE, RIGHTS AND REMEDIES - If (i) default is made in the
payment of rent at the times herein stated, (ii) Lessee shall fail to
perform any of the convenants, conditions and agreements contained in this
Lease and such default continues for fifteen (15) days after written notice
thereof by Lessor to Lessee or, (iii) such performance is not reasonably
capable of being completed within fifteen (15) days after such notice and
Lessee has not commenced to cure such default and is not diligently
attempting to cure such default, then Lessor, or its legal representative,
shall have all rights and remedies at Law or in equity to evict Lessee and
retake possession with or without court order and without in any way
prejudicing Lessor from exercising any and all rights, remedies or causes
of action which it may have, including the right to receive and collect the
balance of rent or any other sums which may be due under this Lease. All
remedies of Lessor are cumulative and the selection of one remedy shall not
be deemed a waiver of any other.
If Lessee shall make any assignment for the benefit of creditors, file a
petition in any court for insolvency proceedings of any kind, or have a
petition filed against it for insolvency proceedings in any court, this
Lease shall automatically terminate and Lessor shall have the rights
provided for herein in the event of default.
14. WAIVER - The waiver by Lessor of breach of any term, covenant, condition or
agreement herein contained shall not be deemed to be a
<PAGE>
-11-
waiver of any subsequent breach of the same or any other term, covenant,
covenant, condition or agreement.
15. ASSIGNMENT OR SUBLETTING - Lessee shall not assign this Lease or sublease
all or any portion of the Premises without the written consent of Lessor,
which consent shall not be unreasonably withheld, conditioned or delayed.
16. SUBORDINATION - This Lease and all the rights of Lessee hereunder are and
shall be subject and subordinate at all times to the lien or liens of any
mortgages placed on the Premises or the Caterpillar Davenport Plant, either
prior or subsequent to the date hereof. Lessee shall execute and deliver
upon demand such further instrument or instruments evidencing such
subordination of this lease as may be requested by any mortgagee or
proposed mortgagee.
17. WASTE OR NUISANCE - Lessee shall not commit or suffer to be committed any
waste upon the Premises or any nuisance or other act or thing which may
disturb the quiet enjoyment of another tenant in Unit 3.
18. QUIET ENJOYMENT - As long as Lessee is not in default under the terms of
this Lease, Lessee shall at all times during the term hereof have the
peaceable and quite enjoyment, possession, occupancy and use of the
Premises.
19. BROKERS - Lessor and Lessee each represent that it has not dealt with any
broker in connection with the negotiation, execution, or
<PAGE>
-12-
delivery of this Lease, except for the Binswanger Company, for whose
commission Lessor is solely responsible. Each party shall defend, indemnify
and hold harmless the other party from and against any claims or demands
for brokerage commissions or finder's fees alleged to arise from the acts
of that party.
20. NOTICE - Any notice or other communication provided for in this Lease shall
be given by certified mail or telefax to the other party at the address
specified below unless a party has changed its address by notice given
pursuant to this section:
Lessor: Caterpillar Inc.
100 N.E. Adams Street
Peoria, IL 61629-3315
Attention: Manager of Real Estate
Lessee: Roll & Hold Warehousing & Distribution Corp.
201 Mississippi Street
Gary, Indiana 46402
Attention: Mr. W. Kent Robbins
21. SUCCESSORS - All rights, liabilities, and covenants herein contained, given
to or imposed upon the parties hereto shall extend to and bind their
successors and assigns.
22. PARTIAL INVALIDITY - The provisions of this Lease shall be severable and
the invalidity or unenforceability of any provision
<PAGE>
-13-
shall not affect the validity or enforceability of the remaining
provisions.
23. GOVERNING LAW - This lease or any term hereof shall be construed according
to the laws of the State of Iowa.
24. SURVIVAL OF PROVISIONS - Sections 4, 10, 12, 13, and 19 hereof shall
survive termination of this Lease.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed on the day
and year first above written.
CATERPILLAR INC., Lessor ROLL & HOLD WAREHOUSING &
DISTRIBUTION CORP., Lessee
By: /s/ Gerald Palmer By: /s/ Michael Kelly
-------------------------- ----------------------------
Name: Gerald Palmer Name: Michael Kelly
----------------------- --------------------------
Title: Vice President Title: CFO
---------------------- -------------------------
<PAGE>
[LOGO OF ROLL & HOLD] EXHIBIT 10.3
WAREHOUSING & DISTRIBUTION An ATS Company 935 West 175th Street
Homewood, IL 60430-2028
Tel. (708) 799-4990
FAX (708) 799-5935
- -------------------------------------------------------------------------------
ADDENDUM TO LEASE AGREEMENT
Commercial lease dated March 20, 1991 and amended April 1, 1995 between Sharon
Rankin (Lessor) and Roll & Hold Warehousing & Distribution Corp. (Roll & Hold),
(Lessee).
The agreement between Roll & Hold and S&R Management, Inc. was reached on April
1, 1995, Roll & Hold does wish to extend the lease as provided in item #Five
(5) of the April 1, 1995 Lease Agreement on the same terms and conditions
contained in the lease subject however to the following changes:
1. Commencement date: April 1, 1996
2. Term of lease: Three (3) years from commencement date
3. All of warehouse Building #2 which consists of approximately 240,000 square
feet.
4. Rental Rate: Roll & Hold will lease 150,000 square feet of Building #2 at
the rate of twenty-five thousand dollars ($25,000.00) per month gross (base
rent). This gross base rent includes real estate taxes, building insurance,
common area maintenance and crane and building maintenance.
5. Additional rent will be paid during the lease term for the remaining
warehouse space at a gross rental rate of .125 per square foot per month
for actual square feet occupied by product. The maximum gross rent for
additional space utilized may not exceed $11,250.00 per month. As agreed
to, an audit of the actual warehouse space occupied by Roll & Hold product
will take place by your designated personnel and our warehouse personnel on
or about the 25th of each month to determine the next months applicable
rent.
6. Deposit received and in the possession of lessor is twenty-five thousand
dollars ($25,000.00).
7. Gross base rent will be reviewed annually and may not increase or decrease
more than twenty percent (20%).
8. Roll & Hold will have the option to extend this lease for an additional
three (3) year term by delivering written notice at least thirty (30) days
prior to lease expiration.
9. All other terms and conditions of the original lease dated March 20, 1991
remain unmodified and in full force and effect.
If the foregoing accurately sets forth our agreement, please sign this letter
below where indicated and return it to my attention at 935 W. 175th Street,
Homewood, IL 60430.
Agreed this 11th day of March, 1996.
Michael Kelly Sharon Rankin, Pres.
- -------------------------------------------- -------------------------------
Roll & Hold Warehousing & Distribution Corp. Sharon Rankin, President
Michael Kelly S&R Management, Inc.
Chief Financial Officer
<PAGE>
COMMERCIAL LEASE AND DEPOSIT RECEIPT
RECEIVED FROM: AREA TRANSPORTATION CO., hereinafter referred to as LESSEE, the
sum of $27,083.34 (TWENTY SEVEN THOUSAND EIGHTY THREE AND 34/100-------DOLLARS),
evidenced by check, as a deposit which, upon acceptance of this lease, shall
belong to Lessor and shall be applied as follows:
<TABLE>
<CAPTION>
RECEIVED PAYABLE PRIOR TO OCCUPANCY
-------- --------------------------
<S> <C> <C>
Rent for the period from April 1, 1991 to May 1, 1991 $ $ 13,541.67
Security deposit Parcel 1 $ $ 13,541.67
Security deposit Parcel 2 $ $ 13,541.67 (Due 10/1/91)
Other $ $
TOTAL $ $
</TABLE>
In the event that this lease is not accepted by the Lessor within 10 business
days, the total deposit received shall be refunded. Lessee hereby offers to
lease from Lessor the premises situated in the City of Hammond, County of Lake,
State of Indiana, described as 1745-165th St. and more particularly described on
Exhibit "A", 101,007 sq. ft. of Building #2 Warehouse space and on Exhibit "B"
adjacent outside storage and parking space, following TERMS and CONDITIONS:
1. PARCEL #1: Term shall commence on April 1, 1991, and expire on March 31,
1992.
PARCEL #2: Term shall commence on October 1, 1991, and expire on March 31,
1992.
2. RENT: A late charge of $25.00 per day will be assessed after the third day
of each month & continue until receipt of late payments. All rents shall be
paid to Owner or his authorized agent, at the following address: R & R
Industrial Park, 4400 Homerlee Ave. Suite A, East Chicago, Indiana 46312, or
at such other places as may be designated by Owner.
3. USE: The premises are to be used for the operation of storage, handling
and processing of steel products and for no other purpose, without prior written
consent of Lessor.
4. USES PROHIBITED: Lessee shall not use any portion of the premises other
than those specified hereinabove, and no use shall be made or permitted to be
made upon the premises, nor acts done, which will increase the existing rate of
insurance upon the property, or cause cancellation of insurance policies
covering property. Lessee shall not conduct or permit any sale by auction on
premises.
5. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this lease or sublet
any portion of the premises without prior written consent of the Lessor, which
shall not be unreasonably withheld. Any such assignment or subletting without
consent shall be void and, at the option of the Lessor, may terminate this
lease.
6. ORDINANCES AND STATUTES: Lessee shall comply with all statutes, ordinances
and requirements of all municipal, state and federal authorities now in force,
or which may hereafter be in force, pertaining to the premises.
7. MAINTENANCE, REPAIRS, ALTERATIONS: Lessee acknowledges that the premises
are in good order and repair, unless otherwise indicated herein. Lessee shall,
at his own expense and at all times, maintain the premises in good and safe
condition, including plate glass, electrical wiring, plumbing and heating
installations and any other system or equipment upon the premises and shall
surrender the same, at termination hereof, in as good condition as received,
normal wear and tear excepted. Lessee shall be responsible for all repairs
required, including overhead doors, structural foundations, interior siding
walls, and warehouse concrete flooring. Lessee shall also maintain in good
condition such portions adjacent to the premises, such as sidewalks, driveways,
lawns and shrubbery, which would otherwise be required to be maintained by
Lessor. No improvement or alteration of the premises shall be made without the
prior written consent of the Lessor. Prior to the commencement of any
substantial repair, improvement, or alteration, Lessee shall give Lessor at
least 2 days written notice in order that Lessor may post appropriate notices to
avoid any liability for liens. Lessee shall not commit any waste upon the
premises, or any nuisance or act which may disturb the quiet enjoyment of any
tenant in the building.
8. ENTRY AND INSPECTION: Lessee shall permit Lessor or Lessor's agent to enter
upon the premises at reasonable times and upon reasonable notice, for the
purpose of inspecting the same, and will permit Lessor at any time within sixty
(60) days prior to the expiration of this lease, to place upon the premises any
usual "To Let" or "For Lease" signs, and permit persons desiring to lease the
same to inspect the premises thereafter.
9. INDEMNIFICATION OF LESSOR: Lessor shall not be liable for any damage or
injury to Lessee, or any other person, or to any property, occurring on the
demised premises or any part thereof, and Lessee agrees to hold Lessor harmless
from any claims for damages, caused by the negligence or willful misconduct of
Lessee.
10. POSSESSION: If Lessor is unable to deliver possession of the premises at
the commencement hereof, Lessor shall not be liable for any damage caused
thereby, nor shall this lease be void or voidable, but Lessee shall not be
liable for any rent until possession is delivered. Lessee's only remedy may be
to terminate lease if possession is not delivered within 10 days of commencement
of term hereof.
11. INSURANCE: Lessee, at this expense, shall maintain plate glass and public
liability insurance including bodily injury and property damage insuring Lessee
and Lessor with minimum coverage as follows: Lessor shall not be liable for
damages by any visitor to premises. Lessee shall furnish public liability and
property damage insurance 500,000/500,000 to Lessor. Lessee shall provide
Lessor with a Certificate of Insurance showing Lessor as additional insured.
The Certificate shall provide for a ten-day written notice to Lessor in the
event of cancellation or material change of coverage. To the maximum extent
permitted by insurance policies which may be owned by Lessor or Lessee, Lessee
and Lessor, for the benefit of each other, waive any and all rights of
subrogation which might otherwise exist.
12. UTILITIES: Lessee agrees that he shall be responsible for the payment of
all utilities, including water, gas, electricity, heat and other services
delivered to the premises.
13. SIGNS: Lessor reserves the exclusive right to the roof, side and rear of
the Premises. Lessee shall not construct any projecting sign or awning without
the prior written consent of Lessor which consent shall not be unreasonably
withheld.
14. ABANDONMENT OF PREMISES: Lessee shall not vacate or abandon the premises
at any time during the term hereof, and if Lessee shall abandon or vacate the
premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Lessee left upon the premises shall be deemed to be
abandoned, at the option of the Lessor.
15. CONDEMNATION: If any part of the premises shall be taken or condemned for
public use, and a part thereof remains which is susceptible of occupation
hereunder, this lease shall, as to the part taken, terminate as of the date the
condemnor acquires possession, and thereafter Lessee shall be required to pay
such proportion of the rent for the remaining term as the value of the premises
remaining bears to the total value of the premises at the date of condemnation;
provided however, that Lessor may at his option, terminate this lease as of the
date the condemnor acquires possession. In the event that the demised premises
are condemned in whole, or that such portion is condemned that the remainder
is not susceptible for use hereunder, this lease shall terminate upon the date
upon which the condemnor acquires possession. All sums which may be payable on
account of any condemnation shall belong to the Lessor, and Lessee shall not be
entitled to any part thereof, provided however, that Lessee shall be entitled to
retain any amount awarded to him for his trade fixtures or moving expenses.
16. TRADE FIXTURES: Any and all improvements made to the premises during the
term hereof shall belong to the Lessor, except trade fixtures of the Lessee.
Lessee may, upon termination hereof, remove all his trade fixtures, but shall
repair or pay for all repairs necessary for damages to the premises occasioned
by removal.
<PAGE>
17. DESTRUCTION OF PREMISES: In the event of a partial destruction of the
premises during the term hereof, from any cause, Lessor shall forthwith repair
the same, provided that such repairs can be made within sixty (60) days under
existing governmental laws and regulations, but such partial destruction shall
not terminate this lease, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
of Lessee on the premises. If such repairs cannot be made within said sixty (60)
days, Lessor, at his option, may make the same within a reasonable time, this
lease continuing in effect with the rent proportionately abated as aforesaid,
and in the event that Lessor shall not elect to make such repairs which cannot
be made with sixty (60) days, this lease may be terminated at the option of
either party. In the event that the building in which the demised premises may
be situated is destroyed to an extent of not less than one-third of the
replacement costs thereof, Lessor may elect to terminate this lease whether the
demised premises be injured or not. A total destruction of the building in which
the premises may be situated shall terminate this lease.
18. INSOLVENCY: In the event that a receiver shall be appointed to take over
the business of the Lessee, or in the event that the Lessee shall make a general
assignment for the benefit of creditors, or Lessee shall take or suffer any
action under any insolvency or bankruptcy act, the same shall constitute breach
of this lease by Lessee.
19. REMEDIES OF OWNER ON DEFAULT: In the event of any breach of this lease by
lessee, lessor may, at his option, terminate the lease and recover from lessee:
(a) the worth at the time of award of the unpaid rent which was earned at the
time of termination; (b) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
the award exceeds the amount of such rental loss that the lessee proves could
have been reasonably avoided; (c) the worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that lessee proves could be reasonably
avoided; or (d) any other amount necessary to compensate lessor for all
detriment proximately caused by lessee's failure to perform his obligations
under the lease or which in the ordinary course of things would be likely to
result therefrom. Lessor may, in the alternative, continue this lease in
effect, as long as lessor does not terminate lessee's right to possession, and
lessor may enforce all his rights and remedies under the lease, including the
right to recover the rent as it becomes due under the lease. If said breach of
lease continues, lessor may, at any time thereafter, elect to terminate the
lease. Nothing contained herein shall be deemed to limit any other rights or
remedies which lessor may have.
20. SECURITY: The security deposit set forth above, if any, shall secure the
performance of the Lessee's obligations hereunder. Lessor may, but shall not
be obligated to, apply all or portions of said deposit on account of Lessee's
obligations hereunder. Any balance remaining upon termination shall be returned
to Lessee. Lessee shall not have the right to apply the Security Deposit in
payment of the last month's rent.
21. DEPOSIT REFUNDS: The balance of all deposits shall be refunded within two
weeks from date possession is delivered to Owner or his authorized Agent,
together with a statement showing any changes made against such deposits by
Owner.
22. ATTORNEY'S FEES: In case suit should be brought for recovery of the
premises, or for any sum due hereunder, or because of any act which may arise
out of the possession of the premises, by either party, the prevailing party
shall be entitled to all costs incurred in connection with such action,
including a reasonable attorney's fee.
23. WAIVER: No failure of Lessor to enforce any term hereof shall be deemed to
be a waiver.
24. NOTICES: Any notice which either party may or is required to give, shall be
given by mailing the same, postage prepaid, to Lessee at the premises, or Lessor
at the address shown below, or at such other places as may be designated by the
parties from time to time.
25. REPOSSESSION: Lessee shall deliver possession of premises at the end of
term; there shall be no holding over.
26. TIME: Time is of the essence of this lease.
27. HEIRS, ASSIGNS, SUCCESSORS: This lease is binding upon and inures to the
benefit of the heirs, assigns and successors in interest to the parties.
28. TAX INCREASE: In the event there is any increase during any year of the
term of this lease in the City, County or State real estate taxes over and above
the amount of such taxes assessed for the tax year during which the term of this
lease commences, whether because of increased rate or valuation, or for any
other reason Lessee shall pay to Lessor, within 30 days, upon presentation of
tax bills due an amount equal to 100% of the increase in taxes attributable to
the leased premises. In the event that such taxes are assessed for a tax year
extending beyond the term of the lease, the obligation of Lessee shall be
proportionate to the portion of the lease term included in such year. If Lessee
shall lease additional space, then the 'term' for the purpose of this paragraph
and additional space shall commence on the date of the lease of the additional
space.
29. COST OF LIVING INCREASE: The rent provided for in paragraph 2 shall be
adjusted effective upon the first day of the month immediately following the
expiration of 36 months from the date of commencement of the term and upon the
expiration of each 36 months thereafter in accordance with changes in the United
States Consumer Price Index for All Urban Consumers (1967=100) hereinafter
called the "CPI." The monthly rent shall be increased to an amount equal to the
monthly rent set forth in paragraph 2 multiplied by a fraction the numerator of
which is the CPI for the second calendar month immediately preceding the
adjustment date and the denominator of which is the CPI for the second calendar
month preceding the commencement of the lease term. Provided, however, in no
event shall the monthly rent be less than the amount set forth in paragraph 2.
30. INCREASE IN INSURANCE PREMIUM: Increase in premium for fire and extended
coverage insurance paid by Lessor during the first year of lease as result of
Lessee's operations or cost of living increases shall be paid to Lessor upon
presentation of paid insurance bill, by Lessee, an amount of 100% of premium
increase attributable to the leased premises.
31. SNOW REMOVAL: Lessor is responsible for snow removal in parking lots and
park entrance.
32. ENVIRONMENTAL STATEMENT: The above notwithstanding, Lessor hereby states
that he has no knowledge, after diligent inspection of the site, of the presence
of any environmental hazards on the subject site: Lessor attests that he is
under no claims or instructions by any regulatory agency pursuant to any
environmental hazards, and further warrants that, to his knowledge, said site is
free of toxic, noxious and harmful residues, materials and conditions. Lessor
hereby indemnifies lessee against any and all claims arising from un-named and
unknown hazards present at the subject site at the initiation of this lease
agreement.
33. USE OF PREMISES-ENVIRONMENTAL: Lessee shall not use the premises in any
manner which endangers the environment or is in violation of any state, federal
or municipal regulation, statute or ordinance. Lessor shall have the right to
inspect and conduct tests on demised premises at reasonable times and place to
insure that there are no violations of this covenant. Lessee shall and hereby
indemnifies lessor against any liability or loss incurred by lessor as the
result of lessees failure to perform any of the covenants contained herein
including lessees failure to comply with any governmental authority. Lessors
right to indemnify hereunder shall arise notwithstanding that joint or
concurrent liability may be imposed on lessor by statute, ordinance, regulation
or other law. Lessees indemnity shall include, without being limited to, lessors
reasonable expenses including attorney fees.
34. RENOVATION:
1. Lessor shall at his sole cost and expense.
a. Relocate one overhead door on the north wall of east bay prior to
occupancy.
b. Install one overhead door (14'2"x14') on east wall between columns 63
and 64 on or before May 1, 1991.
c. Repair all roof leaks in west bay of Parcel 1 prior to occupancy and
Parcel 2 prior to October 1, 1991.
d. Check overhead cranes and have them in working order prior to
occupancy. Lessor has the obligation to keep cranes in mechanical
working order, excepting for normal maintenance or any operating abuse
for the term of 6 months.
<PAGE>
e. Repair, replace and put rail service in working condition to leased
property prior to occupancy.
2. Lessee shall:
a. Inspect and accept condition of Parcel 1 and Parcel 2 described in
Exhibit "A" excepting for roof repairs prior to occupancy of Parcel 1.
b. Provide any and all facilities for employees, such as office, locker
rooms, lunch rooms etc. at their own expense with Lessor. Layouts,
plans and blueprints for any new construction shall be submitted to
Lessor for approval.
ENTIRE AGREEMENT: The foregoing constitutes the entire agreement between the
parties and may be modified only by a writing signed by both parties. The
following Exhibits, if any, have been made a part of this lease before the
parties' execution hereof:
The undersigned Lessee hereby acknowledges receipt of a copy hereof.
DATED: March 19, 1991
-----------------------------
By: /s/ Robert S. Rankin By: /s/ Michael A. Kelly
---------------------------- ---------------------------- Lessee
Robert S. Rankin, Owner
R & R Industrial Park
Rider
R-1 The total rent shall be $243,750.06 payable as follows: $13,541.67 per
month for Parcel 1 commencing April 1, 1991 and ending September 30, 1991 and
$27,083.34 per month for Parcels 1 and 2 commencing October 1, 1991 and ending
March 31, 1992. Notwithstanding anything contained in this Lease to the
contrary, Lessor grants Lessee the right to use and occupy Parcel 2 commencing
April 1, 1991 through and including September 30, 1991 rent free.
R-2 LEASE EXTENSION: The lease shall be extended from April 1, 1992 through
March 31, 1994 under the same terms and conditions of the original term upon 30
days' written notice to Lessor. If Lessee does not extend, it shall vacate the
property on or before March 31, 1992.
If a lease extension is not executed, Lessee shall pay to Lessor amounts for
reimbursement of installation of overhead door between Columns #68 and #69 on
the East wall in the amount of $2,500.00; relocation of the existing overhead
door in Northeast bay in the amount of $1,250.00; and, repair and construction
of rail entering leased property in the amount of $16,000.00. Such payments to
be made at least 30 days prior to vacating the premises.
Lessee is further granted the option to extend the term of this lease for four
(4) additional 3-year periods commencing March 31, 1994. All terms and
provisions of this lease shall remain in full force and effect during any such
option period. Lessee shall notify Lessor in writing of its intention to
exercise any option at least 60 days before the expiration of the then current
term.
R-3 Lessor further grants Lessee the option to lease all or any part of the
space which is or becomes available in Building 2, or otherwise on the property
of which the Premises are a part ("Building"), upon the terms set forth in this
paragraph. Lessor will notify Lessee, in writing, of any bona fide proposed
leases for any portion of the Building which Lessor intends to lease to a third
party ("Option Space"). Lessee shall then have the option to lease the Option
Space, upon the same terms and conditions of the proposed lease, by giving
written notice to Lessor within seven (7) business days after Lessee's receipt
of Lessor's notice. If Lessee fails to exercise its option to lease the Option
Space within the aforesaid seven (7) business day period, Lessee's rights as to
the Option Space shall terminate, provided however, Lessee's option to lease
space in the future in the Building, including, without limitation, the Option
Space, as and when such space becomes available shall not be prejudiced. If
Lessee exercises its option on the Option Space, the Option Space shall become
part of the Premises and subject to all of the Lease terms and conditions.
R-4 In no event shall Lessee be liable for any fine, levy, assessment, penalty
or other charge assessed against the Premises, Building or other property of
which the Premises for a part, resulting from Lessor's violation of any law,
regulation or ordinance pertaining to hazardous substances or environmental
contamination. Lessor's indemnification of Lessee under paragraph 34 of the
Lease shall include Lessee's costs, expenses and reasonable attorney's fee
thereunder.
R-5 So long as Lessee is not in default under this Lease, Lessee's right to
quiet and peaceful enjoyment of the Premises shall not be disturbed.
<PAGE>
R-6 Real Estate tax increases shall be allocated on a building square footage
basis between the leased premises and the balance of building #2.
Insurance premium increase shall be allocated to the leased premises as follows:
A. 100% of premium increases assessed as a result of lessee's activities; and
B. General price level increases on a building square footage basis between the
leased premises and the balance of the building(s) covered by the same insurance
policy.
Executed this 20 day of March, 1991.
Lessor: Lessee:
/s/ Robert S. Rankin /s/ Michael A. Kelly
- ------------------------------- ---------------------------------
Robert S. Rankin, Owner
R & R Industrial Park Area Transportation Company
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
THIS FIRST AMENDMENT TO LEASE AGREEMENT is made and entered into as of this
2nd day of August, 1993 by and between Great Lakes Investors I, an Illinois
limited partnership ("Lessor") and Roll & Hold Warehousing and Distribution
Corp., an Illinois corporation ("Lessee").
RECITALS
--------
WHEREAS, Lessor and Area Transportation Company, Inc., an Illinois
corporation ("Original Area"), entered into that certain Lease Agreement dated
as of May 1, 1992 ("Lease"), pertaining to certain premises located in Lake
County, Indiana, more particularly described in Exhibit A to the Lease; and
WHEREAS, subsequent to the date of the Lease, Original Area was merged into
Area Interstate Trucking, Inc., an Illinois corporation ("Area Interstate")
which was the surviving corporation of said merger and thereupon or thereafter,
Area Interstate changed its name to Area Transportation Company, Inc., an
Illinois corporation ("New Area"); and
WHEREAS, New Area assigned all of its right, title and interest in and to
the Lease to Lessee pursuant to that certain Assignment and Assumption of Lease
Agreement dated as of August 2, 1993 from New Area to Lessee; and
WHEREAS, Lessor and Lessee desire to amend the Lease as more fully set
forth below.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Lessor and Lessee agree as follows:
1. Definitions. All terms used herein without definition shall have the
meanings ascribed to such terms in the Lease.
2. Premises. Paragraph 1 of the Lease is hereby deleted in its entirety and
the following is substituted in lieu therefor:
<PAGE>
"1. Premises:
--------
(a) Original Premises. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor for the Term, at the rental and upon all of the
conditions and covenants set forth herein, that certain real estate and
facilities within the Complex, including any and all buildings, structures
and improvements located thereon, which are more fully described on Exhibit
"B-1" attached hereto and by this reference incorporated herein (the
"Original Premises"), and are commonly referred to as Units 20A, 20B, 20C,
Building 16 and a portion of Building 21 of the Complex, consisting of two
hundred five thousand five hundred sixty-one (205,561) stipulated rentable
square feet.
(b) Expansion and Access Premises. Effective as of the Completion Date (as
hereinafter defined), Lessor shall lease to Lessee and Lessee shall lease
from Lessor for the balance of the Term, at the rental and upon all of the
conditions and covenants set forth herein, that certain real estate and
facilities within the Complex, including any and all buildings, structure
and improvements located thereon, which are more fully described on Exhibit
"B-2" attached hereto and by this reference incorporated herein and are
commonly referred to as (i) Units 18C and 18D of the Complex, consisting of
fifty seven thousand (57,000) stipulated rentable square feet (the
"Expansion Premises") and (ii) a portion of Unit 18E of the Complex,
consisting of nine thousand two hundred fifty-nine (9,259) stipulated
rentable square feet (the "Access Premises") (as of the Completion Date,
the Original Premises, the Expansion Premises and the Access Premises, as
the context shall require, are collectively referred to in the Lease as the
"Premises")."
3. Rent. Paragraphs 3.1 and 3.2 of the Lease are hereby deleted in its
entirety and the following are inserted in lieu therefor:
-2-
<PAGE>
"3. Rent
----
3.1.1 Original Premises Base Rent. Lessee shall, subject to subparagraph
3.2 below, pay to Lessor as "Original Base Rent" for the Original Premises
annual rent in the amount of Six Hundred Forty-Nine Thousand Five Hundred
Seventy-Two and no/100 Dollars ($649,572.00), payable in equal monthly
installment of Fifty-Four Thousand One Hundred Thirty-One and no/100
Dollars ($54,131.00), in advance, on the first (1st) day of each month of
the Term.
3.1.2 Expansion Premises and Access Premises Base Rent. From and after the
date hereof through the Completion Date, the Lessee shall pay to Lessor as
"Expansion and Access Premises Base Rent" for the Expansion Premises and
Access Premises, monthly rent in the amount of $3,750.00, in advance, on
the first (1st) day of each month during said period. Commencing as of the
later of (i) January 1, 1994 or (ii) the Completion Date (the applicable
date being the "Rent Commencement Date"), Lessee shall pay to Lessor as
"Expansion and Access Premises Base Rent" for the Expansion Premises and
Access Premises, annual rent in the amount of One Hundred Thirty Two
Thousand Five Hundred Eighteen Dollars ($132,518.00), payable in equal
monthly installments of Eleven Thousand Forty Three and 17/100 Dollars
($11,043.17), in advance, on the first day of each month from and after the
Rent Commencement Date through the balance of the Term.
3.1.3 General. Effective as of the Completion Date, Original Base Rent,
Expansion and Access Premises Base Rent and any other amounts due hereunder
are hereinafter referred to collectively as "Rent", the payment of which
shall be deemed an independent covenant by Lessee. Rent for any period
during the Term which is for less than one month shall be a prorata portion
of the monthly installment. Rent shall be payable in lawful money of the
United States, without demand and without set-off or deduc-
-3-
<PAGE>
tion for any reason whatsoever, to Lessor at the address stated herein or
to such other persons or at such other places as Lessor may designate in
writing.
3.1.4 Applicable Taxes and Operating Expenses - Expansion and Access
Premises Partial Abatement. Lessor agrees, from and after the date hereof
through the later of (i) January 1, 1994 or (ii) the Completion Date,
Lessee's Proportionate Share of Applicable Taxes and Operating Expenses
applicable to the Expansion and Access Premises shall be abated.
3.2. Annual Rent Adjustment.
----------------------
(a) Original Premises. On January 1, 1996 and on the same day and month
each year thereafter during the Term of the Lease (the "Adjustment
Date"), the Original Base Rent shall be increased by an amount equal
in proportion to the increase, if any, in the United States Department
of Labor Statistics, Consumer Price Index - all items, Urban Consumers
(the "CPI") applicable to the Chicago, Metropolitan area. If the CPI
for the month in which the Adjustment Date occurs (the "Extension
Index") shows an increase over the CPI for May, 1992 (the "Base
Index"), the Original Base Rent, as determined in 3.1.1 above, shall
be multiplied by fifty percent (50%) of the percentage increase of the
Extension Index as of the Adjustment Date over the Base Index, which
amount shall then be added to the Original Base Rent and become the
adjusted Original Base Rent due and payable in equal monthly
installments commencing on the Adjustment Date of that year through
the next Adjustment Date; provided, however, that the monthly Original
Base Rent shall in no event be decreased below the monthly Original
Base Rent applicable to the preceding year. In the event that the
computation of the adjusted monthly Original Base Rent is delayed
because
-4-
<PAGE>
the CPI has not yet been released, said computation shall be made as
soon as reasonably possible after the release of the CPI, and once
said computation is completed, Lessee shall make payments of the
adjusted monthly Original Base Rent retroactive to the Adjustment Date
of the applicable year. If the CPI is changed from the current base
year (i.e., 1982-1984=100), the CPI shall be converted in accordance
with the conversion factor published by the U.S. Department of Labor.
If the CPI is discontinued or revised during the term, such other
government index or computation with which it is replaced shall be
used in order to obtain substantially the same result.
(b) Expansion Premises and Access Premises. On January 1, 1995 and on the
same day and month each year thereafter during the Term of the Lease
(the "Other Adjustment Date"), the Expansion and Access Premises Base
Rent shall be increased by an amount equal in proportion to the
increase, if any, in the United States Department of Labor Statistics,
Consumer Price Index - all items, Urban Consumers (the "CPI")
applicable to the Chicago, Metropolitan area. If the CPI for the
calendar month of October of the year immediately preceding the Other
Adjustment Date (the "Other Extension Index") shows an increase over
the CPI for October, 1993 (the "Other Base Index"), the Expansion and
Access Base Rent, as determined in 3.1.2 above, shall be multiplied by
fifty percent (50%) of the percentage increase of the Other Extension
Index as of the Other Adjustment Date over the Other Base Index, which
amount shall then be added to the Expansion and Access Premises Base
Rent and become the adjusted Expansion and Access Base Rent due and
payable in equal monthly installments commencing on the Other
Adjustment Date of that year through the next Other
-5-
<PAGE>
Adjustment Date; provided, however, that the monthly Expansion and
Access Premises Base Rent shall in no event be decreased below the
monthly Expansion and Access Premises Base Rent applicable to the
preceding year. In the event that the computation of the adjusted
monthly Expansion and Access Premises Base Rent is delayed because the
CPI has not yet been released, said computation shall be made as soon
as reasonably possible after the release of the CPI, and once said
computation is completed, Lessee shall make payments of the adjusted
monthly Expansion and Access Premises Base Rent retroactive to the
Adjustment Date of the applicable year. If the CPI is changed from the
current base year (i.e., 1982-1984=100), the CPI shall be converted in
accordance with the conversion factor published by the U.S. Department
of Labor. If the CPI is discontinued or revised during the term, such
other government index or computation with which it is replaced shall
be used in order to obtain substantially the same result.
4. Security Deposit. As of the Completion Date, Lessee hereby agrees to
deposit with Lessor a sufficient sum of money to increase the security
deposit held by Lessor under Paragraph 4 of the Lease to an amount equal to
Eighty Thousand Eight Hundred Five and 17/100 Dollars ($80,805.17).
5. Lessor's Work. As soon as reasonably practicable subsequent to the date
hereof, Lessor, at Lessor's sole cost and expense, shall complete the
following improvements to the Expansion Premises and Access Premises
(collectively, "Lessor's Work"):
a. Lessor shall extend Lessee's currently existing cranework system into
the Expansion Premises;
b. Lessor shall install two (2) twenty-five (25) ton cranes into the
Expansion Premises. These cranes shall be P & H Class D cranes which
are radio controlled with cab seating or such other equivalent cranes
as Lessee shall approve in writing,
-6-
<PAGE>
which approval shall not be unreasonably withheld or delayed;
c. Lessor shall remove the existing demising partitions currently located
on the west and south walls of the Expansion Premises;
d. Lessor shall erect a separate demising partition on the northernmost
boundary of the Expansion Premises. The partition is to consist of
steel sheets comparable to the steel sheet partitions located in the
Original Premises and shall be insulated to the same R value as those
partitions removed pursuant to clause c. immediately above. It is
acknowledged and agreed by Lessee that materials from the partitions
removed pursuant to clause c. immediately above may be salvaged and
re-installed by Lessor;
e. Lessor shall provide the necessary labor and materials to construct
the Access Premises;
f. Lessor shall adjust the heating equipment currently located in the
Original Premises necessary to provide heat and airflow into the
Expansion Premises. Lessor shall further install any additional
equipment necessary to maintain the heating specifications contained
in the Lease, including building pressurization.
When Lessor is of the reasonable option that Lessor's Work is
Substantially Complete (as hereinafter defined), Lessor shall so
notify Lessee, and upon such notification, Lessor and Lessee shall
promptly (and not later than five (5) business days after the date of
Lessor's notice) inspect the Expansion Premises and Access Premises
and mutually prepare a written statement of yet to be completed items
of Lessor's Work ("Punch List"). It is acknowledged between the
parties, the completion date ("Completion Date") shall be deemed to
have occurred when the Expansion Premises and Access Premises shall be
Substantially Completed. The Expansion Premises and Access Premises
shall be deemed substantially completed ("Substantially Completed" or
Substantial Completion") at such time as, in the reasonable opinion of
Lessor and Lessee, Lessor has completed Lessor's Work to the point
where items on the Punch List do not materially impair
-7-
<PAGE>
Lessee's ability to conduct normal business operations in the
Expansion Premises and Access Premises ("Lessor's Work Standard").
Lessor will complete the Punch List as soon as reasonably practical
after the Completion Date.
6. Possession. Lessee will take possession of the Expansion Premises and
Access Premises as of and on the Completion Date. In the event, with
Lessor's consent, Lessee shall occupy all or any portion of the Expansion
Premises and/or Access Premises prior to the Completion Date, all of the
covenants and conditions of the Lease (except for the payment of Rent
pursuant to subparagraph 3.1.2 hereof, however, Lessee shall continue to be
obligated to pay to Lessor the Rent payable to Lessor for the current
occupancy of a portion of the Expansion Premises in accordance with the
terms of the Lease) shall be binding upon Lessee in respect to such
occupancy as if the Completion Date had been the date when Lessee began
such occupancy.
7. Property Taxes. Effective as of the Completion Date, for all purposes of
Paragraph 9.1 of the Lease, Lessee's "Proportionate Share" shall increase
from twenty and 15/100 percent (20.15%) to twenty-six and 64/100 percent
(26.64%).
8. Common Area Expenses. Lessee hereby acknowledges and agrees, as of the
Completion Date, Lessee's Proportionate Share of the Operating Expenses
applicable to the Original Premises shall be twenty and 15/100 percent
(20.15%) and as applicable to the Expansion Premises and Access Premises
shall be six and 18/100 percent (6.49%) and as to the Premises shall
increase from twenty and 15/100 percent (20.15%) to twenty-six and 64/100
percent (26.64%). It is further agreed between the parties that, as of the
Completion Date, clauses (b) and (c) contained in the last grammatical
paragraph of paragraph 10 of the Lease shall be deleted in their entirety
and the following is inserted in lieu therefor:
"(b) Lessee's Proportionate Share of Operating Expenses applicable to the
Original Premises for calendar year 1993 shall not exceed One Hundred
Eighty One Thousand Five Hundred Seventy Two and 02/100 Dollars
($181,572.02), and (c)(i) the increase in Lessee's Proportionate Share of
Operating Expenses applicable to the Original Premises for calendar year
1994 shall not exceed ten percent (10%) of Lessee's
-8-
<PAGE>
Proportionate Share of Operating Expenses applicable to the Original
Premises charged to Lessee in calendar year 1993 and (ii) the increase in
Lessee's Proportionate Share of Operating Expenses applicable to the
Premises for any calendar year after calendar year 1994 shall not exceed
ten percent (10%) of Lessee's Proportionate Share of Operating Expenses
applicable to the Premises charged to Lessee in the prior calendar year."
Lessor and Lessee acknowledge and agree the provisions of
subparagraphs (b) and (c)(i) above apply only to the Original Premises and
are inapplicable to the Expansion Premises and Access Premises (it being
acknowledged between the parties Lessee shall be charged the full Lessee's
Proportionate Share of Operating Expenses applicable to the Expansion
Premises and Access Premises for calendar year 1994), and after calendar
year 1994 shall not increase more than ten percent (10.0%) of the previous
year.
9. Option to Renew. Provided Lessee is not in default under the terms and
conditions of the Lease on (i) the date Lessee delivers to Lessor the
Renewal Notice (as defined below) and (ii) the date the Renewal Period (as
defined below) commences, Lessee shall have the option ("Renewal Option")
to extend the Term of the Lease for one (1) additional five (5) year period
("Renewal Period"). If Lessee desires to exercise its Renewal Option,
Lessee shall deliver written notice ("Renewal Notice") to Lessor at least
fourteen (14) months prior to the expiration of the Term. The Renewal
Option shall on the same terms and conditions as contained in the Lease,
except annual Rent for the Renewal Period shall be the Prevailing Market
Rental Rate (as defined below). Notwithstanding any of the foregoing, any
attempt by Lessee to exercise the Renewal Option by any method, or at any
time, or in any circumstance, except as specifically set forth above,
shall, at the sole option and discretion of Lessor be null and void and of
no force or effect. For purposes of this Paragraph 9, "Prevailing Market
Rental Rate" shall mean the rental rate, expressed as the annual amount per
rentable square foot for a term equivalent to the period for which
Prevailing Market Rental Rate is being determined and rental related terms
beginning with the first (1st) day of the subject period that a willing,
creditworthy, new, non-equity tenant leasing comparable space to Lessee's
would pay and a willing, comparable landlord of an industrial complex
comparable to the Complex located in the Chicago Metropolitan Industrial
Market, includ-
-9-
<PAGE>
ing, Lake County, Indiana (the "Market") would accept at arms length,
giving appropriate consideration to annual rental rate per rentable square
foot, rental escalations (including type, base year and stops), length of
lease term, size and location of the premises being leased and other
generally applicable terms and conditions prevailing for comparable space
in comparable industrial complexes located in the Market. It is hereby
agreed between Lessor and Lessee that each party shall negotiate in good
faith for a period of sixty (60) days subsequent to the date Lessor is in
receipt of the Renewal Notice ("Negotiation Period") as to the Prevailing
Market Rental Rate. In the event Lessor and Lessee are unable to agree upon
the Prevailing Market Rental Rate, despite each party's good faith efforts,
prior to the expiration of the Negotiation Period, Lessee's Renewal Option
shall be deemed no longer to be of any force and effect.
10. Right of First Opportunity. Subject to any pre-existing rights of other
tenants within the Complex to lease all or any portion of the Right of
First Opportunity Premises (as defined below), and provided Lessee is not
in default under the terms and conditions of the Lease as of the date
Lessee notifies Lessor of its desire to exercise a Right of First
Opportunity (as defined below), Lessee shall have a right of first
opportunity through the end of the Term ("Right of First Opportunity") to
lease any space adjacent to the Premises which becomes available for
leasing to third parties during the Term (the "Right of First Opportunity
Premises"), subject to the terms and conditions hereof. Immediately prior
to the date on which Lessor contemplates offering all or a portion of the
First Opportunity Premises to third parties (in such case, a "Proposal"),
Lessor shall notify Lessee, in writing, as to the date in the future
("Availability Date") when such Right of First Opportunity Premises shall
be available to Lessee ("Lessor's Notice"), which Lessor's Notice shall
also contain a narrative description of the terms of the Proposal. Lessee
must notify Lessor, in writing, within five (5) days immediately following
Lessee's receipt of Lessor's Notice of Lessee's desire to exercise its
Right of First Opportunity ("Lessee's First Opportunity Notice") with
respect to that portion of the Right of First Opportunity Premises
designated in Lessor's Notice ("Designated Space"). Lessee's Right of First
Opportunity must be exercised as to one hun-
-10-
<PAGE>
dred percent (100%) of the Designated Space. If Lessee does not notify
Lessor of its election to exercise its Right of First Opportunity with
respect to the Designated Space within said five (5) day period, then, in
such event, Lessee shall be deemed to have elected not to exercise its
Right of First Opportunity with respect to the Designated Space and shall
be deemed to have waived its Right of First Opportunity with respect to
such Designated Space. If Lessee elects to exercise Lessee's Right of First
Opportunity within the aforesaid five (5) day period, then, in such event,
Lessee shall lease the Designated Space, as of the Availability Date, on
the same terms and conditions contained in the Lease, except (i) Rent for
the Designated Space shall be the rent set forth in the Proposal and (ii)
the term "Premises" for all purposes of the Lease shall include the
Designated Space. In the event Lessee delivers Lessee's First Opportunity
Notice, the parties shall enter into an amendment to the Lease to reflect
the incorporation of the Designated Space into the Premises and the terms
referenced in this Paragraph 10. In the event Lessee fails to exercise its
Right of First Opportunity, Lessor shall be free to lease the Right of
First Opportunity Premises, which was the subject of Lessor's Notice, to
such parties and upon such terms as Lessor may elect.
11. First Amendment. Any reference in the Lease to the "Lease" shall mean and
include this First Amendment.
12. Affirmation. Except as otherwise provided herein, the terms and conditions
of the Lease shall remain in full force and effect.
13. Conflict. In the event of a conflict between the terms of the Lease and the
terms of this First Amendment, the terms of this First Amendment shall
control.
-11-
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this First Amendment as
of the day and year first above written.
LESSOR
- ------
GREAT LAKES INVESTORS I,
an Illinois limited partnership
By: Indiana Land Corp., an Illinois
corporation, general partner
By: /s/ John S. Gates, Jr.
----------------------------
John S. Gates, Jr.,
Its President
LESSEE
- ------
ROLL & HOLD WAREHOUSING AND
DISTRIBUTION CORP., an
Illinois corporation
By: /s/ Michael Kelly
--------------------------------
Its: CFO
---------------------------
-12-
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT
--------------------------------------------
THIS ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT ("Assignment") is made as
of the 2nd day of August, 1993 by and between AREA TRANSPORTATION COMPANY, INC.,
an Illinois corporation ("Assignor") and ROLL & HOLD WAREHOUSING AND
DISTRIBUTION CORP., an Illinois corporation ("Assignee").
WITNESSETH:
----------
WHEREAS, Assignor, as lessee, and Great Lakes Investors I, an Illinois
limited partnership ("Landlord"), as lessor, entered into that certain Lease
Agreement dated as of May 1, 1992 (the "Lease"), pertaining to certain premises
located in Lake County, Indiana, more particularly described in Exhibit A to the
Lease; and
WHEREAS, Assignor desires to assign all of Assignor's right, title and
interest in and to the Lease to Assignee and Assignee desires to accept all of
Assignor's right, title and interest in and to the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Assignment. Assignor does hereby assign, transfer, set over and convey
unto Assignee, all of Assignor's right, title and interest in and to the Lease,
as lessee thereunder, to have and to hold the same unto Assignee, its successors
and assigns, from and after the date hereof, subject, however, to the terms,
covenants, conditions and provisions of the Lease and this Assignment.
2. Assumption of Obligations. Assignee hereby accepts the assignment of the
Lease subject to the terms and conditions of the Lease and this Assignment, and,
from and after the date hereof, does hereby assume and become fully responsible
for and agree to perform, discharge, fulfill and observe all of Assignor's
obligations, covenants and conditions with respect to the Lease whether accruing
prior to or after the date hereof with the same force and effect as if Assignee
were the original party, as lessee, thereto and agrees to be liable for the
observation and performance thereof.
3. Successors. The terms, covenants, conditions and warranties herein
contained and the powers hereby granted shall inure to the benefit of, and bind,
all parties hereto and their respective successors and assigns.
<PAGE>
4. Severability. If any provision of this Assignment or the application
thereof to any entity, person or circumstance shall be invalid or unenforceable
to any extent, the remainder of this Assignment and the application of its
provisions to other entities, persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
5. Third Party Beneficiaries. It is expressly agreed by Assignor and
Assignee that this Assignment shall not be construed or deemed made for the
benefit of any third party or parties, except for any successors or assigns of
Assignor or Assignee pursuant to paragraph 3 above.
6. Entire Agreement. This document and the Agreement contain the entire
agreement concerning the assignment of Leases and Contracts between the parties
hereto. No variations, modifications or changes herein or hereof shall be
binding upon any party hereto, unless set forth in a document duly executed by,
or on behalf of, such party.
7. Construction. Whenever used herein and the context requires it, the
singular number shall include the plural, the plural the singular, and any
gender shall include all genders.
8. Governing Law. The parties agree that the law of the State of Indiana
shall govern the performance and enforcement of this Assignment.
9. Condition. This Assignment is expressly subject to and conditioned upon
Landlord executing Landlord's Consent attached to this Assignment.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
ASSIGNOR:
--------
AREA TRANSPORTATION COMPANY,
INC., an Illinois corporation
By: /s/ Michael Kelly
-------------------------------
Name: Michael Kelly
-----------------------
Title: CFO
-----------------------
ASSIGNEE:
--------
ROLL & HOLD WAREHOUSING AND
DISTRIBUTION CORP., an Illinois
corporation
By: /s/ Michael Kelly
-------------------------------
Name: Michael Kelly
-----------------------
Title: CFO
-----------------------
-3-
<PAGE>
LANDLORD'S CONSENT
------------------
From and after the Effective Date (as hereinafter defined), Landlord hereby (i)
consents to the foregoing Assignment and (ii) agrees to recognize Assignee as
the lessee under the Lease in the same manner and to same extent as if Assignee
were the original lessee thereunder and agrees to accept the performance by
Assignee of lessee's obligations under the Lease. From and after the Effective
Date, Assignor agrees to release Assignor from all of its obligations and
liabilities under the Lease and shall only seek recourse against Assignor, if
necessary, under and pursuant to the terms of the Guaranty (as hereinafter
defined). For purposes of this Landlord's Consent, the "Effective Date" shall be
deemed to have occurred on the later of the date upon which, (i) Assignor has
executed and delivered to Landlord the Guaranty ("Guaranty") in the form
attached to the Assignment as Exhibit A and (ii) Assignor and Assignee have
executed and delivered to Landlord the certificate attached to the Assignment
as Exhibit B.
Date: GREAT LAKES INVESTORS I, an
---------------------- Illinois limited partnership
By: Indiana Land Corp., an
Illinois corporation,
general partner
By: /s/ John S. Gates
-------------------------
Its:
---------------------
<PAGE>
EXHIBIT A
---------
GUARANTY
--------
FOR VALUE RECEIVED, and in consideration for, and as an inducement to Great
Lakes Investors I, an Illinois limited partnership ("Landlord") to consent to
the undersigned assigning all of its right, title and interest, as lessee, in
and to that certain Lease Agreement dated as of May 2, 1992 ("Lease") by and
between Landlord, as lessor, and the undersigned, as lessee, to Roll & Hold
Warehousing and Distribution Corp., an Illinois corporation ("Tenant"), the
undersigned, whose interest would be served by entering into this Guaranty,
hereby absolutely and unconditionally guarantees to Landlord, its successors and
assigns, through the initial term of the Lease (and not during any extension or
renewal periods contained therein), the prompt and full payment of all Rent, as
that term is defined in the Lease, and all other payments to be made by Tenant
under the Lease, and the full performance and observance by Tenant of all other
terms, covenants, conditions and agreements therein provided to be performed and
observed by Tenant, for which the undersigned shall be jointly and severally
liable with Tenant. The undersigned hereby waives any notice of non-payment,
non-performance or non-observance, or proof of notice or demand.
The undersigned agrees that, in the event of a default by Tenant under the
Lease, Landlord may proceed against the undersigned before, after or
simultaneously with or in lieu of proceeding against Tenant. This Guaranty shall
not be terminated, affected or impaired in any manner by reason of (1) the
assertion by Landlord against Tenant of any of the rights or remedies reserved
to Landlord pursuant to the provisions of the Lease; (2) the relief of Tenant
from any of Tenant's obligations under the Lease by operation of law or
otherwise; (3) the commencement of summary or other proceedings against Tenant;
(4) the failure of Landlord to enforce any of its rights against Tenant; or (5)
the granting by Landlord of any extensions of time to Tenant. The undersigned
hereby waives all defenses of suretyship.
The undersigned further covenants and agrees that (1) it shall be bound by
all the provisions, terms, conditions, restrictions and limitations contained in
the Lease which are to be observed or performed by Tenant thereunder, the same
as if the undersigned were named therein as Tenant; and (2) this Guaranty shall
be absolute and unconditional and shall be in full force and effect
notwithstanding any amendment, addition, assignment,
<PAGE>
sublease, transfer, or other modification of the Lease, whether or not the
undersigned shall have knowledge or have been notified of or agreed or consented
thereto. The failure of Landlord to insist in any one or more instances upon
strict performance or observance of any of the terms, provisions or covenants
of the Lease or to exercise any right therein contained shall not be construed
or deemed to be a waiver or relinquishment for the future of such term,
provision, covenant or right but the same shall continue and remain in full
force and effect. If Landlord, at any time, is compelled to take action, by
legal proceedings or otherwise, to enforce or compel compliance with the terms
of this Guaranty, the undersigned shall, in addition to any other rights or
remedies to which Landlord may be entitled hereunder or as a matter of law or in
equity, pay to Landlord all costs, including reasonable attorneys' fees,
incurred or expended by Landlord in connection therewith.
In the event the Lease is disaffirmed by a Trustee in Bankruptcy for
Tenant, the undersigned agrees that it shall, at the election of Landlord,
either assume the Lease and perform all of the covenants, terms and conditions
of Tenant thereunder or enter into a new lease which said new lease shall be in
form and substance identical to the Lease. All duties and obligations of the
undersigned pursuant to this Guaranty shall be binding upon the successors,
heirs, executors, personal representatives, trustees, guardians, conservators
and assigns of the undersigned. If the undersigned consists of more than one
person or entity, then each of such person shall be jointly and severally liable
for the obligations of the undersigned under this Guaranty.
For purposes of this Guaranty, the word "Tenant" shall also include the
successors, heirs, executors, personal representatives, trustees, guardians,
conservators and permitted assigns of Tenant. All capitalized terms used in this
Guaranty shall have the same meanings as are given to such terms in the Lease
unless otherwise specifically defined in this Guaranty. This Guaranty shall be
governed by and construed in accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, this Guaranty is executed as of the 2nd day of August
1993.
AREA TRANSPORTATION COMPANY,
INC., an Illinois corporation
By: /s/ Michael A. Kelly
-----------------------------
Its: CFO
-------------------------
A-2
<PAGE>
EXHIBIT B
---------
CERTIFICATE
-----------
Each of the undersigned, as a material inducement to Great Lakes Investors I, an
Illinois limited partnership ("Great Lakes") consenting to Area Transportation
Company, Inc., an Illinois corporation ("Area") assignment of all of its right,
title and interest in and to that certain Lease Agreement dated as of May 2,
1993 (the "Lease") by and between Great Lakes, as lessor, and Area, as lessee,
to Roll & Hold Warehousing and Distribution Corp., an Illinois corporation
("Roll & Hold"), pursuant to that certain Assignment and Assumption of Lease
Agreement dated of even date herewith (the "Assignment") from Area to Roll &
Hold, hereby represent and warrant to Great Lakes that (i) each of the
undersigned is duly organized, validly existing and in good standing under the
laws of the State of Illinois and (ii) the Assignment and Guaranty (as defined
in Landlord's Consent attached to the Assignment), as the case may be, are duly
authorized, executed and delivered by and binding upon each party, as the case
may be, in accordance with their respective terms and no consent, approval or
authorization is required to be obtained in connection therewith. Each of the
undersigned hereby acknowledge and agree a breach, by either party, of the
representations and warranties contained in this Certificate shall constitute a
material breach under the Lease.
Dated as of August 2, 1993.
AREA:
----
AREA TRANSPORTATION COMPANY,
INC., an Illinois corporation
By: /s/ Michael A. Kelly
-------------------------
Its: CFO
---------------------
ROLL & HOLD:
-----------
ROLL & HOLD WAREHOUSING AND
DISTRIBUTION CORP., an Illinois
corporation
By: /s/ Michael A. Kelly
-------------------------
Its: CFO
---------------------
B-1
<PAGE>
CERTIFICATE
-----------
Each of the undersigned, as a material inducement to Great Lakes Investors I, an
Illinois limited partnership ("Great Lakes") consenting to Area Transportation
Company, Inc., an Illinois corporation ("Area") assignment of all of its right,
title and interest in and to that certain Lease Agreement dated as of May 2,
1993 (the "Lease") by and between Great Lakes, as lessor, and Area, as lessee,
to Roll & Hold Warehousing and Distribution Corp., an Illinois corporation
("Roll & Hold"), pursuant to that certain Assignment and Assumption of Lease
Agreement dated of even date herewith (the "Assignment") from Area to Roll &
Hold, hereby represent and warrant to Great Lakes that (i) each of the
undersigned is duly organized, validly existing and in good standing under the
laws of the State of Illinois and (ii) the Assignment and Guaranty (as defined
in Landlord's Consent attached to the Assignment), as the case may be, are duly
authorized, executed and delivered by and binding upon each party, as the case
may be, in accordance with their respective terms and no consent, approval or
authorization is required to be obtained in connection therewith. Each of the
undersigned hereby acknowledge and agree a breach, by either party, of the
representations and warranties contained in this Certificate shall constitute a
material breach under the Lease.
Dated as of August 2, 1993.
AREA:
----
AREA TRANSPORTATION COMPANY,
INC., an Illinois corporation
By: /s/ Michael A. Kelly
-------------------------
Its: CFO
---------------------
ROLL & HOLD:
-----------
ROLL & HOLD WAREHOUSING AND
DISTRIBUTION CORP., an Illinois
corporation
By: /s/ Michael A. Kelly
-------------------------
Its: CFO
---------------------
B-1
<PAGE>
GUARANTY
--------
FOR VALUED RECEIVED, and in consideration for, and as an inducement to
Great Lakes Investors I, an Illinois limited partnership ("Landlord") to
consent to the undersigned assigning all of its right, title and interest, as
lessee, in and to that certain Lease Agreement dated as of May 2, 1992 ("Lease")
by and between Landlord, as lessor, and the undersigned, as lessee, to Roll &
Hold Warehousing and Distribution Corp., an Illinois corporation ("Tenant"),
the undersigned, whose interest would be served by entering into this Guaranty,
hereby absolutely and unconditionally guarantees to Landlord, its successors and
assigns, through the initial term of the Lease (and not during any extension or
renewal periods contained therein), the prompt and full payment of all Rent, as
that term is defined in the Lease, and all other payments to be made by Tenant
under the Lease, and the full performance and observance by Tenant of all other
terms, covenants, conditions and agreements therein provided to be performed and
observed by Tenant, for which the undersigned shall be jointly and severally
liable with Tenant. The undersigned hereby waives any notice of non-payment,
non-performance or non-observance, or proof of notice or demand.
The undersigned agrees that, in the event of a default by Tenant under the
Lease, Landlord may proceed against the undersigned before, after or
simultaneously with or in lieu of proceeding against Tenant. This Guaranty
shall not be terminated, affected or impaired in any manner by reason of (1) the
assertion by Landlord against Tenant of any of the rights or remedies reserved
to Landlord pursuant to the provisions of the Lease; (2) the relief of Tenant
from any of Tenant's obligations under the Lease by operation of law or
otherwise; (3) the commencement of summary or other proceedings against Tenant;
(4) the failure of Landlord to enforce any of its rights against Tenant; or
(5) the granting by Landlord of any extensions of time to Tenant. The
undersigned hereby waives all defenses of suretyship.
The undersigned further covenants and agrees that (1) it shall be bound by
all the provisions, terms, conditions, restrictions and limitations contained in
the Lease which are to be observed or performed by Tenant thereunder, the same
as if the undersigned were named therein as Tenant; and (2) this Guaranty shall
be absolute and unconditional and shall be in full force and effect
notwithstanding any amendment, addition, assignment,
<PAGE>
sublease, transfer, or other modification of the Lease, whether or not the
undersigned shall have knowledge or have been notified of or agreed or consented
thereto. The failure of Landlord to insist in any one or more instances upon
strict performance or observance of any of the terms, provisions or covenants of
the Lease or to exercise any right therein contained shall not be construed or
deemed to be a waiver or relinquishment for the future of such term, provision,
covenant or right but the same shall continue and remain in full force and
effect. If Landlord, at any time, is compelled to take action, by legal
proceedings or otherwise, to enforce or compel compliance with the terms of this
Guaranty, the undersigned shall, in addition to any other rights or remedies to
which Landlord may be entitled hereunder or as a matter of law or in equity, pay
to Landlord all costs, including reasonable attorneys' fees, incurred or
expended by Landlord in connection therewith.
In the event the Lease is disaffirmed by a Trustee in Bankruptcy for
Tenant, the undersigned agrees that it shall, at the election of Landlord,
either assume the Lease and perform all of the covenants, terms and conditions
of Tenant thereunder or enter into a new lease which said new lease shall be in
form and substance identical to the Lease. All duties and obligations of the
undersigned pursuant to this Guaranty shall be binding upon the successors,
heirs, executors, personal representatives, trustees, guardians, conservators
and assigns of the undersigned. If the undersigned consists of more than one
person or entity, then each of such person shall be jointly and severally liable
for the obligations of the undersigned under this Guaranty.
For purposes of this Guaranty, the word "Tenant" shall also include the
successors, heirs, executors, personal representatives, trustees, guardians,
conservators and permitted assigns of Tenant. All capitalized terms used in
this Guaranty shall have the same meanings as are given to such terms in the
Lease unless otherwise specifically defined in this Guaranty. This Guaranty
shall be governed by and construed in accordance with the laws of the State of
Indiana.
IN WITNESS WHEREOF, this Guaranty is executed as of the 2nd day of August
1993.
AREA TRANSPORTATION COMPANY,
INC., an Illinois corporation
By: /s/ Michael A. Kelly
--------------------------
Its: CFO
----------------------
A-2
<PAGE>
L E A S E A G R E E M E N T
- - - - - - - - - - - - - -
This Lease Agreement ("Lease") is made and entered into as of the 1st day
of May, 1992, by and between GREAT LAKES INVESTORS I, an Illinois limited
partnership ("Lessor"), and AREA TRANSPORTATION COMPANY, INC., an Indiana
corporation ("Lessee").
RECITALS
--------
This Lease is made with reference to the following facts and objectives:
(a) Lessor is the owner of certain real estate and facilities located in
Lake County, Indiana, more particularly described in Exhibit "A" attached
hereto, hereinafter referred to as the "Complex," and desires to lease a portion
of the Complex to Lessee.
(b) Lessee desires to lease from Lessor a portion of said Complex.
(c) The parties hereto desire to enter into this Lease defining their
rights, duties and obligations relating to the portion of the Complex leased
hereunder.
AGREEMENT
---------
NOW, THEREFORE, in order to consummate the desires of the parties set forth
in the foregoing Recitals, which are made a contractual part of this Lease, and
in consideration of the mutual agreements, provisions and covenants herein
contained, the parties hereto mutually agree as follows:
1. Premises. Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor for the term, at the rental and upon all of the conditions and covenants
set forth herein, that certain real estate and facilities within the Complex,
including any and all buildings, structures and improvements located hereon,
which are more fully described on Exhibit "B" attached hereto and by this
reference incorporated herein (the "Premises"), and are commonly referred to as
Units 20A, 20B, 20C, Building 16 and a portion of Building 21 of the Complex,
consisting of two hundred five thousand five hundred sixty-one (205,561)
stipulated rentable square feet.
2. Term. The term of this Lease shall be for a period of sixty (60) months
commencing on May 1, 1992 ("Commencement Date"), and terminating on April 30,
1997 unless sooner terminated pursuant to any provision hereof ("Term").
3. Rent.
3.1 Base Rent. Lessee shall, subject to subparagraph 3.2 below, pay to
Lessor as "Base Rent" for the Premises annual rent in the amount of Six Hundred
Forty-Nine Thousand Five Hundred Seventy-Two and no/100 Dollars ($649,572.00),
payable in equal monthly installments of Fifty-Four Thousand One Hundred Thirty-
One and no/100 Dollars ($54,131.00), in advance, on the first (1st) day of each
month of the Term. Base Rent and any other amounts due hereunder are hereinafter
referred to collectively as "Rent", the payment of which shall be deemed an
independent covenant by Lessee. Rent for any period during the Term which is for
less than one month shall be a prorata portion of the monthly installment. Rent
shall be payable in lawful money of the United States, without demand and
without set-off or deduction for any reason whatsoever, to Lessor at the address
stated herein or to such other persons or at such other places as Lessor may
designate in writing.
Page 1 of 27
<PAGE>
3.2 Annual Rent Adjustment. On January 1, 1996 and on the same day and
month each year thereafter during the term of this Lease (the "Adjustment
Date"), the Base Rent shall be increased by an amount equal in proportion to the
increase, if any, in the United States Department of Labor Statistics, Consumer
Price Index - all items, Urban Consumers (the "CPI") applicable to the Chicago,
Metropolitan area. If the CPI for the month in which the Adjustment Date occurs
(the "Extension Index") shows an increase over the CPI for May, 1992, (the "Base
Index"), the Base Rent, as determined in 3.1 above, shall be multiplied by fifty
percent (50%) of the percentage increase of the Extension Index as of the
Adjustment Date over the Base Index, which amount shall then be added to the
Base Rent and become the adjusted Base Rent due and payable in equal monthly
installments commencing on the Adjustment Date of that year through the next
Adjustment Date; provided, however, that the monthly Rent shall in no event be
decreased below the monthly Rent applicable to the preceding year. In the event
that the computation of the adjusted monthly Rent is delayed because the CPI has
not yet been released, said computation shall be made as soon as reasonably
possible after the release of the CPI, and once said computation is completed
Lessee shall make payments of the adjusted monthly Rent retroactive to the
Adjustment Date of the applicable year. If the CPI is changed from the current
base year (i.e., 1982-1984=100), the CPI shall be converted in accordance with
the conversion factor published by the U.S. Department of Labor. If the CPI is
discontinued or revised during the term, such other government index or
computation with which it is replaced shall be used in order to obtain
substantially the same result.
3.3 Application of Payments. All monies received by Lessor from Lessee may
be applied by Lessor to the oldest outstanding sums due Lessor under this Lease,
inclusive of any amounts due Lessor pursuant to Paragraph 13.3 hereof.
4. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the sum of Sixty-Nine Thousand Seven Hundred Sixty-Two and No/100 ($69,762.00)
as security for Lessee's faithful performance of Lessee's obligations hereunder.
Lessor shall have the right, at its option, to require Lessee to deposit with
Lessor, in lieu of a cash security deposit, an irrevocable letter of credit in
favor of Lessor in form and substance and issued by an institution satisfactory
and to Lessor. If Lessee fails to pay Rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit or proceeds of the letter of
credit for the payment of any Rent or other charge in default or for the payment
of any other sum to which Lessor may become obligated by reason of Lessee's
default, or to compensate Lessor for any loss or damage which Lessor may suffer
thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee
shall, within ten (10) days after written demand therefor, deposit cash with
Lessor in an amount sufficient to restore said deposit to the full amount
hereinabove stated and Lessee's failure to do so shall be deemed a material
breach of this Lease. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, with payment of interest thereon on any cash
deposit at the rate of five percent (5%) per annum to Lessee (or, at Lessor's
option, to the last assignee, if any, of Lessee's interest hereunder) at the
expiration of the term hereof and after Lessee has vacated the Premises. No
trust relationship is created herein between Lessor and Lessee with respect to
said security deposit. In the event the security deposit is in the form of a
letter of credit, Lessee shall be required to deliver evidence of the renewal
thereof at least thirty (30) days prior to the then current expiration date
thereof.
Page 2 of 27
<PAGE>
5. Use of the Premises.
-------------------
5.1 Use. The Premises shall be used and occupied only for trucking, steel
storage, storage of metal products and building materials and railway and other
activities reasonably related thereto and for no other purpose, unless Lessor
specifically consents to another use in writing.
5.2 Compliance with Law. Lessee shall, at Lessee's sole expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders,
restrictions of record, and requirements in effect during the Term or any part
of the Term hereof regulating the use by Lessee of the Premises. Lessee shall
not use nor permit the use of the Premises in any manner that will tend to
create waste or a nuisance or, if there shall be more than one tenant in the
building containing the Premises, shall tend to disrupt such other tenants.
5.3 Condition of Premises. Lessee hereby accepts the Premises, including
all equipment, fixtures, improvements, utilities and electrical, plumbing and
heating systems (if any) situated thereon in their condition existing as of the
date of the execution hereof, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and accepts this Lease subject thereto and to all matters
disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that
neither Lessor nor Lessor's agent has made any representation or warranty as to
the suitability of the Premises for the conduct of Lessee's business. Lessor
makes no warranties, express or implied, including, without limitation, the
implied warranties of merchantability or fitness for a particular purpose, with
respect to the premises or any buildings, structures, improvements, fixtures,
equipment or properties located thereon or relating thereto.
6. Maintenance Repairs and Alterations.
-----------------------------------
6.1 Lessor's Obligations. Subject to the provisions of Paragraph 8 and
except for damage caused by any negligent or intentional act or omission of
Lessee, Lessee's agents, employees, or invitees (in which event Lessee shall
repair the damage), Lessor, at Lessor's expense, shall keep in good order,
condition and repair the foundations, exterior walls and the exterior roof of
the Premises. Lessor shall not, however, be obligated to paint such exterior,
nor shall Lessor be required to maintain the interior surface of exterior walls,
windows, doors or plate glass. Lessor shall have no obligation to make repairs
under this Paragraph 6.1 until a reasonable time after receipt of written notice
of the need for such repairs. Thereafter, Lessor shall use reasonable efforts to
make such repairs in a timely and workmanlike manner. In the event Lessee fails
to remove its trade fixtures and personal property from the Premises at the
termination of this Lease, Lessor may remove same at the risk, cost and expense
of Lessee, and Lessor shall in no event be responsible as warehouseman, bailee
or otherwise for any property left in the Premises, or for the value,
preservation or safekeeping thereof. Lessee shall pay to Lessor, upon demand,
any and all expenses incurred by Lessor in the removal or storage of Lessee's
property.
6.2 Lessee's Obligations.
(a) Subject to the provisions of this Paragraph 6 and Paragraph 8,
Lessee, at Lessee's expense, shall keep in good order, condition and repair the
Premises and every part thereof, specifically including any and all overhead
cranes located on the Premises, (whether or not the damaged portion of the
Premises or the means of repairing the same are reasonably or readily accessible
to Lessee) including, without limiting the generality of the
Page 3 of 27
<PAGE>
foregoing, all plumbing, heating, air conditioning, ventilating, utilities,
electrical and lighting facilities and equipment within the building area and
land making up the Premises, fixtures, interior walls and interior surfaces of
exterior walls, ceilings, windows, doors, plate glass and skylights, located
within the building area of the Premises, and all landscaping, driveways,
parking lots, fences and signs located in or on the building area or land making
up the Premises and all sidewalks and parkways adjacent thereto. Lessee
specifically agrees to keep a log or record of all preventive and other
maintenance on any and all overhead cranes on the Premises, and to permit Lessor
to examine the same from time to time upon request by Lessor.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 6.2, Lessor may at Lessor's option enter upon the Premises, after five
(5) days' prior written notice to Lessee (except in the case of an emergency in
which event no prior notice shall be required), and put the same in good order,
condition and repair, and the cost thereof together with interest thereon at the
rate of three percent (3%) per annum in excess of the Prime Rate announced from
time to time by the First National Bank of Chicago ("Default Rate"), shall be
due and payable as additional Rent to Lessor, together with Lessee's next rental
installment.
(c) On the last day of the Term, or on any sooner termination, Lessee
shall surrender the Premises to Lessor in the same condition as received on the
date of commencement of the Prior Term (as hereinafter defined) or when
delivered to Tenant, broom clean, ordinary wear and tear excepted and casualty
losses incurred during the last two (2) months of the Term also excepted,
provided that all insurance proceeds for such casualty to the Premises are paid
to Lessor. Lessee shall repair any damage to the Premises occasioned by the
removal of its trade fixtures, furnishings and equipment, and any other
alterations to the Premises made by Lessee, which repair shall include the
patching and filling of holes and repair of structural damage. The Prior Term
means the term which commenced on May 1, 1987 and terminated on the day prior to
the date hereof pursuant to which Tenant occupied all or a portion of the
Premises pursuant to lease dated November 28, 1986, as amended ("Prior Lease").
6.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent, make
any alterations, improvements, additions, or Utility Installations in, on or
about the Premises, except for non-structural alterations not exceeding Ten
Thousand Dollars ($10,000) in cost. Lessee shall not make any such alterations,
improvements, additions or Utility Installations exceeding One Thousand Dollars
($1,000) in cost without giving Lessor prior written notice thereof. As used in
this Paragraph 6.3 the term "Utility Installation" shall mean bus ducting, power
panels, wiring, fluorescent fixtures, space heaters, conduits, air conditioning
and plumbing. Lessor may require that Lessee remove any or all of said
consented alterations, improvements, additions or Utility Installations made
during the Prior Term or the Term at the expiration of the Term, and restore the
Premises to their prior condition. All such alterations, improvements and
additions by Lessee shall be made and maintained by Lessee at its sole expense,
including, but not limited to, the cost of insurance, maintenance, repairs or
taxes on or to the same. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half times the estimated cost of such improvements, to insure Lessor
against any liability for mechanic's and materialmen's liens and to insure
completion of the work. Should Lessee make any alterations, improvements,
additions or Utility Installations without the prior approval of Lessor, Lessor
may require that Lessee immediately remove any or all of such at Lessee's sole
expense.
Page 4 of 27
<PAGE>
(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee's acquiring a permit to do so
from appropriate governmental agencies, the furnishing of a copy thereof to
Lessor prior to the commencement of the work and the compliance by Lessee with
all conditions of said permit in a prompt and expeditious manner. Lessee shall
reimburse Lessor for reasonable costs incurred in reviewing Lessee's proposed
alterations.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall,
in good faith, contest the validity of any such lien, claim or demand, then
Lessee shall at its sole expense defend itself and Lessor against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorneys fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, which Lessor may require
and in such event same shall be removed by Lessee subject to the provisions of
Paragraph 6.2(c) hereof, all alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the Term. Notwithstanding the provisions of this Paragraph
6.3(d), Lessee's machinery and equipment, other than that which is affixed to
the Premises so that it cannot be removed without material damage to the
Premises, shall remain the property of Lessee and may be removed by Lessee
subject to the provisions of Paragraph 6.2(c).
(e) Lessee shall, prior to commencing any work hereunder, furnish
Lessor a certificate of insurance giving evidence of workers' compensation
insurance (covering all persons employed by Lessee and/or Lessee's contractors
and subcontractors) along with comprehensive public liability insurance
(including property damage insurance) in such forms, for such periods, in such
amounts and with such companies as are acceptable to Lessor.
(f) Notwithstanding anything herein to the contrary, Lessor shall not
unreasonably withhold its consent to alterations to the Office Premises.
7. Insurance and Indemnity.
7.1 Liability Insurance. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease a policy of combined single limit,
bodily injury and property damage public liability insurance insuring Lessor and
Lessee against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.
Page 5 of 27
<PAGE>
Such insurance shall be a combined single limit policy in an amount not less
than One Million Dollars ($1,000,000). The policy shall permit "inter-insureds
lawsuits" with regard to Lessor and Lesser and shall insure performance by
Lessee of the indemnity provisions of this Paragraph 7. The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. If Lessee
shall fail to procure and maintain said insurance Lessor may, but shall not be
required to, procure and maintain the same, but at the expense of Lessee. If, in
the reasonable opinion of Lessor, the amount of liability insurance required
hereunder is not adequate, Lessee shall increase said insurance coverage as
required by Lessor. Each policy obtained by Lessee pursuant to this
subparagraph shall name Lessor as an additional insured as Lessor's interests
may appear pursuant to this Lease.
7.2 Property Insurance.
(a) Lessor shall, as an Operating Expense (as hereinafter defined),
obtain and keep in force during the term of this Lease a policy or policies of
insurance covering loss or damage to the Premises (excluding the personal
property and equipment owned and brought into the Premises by Lessee, but
including all tenant improvements installed by or paid for by Lessor) providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils (all
risk), but not plate glass insurance, and such other insurance as is required by
mortgagees of the Complex ("Property Insurance").
(b) Lessee shall obtain and keep in force during the term of this
Lease a policy or policies of insurance covering loss of or damage to all of the
personal or other property and equipment owned by Lessee and located on or about
the Premises in the amount of the full replacement value thereof, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief and special extended perils
(all risk).
7.3 Insurance Policies. Insurance required hereunder shall be contracted
with companies holding a "General Policyholders Rating" of A or better as set
forth in the most current issue of "Best Insurance Guide" or such higher
standard as required by any mortgagee of the Complex. Lessee shall deliver to
Lessor copies of policies of insurance required under this Paragraph 7 or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Lessor and its mortgagees. No such policy shall
be cancellable or subject to reduction of coverage or other modification,
except after thirty (30) days prior written notice to Lessor. Lessee shall,
within thirty (30) days prior to the expiration of such policies, furnish Lessor
with renewals or "binders" thereof, or Lessor may order such insurance and
charge the cost thereof to Lessee, which amount shall be payable by Lessee,
along with interest thereon at the Default Rate, upon demand. Lessee shall not
do or permit to be done anything which shall invalidate the insurance policies
referred to in Paragraph 7.2.
7.4 Waiver of Subrogation. Lessee and Lessor each hereby waive any and
all rights of recovery against the other, or against the officers, employees,
agents and representatives of the other, for loss of or damage to such waiving
party or its property or the property of others under its control where such
loss or damage is insured against under any insurance policy in force at the
time of such loss or damage or should have been insured against pursuant to the
requirements of this Lease. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.
Page 6 of 27
<PAGE>
7.5 Indemnity. Lessee shall, as to the Prior Term and the Term, indemnify
and hold harmless Lessor from and against any and all claims arising from
Lessee's use of the Premises, or from the conduct of Lessee's business or from
any activity, work or things done, permitted or suffered by Lessee in or about
the Premises or elsewhere and shall further indemnify and hold harmless Lessor
from and against any and all claims arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the terms
of this Lease or the Prior Lease or arising from any negligence of the Lessee,
or any of Lessee's agents, contractors, or employees, and from and against all
costs, attorney's fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon; and in case any action
or proceeding be brought against Lessor by reason of any such claim, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
satisfactory to Lessor. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons, in,
upon or about the Premises arising from any cause and Lessee hereby waives all
claims in respect thereof against Lessor. Lessee shall conduct its business in a
manner as to reduce the risk of and/or mitigate any third party claims against
Lessor, including, but not limited to, proper protection of third party products
and equipment.
7.6 Exemption of Lessor from Liability. Unless caused by the negligence
or wilful misconduct of Lessor, its agents, employees or contractors, Lessee
hereby agrees that Lessor shall not be liable for injury to Lessee's business
or any loss of income therefrom or for damage to the goods, wares, merchandise
or other property of Lessee, Lessee's employees, invitees, customers, or any
other person in or about the Premises, nor shall Lessor be liable for injury to
the person of Lessee, Lessee's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, including but not limited to vandalism or
acts of God, whether the said damage or injury results from conditions arising
upon the Premises or upon other portions of the building of which the Premises
are a part, or from other sources or places, and regardless of whether the cause
of such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant in the Complex.
8. Damage or Destruction.
8.1 Partial Damage -- Insured. Subject to the provisions of Paragraphs
8.3 and 8.4, if the Premises are damaged and such damage was caused by a
casualty covered under an insurance policy required to be maintained pursuant to
Paragraph 7.2 and the proceeds of insurance are sufficient to cover the cost of
repair, Lessor shall at Lessor's expense repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect but
Lessor shall not repair or replace Lessee's fixtures, equipment or tenant
improvements.
8.2 Partial Damage -- Uninsured. Subject to the provisions of Paragraphs
8.3 and 8.4, if at any time during the Term hereof the Premises are damaged,
except by a negligent or willful act of Lessee (in which event Lessee shall make
the repairs at its expense) and such damage was caused by a casualty not covered
under an insurance policy required to be maintained by Lessor pursuant to
Paragraph 7.2 Lessor may at Lessor's option either (i) repair such damage as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee within
thirty
Page 7 of 27
<PAGE>
(30) days after the date of the occurrence of such damage of Lessor's intention
to cancel and terminate this Lease as of the date of the occurrence of such
damage. In the event Lessor elects to give such notice of Lessor's intention to
cancel and terminate this Lease, Lessee shall have the right within ten (10)
days after the receipt of such notice to give written notice to Lessor of
Lessee's intention to repair such damage at Lessee's expense, without
reimbursement from Lessor, in which event this Lease shall continue in full
force and effect, and Lessee shall proceed to make such repairs as soon as
reasonably possible. If Lessee does not give such notice within such ten
(10) day period, this Lease shall be cancelled and terminated as of the date
of the occurrence of such damage.
8.3 Total Destruction. If at any time during the Term the Premises are
totally destroyed from any cause whether or not covered by the insurance
required to be maintained by Lessor pursuant to Paragraph 7.2 (including any
total destruction required by any authorized public authority) this Lease shall,
at the election of Lessor, terminate as of the date of such total destruction.
In the event Lessor, within ninety (90) days of the date of destruction, fails
to notify Tenant of Lessor's election to terminate this Lease, Lessor shall be
obligated to restore the Premises as soon as reasonably practicable thereafter.
8.4 Damage Near End of Term. If the Premises are partially destroyed or
damaged during the last six (6) months of the Term, Lessor may at Lessor's
option cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to Lessee of Lessor's election to do so within
thirty (30) days after the date of occurrence of such damage.
8.5 Abatement of Rent; Lessee's Remedies.
(a) If the Premises are partially destroyed or damaged and Lessor or
Lessee repairs or restores them pursuant to the provisions of this Paragraph 8,
the Rent payable hereunder for the period during which such damage, repair or
restoration continues shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Except for abatement of Rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 8 and shall not commence such repair or
restoration within ninety (90) days after such obligations shall accrue, Lessee
may at Lessee's option cancel and terminate this Lease by giving Lessor written
notice of Lessee's election to do so within thirty (30) days following the
expiration of said ninety (90) day period. In such event this Lease shall
terminate as of the date of such notice.
8.6 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 8, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, after settlement of all Rent allocations (advance or otherwise),
return to Lessee so much of Lessee's security deposit as has not theretofore
been applied by Lessor.
9. Property Taxes.
9.1 Payment of Taxes. Lessor shall pay all Property Taxes applicable to
the Complex (the "Applicable Taxes"); provided, however, that Lessee shall pay,
as additional Rent, Lessee's Proportionate Share (as hereinafter defined) of the
Applicable Taxes. Such payment shall be made by Lessee within thirty (30) days
after receipt of Lessor's written statement setting forth the amount of such
Proportionate Share and the computation
Page 8 of 27
<PAGE>
thereof. If the term of this Lease shall not begin or expire concurrently with
the beginning or expiration of a calendar year, then Lessee's liability for
Applicable Taxes shall be prorated on an annual basis. Lessee's "Proportionate
Share" shall mean twenty and 15/100 percent (20.15%). Lessee shall also pay its
Proportionate Share of any costs, including but not limited to attorneys fees,
incurred by Lessor in successfully or unsuccessfully seeking to reduce or
maintain any taxes applicable to the Complex. To the extent Lessee has paid its
Proportionate Share of Applicable Taxes and thereafter Lessor obtains a refund
or credit of Applicable Taxes, Lessor shall refund or credit Lessee with its
Proportionate Share of such refund or credit less Lessee's Proportionate Share
of costs with respect thereto.
9.2 Definition of "Property" Tax. As used herein, the term "Property
Taxes" shall include those amounts payable in any given year with respect to any
form of assessment, license fee, user fee, commercial rental tax, personal
property tax, levy, penalty, or tax (other than inheritance or estate taxes),
imposed by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school, agricultural,
lighting, drainage, water or sanitary or other improvement district thereof, as
against any legal or equitable interest of Lessor in the Premises or in the real
property of which the Premises are a part, as against Lessor's right to rent or
other income therefrom, or as against Lessor's business of leasing the Premises
or any tax imposed in substitution, partially or totally, of any tax previously
included within the definition of real property tax, or any additional tax the
nature of which was previously included within the definition of real or
personal property tax, and any costs related to the protest thereof or related
to efforts by Lessor to reduce or otherwise maintain or mitigate the level of
taxes on the Complex, such costs to be reasonably amortized over the period
directly affected by such protest. "Property Taxes" shall not include personal
property taxes paid by Lessee or any other tenant of the Complex paid by or
charged directly to said party.
9.3 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee's property within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
10. Common Area Expenses. In addition to the Base Rent set forth in
paragraph 3, Lessee agrees to pay "Additional Rent" equal to its Proportionate
Share of the Operating Expenses (as hereinafter defined) of the Complex and
Common Areas for the Term.
The term "Operating Expenses" shall mean and include all costs, exclusive
of Property Taxes (as defined in Paragraph 9.2 hereof), of operating, equipping,
policing and protecting, maintaining, repairing, lighting, utilities, insuring
and managing the Complex and Common Areas (as hereinafter defined), including
but not limited to, costs and expenses incurred for security, security devices
and systems; cleaning and sweeping, snow, ice and trash removal; planting,
replanting, landscaping; Property insurance, water, power and sewage charges;
the repair of systems or equipment, the repair of exterior areas including
perimeter
Page 9 of 27
<PAGE>
and trash removal; planting, replanting, landscaping; Property Insurance, water,
power and sewage charges; the repair of systems or equipment, the repair of
exterior areas including perimeter fencing, storm sewers, the repair of utility
systems; repair of roadways or railroad trackage; heating and air conditioning
of the Common Areas; freight and delivery consolidation and offsite staging
areas; painting; net premiums for workman's compensation and disability
insurance; wages; salaries (including employee benefits) and fees of the
property manager and on-site personnel directly and actually performing services
in connection with the Complex and Common Areas; unemployment taxes; social
security taxes; personal property taxes, if any; the cost (including sales and
use tax) of material, equipment, supplies and services purchased for maintenance
and repairs; fees for required licenses and permits; legal and accounting fees;
policing the common areas in affording protection thereof against fire and other
hazards; inspections of cranes and craneways; straight line depreciation of
mobile equipment used in the operation, maintenance or repair of the common
areas; straight line amortization of any capital expenditures incurred in
operating, maintaining or repairing the Complex and any common areas; and all
other similar direct costs and expenses "properly" chargeable to the operation,
management and maintenance or repair of the buildings (exclusive of Lessor's
obligation under paragraph 6.1 hereof) or Common Areas. Common Areas shall mean
all areas of the Complex not specifically leased to tenants.
Lessee's Proportionate Share of such cost and expense of Operating Expenses
for each lease year shall be paid in monthly installments on the first day of
each calendar month, in advance, in an amount estimated by Lessor. As soon as
the Operating Expenses for the year are known, Lessor shall furnish Lessee with
a statement of the actual amount of Operating Expenses and Lessee's
Proportionate Share of the Operating Expenses for such period. If the total
amount paid by Lessee under this paragraph for any year for Operating Expenses
shall be less than the actual amount due from Lessee for such year as shown on
such statement, Lessee shall pay to Lessor the difference between the amount
paid by Lessee and the actual amount due, such deficiency to be paid within
thirty (30) days after the furnishing of each such statement, and if the total
amount paid by Lessee hereunder for any year shall exceed such actual amount due
from Lessee for such year, such excess shall be refunded by Lessor to Lessee.
Lessee shall, upon two (2) days prior written notice of such request to Lessor's
property manager, have the right to inspect Lessor's books and records with
respect to this paragraph 10. In the event Lessee fails, within forty-five (45)
days of receipt of Lessor's statement, to object to any matters set forth
therein, same shall be deemed to be conclusively binding on Lessee.
Lessee's Proportionate Share of the Operating Expenses shall equal the
ratio of the Lessee's total rentable square feet of the Premises divided by the
number of rentable square feet of floor area in all buildings located in the
Complex, as determined by Lessor from time to time, during the period of such
costs. Notwithstanding anything herein to the contrary, Lessor agrees,
(a) Lessee's Proportionate Share of Operating Expenses for the period from the
Commencement Date to December 31, 1992 shall not exceed One Hundred Ten Thousand
Forty-Three and 65/100 Dollars ($110,043.65), (b) Lessee's Proportionate Share
of Operating Expenses for calendar year 1993 shall not exceed One Hundred
Eighty-One Thousand Five Hundred Seventy-Two and 02/100 Dollars ($181,572.02),
and (c) the increase in Lessee's Proportionate Share of Operating Expenses for
any calendar year thereafter shall not exceed ten percent (10%) of the Operating
Expenses charged to Lessee in the prior calendar year.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such
-10-
<PAGE>
meters have been installed, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises. Lessor
shall not be liable to Lessee in damages, or otherwise, should the furnishing of
any one or more of the utility services be inadequate or interrupted or required
to be terminated because of necessary repairs or improvements.
12. Assignment and Subletting.
-------------------------
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which consent shall not be unreasonably
withheld. It shall not be unreasonable for Lessor to withhold its consent on
account of the prospective assignee's or subtenant's credit history, proposed
use, nature of workforce, reputation in the community or bank references. Any
attempted assignment, transfer, mortgage, encumbrance or subletting without such
consent shall be void, and shall constitute a material breach of this Lease.
12.2 Lease Affiliate. Notwithstanding the provisions of Paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without the Lessor's consent, to any corporation which controls, is controlled
by or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all of the assets of Lessee as a going concern of the business that is
being conducted on the Premises, provided that said assignee assumes, in full,
the obligations of Lessee under this Lease. Any such assignment shall not, in
any way, affect or limit the liability of Lessee under the terms of this Lease
even if after such assignment or subletting the terms of this Lease are
materially changed or altered without the consent of Lessee, the consent of whom
shall not be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the Rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of Rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent of one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee in the performance of any of the terms hereof,
Lessor may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee. Lessor may consent to subsequent assignments or
subletting of this Lease or amendments or modifications to this Lease with
assignees of Lessee, without notifying Lessee, or any successor of Lessee, and
without obtaining its or their consent thereto and such action shall not relieve
Lessee of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, which fee shall not exceed $2,500.
13. Defaults; Remedies.
------------------
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
Page 11 of 27
<PAGE>
(b) The failure by Lessee to make any payment of Rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than those described in Paragraphs 13.1(a) and 13.1(b) above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
default is such that more than thirty (30) days are reasonably required for its
cure, then Lessee shall not be deemed to be in default if Lessee commenced such
cure within said thirty (30) day period and thereafter diligently prosecutes
such cure to completion.
(d) (i) the making by Lessee of any general arrangement for the
benefit of creditors; (ii) the filing by or against Lessee of a petition to have
Lessee adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor
in interest of Lessee or any guarantor of Lessee's obligation hereunder, or any
of them, was materially false.
13.2 Remedies. In the event of any failure of Lessee to pay any Rent or
other charges due hereunder, or any failure to perform any other of the terms,
conditions or covenants of this Lease to be observed or performed by Lessee in
accordance with the terms hereof, or if Lessee shall abandon the Premises, or
permit this Lease to be taken under any writ of execution, or otherwise default
hereunder, then the Lessor, besides other rights or remedies it may have at law
or in equity, shall have the right to declare this Lease terminated and the Term
ended and/or shall have the immediate right of re-entry and may remove all
persons and property from the Premises and such property may be removed and
stored in a public warehouse or elsewhere at the cost of, and for the account of
Lessee, without evidence of notice or resort to legal process and without being
deemed guilty of trespass, or becoming liable for any loss or damage which may
be occasioned thereby.
In the event of any breach by Lessee of any of the provisions of this
Lease, Lessor may immediately or at any time thereafter, without notice, cure
such breach for the account and at the expense of Lessee. If Lessor at any time
by reason of such breach, is compelled to pay, or elects to pay, any sum of
money or do any act which will require the payment of any sum of money or incurs
any expense, including attorneys' fees, in instituting or prosecuting any action
or proceedings to enforce Lessor's rights hereunder, the sum or sums so paid by
Lessor, with interest thereon at the Default Rate from the date of payment
thereof, shall be deemed to be additional Rent hereunder and shall be due from
Lessee to Lessor on the first day of the month following the payment of such
respective sums or expenses.
Page 12 of 27
<PAGE>
Should Lessor elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may from time to time, without
terminating this Lease, make such alterations and repairs as may be necessary in
order to relet the Premises, and relet the Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this Lease)
and at such rental or rentals and upon such other terms and conditions as Lessor
in its sole discretion may deem advisable. Upon each such reletting all rentals
and other sums received by Lessor from such reletting shall be applied, first,
to the payment of any indebtedness other than Rent due hereunder from Lessee to
Lessor; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorney's fees and of costs of such alterations
and repairs; third, to the payment of Rent and other charges due and unpaid
hereunder; and the residue, if any, shall be held by Lessor and applied in
payment of future Rent as the same may become due and payable hereunder. If such
rentals and other sums received from such reletting during any month be less
than that to be paid during that month by Lessee hereunder, Lessee shall pay
such deficiency to Lessor. Such deficiency shall be calculated and paid monthly.
No such re-entry or taking possession of the Premises by Lessor shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Lessee or unless the termination thereof be
decreed by a Court of competent jurisdiction. Notwithstanding any such reletting
without termination, Lessor may at any time hereafter elect to terminate this
Lease. Should Lessor at any time terminate this Lease for any breach, in
addition to any other remedies it may have, it may recover from Lessee all
damages it may incur by reason of such breach, including the cost of recovering
the Premises, attorney's fees, any other sum of money and damages due and to
become due to Lessor from Lessee including the worth at the time of such
termination of the excess, if any, of the amount of Rent reserved in this Lease
for the remainder of the Term over the fair market value of the Premises, all of
which amounts shall be immediately due and payable from Lessee to Lessor.
All rights and remedies of Lessor herein enumerated shall be cumulative and
none shall exclude any other right or remedy allowed by law, and said rights and
remedies may be exercised and enforced concurrently and whenever and as often as
occasion therefor arises.
In case suit shall be brought for recovery of possession of the Premises,
for the recovery of Rent, or any other amount due under the provisions of this
Lease, or because of the breach of any other covenant contained herein, Lessee
shall pay to Lessor all expenses incurred therefor, including attorney's fees.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascer-
Page 13 of 27
<PAGE>
tain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed on Lessor by the terms of any
mortgage or trust deed covering the Premises. Accordingly, if any installment of
Rent or any other sum due from Lessee shall not be received by Lessor or
Lessor's designee within ten (10) days after such amount shall be due, Lessee
shall pay to Lessor, in addition to the Default Rate, a late charge equal to
three percent (3%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor will
incur by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's default with respect to
such overdue amount, nor prevent Lessor from exercising any of the other rights
and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "Condemnation"), this lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%) of
the floor area of the improvements on the Premises, or more than twenty-five
percent (25%) of the land area used exclusively by Lessee at the Premises which
is not occupied by any improvements is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent shall be reduced in the
proportion that the floor area taken bears to the total floor area of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages.
15. Broker's Fees. The parties agree that any broker's fee or commission
arising in connection with this lease, shall be paid by the party that
contracted with the broker, agent, individual or entity that claims a fee or
commission is due. The parties further agree to indemnify each other from any
and all costs, expenses, losses and damages, including but not limited to
attorneys fees and court costs, arising out of any broker, agent, individual or
entity claiming such a fee or commission through the indemnifying party. The
parties acknowledge Coldwell Banker and Ennis Realty Co. were the sole and
exclusive brokers in this transaction.
16. General Provisions.
------------------
16.1 Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledge that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
Page 14 of 27
<PAGE>
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor's performance and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.
(c) Lessee hereby agrees to deliver to Lessor or any lender designated
by Lessor such certified and any audited financial statements of Lessee as may
be reasonably required by Lessor or such lender. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor in confidence and shall be used only for
the purposes herein set forth.
16.2 Lessor's Liability. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title or a lessee's
interest in a ground lease of the Premises, and in the event of any transfer of
such title or interest, Lessor herein named (and in case of any subsequent
transfers the then grantor) shall be relieved from and after the date of such
transfer of all liability as respects Lessor's obligations thereafter to be
performed, provided that any funds in the transfer in which Lessee has an
interest shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
16.3 Severability. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
16.4 Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest from
the date due at the Default Rate. Payment of such interest shall not excuse
or cure any default by Lessee under this Lease.
16.5 Time of Essence. Time is of the essence with respect to the
performance of all terms, conditions and covenants of this Lease.
16.6 Captions. Article and paragraph captions are not a part hereof.
16.7 Incorporation of Prior Agreements; Amendments. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the real estate broker listed in
Paragraph 15 hereof, if any, nor any cooperating broker on this transaction nor
the Lessor or any employees or agents of any of said persons has made any oral
or written warranties or representations to Lessee relative to the condition or
use by Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease, except as otherwise
specifically stated in this Lease.
16.8 Notices. Any notice required or permitted to be given hereunder shall
be in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed to
Lessee or to
Page 15 of 27
<PAGE>
Lessor at the address noted below the signature of the respective parties, as
the case may be, and in the case of notice to Lessor with a copy to Great Lakes
Industrial Center c/o Capital and Regional Properties Corporation, Suite 3000,
401 North Michigan Avenue, Chicago, Illinois 60611 and with a copy to Coffield
Ungaretti & Harris, 3500 Three First National Plaza, Chicago, Illinois 60602,
Attention: James B. Smith, and in the case of notice to Lessee with a copy to
Fagel, Haber & Maragos, 140 South Dearborn Street, Chicago, Illinois 60603,
Attn: Walter D. Cupkovic. Either party may by notice to the other specify a
different address for notice purposes, except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.
16.9 Waivers. No waiver by Lessor of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any subsequent breach by Lessee of the same or any other provision.
Lessor's consent to or approval of any act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to or approval of any subsequent
act by Lessee. The acceptance of Rent hereunder by Lessor shall not be a waiver
of any preceding breach by Lessee of any provision hereof, other than the
failure of Lessee to pay the particular Rent so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such Rent.
16.10 Recording. Lessee shall not record this Lease without Lessor's prior
written consent, and such recordation shall, at the option of Lessor, constitute
a non-curable default of Lessee hereunder. Either party shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
16.11 Holding Over. Lessee acknowledges that possession of the Premises
must be surrendered to Lessor on the expiration of the Term or sooner
termination of the Lease Term. Lessee agrees to indemnify and hold Lessor
harmless against all liabilities, costs, suits, demands, charges and expenses of
any kind or nature, including attorneys' fees and disbursements, resulting from
a delay by Lessee in so surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Should Lessee hold possession hereunder after the expiration of the Term of this
Lease, Lessee shall become a Lessee on a month-to-month basis upon all the
terms, covenants and conditions herein specified, excepting however that Lessee
shall pay Lessor a monthly rental, for the period of such month-to-month
tenancy, in an amount equal to twice the adjusted Base Rent for such period,
and, in addition, Lessee shall pay Lessor all damages, consequential as well as
direct, sustained by reason of Lessee's holding over. Nothing herein contained
shall be deemed to permit Lessee to retain possession of the Premises after the
expiration or sooner termination of the Term of this Lease. Lessor by availing
itself of the rights and privileges granted by this provision shall not be
deemed to have waived any of its rights and privileges granted in other
provisions of this Lease, and the rights granted in this subsection 16.11 shall
be considered in any event as in addition to and not in exclusion of such other
rights and privileges. The aforesaid provisions of this subsection 16.11 shall
survive the expiration or sooner termination of the term of this Lease.
16.12 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
Page 16 of 27
<PAGE>
16.13 Covenants and Conditions. Each provision of this Lease performable
by Lessee shall be deemed both a covenant and a condition.
16.14 Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
Paragraph 16.2, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of Indiana.
16.15 Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
now or hereafter placed upon the real or personal property of which the Premises
are a part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof. If
any mortgagee, trustee or ground lessor shall elect to have this Lease prior to
the lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any mortgage, deed
of trust or ground lease, as the case may be, and failing to do so within ten
(10) days after written demand, does hereby make, constitute and irrevocably
appoint Lessor as Lessee's attorney in fact and in Lessee's name, place and
stead, to do so.
16.16 Attorney's Fees. If either party brings an action to enforce the
terms hereof or declare rights hereunder the prevailing party in any such
action, on trial or appeal, shall be entitled to its reasonable attorney's fees
to be paid by the other party as fixed by the court.
16.17 Lessor's Access. Upon prior notice (except in the case of
emergency), Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same, including
all cranes or craneways, showing the Premises to prospective purchasers,
lenders, or lessees, and making such alterations, repairs, improvements or
additions to the Premises or to the building of which they are a part as Lessor
may deem necessary or desirable. Lessor may at any time during the last one
hundred eighty (180) days of the term hereof place on or about the Premises any
ordinary "For Lease" signs, all without rebate of Rent or liability to Lessee.
16.18 Signs and Auctions. Lessee shall not place any sign upon the
Premises or conduct any auction thereon without Lessor's prior written consent.
16.19 Merger. The voluntary or other surrender of this Lease by Lessee or
a mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
16.20 Corporate Authority. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-Laws of said corpora-
Page 17 of 27
<PAGE>
tion, and that this Lease is binding upon said corporation in accordance with
its terms. If Lessee is a corporation Lessee shall, within fifteen (15) days
after execution of this Lease, deliver to Lessor a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
16.21 Consents. Wherever in this Lease the consent of one party is
required to an act of the other party such consent shall not be unreasonably
withheld.
16.22 Quiet Possession. Upon Lessee's paying the Rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all the
provisions of this Lease.
16.23 Multiple Tenant Building. The Premises are part of a larger
building or group of buildings and Lessee agrees therefor that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.
16.24 Changes and Additions to Complex. Lessor reserves the right to
change the number or address of the Complex, building dimensions, and the
identity and type of other tenancies in the Complex provided only that the size
of the Premises and reasonable access to Lessee's Premises shall not be material
impaired.
16.25 Notice to Mortgagee. In the event of any act or omission by Lessor
under this Lease which would arguably give Lessee the right to terminate this
Lease or to claim a partial or total eviction, Lessee shall not exercise any
such right until: (i) it has given written notice of such act or omission to any
mortgagee which at the time holds a lien on the Complex, and (ii) any such
mortgagee shall, following the giving of such notice have failed with reasonable
diligence to commence and to pursue reasonable action to remedy such act or
omission.
16.26 Remedial Action Required as a Result of Crane Inspections. Lessee
acknowledges Lessor shall have the right, from time to time, to inspect the
cranes and craneways, if any, located in the Premises ("Cranes"). Lessee further
agrees, in the event it receives a notice from Lessor ("Crane Repair Notice")
specifying defects in the Cranes identified pursuant to Lessor's inspection of
the Cranes, Lessee shall, at Lessee's cost, remedy such defects within sixty
(60) days of Lessee's receipt of the Crane Repair Notice. In the event Lessee
fails to repair such defects within said period, Lessor shall have the right to
either (a) remedy the defects not corrected by Lessee and, in such event, Lessee
shall reimburse Lessor for the cost thereof plus interest thereon at the Default
Rate from the date such costs are incurred to the date repaid to Lessor, or (b)
notify Lessee to cease use of the Cranes and, in such event, Lessee shall cease
use of the Cranes until such defects have been remedied.
17. Force Majeure. In the event Lessor is unable to perform any of its
duties or fulfill any of its covenants or obligations under this Lease as a
result of causes beyond the control and without the fault or negligence of
Lessor, such as, but not limited to, acts of God, fire, flood, war, governmental
controls, and labor strikes, then Lessor shall not be deemed to be in default
under the terms of this Lease during the continuance of such events which
rendered Lessor unable to perform and such
Page 18 of 27
<PAGE>
additional time thereafter as is reasonably necessary to enable Lessor to resume
performance of its duties and obligations under this Lease. During such time,
Lessee shall be entitled to no offset or abatement of rents or other charges due
under this Lease.
18. Hazardous Materials. Lessor and Lessee agree as follows with respect
to the existence or use of "Hazardous Material" in the Premises or otherwise in
the Complex.
(a) Lessee, at its sole cost and expense, shall comply with all laws,
statutes, ordinances, rules regulations and orders of any governmental authority
having jurisdiction concerning environmental, health and safety matters
("Environmental Laws"), including, but not limited to, any discharge by Lessee,
its agents, employees, contractors or invitees into the air, surface water,
sewers, soil or groundwater of any hazardous material (as defined in paragraph
18(j)), whether within or outside the Premises or otherwise in the Complex.
(b) In the event the Premises are ever used for a purpose other than as a
warehouse, on or before each anniversary date of this Lease, Lessee shall
provide Lessor with written certification that it is in compliance with all
Environmental Laws or shall otherwise specify the extent of Lessee's
noncompliance, including Lessee's intended course of action and time frame for
coming into compliance. Lessee shall additionally provide Lessor with a
duplicate copy of any emergency preparedness and response plans which it has
prepared or has had prepared. Lessor assumes no responsibility for
implementation of the plan by virtue of possession of said duplicate copy.
(c) Lessee shall, within 10 days of its receipt, provide Lessor with copies
of any notice of alleged violations, or other claims, relating to Environmental
Laws, or any changes to its emergency preparedness and response plans.
(d) Lessee has been advised that asbestos and asbestos containing materials
may have been used in the construction of the Premises or the Complex. Lessee
shall maintain the Premises and cause alterations to be performed to the
Premises only in a manner such that any asbestos does not become friable or
airborne, or violate any Environmental Laws.
(e) The Lessee, on its own behalf and on behalf of its successors and
assigns, hereby releases and forever discharges Lessor, its officers,
directors, employees and agents, both in their capacities as corporate
representatives and as individuals, from any and all claims, actions or
liabilities of any manner whatsoever, whether in law or equity, whether now or
hereafter claimed or known, which Lessee now has or may have in the future
against the Lessor arising from or relating in any way to releases or threatened
releases of Hazardous Materials to the environment which may occur as a result
of lessee's activities on the Premises, or which arise from Lessee's failure or
alleged failure to comply with all Environmental Laws.
(f) Lessee shall not install any underground storage tanks of any kind
whatsoever on the Premises without the prior written approval of Lessor.
"Underground Storage tank" as used herein shall have the meaning ascribed to it
by the Solid Waste Disposal Act, 42 U.S.C. (S) 6901 et seq., as it may be
amended, except that tanks specifically excluded from the statutory definition
shall nonetheless be encompassed within the definition for purposes of this
paragraph.
(g) Lessee shall (i) not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises or otherwise in the Complex
by Lessee, its agents, employees, contractors or invitees, without the prior
written consent of
Page 19 of 27
<PAGE>
Lessor (which consent Lessor shall not unreasonably withhold as long as Lessee
demonstrates to Lessor's reasonable satisfaction that such Hazardous Material is
necessary or useful to Lessee's business and will be used, kept and stored in a
manner that complies with Environmental Laws). If Lessee breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material in the Premises or otherwise in the Complex caused or permitted by
Lessee during the Prior Term or the Term results in contamination of the
Premises or the Complex, or other property, then Lessee shall indemnify, defend
and hold Lessor harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities or losses (including without limitation, diminution in
value of the Premises or the Complex, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Premises or the Complex,
damages arising from any adverse impact on marketing of space in the Complex,
and sums paid in settlement of claims, actual attorneys' fees, consultant fees
and expert fees) which arise during or after the Term as a result of such
contamination. This indemnification of Lessor by Lessee includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by any
federal, state or local governmental agency or political subdivision because of
Hazardous Material present in the soil or ground water on or under the Premises
or otherwise in the Complex. The indemnification and hold harmless obligations
of Lessee under this paragraph 18 regarding Lessee's causing or permitting
contamination of the Premises or Complex shall survive any termination of this
Lease. Without limiting the foregoing, if the presence of any Hazardous Material
in the Premises or otherwise in the Complex caused or permitted by Lessee during
the Prior Term or the Term results in any contamination of the Premises or the
Complex, Lessee shall promptly take all actions at its sole expense as are
necessary to return the Premises or the Complex to the condition existing prior
to the introduction of any such Hazardous Material to the Premises or the
Complex; provided that Lessor's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions, in Lessor's sole and absolute discretion, would not potentially have
any materially adverse long-term or short-term effect on the Premises or the
Complex.
(h) Provided that it does not materially interfere with Lessee's use of
the Premises, Lessor shall have the right, at any time, to cause at least three
(3) permanent testing wells to be installed in the Complex in locations selected
by Lessor at Lessor's sole discretion and may at its option cause the ground
water to be tested to detect the presence of Hazardous Material at least once
every twelve (12) months during the Term by the use of such tests as are then
customarily used for such purposes. If Lessee so requests, Lessor shall supply
Lessee with copies of such test results. The cost of such tests and of the
maintenance, repair and replacement of such wells shall be deemed Operating
Expenses (as defined in paragraph 10) for which Lessee shall be responsible in
accordance with the terms and conditions of paragraph 10. Lessee shall have the
right at any time during the Term to conduct its own test of the ground water
underlying the Complex by using such wells so long as each of the following
conditions are satisfied: (i) such tests are conducted by Lessee at its own
expense; (ii) it repairs any damage to such wells caused by such tests; and
(iii) it delivers copies of the results of such tests to Lessor.
(i) It shall not be unreasonable for Lessor to withhold its consent to any
proposed assignment or sublease pursuant to paragraph 12 if (i) the proposed
assignee's or sublessee's anticipated use of the Premises involves the
generation, storage, use, treatment or disposal of Hazardous Material; (ii) the
proposed assignee or sublessee has been required by any prior lessor, lender or
governmental authority to take remedial action in
Page 20 of 27
<PAGE>
connection with Hazardous Material contaminating a property if the contamination
resulted from such assignee's or sublessee's actions or use of the property in
question; or (iii) the proposed assignee or sublessee is subject to an
enforcement order issued by any governmental authority in connection with the
use, disposal or storage of a Hazardous Material.
(j) As used herein, the term "Hazardous Materials" means any hazardous or
toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of Indiana or the United States Government.
The term "Hazardous Material" includes, without limitation, any material or
substance which is (i) designated as a "hazardous substance" pursuant to Section
311 of the Federal Water Pollution Control Act, as amended, (33 U.S.C. Section
1317), (ii) defined as a "hazardous waste" pursuant to Section 3004 of the
Federal Resource Conservation and Recovery Act, as amended, (42 U.S.C. Section
6901 et seq.) (iii) defined as a "hazardous substance" pursuant to Section 101
of the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601), or (iv)
petroleum or petroleum derivatives.
(k) Lessee shall immediately notify Lessor of any materials which may be
used by Lessee or stored by Lessee on or about the Premises which may be
hazardous, as defined in paragraph 18(j) or otherwise, and shall obtain Lessor's
written consent prior to such use or storage.
(l) Any increase in the premiums for necessary insurance on the Premises or
the Complex which arises from Lessee's use and/or storage of these materials
shall be solely at Lessee's expense. Lessee shall procure and maintain at its
sole expense such additional insurance as may be necessary to comply with any
requirement of any Federal, State or local government agency with jurisdiction.
(m) Lessor shall have the right, from time to time, as deemed reasonably
necessary by Lessor and during the last year of the Term, to perform
environmental inspections of the Premises ("Environmental Audits") to ascertain
Lessee's compliance with the terms of this Paragraph. In the event Lessor's
Environmental Audit reveals non-compliance, Lessor shall so notify Lessee
("Lessor's Non-Compliance Notice") and Lessee shall have a period of sixty (60)
days from receipt of Lessor's Non-Compliance Notice to remedy such
non-compliance. In the event Lessee fails to remedy the non-compliance in the
aforesaid period, Lessor shall have the right to do so and Lessee shall, upon
demand, reimburse Lessor for the costs thereof plus interest thereon at the
Default Rate from the date such costs are incurred to the date such costs are
repaid to Lessor.
(n) Lessee, its officers, directors and assigns hereby covenant and agree
to indemnify, defend and hold Lessor, its officers, directors, employees and
assigns harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses contingent or otherwise which Lessor, its
officers, directors, employees or assigns may incur arising out of
contamination of real estate or other property not a part of the Complex which
contamination arises during the Prior Term or the Term as a result of the
presence of Hazardous Material in the Premises or in the Complex, the presence
of which is caused or permitted by Lessee. The indemnification and hold
harmless provisions of this paragraph and the reimbursement obligations
referenced in subparagraph (m) above shall survive any termination of the Lease
and shall be co-extensive with the indemnification and hold harmless rights of
Lessor with respect to the Premises and the Complex.
Page 21 of 27
<PAGE>
19. First Option to Reduce Area of Premises. Lessee shall have the option
("First Termination Option"), upon written notice to Lessor, to terminate its
lease as to that portion of the Premises identified on Exhibit C as Area A or
those portions of the Premises identified on Exhibit C as Area A and Area B
("First Option Termination Notice"). The First Option Termination Notice shall
specify whether Lessee has elected to terminate the Lease as to Area A or Area A
and Area B ("Designated Termination Area"). In the event Lessee delivers to
Lessor the First Option Termination Notice, this Lease shall, upon satisfaction
of the Termination Obligations (as hereinafter defined), terminate as to the
Designated Termination Area on the later of (i) the first anniversary of
Lessor's receipt of the First Option Termination Notice by Lessor, or (ii) the
date set forth in the First Option Termination Notice for termination of the
Designated Area ("First Option Termination Date"). Notwithstanding such partial
termination, Lessee shall remain liable for any unsatisfied obligations of
Lessee with respect to the Designated Area for the period prior to the First
Option Termination Date.
For the purposes hereof, the Termination Obligations shall mean the
following:
1. The delivery of possession of the Designated Area to Lessor on the First
Option Termination Date in the condition required pursuant to subparagraph
6.2(c) hereof; and
2. The payment to Lessor of the Separation Costs. For the purposes hereof,
the Separation Costs shall mean the aggregate cost of the following not to
exceed $155,000 in total for any exercise of such option:
a. Lessor costs in separating the Designated Termination Area or Area
C, as applicable, from the balance of the Premises including costs of an
insulated demising partition, any HVAC work required to maintain existing
conditions in the Designated Termination Area and the remainder of the
Premises and the separation and individual metering of utilities to the
remainder of the Premises and the Designated Termination Area or Area C, as
applicable ("Physical Separation Costs"); and
b. Brokerage commissions paid by Lessor in conjunction with obtaining
a replacement tenant for the Designated Termination Area or Area C
("Replacement Lease"), as applicable, attributable to that portion of the
Term and Premises then being terminated; and
c. Lessor's legal costs associated with the Physical Separation Costs
or the Replacement Lease.
Subject to the terms and conditions hereof, on the First Option Termination
Date, the Premises shall be reduced by the square footage identified on Exhibit
C for the Designated Termination Area and Lessee's Proportionate Share shall, as
of the First Option Termination Date, be adjusted accordingly.
20. Second Option to Reduce Area of the Premises. Provided Lessee has
exercised its First Termination Option and satisfies its Termination Obligations
with respect thereto, Lessee shall have the further option ("Second Termination
Option"), upon written notice to Lessor given not earlier than six (6) months
after the First Option Termination Date, to terminate its lease as to that
portion of the Premises identified on Exhibit C as Area C ("Second Option
Termination Notice"). In the event Lessee delivers to Lessor the Second Option
Termination Notice, this Lease shall, upon satisfaction of the Termination
Obligations, not to exceed $155,000 in total for any exercise of such option,
terminate on the later of (i) the first anniversary of Lessor's receipt of the
Second Option Termination Notice, or (ii) the date
Page 22 of 27
<PAGE>
set forth in the Second Option Termination Notice for termination of Area C
("Second Option Termination Date"). Notwithstanding such partial termination,
Lessee shall remain liable for any unsatisfied obligations of Lessee with
respect to Area C for the period prior to the Second Option Termination Date.
Subject to the terms and conditions hereof, on the Second Option Termination
Date, the Premises shall be reduced by the square footage identified on
Exhibit C for Area C and Lessee's Proportionate Share shall, as of the Second
Option Termination Date, be adjusted accordingly.
21. Termination of Prior Lease. The parties acknowledge the Prior Lease
is hereby terminated as of April 30, 1992.
IN WITNESS WHEREOF, the undersigned have executed this Lease on the day and
date first above written.
GREAT LAKES INVESTORS I,
an Illinois limited
partnership, Lessor
By: Indiana Land Corp.
an Illinois corporation,
general partner
Executed at Chicago
------------------
on By: /s/ John S. Gates
--------------------------- ----------------------------
Its: President
-----------------------
Address:
c/o Capital and Regional Properties
Corporation, as agent for Great Lakes
Industrial Center
401 North Michigan Avenue, Suite 3000
Chicago, Illinois 60611
(Corporate Seal)
Executed at Homewood, IL. AREA TRANSPORTATION COMPANY, an
------------------ Indiana corporation, Lessee
on 8/3/92
---------------------------
By: /s/ Michael A. Kelly
----------------------------
Its: CFO
-----------------------
Address 935 W. 175th St.
----------------------
Homewood, IL. 60430
- ------------------------------
Page 23 of 27
<PAGE>
EXHIBIT "A"
----------
Great Lakes Industrial Center
Legal Description
PARCEL I
--------
A parcel of land lying in the North half of Section 2 in the Northeast
Quarter of Section 3, Township 36 North, Range 8 West of the 2nd P.M., bounded
and described as follows: Commencing at the point of intersection of the West
line of said Section 2 with the North line of the property now owned by the New
York Central Railroad Company, said point being 842.4 feet more or less South of
the Northwest corner of said Section 2, and said North line of property of New
York Central Railroad Company being 130 feet by rectangular measurement North of
the base line of location of the New York Central Railroad as described in deed
from Gary Land Company to New York Central Railroad Company, dated February 20,
1917 and recorded in the Recorder's Office of Lake County, Indiana, in Book 270,
page 82; thence Easterly along said North property line of New York Central
Railroad Company 1,750 feet more or less to a point of curve (which point is the
Westerly corner of a parcel of land conveyed by Gary Land Company to New York
Central Railroad Company by Deed dated June 24, 1927 and recorded in the
Recorder's Office of Lake County, Indiana, on August 12, 1927 in Book 404, page
45); thence Northeasterly along a curve convex to the Southeast having a radius
of 1,499 feet, a distance of 969.4 feet to a point of reverse curve; thence
continuing Northeasterly on a curve convex to the Northwest having a radius of
3,408.29 feet, a distance of 1,079.05 feet, more or less, (said 969.4 foot
course and said 1,079.095 foot course being the Northwesterly line of said land
conveyed by Gary Land Company to New York Central Railroad Company by deed
aforesaid, dated June 24, 1927) to a point in the North line of said Section 2,
which point is the Northwesterly corner of said land so conveyed; thence West
along the North line of said Section 2, a distance of 951 feet more or less to a
point of curve; thence Westerly and Southwesterly along a curve convex to the
Northwest and having a radius of 11,409.2 feet, a distance of 1,679.4 feet more
or less to a point of tangent to said curve, (said curve being the Southerly
line or Southerly line extended of lands conveyed by Gary Land Company, to
Chicago, Lake Shore and Eastern Railway Company by deed dated June 20, 1928 and
recorded in the Recorder's Office of Lake County, Indiana, on September 19, 1928
in Book 432, page 553); thence continuing Southwesterly along the tangent to
said curve (said tangent being also a part of the Southerly line of aforesaid
lands conveyed to Chicago, Lake Shore and Eastern Railway Company) a distance of
1,619 feet more or less to the Northeast corner of a parcel of land containing
4.566 acres, conveyed by Gary Land Company to Gary Tube Company by deed dated
August 4, 1922 and recorded in the Recorder's Office of Lake County, Indiana, on
August 31, 1922 in Book 302, page 544; thence South along the East line of said
4.566 acre tract and said East line extended, a distance of 345.5 feet more or
less, to the Northerly line of the property of the New York Central Railroad
Company described as Parcel No. 6 in the deed from Gary Land Company to New York
Central Railroad Company dated February 20, 1917; thence Southeasterly along
said Northerly property line of New York Central Railroad Company 636.15 feet
more or less to the Place of Beginning; in the City of Gary, Lake County,
Indiana.
PARCEL II
---------
Part of the Northeast 1/4 of the Northeast 1/4 of Section 3, Township 36
North, Range 8 West of the 2nd Principal Meridan, in the City of Gary, Lake
County, Indiana, described as follows: Beginning at a point in the East line of
said Section 3 which is 842.4 feet South of the Northeast corner of said Section
3 and is marked by an iron pipe in concrete; thence West on a line that is 130
feet North of and parallel to the base line described in Deed
Page 24 of 27
<PAGE>
Record 270 page 82 from Gary Land Company to New York Central Railroad recorded
1-23-20, a distance of 1113.25 feet to an iron pipe in the East varying width
right of way of dedicated Tennessee Street as opened March 29, 1960 by
Resolution 9586 City of Gary; thence Northwesterly on said East line of
dedicated Tennessee Street 170.80 feet to the South line of dedicated 60 foot
wide Mason Avenue as opened April 23, 1948; thence East on the South line of
said 60 foot wide Mason Avenue 257.6 feet to a point of straight deflection in
the South line of Mason Avenue; thence continuing on the South line of Mason
Avenue deflected which is also the Northerly line of Parcel 6 in the aforesaid
Deed Record 270 page 82, for a distance of 884.53 feet more or less to the point
of beginning.
Page 25 of 27
[Pages 26 & 27 are sketches.]
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. ONE
to
LOAN AND SECURITY AGREEMENT
This Amendment No. One ("Amendment"), dated as of April 28, 1995,
constitutes a part of the Loan and Security Agreement dated as of July 12, 1993
(the Loan and Security Agreement which amended and restated prior Loan and
Security Agreements, and as amended from time to time, is hereinafter referred
to as the "Agreement") between Lake Shore National Bank and Area Transportation
Company (the "Borrower"). Terms capitalized herein have the same meanings as in
the Agreement, unless otherwise defined herein.
AMENDMENT TO CHANGE NAME OF BANK
WHEREAS, Lake Shore National Bank is now known as American National Bank
and Trust Company of Chicago, the Agreement is hereby amended as follows:
(a) in the first paragraph of the Agreement, "LAKE SHORE NATIONAL BANK (the
"Bank"), a national banking association with its principal place of
business at 605 North Michigan Avenue, Chicago, Illinois 60611" is hereby
replaced with the following:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (the "Bank"), a
national banking association with its principal place of business at
33 North LaSalle Street, Chicago, Illinois 60690; and
(b) in Article I, section D, Payments, the address of the Bank's Principal
Offices is changed from "605 North Michigan Avenue, Chicago, Illinois
60611" to the following:
33 North LaSalle Street, Chicago, Illinois 60690.
AMENDMENT TO INCREASE REVOLVING CREDIT LOAN
WHEREAS, the Bank has agreed to increase the Accounts Revolving Loan which
the Bank will lend to Borrower, the parties have agreed to amend the Agreement
as follows:
(a) under the section entitled "REVOLVING CREDIT LOANS" the first sentence of
the subsection entitled "ACCOUNTS RECEIVABLE" is replaced with the
following:
ACCOUNTS RECEIVABLE. The Bank will lend and relend to the Borrower
from time to time the sum of 80% of the face amount of the Borrower's
then existing "Eligible Accounts Receivable," as hereinafter defined
(the "Accounts Revolving Loan"); provided that the outstanding
principal amount of the Accounts Revolving Loan shall not at any time
exceed an amount equal to the lesser of $3,000,000.00 or the
Borrower's Accounts Borrowing Base, as hereinafter defined; and
further provided that the Bank may, at its sole discretion, terminate
the Accounts Revolving Loan or reduce the Accounts Borrowing Base,
upon 90 days written notice to the Borrower.
AMENDMENT TO AMOUNT OF TOTAL LOANS
WHEREAS, the Borrower and the Bank have agreed to the above-described
increase in the Revolving Credit Loan, and whereas, the current outstanding
aggregate principal balance of the Machinery and Equipment Term Loans under the
Agreement is $2,723,084.00, the parties have agreed to amend the total loans
under the Agreement as follows:
<PAGE>
(a) the first sentence under the caption "TOTAL LOANS UNDER THIS AGREEMENT" is
replaced with the following:
Any provision of this Agreement to the contrary notwithstanding, the
aggregate amount of all outstanding loans by the Bank to the Borrower
under this Agreement shall not at any time exceed FIVE MILLION SEVEN
HUNDRED TWENTY THREE THOUSAND EIGHTY FOUR AND NO/100 DOLLARS
($5,723,084.00)(the "Total Credit").
This Amendment supplements and modifies the Agreement, and all of the terms
and conditions and agreements therein contained are hereby reaffirmed and agreed
to and shall remain in full force and effect except as herein modified.
Dated: April 28, 1995
AMERICAN NATIONAL BANK AND AREA TRANSPORTATION COMPANY
TRUST COMPANY OF CHICAGO (Borrower)
By: /s/ By: /s/ Michael A. Kelly
--------------------- _____________________
Its: Its: CFO
---------------------- ---------------------
<PAGE>
AMERICAN NATIONAL BANK
and Trust Company of Chicago
- --------------------------------------------------------------------------------
PROMISSORY NOTE (SECURED)
- --------------------------------------------------------------------------------
$3,000,000.00 Chicago, Illinois May 31, 1996
Due May 31, 1997
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of THREE MILLION AND 00/100 DOLLARS
($3,000,000.00), or such lesser principal sum as may then be owed by Borrower
to Bank hereunder, which sum shall be due and payable on May 31, 1997.
Borrower's obligations and liabilities to Bank under this Note, and all
other obligations and liabilities of Borrower to Bank (including without
limitation all debts, claims and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, including those evidenced in rate
hedging agreements designed to protect the Borrower from the fluctuation of
interest rates, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Note, any agreement, instrument or document
heretofore, now or from time to time hereafter executed and delivered to Bank by
or on behalf of Borrower, or by oral agreement or operation of law or otherwise
shall be defined and referred to herein as "Borrower's Liabilities."
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid, computed as follows: at
a daily rate equal to the daily rate equivalent of 0.0% per annum (computed on
the basis of a 360-day year and actual days elapsed) in excess of the rate of
interest announced or published publicly from time to time by Bank as its prime
or base rate of interest (the "Base Rate"); provided, however, that in the event
that any of Borrower's Liabilities are not paid when due, the unpaid amount of
Borrower's Liabilities shall bear interest after the due date until paid at a
rate equal to the sum of the rate that would otherwise be in effect plus 3%.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day of
each month and at maturity, commencing with the last day of June, 1996, or as
billed by Bank to Borrower, at Bank's principal place of business, or at such
other place as Bank may designate from time to time hereafter. After maturity,
accrued interest on all of Borrower's Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Note and/or any other
agreement, instrument or document heretofore, now and/or from time to time
hereafter delivered by or on behalf of Borrower to Bank, Borrower grants to Bank
a security interest in and to the following property: (a) all of Borrower's now
existing and/or owned and hereafter arising or acquired monies, reserves,
deposits, deposit accounts and interest or dividends thereon, securities, cash,
cash equivalents and other property now or at any time or times hereafter in the
possession or under the control of Bank or its bailee for any purpose; (b)
Certain business assets of Area Transportation Company, an Illinois corporation,
pursuant to Loan and Security Agreement dated July 12, 1993 as amended from time
to time by and between Borrower and Bank; and (c) all substitutions, renewals,
improvements, accessions or additions thereto, replacements, offspring, rents,
issues, profits, returns, products and proceeds thereof, including without
limitation proceeds of insurance policies insuring the foregoing collateral (all
of the foregoing property is referred to herein individually and collectively as
"Collateral").
<PAGE>
Regardless of the adequacy of the Collateral, any deposits or other sums at
any time credited by or payable or due from Bank to Borrower, or any monies,
cash, cash equivalents, securities, instruments, documents or other assets of
Borrower in the possession or control of Bank or its bailee for any purpose, may
be reduced to cash and applied by Bank to or setoff by Bank against Borrower's
Liabilities.
Borrower agrees to deliver to Bank immediately upon Bank's demand, such
additional collateral as Bank may request from time to time should the value of
the Collateral (in Bank's sole and exclusive opinion) materially decline,
deteriorate, depreciate or become impaired, or should Bank deem itself insecure
for any material reason whatsoever, including without limitation a change in the
financial condition of Borrower or any party liable with respect to Borrower's
Liabilities, and does hereby grant to Bank a continuing security interest in
such other collateral, which shall be deemed to be a part of the Collateral.
Borrower shall execute and deliver to Bank, at any time upon Bank's demand, all
agreements, instruments, documents and other written matter that Bank may
request, in form and substance acceptable to Bank, to perfect and maintain
perfected Bank's security interest in the Collateral or any additional
collateral. Borrower agrees that a carbon, photographic or photostatic copy, or
other reproduction, of this Note or of any financing statement, shall be
sufficient as a financing statement.
In the Event of Default (as defined hereinbelow) Bank may take, and
Borrower hereby waives notice of, any action from time to time that Bank may
deem necessary or appropriate to maintain or protect the Collateral, and Bank's
security interest therein, and in particular Bank may at any time (i) transfer
the whole or any part of the Collateral into the name of the Bank or its
nominee, (ii) collect any amounts due on Collateral directly from persons
obligated thereon, (iii) take control of any proceeds and products of
Collateral, and/or (iv) sue or make any compromise or settlement with respect to
any Collateral. Borrower hereby releases Bank from any and all causes of action
or claims which Borrower may now or hereafter have for any asserted loss or
damage to Borrower claimed to be caused by or arising from: (a) Bank's taking
any action permitted by this paragraph; (b) any failure of Bank to protect,
enforce or collect in whole or in part any of the Collateral; and/or (c) any
other act or omission to act on the part of Bank, its officers, agents or
employees, except for willful misconduct.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable or declared due
and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's
Liabilities fails or neglects to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Note; (c)
occurrence of a default or event of default under any agreement, instrument or
document heretofore, now or at any time hereafter delivered by or on behalf of
Borrower to Bank; (d) occurrence of a default or an event of default under any
agreement, instrument or document heretofore, now or at any time hereafter
delivered to Bank by any guarantor of Borrower's Liabilities or by any person or
entity which has granted to Bank a security interest or lien in and to some or
all of such person's or entity's real or personal property to secure the payment
of Borrower's Liabilities; (e) if the Collateral or any other of Borrower's
assets are attached, seized, subjected to a writ, or are levied upon or become
subject to any lien or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors; (f) if a notice of lien,
levy or assessment is filed of record or given to Borrower with respect to all
or any of Borrower's assets by any federal, state or local department or agency;
(g) if Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
become due, if a petition under Title 11 of the United States Code or any
similar law or regulation is filed by or against Borrower or any such guarantor,
if Borrower or any such guarantor shall make an assignment for the benefit of
creditors, if any case or proceeding is filed by or against Borrower or any such
guarantor for its dissolution or liquidation, or if Borrower or any such
guarantor is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; (h) the death or
incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets or the
Collateral; (i) the revocation, termination or cancellation of any guaranty of
Borrower's Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k) if
Borrower or any guarantor of Borrower's Liabilities is in default in the payment
of any obligations, indebtedness or other liabilities to any third party and
such default is declared and is not cured within the time, if any, specified
therefor in any
<PAGE>
agreement governing the same; (1) if any material statement, report or
certificate made or delivered by Borrower, any of Borrower's partners, officers,
employees or agents or any guarantor of Borrower's Liabilities is not true and
correct; or (m) if Bank is insecure for a material reason.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower: (i) all of Borrower's
Liabilities shall be immediately due and payable; (ii) Bank may exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code of the relevant jurisdiction and any other applicable law upon
default by a debtor; (iii) Bank may enter, with or without process of law and
without breach of the peace, any premises where the Collateral is or may be
located, and may seize or remove the Collateral from said premises and/or remain
upon said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and/or (iv) Bank may sell or otherwise dispose of
the Collateral at public or private sale for cash or credit, provided, however,
that Borrower shall be credited with the net proceeds of any such sale only when
the same are actually received by Bank.
Upon an Event of Default, Borrower, immediately upon demand by Bank, shall
assemble the Collateral and make it available to Bank at a place or places to be
designated by Bank which is reasonably convenient to Bank and Borrower.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver of
an Event of Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment, demand and
protest and notice of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of this Note, and hereby
ratify and confirm whatever Bank may do in this regard. Borrower further waives
any and all notice or demand to which Borrower might be entitled with respect to
this Note by virtue of any applicable statute or law (to the extent permitted by
law).
Borrower agrees to pay, immediately upon demand by Bank, any and all costs,
fees and expenses (including reasonable attorneys' fees, costs and expenses)
incurred by Bank (i) in enforcing any of Bank's rights hereunder, and (ii) in
representing Bank in any litigation, contest, suit or dispute, or to commence,
defend or intervene or to take any action with respect to any litigation,
contest, suit or dispute (whether instituted by Bank, Borrower or any other
person) in any way relating to this Note, Borrower's Liabilities or the
Collateral, and to the extent not paid the same shall become part of Borrower's
Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank and to
have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Advances under this Note may be made by Bank upon oral or written request
of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which Bank
in good faith believes to be made by an Authorized Person, regardless of whether
such requests are in fact made by an Authorized Person. Any such advance shall
be conclusively presumed to have been made by Bank to or for the benefit of
Borrower. Borrower does hereby irrevocably confirm, ratify and approve all such
advances by Bank and agrees to indemnify Bank against any and all losses and
expenses (including reasonable attorneys' fees) and shall hold Bank harmless
with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
<PAGE>
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR
(II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES
THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
935 West 175th Street AREA TRANSPORTATION COMPANY
Homewood, Illinois 60430 an Illinois corporation
By: /s/ Richard Dickson
------------------------------
Richard Dickson, President & CEO
By: /s/ Michael Kelly
------------------------------------
Michael Kelly, Secretary/Treasurer &
CFO
By: /s/ George Trainer
------------------------------------
George Trainer, Executive Vice
President
36-3078859
- ----------
FEIN
<PAGE>
4-26-93 rev.
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of July
12, 1993 between LAKE SHORE NATIONAL BANK (the "Bank"), a national banking
association with its principal place of business at 605 North Michigan Avenue,
Chicago, Illinois 60611, and Area Transportation, as a successor to the merger
of Area Interstate Trucking, Inc. and Area Transportation Co. (the "Borrower"),
a(n) Illinois Corporation with its principal place of business at 935 W. 175th
St., Homewood, IL 60430.
W I T N E S S E T H :
WHEREAS, the Borrower desires that the Bank lend money to the Borrower and
the Bank is willing to lend money to the Borrower upon the following terms and
conditions:
AGREEMENT TO LEND
- -----------------
Subject to the terms and conditions of this Agreement, including, without
limitation, the General Conditions of Credit set forth below, and the
limitations herein provided, the Bank will make loans (herein sometimes referred
to as the "Credit Facility") to the Borrower on the following terms:
Indicate lending arrangements by checking all applicable boxes.
Appropriate officers of the Bank and the Borrower should also
affix their initials in the margin next to each box that has been
checked and should also affix their initials on the lower right
hand corner of each page of this Agreement.
REVOLVING CREDIT LOANS
----------------------
[X] ACCOUNTS RECEIVABLE. The Bank will lend and relend to the
Borrower from time to time the sum of 80% of the face amount of
the Borrower's then existing "Eligible Accounts Receivable," as
hereinafter defined (the "Accounts Revolving Loan"); provided
that the outstanding principal amount of the Accounts Revolving
Loan shall not at any time exceed an amount equal to the lesser
of $1,500,000.00 or the Borrower's Accounts Borrowing Base, as
hereinafter defined; and further provided that the Bank may, at
its sole discretion, terminate the Accounts Revolving Loan or
reduce the Accounts Borrowing Base, upon 90 days written notice
to the Borrower. The Accounts Revolving Loan (including the first
such loan and all additional such loans) shall be evidenced by
the Borrower's Accounts Demand Note, in form and substance
acceptable to the Bank, in the dollar amount specified in the
preceding sentence, being the maximum amount of the Accounts
Revolving Loan available to the Borrower under this Agreement.
The Accounts Demand Note shall be executed and delivered to the
Bank before or concurrently with the Bank's disbursement of the
first Accounts Revolving Loan. The unpaid principal amount of the
Accounts Revolving Loan shall bear interest and shall be due and
payable as provided in the Accounts Demand Note.
[NO] INVENTORY. The Bank will lend and relend to the Borrower from
time to time the sum of _____% of the Borrower's "Eligible
Inventory," as hereinafter defined (the "Inventory Revolving
Loan"); provided that the outstanding principal amount of the
Inventory Revolving Loan shall not at any time exceed an amount
equal to the lesser of $____________ or the Borrower's Inventory
Borrowing Base, as hereinafter defined; and further provided that
the Bank may, at its sole discretion, terminate the Inventory
Revolving Loans or reduce the Inventory Borrowing Base upon 90
days written notice to the Borrower. The Inventory Revolving Loan
(including the first such loan and all additional such loans)
shall be evidenced by the Borrower's Inventory Demand Note, in
form and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence, being the maximum amount of
the Inventory Revolving Loan available to the Borrower under this
Agreement. The Inventory Demand Note shall be executed and
delivered to the Bank before or concurrently with the Bank's
disbursement of the first Inventory Revolving Loan. The unpaid
principal amount of the Inventory Revolving Loan shall bear
interest and shall be due and payable as provided in the
Inventory Demand Note.
[NO] GENERAL. The Bank will lend and relend money to the Borrower from
time to time (the "General Revolving Loan"); provided that the
outstanding principal amount of the General Revolving Loan shall
not at any time exceed $_______________; and further provided
that the Bank may, at its sole discretion, terminate or modify
the terms of the General Revolving Loan upon 90 days written
notice to the Borrower. The General Revolving Loan (including the
first such loan and all additional such loans) shall be evidenced
by the Borrower's General Demand Note, in form and substance
acceptable to the Bank, in the dollar amount specified in the
preceding sentence, being the maximum amount of the General
Revolving Loan available to the Borrower under this Agreement.
The General Demand Note shall be executed and delivered to the
Bank before or concurrently with the Bank's disbursement of the
first General Revolving Loan. The unpaid principal amount of the
General Revolving Loan shall bear interest and shall be due and
payable as provided in the General Demand Note.
<PAGE>
TERM LOANS
----------
[X] MACHINERY AND EQUIPMENT. The Bank will lend to the Borrower the
sum of $4,000,000.00 (the "Machinery and Equipment Term Loan").
The Machinery and Equipment Term Loan shall be evidenced by the
Borrower's Machinery and Equipment Term Note, in form and
substance acceptable to the Bank, in the dollar amount specified
in the preceding sentence. The Machinery and Equipment Term Note
shall be executed and delivered to the Bank before or
concurrently with the Bank's disbursement of the Machinery and
Equipment Term Loan. The unpaid principal amount of the Machinery
and Equipment Term Loan shall bear interest and shall be due and
payable as provided in the Machinery and Equipment Term Note.
[NO] INVENTORY. The Bank will lend to the Borrower the sum of
$_______________ (the "Inventory Term Loan"). The Inventory Term
Loan shall be evidenced by the Borrower's Inventory Term Note, in
form and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence. The Inventory Term Note
shall be executed and delivered to the Bank before or
concurrently with the Bank's disbursement of the Inventory Term
Loan. The unpaid principal amount of the Inventory Term Loan
shall bear interest and shall be due and payable as provided in
the Inventory Term Note.
[NO] GENERAL. The Bank will lend to the Borrower the sum of
$_______________ (the "General Term Loan"). The General Term Loan
shall be evidenced by the Borrower's General Term Note, in form
and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence. The General Term Note shall
be executed and delivered to the Bank before or concurrently with
the Bank's disbursement of the General Term Loan. The unpaid
principal amount of the General Term Loan shall bear interest and
shall be due and payable as provided in the General Term Note.
OTHER LOANS The Bank will lend money to the Borrower on the terms set
forth in the appropriate Loan Supplement indicated below duly executed by
the Borrower and the Bank, and each such Loan Supplement is incorporated in
this Agreement and made a part hereof. Any such Loan Supplement may be
entered into as of the date of this Agreement or at a later date, but shall
in all respects be subject to the provisions of this Agreement except as
may otherwise be specifically provided in such Loan Supplement. Each such
loan shall be evidenced by the Borrower's note, in form and substance
acceptable to the Bank, in the amount of such loan, which shall be executed
and delivered to the Bank before or concurrently with the Bank's
disbursement of such loan. The unpaid principal amount of such loan shall
bear interest and shall be due and payable as provided in such note.
[X] LETTER OF CREDIT LOAN See Letter of Credit Loan Supplement
hereto.
[NO] REAL ESTATE LOAN See Real Estate Loan Supplement hereto.
TOTAL LOANS UNDER THIS AGREEMENT
- --------------------------------
Any provision of this Agreement to the contrary notwithstanding, the
aggregate amount of all outstanding loans by the Bank to the Borrower under this
Agreement shall not at any time exceed FIVE MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($5,500,000.00) (the "Total Credit"). Notwithstanding the stated
amount of the notes described above, the Borrower's liabilities thereunder at
any time shall be limited to the then unpaid principal amount of all loans and
advances (including overadvances and overdrafts) made by the Bank to or for the
account of the Borrower, plus the accrued interest thereon, and all other costs
and expenses, including reasonable attorneys' fees, to be paid by the Borrower
as provided by this Agreement (collectively the "Borrower's Liabilities"). (The
Accounts Demand Note, Inventory Demand Note, the General Demand Note, the
Machinery and Equipment Term Note, the Inventory Term Note, the General Term
Note and any other note delivered in connection with this Agreement or any Loan
Supplement hereto are sometimes herein referred to, together, as the "Notes"
and, individually, as a "Note").
COLLATERAL
- ----------
Payment of the Borrower's Liabilities is secured by all of the Collateral
described or referred to in Article II and by such additional security or
collateral as has been or may hereafter be granted or assigned to the Bank in
connection with this Agreement and any Loan Supplement and Addendum hereto, or
may hereafter be granted or assigned to the Bank in connection with this
Agreement, other loan documents or a credit facility hereafter arising or
otherwise.
GENERAL CONDITIONS OF CREDIT
- ----------------------------
The making of any loans under this Agreement shall be subject to the Bank's
right, at its sole discretion, to terminate the Credit Facility or to reduce the
amount of the loans under the Credit Facility upon 90 days written notice to the
Borrower. Without limitation of the foregoing, each loan hereunder shall in any
event be subject to the following conditions precedent: (a) no Event of Default,
or Unmatured Event of Default (as those terms are hereinafter defined), shall
have occurred and be continuing, (b) the Bank does not deem itself insecure as
provided under the Illinois Uniform Commercial Code (810 ILCS 5/1-208), (c) the
representations, warranties and covenants of the Borrower contained in this
Agreement shall be true and correct as of the date of such loan with the same
effect as though made on such date, (d) all of the covenants of the Borrower in
this Agreement, and all of the requirements of this Agreement with respect to
such loan, shall have been complied with and (e) there shall not have occurred,
since the date of this Agreement, any material adverse change in the financial
condition, results of operations or business of the Borrower. Each borrowing by
the Borrower hereunder shall be deemed a representation and warranty by the
Borrower that the foregoing conditions have been fulfilled as of the date of
such borrowing.
<PAGE>
REPAYMENT
- ---------
The Borrower agrees to repay each loan hereunder in accordance with the
terms and provisions of this Agreement and each Note.
ENTIRE AGREEMENT
- ----------------
This Agreement (and any Loan Supplement and Addendum hereto) and the Notes
and the other documents delivered or to be delivered in connection with or
pursuant to this Agreement contain all of the agreements of the Bank and the
Borrower with respect to the subject matter hereof.
ARTICLE I LOANS: GENERAL TERMS
A. Prime Rate. "Prime Rate" are used herein and in connection herewith
(including, without limitation, in any Note) means the rate per annum from time
to time determined by the Bank as its Prime Rate, as reflected in the Bank's
Prime Rate history book maintained at its principal office in Chicago, Illinois.
The designation of a rate of interest as the Bank's Prime Rate is for
convenience of reference for the Bank's internal procedures and does not
indicate in any way that such Rate is the rate of interest then being charged by
the Bank to its most creditworthy customers. Whenever the Prime Rate is a
component of an interest rate under this Agreement, such interest rate shall
fluctuate from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Prime Rate component thereof.
B. Changes in Interest Rate By Bank. The Bank, at its sole discretion, upon
90 days written notice to the Borrower, shall have the right from time to time
to change the interest rate (without regard and in addition to any change
therein resulting from any change in the Prime Rate or any other component of
such interest rate) applicable to any loan made or to be made to the
Borrower and to any other Borrower's Liabilities. Whenever the Bank shall elect
to increase such interest rate, the Bank shall send written notice to
the Borrower specifying the new interest rate to be charged and the effective
date (but not less than 90 days from date of notice) of the new interest rate.
The Borrower may pay the full amount of the outstanding Borrower's Liabilities,
without penalty or the payment of any specified increase in the interest rate,
within 90 days after the sending of any such notice of a change in the interest
rate.
1. The Greater of 4.5% or -0- percent in excess of the Bank's Prime
Rate, which rate shall change when and as Prime Rate changes with a
maximum Rate of 7.5%.
2. Notwithstanding above, after the 48th payment on the certain Note or
Notes evidencing all or any part of the $4,000,000 Machinery and
Equipment Term Loan, the Floor and Ceiling referenced above shall
expire.
C. Default Rate. After the occurrence of an Event of Default under this
Agreement, the Notes and all other Borrower's Liabilities shall (subject to any
limitations of applicable law) bear interest at rates per annum equal to the
respective rates applicable to such Notes and other Borrower's Liabilities prior
to such Event of Default plus four percent (4%).
D. Payments. All payments under this Agreement and with respect to the
Notes shall be made in immediately available funds by the Borrower to the Bank
prior to 2:00 p.m., Chicago time, on the date when due at the Bank's offices at
605 North Michigan Avenue, Chicago, Illinois 60611 (the "Bank's Principal
Office") or at such other location as the Bank may designate. Any payment
received after 2:00 p.m., Chicago time, shall be deemed received on the next
Business Day. Whenever any payment to be made hereunder or with respect to any
Note shall be stated to be due on a date other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of interest or any fees. "Business Day"
means any day on which the Bank is open for business at the Bank's Principal
Office.
E. Application of Payments. The Bank will apply against the Borrower's
Liabilities, on the date of receipt, if received by the Bank's commercial note
teller prior to 2:00 p.m., Chicago time, all payments received thereon,
including cash, solvent credits, collections of Accounts, proceeds of Collateral
(as hereinafter defined) and any other amounts; provided that (a) interest on
the amount of the reduction in any loan resulting from such application shall be
charged to the Borrower for the two days following the day that payment was
applied against the Borrower's Liabilities, unless the payment received is in
the form of cash or cash equivalent; (b) the Bank shall charge back to the
Borrower any payments that may be required to be returned to the entity making
such payment and the Borrower shall continue to pay interest on the amount
charged back from the date that such payment was applied against the Borrower's
Liabilities; (c) prior to the occurrence of an Event of Default, collections of
Accounts shall be applied only to the repayment of revolving loans and any
Borrower's Liabilities related thereto; and (d) except as provided in (c) above,
the Bank shall have the exclusive right to determine how, when and in what
amounts application of such payments and such credits shall be made on the
Borrower's Liabilities, and such determination shall be conclusive upon the
Borrower. (Notwithstanding the foregoing, the Bank and the Borrower may agree
otherwise in writing with respect to the application of collections and proceeds
of Accounts, as provided in Article III.)
F. Statement of Account. All of the Borrower's Liabilities shall constitute
one loan secured by the Collateral and by all security interests, liens, claims
and encumbrances heretofore, now or from time to time hereafter granted by the
Borrower to the Bank. Loans made by the Bank to the Borrower pursuant to this
Agreement may or may not (at the Bank's sole and absolute discretion) be
evidenced by notes or other instruments issued or made by the Borrower to the
Bank. Where such loans are not so evidenced, such loans shall be evidenced
solely by entries upon the ledgers, books, records or computer records of the
Bank maintained for that purpose. In determining the Borrower's Liabilities, the
books and records of the Bank shall be controlling. All statements of accounts
rendered by the Bank to the Borrower
<PAGE>
concerning the Borrower's Liabilities hereunder, including all statements of
principal, interest, requests for advance, fees, expenses and costs owing to the
Bank by the Borrower, shall be presumed correct and accurate and shall
constitute an account stated between the Bank and the Borrower unless the
Borrower, within 180 days after receipt thereof, delivers to the Bank written
objection thereto, specifying the error or errors, if any, contained in such
statement. The Bank, at it's sole discretion, may request the Borrower to
certify as to the accuracy of the Bank's records relative to the Borrower's
Liabilities and the Borrower shall comply within 30 days of such request.
G. Compensating Balance. So long as this Agreement is in effect or there
are any outstanding Borrower's Liabilities hereunder, the Borrower shall
maintain with the Bank, in demand deposit (non-interest bearing) accounts, an
amount computed as follows (the "Compensating Balance"): NOT APPLICABLE
If the borrower fails to maintain the Compensating Balance, the Bank may charge,
and the Borrower agrees to pay, a deficiency fee, which shall be payable within
30 days after the Bank issues the bill for such fee, in an amount computed as
follows: NOT APPLICABLE
H. Commitment Fee - Service Charges. The Borrower agrees to pay to the
Bank, in addition to all other amounts payable hereunder, a commitment fee
of: _______________________________________________________________________
($_________________) Dollars. NOT APPLICABLE
and a service charge computed as follows: NOT APPLICABLE
I. Unused Commitment Fee. The Borrower agrees to pay the Bank a monthly fee
of N/A of one percent (.____%) of the unused portion of the Accounts
Revolving Loan and/or the Inventory Revolving Loan which shall be paid on the
____ day of each month, and shall be computed on a sum determined by subtracting
the preceding one month's average outstanding daily balance of the Accounts
Revolving Loan and/or the Inventory Revolving Loan from the total available
credit available to the Borrower under the Accounts Revolving Loan and/or the
Inventory Revolving Loan.
J. Prepayment. Unless otherwise provided in the Addendum attached hereto,
any loan to the Borrower may be prepaid, in whole or in part, at any time
without premium or penalty; provided, however, that the Bank, at its sole
discretion, may demand payment of all other indebtedness of the Borrower to the
Bank and all indebtedness of its officers, directors and shareholders to the
Bank if the Revolving Credit Loans are prepaid in whole or in part from a credit
facility established at another banking or financial institution.
K. Certain Other Fees and Expenses. The Borrower shall pay reasonable
attorneys's fees and other expenses incurred by the Bank in connection with this
Agreement and the loans contemplated hereby, (including the reasonable fees,
costs, and expenses in connection with the Bank's inspection of the Collateral
and the books and records, as provided in Paragraph C of Article II), and the
Bank shall have the right to charge or debit any account of the Borrower at the
Bank for any fees or expenses payable by the Borrower hereunder.
ARTICLE II COLLATERAL: GENERAL
----------
A. Description. The Borrower hereby grants and assigns to the Bank and
agrees that the Bank shall have a security interest in the following property,
assets, rights and interests of the Borrower, whether now owned or existing or
hereafter acquired or arising:
1. all of the Borrower's Accounts (the term "Accounts" as used herein
includes, without limitation, all of the Borrower's accounts receivable
arising out of the sale or lease of Inventory or other goods or out of the
rendering of services), whether or not specifically assigned to the Bank
and whether or not constituting Eligible Accounts Receivable;
2. all of the Borrower's Inventory (the term "Inventory" as used
herein includes, without limitation, all of the Borrower's goods held for
sale or lease or being processed for sale or lease, including all
materials, work-in-process, finished goods, supplies and other goods
customarily classified as inventory), including Inventory at any time in
the possession of any bailee and whether or not constituting Eligible
Inventory;
3. all of the Borrower's Machinery and Equipment as described or
referred to in RIDER D hereto (the "Machinery and Equipment");
4. all of the collateral and other security, if any, described in any
Loan Supplement and Addendum entered into by the Borrower and the Bank
pursuant to this Agreement;
5. N/A
6. all of the Borrower's cash, negotiable instruments, documents of
title, warehouse receipts, chattel paper, general intangibles, securities,
leases, contract rights, certificates of deposit, deposit accounts, cash
equivalents, interest or dividends on any of the foregoing, insurance
claims, patents, trademarks, good will and other property of any kind or
description, wherever now or hereafter located, and now or hereafter in
transit to or in the possession or control of or assigned to or owned or
held by the Bank; and
7. without limitation of the foregoing, all substitutions, renewals,
improvements and replacements of, and additions and accessions to, the
foregoing, and all products and proceeds of the foregoing, including,
without limitation, all of the proceeds in any form of the Borrower's
Accounts and Inventory, whether specifically assigned to the Bank or not.
-10-
<PAGE>
All of the assets described or referred to in this Paragraph A are herein called
the "Collateral"; provided, however, that the Collateral shall not include any
excluded assets of the Borrower described in RIDER A hereto. The terms used
herein to identify the Collateral shall have the respective meanings assigned to
such terms as of the date hereof in the Illinois Uniform Commercial Code. The
security interest granted hereby shall continue to attach to the Collateral
notwithstanding any sale, exchange or other disposition of the Collateral, or
any part thereof, by the Borrower except for finished Inventory sold in the
ordinary course of business. The security interest herein granted is to secure
the payment of all of the Borrower's Liabilities and the performance of all of
the Borrower's obligations to the Bank hereunder and any and all other
obligations of the Borrower to the Bank of every kind and description, direct or
indirect, absolute or contingent, due or to become due, not existing or
hereafter arising. The Bank may call for additional Collateral as provided under
the Illinois Uniform Commercial Code (810 ILCS 5/1-208), and the
Borrower shall deliver such Collateral promptly.
B. Financing Statements. The Borrower shall sign and deliver such
financing statements and other documents, in form satisfactory to the Bank, as
the Bank may at any time reasonably request in order to effectuate or perfect
the Bank's security interest in the Collateral hereunder, or facilitate the
realization by the Bank upon the Collateral, or any part thereof, and shall
reimburse the Bank for the costs of preparing and filing the same.
C. Inspection. The Bank or its agents may at any reasonable time and from
time to time inspect the Collateral and the books and records of the Borrower
pertaining to the Collateral, or any part thereof, and may make copies or
extracts from such books and records. The Borrower, at its sole cost and
expense, shall keep and maintain satisfactory and complete books and records of
the Collateral until all of the Borrower's Liabilities shall have been fully
paid and discharged. The Bank shall have a special property interest in and to
any and all books and records of the Borrower pertaining to the Collateral, and
upon the occurrence of an Event of Default the Borrower shall deliver such books
and records to the Bank at the demand of the Bank. The Bank may, at any time,
require the Borrower to furnish copies of any of the Borrower's books and
records to the Bank or its agent and the Borrower agrees to furnish such copies
promptly upon the Bank's request. At the request of the Bank, the Borrower shall
duly cause its accounts receivable ledger and other books and records relating
to the Collateral to be stamped, in form and manner satisfactory to the Bank,
which a proper reference to the fact that the Collateral has been assigned to
the Bank. The Borrower shall pay the Bank's reasonable fees, costs and expenses
as the Bank may fix from time to time in connection with the Bank's inspection
of the Collateral and the books and records of the Borrower as herein provided.
D. Preservation. The Bank may take such action from time to time as it
may, in its sole judgment, deem appropriate to maintain or protect the
Collateral, and for that purpose may, among other things, at its option, pay or
obtain the removal of any tax, lien, security interest, claim or encumbrance
that may be levied or placed on or with respect to any of the Collateral, or pay
the costs of insurance on any of the Collateral. The Borrower shall reimburse
the Bank, promptly upon demand by the Bank, for any costs or expenses (including
reasonable attorneys' fees) incurred by the Bank in the protection or
maintenance of the Collateral, including the expenditures described herein and
any costs to move the Collateral to another location. The Bank shall have
exercised reasonable care in the custody and preservation of any Collateral in
its possession or control if it takes such action for that purpose as the
Borrower shall request in writing, but the failure to comply with any such
request shall not be deemed a failure to exercise reasonable care. The Borrower
shall have the sole responsibility for taking such steps as may be necessary
from time to time to preserve all rights of the Borrower and the Bank in the
Collateral against other parties. The Borrower shall keep the Collateral in good
condition and repair and shall not waste or destroy any of the Collateral.
E. Insurance. The Borrower shall maintain in effect at all times
policies of insurance insuring against loss of or damage to all tangible
property constituting Collateral. Such insurance shall, except as may otherwise
be agreed to in writing by the Bank, (a) cover all risks, (b) be in amounts
equal to the full value of the Collateral, (c) be provided by such companies as
are satisfactory to the Bank, (d) contain a lender's loss payable clause naming
the Bank as payee as its interest may appear and (e) provide for 10 days' prior
written notice to the Bank of any cancellation. The Borrower shall cause a
certificate of insurance evidencing the insurance coverage required under this
Agreement to be delivered to the Bank within 14 days following the date of this
Agreement. The Bank, after an Event of Default as hereinafter defined, may act
as attorney for the Borrower in obtaining and cancelling such insurance and in
adjusting and settling any claims with respect thereto and endorsing any drafts
received as a result thereof.
F. Liens. The Borrower represents and warrants that the Collateral is,
and covenants and agrees that it will keep the Collateral, free from any lien,
security interest (other than the security interest herein granted), claim or
encumbrance, except for any Permitted Encumbrance, as hereinafter defined, and
agrees to defend the Collateral against any and all claims and demands of all
persons at any time claiming the same or any interest therein.
G. Use. The Borrower shall not sell, assign, lease, transfer or convey any
of the Collateral or any interest therein; provided that, so long as no Event of
Default, as hereinafter defined, has occurred under this Agreement, the Borrower
may sell Inventory in the ordinary course of business (not including any
transfer in connection with or in satisfaction of any debt). The Borrower may
use and consume any raw materials or supplies, the use and consumption of which
is necessary in order to carry on the Borrower's business, may use and operate
any Machinery and Equipment and may otherwise use the Collateral in any lawful
manner not inconsistent with this Agreement, so long as no Event of Default has
occurred under this Agreement.
H. Locations. The Borrower represents and warrants that, in addition to
the location indicated in the first paragraph of this Agreement, it has places
of business at the following locations and keeps its books and records at the
place indicated:
201 Mississippi St., Gary, IN
BOOKS & RECORDS: 935 W. 175 St., Homewood, IL
The Borrower shall notify the Bank promptly in writing of any change in the
foregoing or of any change in its name or in the names (or of any other names)
under which it is doing business.
<PAGE>
ARTICLE III COLLATERAL: ACCOUNTS
-----------
Paragraphs A, B, C of this Article are applicable and constitute part
of this Agreement only if an Accounts Revolving Loan is made or to be
made under this Agreement.
A. Accounts Borrowing Base. "Accounts Borrowing Base" means, as to the
Borrower, at any time and from time to time, an amount equal to 80% of the face
amount of the Borrower's then existing "Eligible Accounts Receivable" (as
defined in Paragraph B below) which may be terminated or reduced as hereinabove
provided, less maximum discounts, allowances, credits and adjustments which may
be taken by or granted to any person who is or may become obligated to Borrower
under or on account of such Eligible Accounts Receivable (the "Obligor").
B. Eligible Accounts Receivable. "Account", as that term is used herein,
is a sum due the Borrower as evidenced by an invoice or other document
establishing the sum due the Borrower and the transaction creating the sum due.
"Eligible Accounts Receivable" is an Account or Accounts that, when scheduled to
the Bank and at all times thereafter, does not violate the negative covenants
and other provisions and does satisfy the affirmative covenants and other
provisions of this Agreement. The following Accounts are not Eligible Accounts
Receivable:
1. An Account which remains unpaid for more than 90 days after the
invoice dates or, in the case of "extended terms" an invoice, which remains
unpaid for more than 30 days beyond the date payment is due;
2. An Account which has been invoiced on "extended terms" which is
not due and payable within 30 days after the invoice dates;
3. Accounts owed by a single "Obligor", if the amount of the balance
owed by the Obligor upon all the Accounts owed to the Borrower exceeds 33%
of Obligor's Eligible Accounts Receivable, or such other amount which the
Bank, in its sole discretion, deems excessive;
4. Accounts owed by a single "Obligor" if the amount of the balance
owed by the Obligor is more than 50% (or such other percentage where the
Bank, in its sole discretion, deems excessive) of total ineligible
accounts;
5. An Account with respect to which a director, officer, employee or
agent of the Borrower is Obligor, or the Obligor, directly or indirectly,
controls, is controlled by or is under common control with the Borrower;
6. An Account with respect to which payment by the Obligor is or may
be conditional, and Accounts commonly known as "bill and hold" and Accounts
of a similar arrangement;
7. An Account with respect to which the Obligor is not a resident or
citizen of or otherwise located in the continental United States of
America, or with respect to which the Obligor is not subject to service of
process in the continental United States of America;
8. An Account with respect to which the Obligor is the United States
of America or any department, agency or instrumentality thereof, unless the
Borrower assigns its right to payment of such Accounts to the Bank pursuant
to the Agreement of Claims Act of 1940, as amended;
9. Accounts with respect to which the Borrower is or may become
liable to the Obligor for goods sold or services rendered by the Obligor to
the Borrower;
10. Accounts with respect to which the goods giving rise thereto have
not been shipped and delivered to and accepted as satisfactory by the
Obligor or with respect to which the services performed giving rise thereto
have not been completed and accepted as satisfactory by the Obligor;
11. Accounts which have not been involved, or have been fraudulently
or negligently or improperly included in a Request for Advance, as
hereinafter defined;
12. Accounts with respect to which possession or control of the goods
sold giving rise thereto is held, maintained or retained by the Borrower
(or by any agent or custodian of the Borrower) for the account of or
subject to further or future direction from the Obligor;
13. Accounts arising from a "sale on approval" or a "sale or return";
14. Accounts as to which the Obligor is insolvent or has admitted its
inability to pay its debts as they come due, or has filed a petition under
any bankruptcy or insolvency law or had such a petition filed against it,
or as to which the Obligor has made an assignment for the benefit of its
creditors, or as to which the Bank, at any time, determines, in good faith,
that prospect of payment thereon is unsatisfactory;
15. Accounts with respect to which the Bank does not have a valid,
first priority and fully perfected security interest and accounts subject
to any lien except those in favor of the Bank; and
16. Accounts of an Obligor to the extent that the Bank, in good
faith, has determined at any time that a credit limit shall be applied with
respect to such Obligor and has given notice to the Borrower of the
determination of such credit limit, and such Accounts exceed such credit
limit.
<PAGE>
Immediately upon demand from the Bank, the Borrower shall pay to the Bank an
amount of money equal to the amount theretofore advanced by the Bank to the
Borrower upon any Account that is no longer an Eligible Accounts Receivable, and
the Bank shall apply such payment to and on account of the Accounts Revolving
Loan. The Borrower shall notify the Bank within a reasonable time after learning
that an Account is no longer an Eligible Accounts Receivable, but not later than
the date of the next request by the Borrower for an Accounts Revolving Loan
under this Agreement.
C. Waiver of Obligor's Right of Setoff. The Bank, at its sole discretion,
may require the Borrower to obtain a waiver of setoff from any Obligor of the
Borrower, and if the Borrower is unable to obtain such a waiver acceptable to
the Bank, the Bank, at its sole discretion, may declare the Accounts, or any of
them from such Obligor, as ineligible in determining the Borrower's Accounts
Borrowing Base.
D. Accounts Revolving Loan Advances. Each request for an Accounts
Revolving Loan under this Agreement shall be made by the Borrower by providing
the Bank with at least one Business Day's advance written notice (a "Request
for Advance") in substantially the form of RIDER B hereto specifying the amount
of the Accounts Revolving Loan being requested and the date by which the
Borrower desires such amount to be made available to it. The Bank, in its
reasonable discretion and upon its reasonable determination, that the conditions
set forth in this Agreement have been duly satisfied, will make the amount set
forth in the Request for Advance available to or upon the order of the Borrower
in immediately available funds at the Bank's Principal Office not later than
2:00 p.m., Chicago time, on the date of the proposed borrowing.
E. Collection. The collection of the Accounts and the application of the
proceeds received therefrom shall be subject to the following:
1. The Borrower is authorized to collect the Accounts or any part
thereof, but such authorization may be restricted or terminated by the Bank
at any time in the Event of Default, as hereinafter defined. The Borrower
shall not grant any extension of time for the payment of the Accounts,
shall not compromise, compound or settle the Accounts or any part thereof
for less than the full amount thereof, shall not release, in whole or in
part, any person liable for the payment of the Accounts or any part
thereof, or allow any credit, discount or allowance whatsoever upon the
Accounts or any part thereof, unless such activity shall be deemed to be in
the ordinary course of business and shall not occasion or threaten a
material adverse change in the financial condition, results of operation or
business of the Borrower, without first obtaining the written consent of
the Bank.
2. Unless otherwise agreed to in writing by the Bank, the Borrower
shall deliver or cause to be delivered to the Bank, not later than the
Business Day following the receipt thereof, all collections and proceeds
received by the Borrower on the Accounts, in the form in which they are
received, for application or retention by the Bank in accordance with this
Agreement. Simultaneously with each such delivery, the Borrower shall
deliver to the Bank, on forms provided by the Bank for said purpose, a
full, true and correct report of all such proceeds in manner and form
designated by the Bank. Such reports shall be accompanied by a statement
and description of the discounts, allowances, credits and adjustments
(other than normal trade discounts specifically noted at the time of
assignment) reported therein. The proceeds of the Accounts shall be
delivered to the Bank in precisely the form received, except for the
endorsement of the Borrower when required, and until so turned over shall
be deemed to be held in trust by the Borrower, for and as the property of
the Bank, and shall not be commingled with other funds of the Borrower. All
remittances are received subject to collection, and the Bank assumes no
responsibility in connection therewith beyond the exercise of ordinary care
and will not be liable for default, negligence or willful misconduct of any
correspondent or for losses in transit.
3. In the Event of Default, as hereinafter defined, the Bank may,
without notice to or assent of the Borrower, extend the time of payment or
compromise, settle for cash or credit or otherwise settle, upon any terms
or conditions, any part of the Accounts and thereby discharge or release
the person or persons liable for the payment of the Accounts or any part
thereof without affecting the Borrower's Liabilities to the Bank. The Bank
may, but shall not be obliged to, demand or enforce payment of the Accounts
or any part thereof and shall not be liable for its failure to collect or
enforce the payment thereof or for the negligence of its agents or
attorneys with respect thereto.
F. Notification. In the Event of Default, as hereinafter defined, the
Bank, without notice to the Borrower, may notify (the "Obligor") liable for the
payment of any Account of the fact that the same has been assigned to the Bank
and may direct that payment of any Accounts be made directly to the Bank. If the
Bank so requests, all bills and statements sent by the Borrower to the Obligor
shall state that the same has been assigned to the Bank and is payable solely to
the Bank. When requested by the Bank, for any reason and at any time, the
Borrower will notify or cause to be notified the Obligor to pay directly to the
Bank any sum or sums then due or to become due on account of the Accounts or any
part thereof.
<PAGE>
G. Miscellaneous.
1. The Borrower will promptly notify the Bank, in writing, of the
return or rejection of any Inventory or other goods or materials
represented by any part of the Accounts, and in such event the Borrower
shall promptly account therefor to the Bank in cash without the necessity
of any further demand or notice by the Bank to make such an accounting. In
the event that any check or other instrument for the payment of money in
respect of any Account shall be returned uncollected for any reason, the
Borrower agrees to pay to the Bank the amount of such check or other
instrument, or the Bank may, in its discretion, charge the Borrower's Bank
account with the amount of such check or other instrument, in either case
as may be necessary to maintain the required Accounts Borrowing Base with
respect to the Accounts Revolving Loan, and the amount of such payment or
change shall be applied to the payment of the Accounts Revolving Loan.
2. In the Event of Default, the Bank is hereby authorized to endorse
the Borrower's name on all notes, checks, drafts, bills of exchange, money
orders, commercial paper of any kind whatsoever, and any other documents
received in payment of the Accounts, or any part thereof, and the Bank, or
any officer or employee thereof, is hereby irrevocably constituted and
appointed agent and attorney-in-fact for the Borrower for the foregoing
purpose.
3. In the Event of Default, the Bank shall have and succeed to all
rights, remedies, securities and liens of the Borrower in respect to the
Accounts and the related Inventory, goods, materials and other property
including, but not limited to, the right of stoppage in transit,
guaranties, or other contracts or suretyship, unpaid sellers' liens,
statutory liens, artisans' liens, or other collateral security held by or
to which the Borrower is entitled for the payment of the Accounts, and
shall have the right to enforce the same in its name or to direct the
enforcement thereof by the Borrower for the benefit of the Bank, and the
Borrower shall, at the request of the Bank, deliver to the Bank a separate
written assignment of any of the same.
4. In the Event of Default, the Borrower shall cause an accountant or
representative of the Borrower satisfactory to the Bank, to furnish to the
Bank, as often as the Bank shall reasonably request, the following reports:
(1) a reconciliation of all Accounts; (2) an aging of all Accounts; (3) a
test verification of all Accounts; and (4) trial balances; all certified as
to their accuracy by such accountant or representative; and the Borrower
shall pay the reasonable costs of such reports.
ARTICLE IV COLLATERAL: INVENTORY
----------
Paragraphs A, B and C of this Article are applicable and constitute
part of this Agreement only if an Inventory Revolving Loan is made or
to be made under this Agreement.
A. Inventory Borrowing Base. "Inventory Borrowing Base" means, as to any
Borrower, at any time and from time to time, an amount equal to N/A % of the
face amount of such Borrower's then existing "Eligible Inventory" (as defined in
Paragraph B below), which may be terminated or reduced as hereinabove provided.
B. Eligible Inventory. "Eligible Inventory" means that portion of
the Borrower's inventory that (a) is not obsolete; (b) consists of raw
materials, salable work in process or finished goods; (c) the Bank, in good
faith, has not determined to be unacceptable due to age, type, category or
quantity; and (d) is located on premises owned or leased as lessee by the
Borrower or is located on a third party's property on consignment.
C. Inventory Revolving Loan Advances. Each request for an Inventory
Revolving Loan under this Agreement shall be made by the Borrower by providing
the Bank with at least one Business Day's advance written notice (a "Request for
Advance") in substantially the form of RIDER C hereto specifying the amount of
the Inventory Revolving Loan being requested and the date by which the Borrower
desires such amount to be made available to it. The Bank, in its reasonable
discretion and upon its reasonable determination that the conditions set forth
in this Agreement have been duly satisfied, will make the amount set forth in
the Request for Advance available to or upon the order of the Borrower in
immediately available funds at the Bank's Principal Office not later than 2:00
p.m., Chicago time, on the date of the proposed borrowing. The Borrower will
confirm within 30 days after the Bank's written request that the information
contained in the Request for Advance is accurate, and upon such confirmation,
the Bank may destroy all prior Requests for Advance and the Borrower waives any
right to contest the accuracy of the information set forth in the Request for
Advance confirmed by the Borrower; and further provided, that the Borrower's
failure to confirm or contest the Bank's written request shall be deemed
conclusive evidence that the information contained in the Request for Advance is
accurate and the Bank may destroy all prior Requests for Advances.
D. Location. The Borrower represents and warrants that all Borrower's
Inventory (including, without limitation, any Inventory held in warehouses or
delivered on consignment) is kept at the following locations:
935 W. 175th St., Homewood, IL
E. Changes in Inventory. The Borrower shall notify the Bank immediately
of any change in the location of the Inventory and of any material decrease
(whether by loss, depreciation, damage or otherwise) in the value of the
Inventory and the amount of such decrease. The Borrower shall pay to the Bank,
immediately upon demand, (a) to be applied against the Inventory Revolving Loan,
such amount as may be necessary to maintain the required Inventory Borrowing
Base with respect to the outstanding Inventory Revolving Loan and (b) to be
applied against any other loan, such amount as may be necessary, in the sole
opinion of the Bank, to restore the Bank to an adequate level of security. The
Borrower shall deliver to the Bank, at such times as the Bank may request, a
statement in form satisfactory to the Bank showing (a) the Inventory available
for sale, (b) the Inventory previously sold and delivered, sold and held for
future delivery, used or consumed, (c) the description, value and location of
the Inventory and (d) such other information as the Bank may deem necessary or
desirable with respect to the Inventory.
<PAGE>
ARTICLE V COLLATERAL: MACHINERY AND EQUIPMENT
---------
A. Description and Location. The Borrower represents and warrants that
the Machinery and Equipment is generally described or (if a Machinery and
Equipment Term Loan is made or to be made under this Agreement) is specifically
listed, and kept at the locations specified in RIDER D hereto. The Borrower
shall notify the Bank of any change in the location of the Machinery and
Equipment and shall not remove any Machinery and Equipment from the state in
which it is located as indicated on RIDER D without the prior written consent of
the Bank which consent shall not be unreasonably withheld. If a Machinery and
Equipment Term Loan is made or to be made under this Agreement, and if any of
the Machinery and Equipment is or is to be attached to real estate, the legal
description of such real estate is also contained in RIDER D.
B. Subordination. If requested by the Bank, the Borrower shall obtain
from the owner of and from the person or entity holding a mortgage or lien on
any real estate on which any Machinery and Equipment is located an agreement
that any interest which such owner, mortgagee or lienholder may have in the
Machinery and Equipment is subordinate to the interest of the Bank.
ARTICLE VI REPRESENTATIONS AND WARRANTIES
----------
A. The Borrower represents and warrants to the Bank that, except as may
have been previously disclosed in writing to the Bank:
1. The Borrower is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified and in good standing and authorized to do business in each other
jurisdiction where, because of the nature of Borrower's activities or
properties, such qualification is required;
2. The execution and delivery of this Agreement, the borrowings
hereunder, the execution and delivery of the Notes, and the performance by
the Borrower of its obligations under this Agreement and the Notes are
within the Borrower's powers and have been duly authorized by all necessary
action (corporate, partnership or other), have received all necessary
governmental and regulatory approval, and do not and will not contravene or
conflict with any provision of law or of any organizational documents
(including, without limitation, any articles of incorporation, by-laws, or
partnership agreement) of the Borrower or of any agreement, indenture or
other document binding upon the Borrower or to which its property is
subject;
3. This Agreement is, and the Notes, when duly executed and
delivered will be legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
subject to bankruptcy, insolvency and other similar laws relating to or
affecting the enforceability of creditors' rights;
4. There are no legal, governmental, arbitration or other actions or
proceedings which are pending or threatened against the Borrower which
might result in (a) any material adverse change in its financial condition,
or results of its business operations, or (b) materially and adversely
affect Borrower's use of property or assets, including the Collateral;
5. Except as disclosed in the financial statements of the Borrower
most recently delivered to the Bank pursuant to or in connection with this
Agreement, the Borrower has no indebtedness or other liabilities, other
than trade payables and obligations arising in the ordinary course of its
business;
6. The Borrower is solvent and generally paying its debts as they
mature, and owns property which, at a fair valuation, is greater than the
sum of its debts and the Borrower has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage;
7. The Borrower has and is in good standing with respect to all
governmental permits, licenses, certificates, consents and franchises, and
all patents, copyrights, trademarks and trade names, necessary to conduct
and to continue to conduct the businesses now conducted by it and to own or
lease and operate the properties now owned or leased and operated by it;
and none of the foregoing contains any term, provision, condition or
limitation more burdensome than such as are generally applicable to persons
engaged in the same or similar business as the Borrower;
8. The Borrower is not a party to (or subject to any renegotiation
of) any contract or agreement, or subject to any charge, restriction,
judgment, decree or order, which materially and adversely affects its
financial condition, results of operations or business, or its property or
assets;
9. The Borrower's activities are legal and the intended use of the
Credit Facility will not result in a forfeiture under the provisions of the
Controlled Substance Act of 1978, or the Money Laundry Control Act of 1986,
or the Anti-Drug Abuse Act of 1988;
10. The Borrower is not in violation of any applicable law,
regulation or ordinance of the United States of America or of any state,
city, town, municipality, county or other jurisdiction, or of any agency or
instrumentality of any of the foregoing, in any respect materially and
adversely affecting its financial condition, results of operations or
business, or its property or assets, including, without limitation, any
law, regulation or ordinance relating to occupational health or safety or
protection of the environment (including Hazardous Substances, as
hereinafter defined);
11. The financial statements, schedules and other information
furnished to the Bank prior to the execution and delivery of this Agreement
and all financial statements, schedules and other information furnished to
the Bank after the execution and delivery of this Agreement fairly and
accurately present the financial condition and results of operations of the
Borrower (and any other persons described therein) as of and for the period
ending on the date as
<PAGE>
of which such financial statements are presented, and have been prepared in
accordance with generally accepted accounting principles consistently
applied; and since the date of the financial statements of the Borrower
most recently furnished to the Bank, there has been no material adverse
change in the financial condition, results of operations or business of the
Borrower;
12. To the best of the knowledge of the Borrower, after reasonable
investigation, no hazardous substances, hazardous wastes, industrial
wastes, pollutants, contaminants or toxic substances, within the meaning of
any applicable federal, state or local law, regulation or ordinance
(collectively, "Hazardous Substances"), are stored or otherwise located by
Borrower on any property owned, leased or operated by the Borrower, and no
part of such property including the groundwater located thereon or
thereunder, is contaminated by any Hazardous Substances;
13. The Borrower has timely filed all material tax returns and
reports required to be filed by it with any governmental entity, and has
timely paid all taxes, assessments, fees and other charges upon the
Borrower and upon its properties, assets, income and franchises which are
shown on such returns and reports as due and payable;
14. None of the employees of the Borrower is subject to any
collective bargaining agreement, and there are no strikes, work stoppages,
election or decertification petitions or proceedings, unfair labor charges,
equal employment opportunity proceedings, wage payment or material
unemployment compensation proceedings, material workmen's compensation
proceedings or other material labor or employee-related controversies
pending or threatened involving the Borrower and any of its employees,
other than employee grievances arising in the ordinary course of business
which would not in the aggregate have a material adverse effect on the
financial condition, results of operations or business of the Borrower;
15. No fact, including but not limited to, any "Reportable Event," as
that term is defined in Section 4043 of the Employee Retirement Income
Security Act of 1974, as the same may be amended from time to time
("Pension Reform Act") exists in connection with any Pension Plan (herein
called a "Plan") of the Borrower which might constitute grounds for
termination of any such Plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States District Court of a
Trustee to administer any such Plan. No "Prohibited Transaction" within the
meaning of Section 406 of the Pension Reform Act exists to Borrower's
knowledge or will exist upon the execution or delivery of this Agreement or
the performance by the parties hereto of their respective duties, and
obligations hereunder. Borrower agrees to do all acts, including but not
limited to contributions, necessary to maintain compliance with the Pension
Reform Act and agrees not to terminate any such Plan in a manner or do or
fail to do any act which could result in the imposition of a lien on any
property of the Borrower pursuant to Section 406B of the Pension Reform
Act. Borrower has incurred no withdrawal liability under the Multiemployer
Pension Plan Amendment Act of 1980, as amended.
B. The Borrower further represents and warrants that it is in full
compliance with all of its convenants under this Agreement and there does not
exist any Event of Default or Unmatured Event of Default.
ARTICLE VII COVENANTS
-----------
A. Negative Covenants. The Borrower shall not:
------------------
1. Sell, assign, lease, transfer or convey any of its property or
assets (excluding the Collateral) or any interest therein except in the
ordinary course of business; or sell, assign, lease or convey any of the
Collateral except as permitted by Paragraph G of Article II hereof; and the
Borrower shall at all times have good, indefeasible and merchantable title
to and ownership of its property and assets, including the Collateral,
and shall not allow, suffer or cause to exist thereon any lien, claim,
security interest or encumbrance (including, without limitation, any lien
or encumbrance of any governmental entity or agency or with respect to any
taxes or debts owed thereto), except those of the Bank and Permitted
Encumbrances, if any, specified in RIDER E hereto; provided that the
Borrower shall have the right to contest, in good faith, with reasonable
diligence and by appropriate proceedings, the validity of any lien or
encumbrance or claim thereof, but only if none of the property or assets of
the Borrower is subject to sale or foreclosure during such contest, and the
Borrower shall promptly pay any judgment rendered against it in connection
with any such contest;
2. Incur any indebtedness, whether for borrowed money or otherwise,
except for (a) the Borrower's Liabilities and any other indebtedness owed
to the Bank, (b) extensions of the maturities of existing indebtedness and
interest thereon, (c) indebtedness which is unsecured and is to persons who
execute and deliver to the Bank (in form and substance acceptable to the
Bank) subordination agreements subordinating such indebtedness and their
claims against the Borrower in connection therewith to the payment of the
Borrower's Liabilities, and (d) trade payables and other obligations
arising in the ordinary course of the business, including indebtedness
incurred to purchase machinery and equipment not exceeding at any time
$ N/A in the aggregate with the knowledge of the Bank;
3. [DELETED]
4. Merge or consolidate with or acquire any other person or entity
or, other than in the ordinary course of business, make any investment in
the securities of any other person or entity;
5. Redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of the Borrower's capital stock or any other ownership
interest in the Borrower, declare or pay any dividend or make any
distribution upon any of the Borrower's capital stock, make any
distribution of the Borrower's property or assets or make any loan, advance
or extension of credit to any person;
-16-
<PAGE>
5. Make any material change in the Borrower's capital structure or
in any of the Borrower's business objectives, purposes or operations which
might in any way adversely affect its ability to repay the Borrower's
Liabilities;
6. Enter into any transaction not in the ordinary course of business
which materially and adversely affects the Borrower's ability to repay the
Borrower's Liabilities or any other indebtedness of the Borrower or the
Collateral; or
7. Enter into or be a party to any transaction or arrangement with
any Affiliate (including, without limitation, the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and reasonable terms
no less favorable to the Borrower than would obtain in a comparable arm's-
length transaction with a person other than an Affiliate. (Affiliate means
any person (i) which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with
the Borrower, (ii) which beneficially owns or holds, directly or
indirectly, 5% or more of any class of the voting stock of the Borrower or
(iii) 5% or more of the voting stock of which is beneficially owned or
held, directly or indirectly, by the Borrower (or in the case of a person
which is not a corporation, 5% or more of the equity interest). The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting stock, by contract or otherwise);
B. Affirmative Covenants. The Borrower shall:
---------------------
1. Operate its business and properties in accordance with all
applicable laws, regulations and ordinances of the United States of
America, of any state, city, town, municipality, county or other
jurisdiction, and of any agency or instrumentality of any of the foregoing,
including, without limitation, any law, regulation or ordinance relating to
occupational health or safety or protection of the environment (including
Hazardous Substances);
2. Timely file all material tax returns and reports required to be
filed by it with any govenmental entity, and timely pay all taxes,
assessments, fees and other charges upon the Borrower and upon its
properties, assets, income and franchises which are shown on such returns
and reports as due and payable;
3. Notify the Bank immediately, in writing, if it becomes aware or
receives notice of the existence or alleged existence of any Hazardous
Substance on any property owned, leased or operated by the Borrower;
4. Maintain its principal banking accounts at the Bank at all times
during the term of this Agreement and until all of the Borrower's
Liabilities have been paid;
5. At all times (including, without limitation, on the date of this
Agreement) be solvent and generally paying its debts as they mature, own
property which, at a fair valuation, is greater than the sum of its debts
and have capital sufficient to carry on its business and transactions and
all businesses and transactions in which it is about to engage; and
6. Prepare and keep proper books of account and financial statements
and cause to be furnished to the Bank the financial statements and
certificates specified below. All financial statements furnished to the
Bank by the Borrower pursuant to this Agreement shall be accompanied by a
certificate of the chief financial officer of the Borrower to the effect
that such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
any inconsistencies as to which the Borrower's certified public accountants
concur and which are consistent with generally accepted accounting
principles) and present fairly and accurately the financial condition and
results of operations of the Borrower as of and for the period ending on
the date as of which such financial statements are presented. The Borrower
shall notify its outside accountants and auditors of the Bank's reliance on
statements to be issued by them for the Borrower and shall require such
accountants and auditors to confirm such reliance to the Bank, and in the
event that the Bank waives this covenant at any time, the Bank may,
nonetheless, demand compliance with the covenant at any time and from time
to time, and Borrower's failure to obtain the agreement of its outside
accountant and auditors as herein provided shall constitute a default under
the Credit Facility.
Financial Statements and Certificates to be Furnished to Bank
-------------------------------------------------------------
(a) As soon as available but not later than 120 days after
the close of each fiscal year of the Borrower, the financial
statements of the Borrower for such fiscal year (including at
least a balance sheet as of the end of, and the related statement
of income for, such fiscal year, and a statement of changes in
capital for such year) audited or reviewed by independent
certified public accountants selected by the Borrower and
acceptable to the Bank.
(b) Concurrently with the delivery of the financial
statements described in Subparagraph (a) above, a certificate or
certificates of the chief executive officer of the Borrower and
the aforesaid certified public accountants certifying to the Bank
that (in the case of such certified public accountants, based
upon their examination of the affairs of the Borrower performed
in connection with their audit or review of said financial
statements) they are not aware of the existence of any Event of
<PAGE>
Default, or Unmatured Event of Default, under this Agreement or,
if they are aware of any such Event, the nature thereof and the
steps being taken to remedy it.
(c) As soon as available but not later than 30 days after
the end of each fiscal quarter (or each calender month if the
Bank shall so request), the financial statements of the Borrower
for such period (including at least a balance sheet as of the end
of, and the related statement of income for, such period) and the
portion of Borrower's fiscal year then ended.
(d) Such other data and information (financial and
otherwise) as the Bank, from time to time, may request bearing
upon or related to the Borrower's financial condition, results of
operations or business or the Collateral.
In the event that the Borrower fails to provide the financial
statement's and data as herein provided, the applicable interest rate
on the Notes, for a period beginning thirty (30) days after written
notice of such default and ending upon the curing of said noticed
default, shall increase one quarter of one percent (.25%) for the
first thirty (30) days of said default and increase an additional one
quarter of one percent (.25%) during such thirty (30) day period
thereafter during which the noticed default continues, computed on the
outstanding principal balance of the Notes; and, upon the curing of
the noticed default, the interest rate of the Notes shall revert to
the initially agreed upon interest rate effective on the date on which
the default is cured.
Notwithstanding the foregoing, (i) with the written consent of the Bank,
the financial statements required to be furnished by Subparagraph (a) above need
not be audited or reviewed by independent public accountants; (ii) the Bank
reserves the right to require that the financial statements described in
Subparagraph (a) above be audited by independent public accountants selected by
the Borrower and acceptable to the Bank; and (iii) if the Borrower has any
subsidiaries, all references to financial statements in this Agreement, unless
otherwise directed by the Bank, shall be deemed to refer to the consolidated
financial statements of the Borrower and its subsidiaries.
ARTICLE VIII EVENTS OF DEFAULT: REMEDIES OF BANK
------------
EVENTS OF DEFAULT
- -----------------
Each of the following shall constitute an "Event of Default" hereunder:
A. If principal of or interest on any Note, or if any other of the
Borrower's Liabilities, is not paid when due; or
B. If the Borrower breaches any of the covenants, terms, conditions or
provisions of this Agreement and such breach continues for a period of 15 days
after notice thereof has been given by the Bank to the Borrower; provided,
however, that the Borrower shall not be in default hereunder if the breach is of
such a nature that it does not materially adversely affect the financial
condition or business operation of the Borrower and the Borrower has undertaken
efforts and continues such efforts to cure the breach within a reasonable period
of time; or
C. If any representation or warranty of the Borrower contained in this
Agreement or in any document or instrument delivered pursuant to this Agreement
is untrue or incorrect; or
D. If a default shall occur under any guarantee, instrument or document
furnished to the Bank in connection with this Agreement, or under any other
agreement between the Borrower and the Bank, and such default shall not be cured
or corrected within the time, if any, prescribed therein, and if not so
prescribed within 30 days after notice thereof has been given by the Bank to the
Borrower; or
E. If the Borrower becomes insolvent or generally fails to pay, or admits
in writing its inability to pay, debts as they become due; or the Borrower
applies for, consents to or acquiesces in the appointment of a trustee, receiver
or other custodian for the Borrower or any property or assets of the Borrower,
or makes a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Borrower or for a substantial part of the
property or assets of the Borrower and is not discharged within 60 days; or any
bankruptcy, reorganization, debt arrangement, or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation proceeding,
is commenced in respect of the Borrower and if such case or proceeding is not
commenced by the Borrower, it is consented to or acquiesced in by the Borrower
or remains for 60 days undismissed; or the Borrower takes any corporate action
to authorize, or in furtherance of, any of the foregoing; or
F. If the Borrower is in default in respect of any other indebtedness of
the Borrower; or
G. If notice is given by the Bank to the Borrower that, in the opinion of
the Bank, any legal, governmental, arbitration or other proceeding which has
been instituted with respect to the Borrower or any of its property or assets is
likely to materially and adversely affect the financial condition, results of
operations or business of the Borrower and such legal or governmental proceeding
is not dismissed within 30 days after such notice is given by the Bank; or
<PAGE>
"Unmatured Event of Default" means an event, act or occurrence which, if
it continues uncured will, with the giving of notice or the lapse of time, or
with both thereof, constitute an Event of Default.
REMEDIES IN THE EVENT OF DEFAULT
- --------------------------------
If an Event of Default shall occur, or if the Bank shall otherwise deem
itself to be insecure for the reasons provided under the Illinois Uniform
Commercial Code (810 ILCS 5/1-208), which shall be considered an Event
of Default under this Agreement, then the Bank may, at its option, exercise any
one or more of the following rights and remedies:
A. The Bank may discontinue making any further loans under this Agreement;
B. The Bank may declare the entire unpaid amount of the Borrower's
Liabilities to be immediately due and payable;
C. Except as may otherwise be required by law, the Bank (a) may sell all
or any of the Collateral at public or private sale or sales upon such terms and
conditions as the Bank deems proper (and the Bank may purchase any or all of the
Collateral at any such sale) and apply the net proceeds of such sale, after
deducting all costs, expenses and attorneys' fees incurred at any time in the
collection of the Borrower's Liabilities and in the protection and sale of the
Collateral, first to the payment of the Borrower's Liabilities and then to the
payment of any other liabilities of the Borrower to the Bank, and shall return
any remaining proceeds to the Borrower; provided that the Borrower shall remain
liable for any Borrower's Liabilities or other amounts remaining unpaid after
such application and interest thereon; and (b) may take such other actions as it
may deem appropriate or in its interest with respect to the Collateral
including, without limitation, (i) transfer the whole or any part of the
Collateral into its name or the name of a nominee, (ii) collect any amounts due
on the Collateral directly from the persons obligated thereon, (iii) exercise
any voting or other rights with respect to any Collateral consisting of
securities, (iv) take possession and control of the Collateral and any proceeds
thereof, (v) sue or make any compromise or settlement with respect to any of the
Collateral; and
D. The Bank may exercise from time to time any rights and remedies
available to it under applicable laws, including, without limitation, the
Illinois Uniform Commercial Code and the commercial code of any other applicable
state. In addition to and not in limitation of all rights of offset that the
Bank may have under applicable law, the Bank shall, upon the occurrence of an
Event of Default, have the right to appropriate and apply to the payment of and
to set-off against the Borrower's Liabilities any and all balances, credits,
deposits, accounts or money of the Borrower then or thereafter received or held
by or under the control of the Bank. Except as may otherwise be required by law,
including with respect to notice of any sale of Collateral, the Borrower hereby
waives, in connection with this Agreement and the Borrower's Liabilities, any
right under or benefit of any law (whether or not intended for its advantage or
protection), that would restrict or limit the right or ability of the Bank to
obtain payment of the Borrower's Liabilities, including any law that would
restrict or limit the Bank in the exercise of its right to appropriate at any
time hereafter any indebtedness owing from the Bank to the Borrower and any
deposits or other property of the Borrower in the possession or control of the
Bank and apply the same toward or set-off the same against the payment of the
Borrower's Liabilities.
WAIVER
- ------
THE BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE
BORROWER'S LIABILITIES.
ARTICLE IX MISCELLANEOUS
----------
A. The Borrower hereby waives demand, presentment and protest, and notice
of demand, presentment, protest, nonpayment or dishonor, with respect to the
Notes and the Borrower's Liabilities, and with respect to any notes, checks or
other negotiable instruments which may be included in the Collateral or held by
the Bank with respect to which the Borrower is an endorser, drawer, surety or
other responsible party, and the Borrower hereby consents to any and every
renewal or extension of time that may be granted with respect to such
instruments.
B. If the Borrower shall cease to be indebted to the Bank for loans made
pursuant to this Agreement, any loan or advance made thereafter by the Bank to
the Borrower, secured by any Collateral, shall nevertheless be governed by the
terms of this Agreement without the necessity of any further act, understanding
or writing by the parties hereto, except as may otherwise be agreed to in
writing by the Bank and the Borrower.
C. The Borrower shall pay all reasonable costs of collection of the
Borrower's Liabilities, all reasonable costs in connection with the use,
custody, protection and sale of the Collateral and all reasonable costs paid or
incurred in enforcing or preserving any of the Bank's rights hereunder or in
connection with any transaction or proceeding in which the Bank may become
concerned or involved by reason of its interest in this Agreement or any
Borrower's Liabilities or any action by the Borrower, in each case including
reasonable attorneys' fees, all promptly on demand of the Bank or other person
incurring the same. The Borrower shall also pay interest on the foregoing
amounts at the highest Default Rate provided hereunder. Any such costs may be
deducted by the Bank from any money received under this Agreement or on any
Note.
D. The Bank shall not (by act, delay, omission or otherwise) be deemed to
have waived any of its rights or remedies hereunder, or any provision hereof,
unless such waiver is in writing signed by the Bank, and any such waiver shall
be effective only to the extent specifically set forth therein; and a waiver by
the Bank of any right or remedy under this Agreement on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy which the
Bank would otherwise have had on any further occasion.
<PAGE>
E. The Borrower warrants and represents that (a) each of the loans and
other Borrower's Liabilities under this Agreement is being incurred as a
business loan to a business and is a transaction within the scope of Section
4(1)(c) of the Illinois Interest Act (815 ILCS 205/4), and none of such loans or
Borrower's Liabilities violates the provisions of the usury laws or any other
laws governing interest rates of Illinois or any other state having jurisdiction
over such loan or Liabilities, this Agreement or any transaction contemplated
hereby; and (b) each of the loans and other Borrower's Liabilities under this
Agreement is primarily for a business, commercial or agricultural purpose and
does not consist of or involve any credit offered or extended to a consumer
primarily for personal, family or household purposes, and none of such loans or
Borrower's Liabilities is subject to Regulation Z of the Board of Governors of
the Federal Reserve System.
F. The Borrower shall do and perform all further acts and deeds and shall
execute and deliver to the Bank all instruments, documents, assignments,
assurances or other writings that may be necessary or desirable to the Bank to
carry out the terms and intent of this agreement or effectuate the rights of the
Bank hereunder.
G. The Borrower releases the Bank from any and all causes of action,
claims or rights which the Borrower may now or hereafter have for, or which may
arise from, any loss or damage caused by or resulting from: (a) any failure of
the Bank to protect, enforce or collect in whole or in part any of the
Collateral; (b) the Bank's notification to any Obligor of the Bank's security
interest in the Accounts; (c) the Bank's directing any Obligor to pay any sums
owing to the Borrower directly to the Bank; and (d) any other act or omission to
act on the part of the Bank, its officers, agents or employees, except for gross
negligence or willful misconduct.
H. The Borrower agrees to indemnify and save the Bank, its officers,
directors, employees and agents, harmless of, from and against any liability,
loss, damage or expense (including attorneys' fees) to which the Bank or any of
such persons may become subject, arising from or based upon (a) any violation,
or claim of violation, by the Borrower of any laws, regulations or ordinances
relating to Hazardous Substances, or (b) any Hazardous Substances located or
disposed of on or released or transported from any property owned, leased or
operated by the Borrower, or any claim of any of the foregoing.
I. TO INDUCE THE BANK TO ACCEPT THIS AGREEMENT, THE NOTES AND ANY OTHER
AGREEMENTS OR DOCUMENTS DELIVERED TO THE BANK IN CONNECTION HEREWITH, THE
BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO THE BANK'S SOLE AND ABSOLUTE
ELECTION, ALL LEGAL ACTIONS OR PROCEEDINGS IN ANY MANNER OR RESPECT ARISING OUT
OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OTHER BORROWER'S LIABILITIES,
ANY AGREEMENTS OR DOCUMENTS DELIVERED TO THE BANK IN CONNECTION HEREWITH OR THE
COLLATERAL SHALL BE BROUGHT AND LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE
CITY AND STATE WHERE THE BANK'S PRINCIPAL PLACE OF BUSINESS IS LOCATED; AND THE
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY SUCH LEGAL ACTION OR PROCEEDING.
J. If any provision of this Agreement or the application thereof to any
person or circumstance is held invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and the invalid or unenforceable
provision of this Agreement shall be severable in any such instance.
K. The Bank may furnish any information concerning the Borrower in the
possession of the Bank from time to time to additional lenders and participants
and prospective additional lenders and participants.
L. The Bank may assign its rights and delegate its obligations under this
Agreement and further may assign, or sell participation in, all or any part of
the Credit Facility, its commitments or any other interest herein or in the
Notes to an affiliate or to another person or entity regularly engaged in the
making or buying of commercial loans (including, without limitation, any fund,
bank, savings and loan association, insurance company or commercial finance
company).
M. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Borrower and the Bank, provided that this
Agreement may not be assigned by the Borrower without the prior written consent
of the Bank which consent may not be unreasonably withheld by the Bank.
N. This Agreement shall be construed in accordance with the laws (without
regard to the conflicts of laws provisions) of the State of Illinois.
O. All notices or other communications hereunder shall be in writing,
shall be given either by hand delivery or by certified or registered mail
addressed to the Borrower or the Bank, as the case may be, at the addresses
indicated in the first paragraph of this Agreement, to the attention of the
person or persons indicated below the signatures to this Agreement, and shall be
deemed given when so delivered or delivery is refused by the addressee. The
Bank may, at its option, rely upon notice or other communications received from
the Borrower by facsimile (FAX) communication. Either party to this Agreement
may change the name or address to which notices shall be sent to it, by written
notice to the other party given in accordance with this Paragraph.
P. This Agreement may be amended from time to time by amendments duly
executed by the Borrower and the Bank; provided that any amendment hereto signed
by the Borrower shall be binding upon the Borrower.
Q. If this Agreement (including any counterpart hereof) is signed by more
than one Borrower, the liability of each Borrower shall be joint and several,
and each reference herein to the Borrower shall be deemed to refer to each such
Borrower. No release, discharge or modification of the obligations of, or the
Collateral provided by, any person liable under this Agreement shall affect the
obligations of any other person under this Agreement.
<PAGE>
R. This Agreement includes (a) the Loan Supplements, if any, indicated by
checkmark on page 2 hereof and (b) the Riders (whether or not elsewhere referred
to herein), if any, which are indicated by checkmark below:
Indicate applicable Riders by checking corresponding boxes.
Appropriate officers of the Bank and the Borrower should also sign
each applicable Rider on such Rider.
[X] RIDER A ASSETS EXCLUDED FROM COLLATERAL
[X] RIDER B REQUEST FOR ADVANCE (ACCOUNTS REVOLVING LOAN)
[NO] RIDER C REQUEST FOR ADVANCE (INVENTORY REVOLVING LOAN)
[X] RIDER D MACHINERY AND EQUIPMENT
[NO] RIDER E PERMITTED ENCUMBRANCES
[NO] RIDER F FINANCIAL COVENANTS
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly signed this 12th day of July 1993.
Area Transportation Company
--------------------------------------
(Borrower)
By:/s/ Michael A. Kelly
-----------------------------------
Its: CFO
-------------------
Send notices to attention of:
Michael Kelly
-----------------------------------
Telephone: (708) 322-9021
--- --------
ACCEPTED:
LAKE SHORE NATIONAL BANK
- ----------------------------
(Bank)
By: /s/
-------------------------
Its: V.P.
Send notices to attention of:
Commercial Loan Department
<PAGE>
RIDER A
to
LOAN AND SECURITY AGREEMENT
ASSETS EXCLUDED FROM COLLATERAL
-------------------------------
Describe any property or assets which are to be
excluded from the Collateral.
This Rider A constitutes a part of the Loan and Security Agreement dated as
of July 12, 1993 between Lake Shore National Bank and the undersigned
Borrower. Terms capitalized herein have the same meanings as in such Loan and
Security Agreement.
The following property and assets are excluded from the Collateral:
All Collateral as described in Article II A.6 not in transit, in
possession or control of or assigned to or owned or held by Lake
Shore National Bank.
Dated: July 12, 1993
----------------------
LAKE SHORE NATIONAL BANK Area Transportation Company
----------------------------------
(Borrower)
By: /s/ By: Michael A. Kelly
--------------------------- ---------------------------
Its: V.P. Its: CFO
---------------------- ----------------------
<PAGE>
RIDER B
to
LOAN AND SECURITY AGREEMENT
REQUEST FOR ADVANCE (ACCOUNTS REVOLVING LOAN)
---------------------------------------------
Attach a copy of the Bank's current form of Accounts
Receivable Certificate and Loan Application.
This Rider B constitutes a part of the Loan and Security Agreement dated as
of July 12, 1993 between Lake Shore National Bank and the undersigned Borrower.
Terms capitalized herein have the same meanings as in such Loan and Security
Agreement.
Each request for an Accounts Revolving Loan shall be made by providing the
Bank with at least one Business Day's written notice on the attached certificate
and application.
Dated: July 12, 1993
----------------------
LAKE SHORE NATIONAL BANK Area Transportation Company
----------------------------------
(Borrower)
By: /s/ By: Michael A. Kelly
--------------------------- ---------------------------
Its: V.P. Its: CFO
<PAGE>
RIDER D
to
LOAN AND SECURITY AGREEMENT
DESCRIPTION AND LOCATION OF MACHINERY AND EQUIPMENT
---------------------------------------------------
Describe generally the Borrower's Machinery and Equipment;
if a Machinery and Equipment Term Loan is to be made, insert
or attach a Schedule containing a specific list of the
Machinery and Equipment, including a legal description of
any real estate to which it is or is to be attached.
This Rider D constitutes a part of the Loan and Security Agreement dated as
of July 12, 1993 between Lake Shore National Bank and the undersigned Borrower.
Terms capitalized herein have the same meanings as in such Loan and Security
Agreement.
Property located at 935 W. 175th St., Homewood, IL is as follows:
Twenty-four (24) 1993 Kenworth Tractors with
VIN #'s
- -------
1XKDDR9X1PJ595105 1XKDDR9X3PJ595106 1XKDDR9X5PJ595107
1XKDDR9X7PJ595108 1XKDDR9X9PJ595109 1XKDDR9X5PJ595110
1XKDDR9X7PJ595111 1XKDDR9X9PJ595112 1XKDDR9X0PJ595113
1XKDDR9X2PJ595114 1XKDDR9X7PJ595125 1XKDDR9X7PJ595126
1XKDDR9X0PJ595127 1XKDDR9X2PJ595128 1XKDDR9X4PJ595129
1XKDDR9X0PJ595130 1XKDDR9X2PJ595131 1XKDDR9X4PJ595132
1XKDDR9X6PJ595133 1XKDDR9X8PJ595134 1XKDDR9XXPJ595135
1XKDDR9X1PJ595136 1XKDDR9X3PJ595137 1XKDDR9X5PJ595138
Four (4) 1994 Kenworth Tractors with:
VIN #'s
- -------
1XKDDR9X3PJ595139
1XKDDR9XXPJ595140
1XKDDR9X1PJ595141
1XKDDR9X3PJ595142
Dated: July 12, 1993
-----------------------------
LAKE SHORE NATIONAL BANK Area Transportation Company
------------------------------------
(Borrower)
By: /s/ By: /s/ Michael A. Kelly
-------------------------------- ---------------------------------
Its: Its: CFO
(5-26-93 rev.)
<PAGE>
LETTER OF CREDIT LOAN SUPPLEMENT
to
LOAN AND SECURITY AGREEMENT
This Letter of Credit Loan Supplement supplements and is a part of the Loan
and Security Agreement dated as of July 12, 1993 (the "Agreement") between Lake
Shore National Bank and the undersigned Borrower. Terms capitalized herein have
the same meanings as in the Agreement, unless otherwise defined herein.
1. Letters of Credit. The Bank will from time to time issue, and extend
the expiration dates of, Letters of Credit for the account of the Borrower
("Letters of Credit"); provided that (a) no Letter of credit shall have an
expiration date which is later than One Year from its date of issuance, (b) the
issuance and extension of each Letter of Credit shall be at the discretion of
the Bank and shall also be subject to the conditions precedent set forth under
"General Conditions of Credit" in the Agreement, (c) payment of the Letter of
Credit Loan is secured by the Collateral described in the Agreement, and (d) the
aggregate stated amount of all outstanding Letters of Credit issued by the Bank
(including its correspondents) for the account of the Borrower shall not at any
time exceed [indicate by checking box and completing]:
[X] The lesser of $10,000.00 or the Borrower's Accounts Borrowing
Base, as provided in the Agreement. Each Letter of Credit Loan
shall reduce the Borrower's Accounts Revolving Loan by the amount
of the Letter of Credit.
2. Letter of Credit Loan and Reimbursement Note. The obligation of the
Borrower to reimburse the Bank for amounts drawn on the Letters of Credit (the
"Letter of Credit Loan") shall be evidenced by the Borrower's Reimbursement
Note, in form and substance acceptable to the Bank, in the dollar amount
specified in the preceding paragraph, which shall be executed and delivered to
the Bank before or concurrently with the Bank's issuance of any Letter of
Credit. The unpaid principal amount of the Letter of Credit Loan shall bear
interest and shall be due and payable as provided in the Reimbursement Note.
The Letter of Credit Loan shall be subject to all of the terms and provisions of
the Agreement.
3. Form. Each Letter of Credit shall be in the Bank's (or its
correspondent's) customary form for the type of Letter of Credit to be issued
and shall contain the Bank's (or its correspondent's) usual and customary
provisions for such Letter of Credit. All Letters of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits, 1983 Revision,
International Chamber of Commerce Publication No. 400, and any subsequent
revisions thereof.
4. Request and Application. The Borrower shall furnish to the Bank (a) a
written request for each Letter of Credit to be issued or extended hereunder at
least 3 business days prior to the date such Letter of Credit is to be issued or
extended and (b) a Letter of Credit application prior to the issuance of such
Letter of Credit. Each such request and application shall be in form and
substance acceptable to the Bank.
5. Fees and Charges. The Borrower shall pay to the Bank the fees and
charges described below in connection with such Letter of Credit issued pursuant
to this Loan Supplement. The amounts of such fees and charges shall be
determined based upon the Bank's fee schedule in effect at the time such amounts
are payable.
(a) Issuance fee, payable at the time of issuance;
(b) Amendment fee (including for any extension of the expiration
date), payable at the time of such amendment;
(c) Payment/negotiation fee, payable each time there is draw on a
Letter of Credit;
(d) Acceptance commission, payable, if applicable, each time there is
a draw on the Letter of Credit;
(e) Standby fee (consisting of a single fee applicable to all
outstanding Letters of Credit) equal to a specified percentage of
the aggregate stated amount (available and not drawn) of all
Letters of Credit, payable quarterly or at such other times as may
be determined by the Bank; and
(f) Miscellaneous other fees and charges, as applicable, including for
steamship guarantee, excessive wording, postage and handling and
any out-of-pocket expenses.
IN WITNESS WHEREOF, the undersigned have caused this Letter of Credit Loan
Supplement to be executed as of July 12, 1993.
LAKE SHORE NATIONAL BANK Area Transportation Company
------------------------------------
(Borrower)
By: /s/ By: /s/ Michael A. Kelly
-------------------------------- ---------------------------------
Its: VP Its:
(5-26-93 rev.)
<PAGE>
RIDER D ADDENDUM #1
to
LOAN AND SECURITY AGREEMENT
DESCRIPTION AND LOCATION OF MACHINERY AND EQUIPMENT
---------------------------------------------------
Describe generally the Borrower's Machinery and Equipment;
if a Machinery and Equipment Term Loan is to be made, insert
or attach a Schedule containing a specific list of the
Machinery and Equipment, including a legal description of
any real estate to which it is or is to be attached.
This Rider D Addendum #1 constitutes a part of the Loan and Security
Agreement dated as of July 12, 1993 between Lake Shore National Bank and the
undersigned Borrower. Terms capitalized herein have the same meanings as in such
Loan and Security Agreement.
1. The following Equipment described below is added as of July 26, 1993 to
Property located at 935 W. 175th St., Homewood, IL:
Ten (10) 1994 Kenworth tractors VIN #'s:
1XKDDR9X5RJ595143 1XKDDR9X7RJ595144 1XKDDR9X9RJ595145
1XKDDR9X0RJ595146 1XKDDR9X2RJ595147 1XKDDR9X4RJ595146
1XKDDR9X6RJ595149 1XKDDR9X2RJ595150 1XKDDR9X4RJ595151
1XKDDR9X6RJ595152
Dated: July 12, 1993
-----------------------------
LAKE SHORE NATIONAL BANK Area Transportation Company
------------------------------------
(Borrower)
By: /s/ By: /s/ Michael A. Kelly
-------------------------------- ---------------------------------
Its: VP Its:
(5-26-93 rev.)
<PAGE>
EXHIBIT 10.6
AMENDMENT NO. ONE
to
LOAN AND SECURITY AGREEMENT
This Amendment No. One ("Amendment"), dated as of April 28, 1995,
constitutes a part of the Amended and Restated Loan and Security Agreement
dated as of November 20, 1992 (as amended, the "Agreement") between Lake Shore
National Bank and Western Intermodal Services, Ltd. (the "Borrower"). Terms
capitalized herein have the same meanings as in the Agreement, unless otherwise
defined herein.
AMENDMENT TO CHANGE NAME OF BANK
WHEREAS, Lake Shore National Bank is now known as American National Bank
and Trust Company of Chicago, the Agreement is hereby amended as follows:
(a) in the first paragraph of the Agreement, "LAKE SHORE NATIONAL BANK (the
"Bank") a national banking association with it principal place of business
at 605 North Michigan Avenue, Chicago, Illinois 60611" is hereby replaced
with the following:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (the "Bank"), a
national banking association with its principal place of business at
33 North LaSalle Street, Chicago, Illinois 60690; and
(b) in Article I, section D, Payments, the address of the Bank's Principal
Offices is changed from "605 North Michigan Avenue, Chicago, Illinois
60611" to the following:
33 North LaSalle Street, Chicago, Illinois 60690.
AMENDMENT TO INCREASE REVOLVING CREDIT LOAN
WHEREAS, the Bank has agreed to increase the Accounts Revolving Loan which
the Bank will lend to Borrower, the parties have agreed to amend the Agreement
as follows:
(a) under the section entitled "REVOLVING CREDIT LOANS," the first sentence of
the subsection entitled "ACCOUNTS RECEIVABLE" is replaced with the
following:
ACCOUNTS RECEIVABLE. The Bank will lend and relend to the Borrower
from time to time the sum of 80% of the face amount of the Borrower's
then existing "Eligible Accounts Receivable," as hereinafter defined
(the "Accounts Revolving Loan"); provided that the outstanding
principal amount of the Accounts Revolving Loan shall not at any time
exceed an amount equal to the lesser of $3,000,000.00 or the
Borrower's Accounts Borrowering Base, as hereinafter defined; and
further provided that the Bank may, at its sole discretion, terminate
the Accounts Revolving Loan or reduce the Accounts Borrowing Base,
upon 90 days written notice to the Borrower.
AMENDMENT TO AMOUNT OF TOTAL LOANS
WHEREAS, the Borrower and the Bank have agreed to the above-described
amendments, and whereas, the current outstanding aggregate principal balance
under the Machinery and Equipment Term Loan is $666.00, the parties have agreed
to amend the total loans under the Agreement as follows:
(a) the first sentence under the caption "TOTAL LOANS UNDER THIS AGREEMENT" is
replaced with the following:
<PAGE>
Any provision of this Agreement to the contrary notwithstanding, the
aggregate amount of all outstanding loans by the Bank to the Borrower
under this Agreement shall not at any time exceed THREE MILLION SIX
HUNDRED SIXTY SIX AND NO/100 DOLLARS ($3,000,666.00) (the "Total
Credit").
This Amendment supplements and modifies the Agreement, and all of the terms
and conditions and agreements therein contained are hereby reaffirmed and agreed
to and shall remain in full force and effect except as herein modified.
Dated: April 28, 1995
AMERICAN NATIONAL BANK AND WESTERN INTERMODAL SERVICES, LTD.
TRUST COMPANY OF CHICAGO (Borrower)
By: By: /s/ Michael A. Kelly
------------------------- ------------------------------
Its:
------------------------- Its: CFO
--------------------------------
2
<PAGE>
4-22-92 rev.
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of November
20, 1992 between LAKE SHORE NATIONAL BANK (the "Bank"), a national banking
association with its principal place of business at 605 North Michigan Avenue,
Chicago, Illinois 60611, and Western Intermodal Services, Ltd. (the "Borrower"),
a(n) Illinois Corporation with its principal place of business at 935 W. 175th
St., Homewood, IL 60430.
W I T N E S S E T H :
WHEREAS, the Borrower and the Bank have previously entered into Loan and
Security Agreement(s) dated June 1, 1989 and June 15, 1987 providing for the
borrowings thereunder of $1,500,000.00 pursuant to which $165,000.00 is
outstanding; and Security Agreement(s) dated June 1, 1989 providing for loans of
$340,000.00 pursuant to which $122,220.00 is outstanding;
WHEREAS, in connection with the foregoing, there has been executed
Promissory Note(s) and Business Note(s) of the Borrower, and Guarantees of Area
Transportation Co. and Area Interstate Trucking, Inc. in the amount of
$1,840,000.00 dated June 1, 1989 (the Loan and Security Agreement(s), Security
Agreement(s), Promissory Note(s), Business Note(s) and Guarantee(s) herein
referred to as the "Existing Documents");
WHEREAS, the Borrower and the Bank desire to increase instalment loan,
afforded under and supplement the Existing Documents and the Bank is willing to
lend money to the Borrower upon the following terms and conditions:
WHEREAS, the Borrower desires that the Bank lend money to the Borrower and
the Bank is willing to lend money to the Borrower upon the following terms and
conditions:
AGREEMENT TO LEND
- -----------------
Subject to the terms and conditions of this Agreement, including, without
limitation, the General Conditions of Credit set forth below, and the
limitations herein provided, the Bank will make loans (herein sometimes referred
to as the "Credit Facility") to the Borrower on the following terms:
Indicate lending arrangements by checking all applicable boxes.
Appropriate officers of the Bank and the Borrower should also
affix their initials in the margin next to each box that has been
checked and should also affix their initials on the lower right
hand corner of each page of this Agreement.
REVOLVING CREDIT LOANS
----------------------
[X] Accounts Receivable. The Bank will lend and relend to the
Borrower from time to time the sum of 80% of the face amount of
the Borrower's then existing "Eligible Accounts Receivable," as
hereinafter defined (the "Accounts Revolving Loan"); provided
that the outstanding principal amount of the Accounts Revolving
Loan shall not at any time exceed an amount equal to the lesser
of $1,500,000.00 or the Borrower's Accounts Borrowing Base, as
hereinafter defined; and further provided that the Bank may, at
its sole discretion, terminate the Accounts Revolving Loan or
reduce the Accounts Borrowing Base, upon 90 days written notice
to the Borrower. The Accounts Revolving Loan (including the first
such loan and all additional such loans) shall be evidenced by
the Borrower's Accounts Demand Note, in form and substance
acceptable to the Bank, in the dollar amount specified in the
preceding sentence, being the maximum amount of the Accounts
Revolving Loan available to the Borrower under this Agreement.
The Accounts Demand Note shall be executed and delivered to the
Bank before or concurrently with the Bank's disbursement of the
first Accounts Revolving Loan. The unpaid principal amount of the
Accounts Revolving Loan shall bear interest and shall be due and
payable as provided in the Accounts Demand Note.
[NO] INVENTORY. The Bank will lend and relend to the Borrower from
time to time the sum of _____% of the Borrower's "Eligible
Inventory," as hereinafter defined (the "Inventory Revolving
Loan"); provided that the outstanding principal amount of the
Inventory Revolving Loan shall not at any time exceed an amount
equal to the lesser of $____________ or the Borrower's Inventory
Borrowing Base, as hereinafter defined; and further provided that
the Bank may, at its sole discretion, terminate the Inventory
Revolving Loans or reduce the Inventory Borrowing Base upon 90
days written notice to the Borrower. The Inventory Revolving Loan
(including the first such loan and all additional such loans)
shall be evidenced by the Borrower's Inventory Demand Note, in
form and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence, being the maximum amount of
the Inventory Revolving Loan available to the Borrower under this
Agreement. The Inventory Demand Note shall be executed and
delivered to the Bank before or concurrently with the Bank's
disbursement of the first Inventory Revolving Loan. The unpaid
principal amount of the Inventory Revolving Loan shall bear
interest and shall be due and payable as provided in the
Inventory Demand Note.
-1-
<PAGE>
[NO] GENERAL. The Bank will lend and relend money to the Borrower from
time to time (the "General Revolving Loan"); provided that the
outstanding principal amount of the General Revolving Loan shall
not at any time exceed $_______________; and further provided
that the Bank may, at its sole discretion, terminate or modify
the terms of the General Revolving Loan upon 90 days written
notice to the Borrower. The General Revolving Loan (including the
first such loan and all additional such loans) shall be evidenced
by the Borrower's General Demand Note, in form and substance
acceptable to the Bank, in the dollar amount specified in the
preceding sentence, being the maximum amount of the General
Revolving Loan available to the Borrower under this Agreement.
The General Demand Note shall be executed and delivered to the
Bank before or concurrently with the Bank's disbursement of the
first General Revolving Loan. The unpaid principal amount of the
General Revolving Loan shall bear interest and shall be due and
payable as provided in the General Demand Note.
TERM LOANS
[X] MACHINERY AND EQUIPMENT. The Bank will lend to the Borrower the
sum of $220,000.00 (the "Machinery and Equipment Term Loan"). The
Machinery and Equipment Term Loan shall be evidenced by the
Borrower's Machinery and Equipment Term Note, in form and
substance acceptable to the Bank, in the dollar amount specified
in the preceding sentence. The Machinery and Equipment Term Note
shall be executed and delivered to the Bank before or
concurrently with the Bank's disbursement of the Machinery and
Equipment Term Loan. The unpaid principal amount of the Machinery
and Equipment Term Loan shall bear interest and shall be due and
payable as provided in the Machinery and Equipment Term Note.
[NO] INVENTORY. The Bank will lend to the Borrower the sum of
$_______________ (the "Inventory Term Loan"). The Inventory Term
Loan shall be evidenced by the Borrower's Inventory Term Note, in
form and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence. The Inventory Term Note
shall be executed and delivered to the Bank before or
concurrently with the Bank's disbursement of the Inventory Term
Loan. The unpaid principal amount of the Inventory Term Loan
shall bear interest and shall be due and payable as provided in
the Inventory Term Note.
[NO] GENERAL. The Bank will lend to the Borrower the sum of
$_______________ (the "General Term Loan"). The General Term Loan
shall be evidenced by the Borrower's General Term Note, in form
and substance acceptable to the Bank, in the dollar amount
specified in the preceding sentence. The General Term Note shall
be executed and delivered to the Bank before or concurrently with
the Bank's disbursement of the General Term Loan. The unpaid
principal amount of the General Term Loan shall bear interest and
shall be due and payable as provided in the General Term Note.
OTHER LOANS The Bank will lend money to the Borrower on the terms set
forth in the appropriate Loan Supplement indicated below duly executed by
the Borrower and the Bank, and each such Loan Supplement is incorporated in
this Agreement and made a part hereof. Any such Loan Supplement may be
entered into as of the date of this Agreement or at a later date, but shall
in all respects be subject to the provisions of this Agreement except as
may otherwise be specifically provided in such Loan Supplement. Each such
loan shall be evidenced by the Borrower's note, in form and substance
acceptable to the Bank, in the amount of such loan, which shall be executed
and delivered to the Bank before or concurrently with the Bank's
disbursement of such loan. The unpaid principal amount of such loan shall
bear interest and shall be due and payable as provided in such note.
[NO] LETTER OF CREDIT LOAN See Letter of Credit Loan Supplement
hereto.
[NO] REAL ESTATE LOAN See Real Estate Loan Supplement hereto.
TOTAL LOANS UNDER THIS AGREEMENT
- --------------------------------
Any provision of this Agreement to the contrary notwithstanding, the
aggregate amount of all outstanding loans by the Bank to the Borrower under this
Agreement shall not at any time exceed ONE MILLION SEVEN HUNDRED TWENTY THOUSAND
AND NO/100 DOLLARS ($1,720,000) (the "Total Credit"). Notwithstanding the stated
amount of the notes described above, the Borrower's liabilities thereunder at
any time shall be limited to the then unpaid principal amount of all loans and
advances (including overadvances and overdrafts) made by the Bank to or for the
account of the Borrower, plus the accrued interest thereon, and all other costs
and expenses, including reasonable attorneys' fees, to be paid by the Borrower
as provided by this Agreement (collectively the "Borrower's Liabilities"). (The
Accounts Demand Note, Inventory Demand Note, the General Demand Note, the
Machinery and Equipment Term Note, the Inventory Term Note, the General Term
Note and any other note delivered in connection with this Agreement or any Loan
Supplement hereto are sometimes herein referred to, together, as the "Notes"
and, individually, as a "Note").
COLLATERAL
- ----------
Payment of the Borrower's Liabilities is secured by all of the Collateral
described or referred to in Article II and by such additional security or
collateral as has been or may hereafter be granted or assigned to the Bank in
connection with this Agreement and any Loan Supplement and Addendum hereto.
- 2 -
<PAGE>
GENERAL CONDITIONS OF CREDIT
- ----------------------------
The making of any loans under this Agreement shall be subject to the Bank's
right, at its sole discretion, to terminate the Credit Facility or to reduce the
amount of the loans under the Credit Facility upon 90 days written notice to the
Borrower. Without limitation of the foregoing, each loan hereunder shall in any
event be subject to the following conditions precedent: (a) no Event of Default,
or Unmatured Event of Default (as those terms are hereinafter defined), shall
have occurred and be continuing, (b) the Bank does not deem itself insecure as
provided under the Illinois Uniform Commercial Code (Article I, Section 2-208);
(c) the representations, warranties and covenants of the Borrower contained in
this Agreement shall be true and correct as of the date of such loan with the
same effect as though made on such date, (d) all of the covenants of the
Borrower in this Agreement, and all of the requirements of this Agreement with
respect to such loan, shall have been complied with and (e) there shall not have
occurred, since the date of this Agreement, any material adverse change in the
financial condition, results of operations or business of the Borrower. Each
borrowing by the Borrower hereunder shall be deemed a representation and
warranty by the Borrower that the foregoing conditions have been fulfilled as of
the date of such borrowing.
REPAYMENT
- ---------
The Borrower agrees to repay each loan hereunder in accordance with the
terms and provisions of this Agreement and each Note.
ENTIRE AGREEMENT
- ----------------
This Agreement (and any Loan Supplement and Addendum hereto) and the Notes
and the other documents delivered or to be delivered in connection with or
pursuant to this Agreement contain all of the agreements of the Bank and the
Borrower with respect to the subject matter hereof.
ARTICLE I LOANS: GENERAL TERMS
A. Prime Rate. "Prime Rate" are used herein and in connection herewith
(including, without limitation, in any Note) means the rate per annum from time
to time determined by the Bank as its Prime Rate, as reflected in the Bank's
Prime Rate history book maintained at its principal office in Chicago, Illinois.
The designation of a rate of interest as the Bank's Prime Rate is for
convenience of reference for the Bank's internal procedures and does not
indicate in any way that such Rate is the rate of interest then being charged by
the Bank to its most creditworthy customers. Whenever the Prime Rate is a
component of an interest rate under this Agreement, such interest rate shall
fluctuate from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Prime Rate component thereof.
B. Changes in Interest Rate By Bank. The Bank, at its sole discretion, upon
90 days written notice to the Borrower, shall have the right from time to time
to change the interest rate (without regard and in addition to any change
therein resulting from any change in the Prime Rate or any other component of
such interest rate) applicable to any loan made or to be made to the
Borrower and to any other Borrower's Liabilities. Whenever the Bank shall elect
to increase such interest rate, the Bank shall send written notice to
the Borrower specifying the new interest rate to be charged and the effective
date (but not less than 90 days from date of notice) of the new interest rate.
The Borrower may pay the full amount of the outstanding Borrower's Liabilities,
without penalty or the payment of any specified increase in the interest rate,
within 90 days after the sending of any such notice of a change in the interest
rate.
C. Default Rate. After the occurrence of an Event of Default under this
Agreement, the Notes and all other Borrower's Liabilities shall (subject to any
limitations of applicable law) bear interest at rates per annum equal to the
respective rates applicable to such Notes and other Borrower's Liabilities prior
to such Event of Default plus four percent (4%).
D. Payments. All payments under this Agreement and with respect to the
Notes shall be made in immediately available funds by the Borrower to the Bank
prior to 2:00 p.m., Chicago time, on the date when due at the Bank's offices at
605 North Michigan Avenue, Chicago, Illinois 60611 (the "Bank's Principal
Office") or at such other location as the Bank may designate. Any payment
received after 2:00 p.m., Chicago time, shall be deemed received on the next
Business Day. Whenever any payment to be made hereunder or with respect to any
Note shall be stated to be due on a date other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of interest or any fees. "Business Day"
means any day on which the Bank is open for business at the Bank's Principal
Office.
E. Application of Payments. The Bank will apply against the Borrower's
Liabilities, on the date of receipt, if received by the Bank's commercial note
teller prior to 2:00 p.m., Chicago time, all payments received thereon,
including cash, solvent credits, collections of Accounts, proceeds of Collateral
(as hereinafter defined) and any other amounts; provided that (a) interest on
the amount of the reduction in any loan resulting from such application shall be
charged to the Borrower for the two days following the day that payment was
applied against the Borrower's Liabilities, unless the payment received is in
the form of cash or cash equivalent; (b) the Bank shall charge back to the
Borrower any payments that may be required to be returned to the entity making
such payment and the Borrower shall continue to pay interest on the amount
charged back from the date that such payment was applied against the Borrower's
Liabilities; (c) prior to the occurrence of an Event of Default, collections of
Accounts shall be applied only to the repayment of revolving loans and any
Borrower's Liabilities related thereto; and (d) except as provided in (c) above,
the Bank shall have the exclusive right to determine how, when and in what
amounts application of such payments and such credits shall be made on the
Borrower's Liabilities, and such determination shall be conclusive upon the
Borrower. (Notwithstanding the foregoing, the Bank and the Borrower may agree
otherwise in writing with respect to the application of collections and proceeds
of Accounts, as provided in Article III).
-3-
<PAGE>
F. Prepayment. Any loan to the Borrower may be prepaid, in whole or in
part, at any time without premium or penalty; provided, however, that the Bank,
at its sole discretion, may demand payment of all other indebtedness of the
Borrower to the Bank and all indebtedness of its officers, directors and
shareholders to the Bank if the Revolving Credit Loans are prepaid in whole or
in part from a credit facility established at another banking or financial
institution.
G. Statement of Account. All of the Borrower's Liabilities shall constitute
one loan secured by the Collateral and by all security interests, liens, claims
and encumbrances heretofore, now or from time to time hereafter granted by the
Borrower to the Bank. Loans made by the Bank to the Borrower pursuant to this
Agreement may or may not (at the Bank's sole and absolute discretion) be
evidenced by notes or other instruments issued or made by the Borrower to the
Bank. Where such loans are not so evidenced, such loans shall be evidenced
solely by entries upon the ledgers, books, records or computer records of the
Bank maintained for that purpose. In determining the Borrower's Liabilities, the
books and records of the Bank shall be controlling. All statements of accounts
rendered by the Bank to the Borrower concerning the Borrower's Liabilities
hereunder, including all statements of principal, interest, requests for
advance, fees, expenses and costs owing to the Bank by the Borrower, shall be
presumed correct and accurate and shall constitute an account stated between the
Bank and the Borrower unless the Borrower, within 180 days after receipt
thereof, delivers to the Bank written objection thereto, specifying the error or
errors, if any, contained in such statement. The Bank, at it's sole discretion,
may request the Borrower to certify as to the accuracy of the Bank's records
relative to the Borrower's Liabilities and the Borrower shall comply within 30
days of such request.
H. Compensating Balance. So long as this Agreement is in effect or there
are any outstanding Borrower's Liabilities hereunder, the Borrower shall
maintain with the Bank, in demand deposit (non-interest bearing) accounts, an
amount computed as follows (the "Compensating Balance"): NOT APPLICABLE
If the Borrower fails to maintain the Compensating Balance, the Bank may charge,
and the Borrower agrees to pay, a deficiency fee, which shall be payable within
30 days after the Bank issues the bill for such fee, in an amount computed as
follows: NOT APPLICABLE
I. Commitment Fee - Service Charges. The Borrower agrees to pay to the
Bank, in addition to all other amounts payable hereunder, a commitment fee
computed as follows: NOT APPLICABLE
and a service charge computed as follows: NOT APPLICABLE
J. Certain Other Fees and Expenses. The Borrower shall pay reasonable
attorneys' fees and other expenses incurred by the Bank in connection with this
Agreement and the loans contemplated hereby, and the Bank shall have the right
to charge or debit any account of the Borrower at the Bank for any fees or
expenses payable by the Borrower hereunder.
ARTICLE II COLLATERAL: GENERAL
A. Description. The Borrower hereby grants and assigns to the Bank and
agrees that the Bank shall have a security interest in the following property,
assets, rights and interests of the Borrower, whether now owned or existing or
hereafter acquired or arising:
1. all of the Borrower's Accounts (the term "Accounts" as used herein
includes, without limitation, all of the Borrower's accounts receivable
arising out of the sale or lease of Inventory or other goods or out of the
rendering of services), whether or not specifically assigned to the Bank
and whether or not constituting Eligible Accounts Receivable;
2. all of the Borrower's Inventory (the term "Inventory" as used
herein includes, without limitation, all of the Borrower's goods held for
sale or lease or being processed for sale or lease, including all
materials, work-in-process, finished goods, supplies and other goods
customarily classified as inventory), including Inventory at any time in
the possession of any bailee and whether or not constituting Eligible
Inventory;
3. all of the Borrower's Machinery and Equipment as described or
referred to in RIDER D hereto (the "Machinery and Equipment");
4. all of the collateral and other security, if any, described in any
Loan Supplement and Addendum entered into by the Borrower and the Bank
pursuant to this Agreement;
5. N/A
6. all of the Borrower's cash, negotiable instruments, documents of
title, warehouse receipts, chattel paper, general intangibles, securities,
leases, contract rights, certificates of deposit, deposit accounts, cash
equivalents, interest or dividends on any of the foregoing, insurance
claims, patents, trademarks, good will and other property of any kind or
description as described in Rider A, wherever now or hereafter located, and
now or hereafter in transit to or in the possession or control of or
assigned to or owned or held by the Bank; and
- 4 -
<PAGE>
7. without limitation of the foregoing, all substitutions, renewals,
improvements and replacements of, and additions and accessions to, the
foregoing, and all products and proceeds of the foregoing, including, without
limitation, all of the proceeds in any form of the Borrower's Accounts and
Inventory, whether specifically assigned to the Bank or not.
All of the assets described or referred to in this Paragraph A are herein called
the "Collateral"; provided, however, that the Collateral shall not include any
excluded assets of the Borrower described in RIDER A hereto. The terms used
herein to identify the Collateral shall have the respective meanings assigned to
such terms as of the date hereof in the Illinois Uniform Commercial Code. The
security interest granted hereby shall continue to attach to the Collateral
notwithstanding any sale, exchange or other disposition of the Collateral, or
any part thereof, by the Borrower except for finished Inventory sold in the
ordinary course of business. The security interest herein granted is to secure
the payment of all of the Borrower's Liabilities and the performance of all of
the Borrower's obligations to the Bank hereunder and any and all other
obligations of the Borrower to the Bank of every kind and description, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising. The Bank may call for additional Collateral as provided under
the Illinois Uniform Commercial Code (Article I, Section 1-208), and the
Borrower shall deliver such Collateral promptly.
B. Financing Statements. The Borrower shall sign and deliver such
financing statements and other documents, in form satisfactory to the Bank, as
the Bank may at any time reasonably request in order to effectuate or perfect
the Bank's security interest in the Collateral hereunder, or facilitate the
realization by the Bank upon the Collateral, or any part thereof, and shall
reimburse the Bank for the costs of preparing and filing the same.
C. Inspection. The Bank or its agents may at any reasonable time
inspect the Collateral and the books and records of the Borrower pertaining to
the Collateral, or any part thereof, and may make copies or extracts from such
books and records. The Borrower, at its sole cost and expense, shall keep and
maintain satisfactory and complete books and records of the Collateral until all
of the Borrower's Liabilities shall have been fully paid and discharged. The
Bank shall have a special property interest in and to any and all books and
records of the Borrower pertaining to the Collateral, and upon the occurrence of
an Event of Default the Borrower shall deliver such books and records to the
Bank at the demand of the Bank. The Bank may, at any time, require the Borrower
to furnish copies of any of the Borrower's books and records to the Bank or its
agent and the Borrower agrees to furnish such copies promptly upon the Bank's
request. At the request of the Bank, the Borrower shall duly cause its accounts
receivable ledger and other books and records relating to the Collateral to be
stamped, in form and manner satisfactory to the Bank, with a proper reference
to the fact that the Collateral has been assigned to the Bank. The Borrower
shall pay the Bank's reasonable fees, costs and expenses in connection with the
Bank's inspection of the Collateral and the books and records of the Borrower as
herein provided.
D. Preservation. The Bank may take such action from time to time as it
may, in its sole judgment, deem appropriate to maintain or protect the
Collateral, and for that purpose may, among other things, at its option, pay or
obtain the removal of any tax, lien, security interest, claim or encumbrance
that may be levied or placed on or with respect to any of the Collateral, or pay
the costs of insurance on any of the Collateral. The Borrower shall reimburse
the Bank, promptly upon demand by the Bank, for any costs or expenses incurred
by the Bank in the protection or maintenance of the Collateral, including the
expenditures described herein and any costs to move the Collateral to another
location. The Bank shall have exercised reasonable care in the custody and
preservation of any Collateral in its possession or control if it takes such
action for that purpose as the Borrower shall request in writing, but the
failure to comply with any such request shall not be deemed a failure to
exercise reasonable care. The Borrower shall have the sole responsibility for
taking such steps as may be necessary from time to time to preserve all rights
of the Borrower and the Bank in the Collateral against other parties. The
Borrower shall keep the Collateral in good condition and repair and shall not
waste or destroy any of the Collateral.
E. Insurance. The Borrower shall maintain in effect at all times
policies of insurance insuring against loss of or damage to all tangible
property constituting Collateral. Such insurance shall, except as may otherwise
be agreed to in writing by the Bank, (a) cover all risks, (b) be in amounts
equal to the full value of the Collateral, (c) be provided by such companies as
are satisfactory to the Bank, (d) contain a lender's loss payable clause naming
the Bank as payee as its interest may appear and (e) provide for 10 days' prior
written notice to the Bank of any cancellation. The Borrower shall cause a
certificate of insurance evidencing the insurance coverage required under this
Agreement to be delivered to the Bank within 14 days following the date of this
Agreement. The Bank, after 10 days, an Event of Default as hereinafter defined,
may act as attorney for the Borrower in obtaining and cancelling such insurance
and in adjusting and settling any claims with respect thereto and endorsing any
drafts received as a result thereof.
F. Liens. The Borrower represents and warrants that the Collateral is,
and covenants and agrees that it will keep the Collateral, free from any lien,
security interest (other than the security interest herein granted), claim or
encumbrance, except for any Permitted Encumbrance, as hereinafter defined, and
agrees to defend the Collateral against any and all claims and demands of all
persons at any time claiming the same or any interest therein.
G. Use. The Borrower shall not sell, assign, lease, transfer or convey
any of the Collateral or any interest therein; provided that, so long as no
Event of Default, as hereinafter defined, has occurred under this Agreement, the
Borrower may sell Inventory in the ordinary course of business (not including
any transfer in connection with or in satisfaction of any debt). The Borrower
may use and consume any raw materials or supplies, the use and consumption of
which is necessary in order to carry on the Borrower's business, may use and
operate any Machinery and Equipment and may otherwise use the Collateral in any
lawful manner not inconsistent with this Agreement, so long as no Event of
Default has occurred under this Agreement.
-5-
<PAGE>
H. Locations. The Borrower represents and warrants that, in addition to
the location indicated in the first paragraph of this Agreement, it has places
of business at the following locations and keeps its books and records at the
place indicated:
3400 W. 43rd St., Chicago, IL
6262 Chalet Dr., City of Commerce, CA
BOOKS & RECORDS: 935 W. 175 St., Homewood, IL
The Borrower shall notify the Bank promptly in writing of any change in the
foregoing or of any change in its name or in the names (or of any other names)
under which it is doing business.
ARTICLE III COLLATERAL: ACCOUNTS
Paragraphs A, B, C of this Article are applicable and constitute part
of this Agreement only if an Accounts Revolving Loan is made or to be
made under this Agreement.
A. Accounts Borrowing Base. "Accounts Borrowing Base" means, as to the
Borrower, at any time and from time to time, an amount equal to 80% of the face
amount of the Borrower's then existing "Eligible Accounts Receivable" (as
defined in Paragraph B below) which may be terminated or reduced as hereinabove
provided, less maximum discounts, allowances, credits and adjustments which may
be taken by or granted to any person who is or may become obligated to Borrower
under or on account of such Eligible Accounts Receivable (the "Obligor").
B. Eligible Accounts Receivable. "Eligible Accounts Receivable" is an
account that, when scheduled to the Bank and at all times thereafter, does not
violate the negative covenants and other provisions and does satisfy the
affirmative covenants and other provisions of this Agreement. The following
accounts are not Eligible Accounts Receivable:
1. Accounts which remain unpaid for more than 90 days after their
invoice dates or, in the case of "extended terms" invoices, which remain
unpaid for more than 30 days beyond the date payment is due;
2. Accounts which have been involved on "extended terms" which are
not due and payable within 30 days after their invoice dates;
3. Accounts owed by a single "Obligor", including a currently
scheduled Account, if the amount of the balance owed by the Obligor upon
all the Accounts owned to the Borrower exceeds 33% of Obligor's Eligible
Accounts Receivable, or such other amount which the Bank, in its sole
discretion, deems excessive;
4. Accounts owed by a single "Obligor" if the amount of the balance
owned by the Obligor is more than 50% (or such other percentage where the
Bank, in its sole discretion, deems excessive) of total ineligible
accounts;
5. Accounts with respect to which a director, officer, employee or
agent of the Borrower is Obligor, or the Obligor, directly or indirectly,
controls, is controlled by or is under common control with the Borrower;
6. Accounts with respect to which payment by the Obligor is or may be
conditional, and Accounts commonly known as "bill and hold" and Accounts of
a similar arrangement;
7. Accounts with respect to which the Obligor is not a resident or
citizen of or otherwise located in the continental United States of
America, or with respect to which the Obligor is not subject to service of
process in the continental United States of America;
8. Accounts with respect to which the Obligor is the United States of
America or any department, agency or instrumentality thereof, unless the
Borrower assigns its right to payment of such Accounts to the Bank pursuant
to the Assignment of Claims Act of 1940, as amended;
9. Accounts with respect to which the Borrower is or may become
liable to the Obligor for goods sold or services rendered by the Obligor to
the Borrower;
10. Accounts with respect to which the goods giving rise thereto have
not been shipped and delivered to and accepted as satisfactory by the
Obligor or with respect to which the services performed giving rise thereto
have not been completed and accepted as satisfactory by the Obligor;
11. Accounts which have not been invoiced, or have been fraudulently
or negligently or improperly included in a request for Advance, as
hereinafter defined;
12. Accounts with respect to which possession or control of the goods
sold giving rise thereto is held, maintained or retained by the Borrower
(or by any agent or custodian of the Borrower) for the account of or
subject to further or future direction from the Obligor;
13. Accounts arising from a "sale on approval" or a "sale or return";
14. Accounts as to which the Obligor is insolvent or has admitted its
inability to pay its debts as they come due, or has filed a petition under
any bankruptcy law or had such a petition filed against it, or as to which
the Obligor has made an assignment for the benefit of its creditors, or as
to which the Bank, at any time, determines, in good faith, that prospect of
payment thereon is unsatisfactory;
-6-
<PAGE>
15. Accounts with respect to which the Bank does not have a valid,
first priority and fully perfected security interest and accounts subject
to any lien except those in favor of the Bank; and
16. Accounts of an Obligor to the extent that the Bank, in good
faith, has determined at any time that a credit limit shall be applied with
respect to such Obligor and has given notice to the Borrower of the
determination of such credit limit, and such Accounts exceed such credit
limit.
Immediately upon demand from the Bank, the Borrower shall pay to the Bank an
amount of money equal to the amount theretofore advanced by the Bank to the
Borrower upon any account that is no longer an Eligible Accounts Receivable, and
the Bank shall apply such payment to and on account of the Accounts Revolving
Loan. The Borrower shall notify the Bank within a reasonable time after learning
that an account is no longer an Eligible Accounts Receivable, but not later than
the date of the next request by the Borrower for an Accounts Revolving Loan
under this Agreement.
C. Accounts Revolving Loan Advances. Each request for an Accounts
Revolving Loan under this Agreement shall be made by the Borrower by providing
the Bank with at least one Business Day's advance written notice (a "Request
for Advance") in substantially the form of RIDER B hereto specifying the amount
of the Accounts Revolving Loan being requested and the date by which the
Borrower desires such amount to be made available to it. The Bank, in its
reasonable discretion and upon its reasonable determination, that the conditions
set forth in this Agreement have been duly satisfied, will make the amount set
forth in the Request for Advance available to or upon the order of the Borrower
in immediately available funds at the Bank's Principal Office not later than
2:00 p.m., Chicago time, on the date of the proposed borrowing.
D. Collection. The collection of the Accounts and the application of the
proceeds received therefrom shall be subject to the following:
1. The Borrower is authorized to collect the Accounts or any part
thereof, but such authorization may be restricted or terminated by the Bank
at any time in the Event of Default, as hereinafter defined. The Borrower
shall not grant any extension of time for the payment of the Accounts,
shall not compromise, compound or settle the Accounts or any part thereof
for less than the full amount thereof, shall not release, in whole or in
part, any person liable for the payment of the Accounts or any part
thereof, or allow any credit, discount or allowance whatsoever upon the
Accounts or any part thereof, unless such activity shall be deemed to be in
the ordinary course of business and shall not occasion or threaten a
material adverse change in the financial condition, results of operation or
business of the Borrower, without first obtaining the written consent of
the Bank.
2. Unless otherwise agreed to in writing by the Bank, the Borrower
shall deliver or cause to be delivered to the Bank, not later than the
Business Day following the receipt thereof, all collections and proceeds
received by the Borrower on the Accounts, in the form in which they are
received, for application or retention by the Bank in accordance with this
Agreement. Simultaneously with each such delivery, the Borrower shall
deliver to the Bank, on forms provided by the Bank for said purpose, a
full, true and correct report of all such proceeds in manner and form
designated by the Bank. Such reports shall be accompanied by a statement
and description of the discounts, allowances, credits and adjustments
(other than normal trade discounts specifically noted at the time of
assignment) reported therein. The proceeds of the Accounts shall be
delivered to the Bank in precisely the form received, except for the
endorsement of the Borrower when required, and until so turned over shall
be deemed to be held in trust by the Borrower, for and as the property of
the Bank, and shall not be commingled with other funds of the Borrower. All
remittances are received subject to collection, and the Bank assumes no
responsibility in connection therewith beyond the exercise of ordinary care
and will not be liable for default, negligence or willful misconduct of any
correspondent or for losses in transit.
3. In the Event of Default, as hereinafter defined, the Bank may,
with 10 days notice to the Borrower, extend the time of payment or
compromise, settle for cash or credit or otherwise settle, upon any terms
or conditions, any part of the Accounts and thereby discharge or release
the person or persons liable for the payment of the Accounts or any part
thereof without affecting the Borrower's Liabilities to the Bank. The Bank
may, but shall not be obliged to, demand or enforce payment of the Accounts
or any part thereof and shall not be liable for its failure to collect or
enforce the payment thereof or for the negligence of its agents or
attorneys with respect thereto.
E. Notification. In the Event of Default, as hereinafter defined, the
Bank, with 10 days notice to the Borrower, may notify any person, corporation,
or partnership (the "Obligor") liable for the payment of any Account of the fact
that the same has been assigned to the Bank and may direct that payment of any
accounts be made directly to the Bank. If the Bank so requests, all bills and
statements sent by the Borrower to the Obligor shall state that the same has
been assigned to the Bank and is payable solely to the Bank. When requested by
the Bank, for any reason and at any time, the Borrower will notify or cause to
be notified the Obligor to pay directly to the Bank any sum or sums then due or
to become due on account of the Accounts or any part thereof.
F. Miscellaneous.
1. The Borrower will promptly notify the Bank, in writing, of the
return or rejection of any Inventory or other goods or materials
represented by any part of the Accounts, and in such event the Borrower
shall promptly account therefor to the Bank in cash without the necessity
of any further demand or notice by the Bank to make such an accounting. In
the event that any check or other instrument for the payment of money in
respect of any Account shall be returned uncollected for any reason, the
Borrower agrees to pay to the Bank the amount of such check or other
instrument, or the Bank may, in its discretion, charge the Borrower's Bank
account with the amount of such check or other instrument, in either case
as may be necessary to maintain the required Accounts Borrowing Base with
-7-
<PAGE>
respect to the Accounts Revolving Loan, and the amount of such payment or
change shall be applied to the payment of the Accounts Revolving Loan.
2. In the Event of Default, the Bank is hereby authorized to endorse
the Borrower's name on all notes, checks, drafts, bills of exchange, money
orders, commercial paper of any kind whatsoever, and any other documents
received in payment of the Accounts, or any part thereof, and the Bank, or
any officer or employee thereof, is hereby irrevocably constituted and
appointed agent and attorney-in-fact for the Borrower for the foregoing
purpose.
3. In the Event of Default, the Bank shall have and succeed to all
rights, remedies, securities and liens of the Borrower in respect to the
Accounts and the related Inventory, goods, materials and other property
including, but not limited to, the right of stoppage in transit,
guaranties, or other contracts or suretyship, unpaid sellers' liens,
statutory liens, artisans' liens, or other collateral security held by or
to which the Borrower is entitled for the payment of the Accounts, and
shall have the right to enforce the same in its name or to direct the
enforcement thereof by the Borrower for the benefit of the Bank, and the
Borrower shall, at the request of the Bank, deliver to the Bank a separate
written assignment of any of the same.
4. In the Event of Default, the Borrower shall cause an accountant or
representative of the Borrower satisfactory to the Bank, to furnish to the
Bank, as often as the Bank shall reasonably request, the following reports:
(1) a reconciliation of all Accounts; (2) an aging of all Accounts; (3) a
test verification of all Accounts, and (4) trial balances; all certified as
to their accuracy by such accountant or representative; and the Borrower
shall pay the reasonable costs of such reports.
ARTICLE IV COLLATERAL: INVENTORY
Paragraphs A, B and C of this Article are applicable and constitute
part of this Agreement only if an Inventory Revolving Loan is made or
to be made under this Agreement.
A. Inventory Borrowing Base. "Inventory Borrowing Base" means, as to any
Borrower, at any time and from time to time, an amount equal to N/A % of the
face amount of such Borrower's then existing "Eligible Inventory" (as defined in
Paragraph B below), which may be terminated or reduced as hereinabove provided.
B. Eligible Inventory. "Eligible Inventory" shall mean that portion of
the Borrower's inventory that (a) is not obsolete; (b) consists of raw
materials, salable work in process or finished goods; (c) the Bank, in good
faith, has not determined to be unacceptable due to age, type, category or
quantity; and (d) is located on premises owned or leased as lessee by the
Borrower or is located on a third party's property on consignment.
C. Inventory Revolving Loan Advances. Each request for an Inventory
Revolving Loan under this Agreement shall be made by the Borrower by providing
the Bank with at least one Business Day's advance written notice (a "Request for
Advance") in substantially the form of RIDER C hereto specifying the amount of
the Inventory Revolving Loan being requested and the date by which the Borrower
desires such amount to be made available to it. The Bank, in its reasonable
discretion and upon its reasonable determination, that the conditions set forth
in this Agreement have been duly satisfied, will make the amount set forth in
the Request for Advance available to or upon the order of the Borrower in
immediately available funds at the Bank's Principal Office not later than 2:00
p.m., Chicago time, on the date of the proposed borrowing.
D. Location. The Borrower represents and warrants that all Borrower's
Inventory (including, without limitation, any Inventory held in warehouses or
delivered on consignment) is kept at the following locations:
935 W. 175th St., Homewood, IL
E. Changes in Inventory. The Borrower shall notify the Bank immediately
of any change in the location of the Inventory and of any material decrease
(whether by loss, depreciation, damage or otherwise) in the value of the
Inventory and the amount of such decrease. The Borrower shall pay to the Bank,
immediately upon demand, (a) to be applied against the Inventory Revolving Loan,
such amount as may be necessary to maintain the required Inventory Borrowing
Base with respect to the outstanding Inventory Revolving Loan and (b) to be
applied against any other loan, such amount as may be necessary, in the sole
opinion of the Bank, to restore the Bank to an adequate level of security. The
Borrower shall deliver to the Bank, at such times as the Bank may request, a
statement in form satisfactory to the Bank showing (a) the Inventory available
for sale, (b) the Inventory previously sold and delivered, sold and held for
future delivery, used or consumed, (c) the description, value and location of
the Inventory and (d) such other information as the Bank may deem necessary or
desirable with respect to the Inventory.
ARTICLE V COLLATERAL: MACHINERY AND EQUIPMENT
---------
A. The Borrower represents and warrants that the Machinery and Equipment
is generally described or (if a Machinery and Equipment Term Loan is made or to
be made under this Agreement) is specifically listed, and kept at the locations
specified in RIDER D hereto. The Borrower shall notify the Bank of any change in
the location of the Machinery and Equipment and shall not remove any Machinery
and Equipment from the state in which it is located as indicated on RIDER D
without the prior written consent of the Bank which consent shall not be
unreasonably withheld. If a Machinery and Equipment Term Loan is made or to be
made under this Agreement and if any of the Machinery and Equipment is or is to
be attached to real estate, the legal description of such real estate is also
contained in RIDER D.
B. Subordination. If requested by the Bank, the Borrower shall obtain
from the owner of and from the person or entity holding a mortgage or lien on
any real estate on which any Machinery and Equipment is located an agreement
that
- 8 -
<PAGE>
any interest which such owner, mortgagee or lienholder may have in the Machinery
and Equipment is subordinate to the interest of the Bank.
ARTICLE VI REPRESENTATIONS AND WARRANTIES
----------
A. The Borrower represents and warrants to the Bank that, except as may
have been previously disclosed in writing to the Bank:
1. The Borrower is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified and in good standing and authorized to do business in each other
jurisdiction where, because of the nature of Borrower's activities or
properties, such qualification is required;
2. The execution and delivery of this Agreement, the borrowings
hereunder, the execution and delivery of the Notes, and the performance by
the Borrower of its obligations under this Agreement and the Notes are
within the Borrower's powers and have been duly authorized by all necessary
action (corporate, partnership or other), have received all necessary
governmental and regulatory approval, and do not and will not contravene or
conflict with any provision of law or of any organizational documents
(including, without limitation, any articles of incorporation, by-laws, or
partnership agreement) of the Borrower or of any agreement, indenture or
other document binding upon the Borrower or to which its property is
subject;
3. This Agreement is, and the Notes, when duly executed and
delivered will be, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
subject to bankruptcy, insolvency and other similar laws relating to or
affecting the enforceability of creditors' rights;
4. There are no legal, governmental, arbitration or other actions or
proceedings which are pending or threatened against the Borrower which
might result in (a) any material adverse change in its financial condition,
or results of its business operations, or (b) materially and adversely
affect Borrower's use of property or assets, including the Collateral;
5. Except as disclosed in the financial statements of the Borrower
most recently delivered to the Bank pursuant to or in connection with this
Agreement, the Borrower has no indebtedness or other liabilities, other
than trade payables and obligations arising in the ordinary course of its
business;
6. The Borrower is solvent and generally paying its debts as they
mature, and owns property which, at a fair valuation, is greater than the
sum of its debts and the Borrower has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage;
7. The Borrower has and is in good standing with respect to all
governmental permits, licenses, certificates, consents and franchises, and
all patents, copyrights, trademarks and trade names, necessary to conduct
and to continue to conduct the businesses now conducted by it and to own or
lease and operate the properties now owned or leased and operated by it;
and none of the foregoing contains any term, provision, condition or
limitation more burdensome than such as are generally applicable to persons
engaged in the same or similar business as the Borrower;
8. The Borrower is not a party to (or subject to any renegotiation
of) any contract or agreement, or subject to any charge, restriction,
judgment, decree or order, which materially and adversely affects its
financial condition, results of operations or business, or its property or
assets;
9. The Borrower's activities are legal and the intended use of the
Credit Facility will not result in a forfeiture under the provisions of the
Controlled Substance Act of 1978, or the Money Laundry Control Act of 1986,
or the Anti-Drug Abuse Act of 1988;
10. The Borrower is not in violation of any applicable law,
regulation or ordinance of the United States of America or of any state,
city, town, municipality, county or other jurisdiction, or of any agency or
instrumentality of any of the foregoing, in any respect materially and
adversely affecting its financial condition, results of operations or
business, or its property or assets, including, without limitation, any
law, regulation or ordinance relating to occupational health or safety or
protection of the environment (including Hazardous Substances, as
hereinafter defined);
11. The financial statements, schedules and other information
furnished to the Bank prior to the execution and delivery of this Agreement
and all financial statements, schedules and other information furnished to
the Bank after the execution and delivery of this Agreement fairly and
accurately present the financial condition and results of operations of the
Borrower (and any other persons described therein) as of and for the period
ending on the date as of which such financial statements are presented, and
have been prepared in accordance with generally accepted accounting
principles consistently applied; and since the date of the financial
statements of the Borrower most recently furnished to the Bank, there has
been no material adverse change in the financial condition, results of
operations or business of the Borrower;
12. To the best of the knowledge of the Borrower, after reasonable
investigation, no hazardous substances, hazardous wastes, industrial
wastes, pollutants, contaminants or toxic substances, within the meaning of
any applicable federal, state or local law, regulation or ordinance
(collectively, "Hazardous Substances"), are stored or otherwise located by
Borrower on any property owned, leased or operated by the Borrower, and no
part of such property, including the groundwater located thereon or
thereunder has been contaminated by any of Borrower's Hazardous Substances;
-9-
<PAGE>
13. The Borrower has timely filed all material tax returns and
reports required to be filed by it with any governmental entity, and has
timely paid all taxes, assessments, fees and other charges upon the
Borrower and upon its properties, assets, income and franchises which are
shown on such returns and reports as due and payable;
14. There are no strikes, work stoppages, election or decertification
petitions or proceedings, unfair labor charges, equal employment
opportunity proceedings, wage payment or material unemployment compensation
proceedings, material workmen's compensation proceedings or other material
labor or employee-related controversies pending or threatened involving the
Borrower and any of its employees, other than employee grievances arising
in the ordinary course of business which would not in the aggregate have a
material adverse effect on the financial condition, results of operations
or business of the Borrower;
15. No fact, including but not limited to, any "Reportable Event," as
that term is defined in Section 4043 of the Employee Retirement Income
Security Act of 1974, as the same may be amended from time to time
("Pension Reform Act") exists in connection with any Pension Plan (herein
called a "Plan") of the Borrower which might constitute grounds from
termination of any such Plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States District Court of a
Trustee to administer any such Plan. No "Prohibited Transaction" within the
meaning of Section 406 of the Pension Reform Act exists to Borrower's
knowledge or will exist upon the execution of delivery of this Agreement or
the performance by the parties hereto of their respective duties, and
obligations hereunder. Borrower agrees to do all acts, including but not
limited to contributions, necessary to maintain compliance with the Pension
Reform Act and agrees not to terminate any such Plan in a manner or do or
fail to do any act which could result in the imposition of a lien of any
property of the Borrower pursuant to Section 406B of the Pension Reform
Act. Borrower has incurred no withdrawal liability under the Multiemployer
Pension Plan Amendment Act of 1980, as amended.
B. The Borrower further represents and warrants that it is in full
compliance with all of its convenants under this Agreement and there does
not exist any Event of Default or Unmatured Event of Default.
ARTICLE VII COVENANTS
-----------
A. Negative Covenants. The Borrower shall not:
------------------
1. Sell, assign, lease, transfer or convey any of its property or
assets (excluding the Collateral) or any interest therein except in the
ordinary course of business; or sell, assign, lease or convey any of the
Collateral except as permitted by Paragraph G of Article II hereof; and the
Borrower shall at all times have good, indefeasible and merchantable title
to and ownership of its property and assets, including the Collateral,
and shall not allow, suffer or cause to exist thereon any lien, claim,
security interest or encumbrance (including, without limitation, any lien
or encumbrance of any governmental entity or agency or with respect to any
taxes or debts owed thereto), except those of the Bank and Permitted
Encumbrances, if any, specified in RIDER E hereto; provided that the
Borrower shall have the right to contest, in good faith, with reasonable
diligence and by appropriate proceedings, the validity of any lien or
encumbrance or claim thereof, but only if none of the property or assets of
the Borrower is subject to sale or foreclosure during such contest, and the
Borrower shall promptly pay any judgment rendered against it in connection
with any such contest;
2. Incur any indebtedness, whether for borrowed money or otherwise,
except for (a) the Borrower's Liabilities and any other indebtedness owed
to the Bank, (b) extensions of the maturities of existing indebtedness and
interest thereon, (c) indebtedness which is unsecured and is to persons who
execute and deliver to the Bank (in form and substance acceptable to the
Bank) subordination agreements subordinating such indebtedness and their
claims against the Borrower in connection therewith to the payment of the
Borrower's Liabilities, and (d) trade payables and other obligations
arising in the ordinary course of the business, including indebtedness
incurred to purchase machinery and equipment not exceeding at any time
$ N/A in the aggregate; without the knowledge of the Bank;
3. Guarantee or otherwise become liable, in any way, with respect to
the obligations, indebtedness or liabilities of any other person or entity
except by endorsement of instruments or items of payment for deposit to the
general account of the Borrower or for delivery to the Bank on account
of the Borrower's Liabilities;
4. Merge or consolidate with or acquire any other person or entity
or, other than in the ordinary course of business, make any investment in
the securities of any other person or entity;
5. Redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of the Borrower's capital stock or any other ownership
interest in the Borrower, declare or pay any dividend or make any
distribution upon any of the Borrower's capital stock, make any
distribution of the Borrower's property or assets or make any loan, advance
or extension of credit to any person;
6. Make any material change in the Borrower's capital structure or
in any of the Borrower's business objectives, purposes or operations which
might in any way adversely affect its ability to repay the Borrower's
Liabilities;
7. Enter into any transaction not in the ordinary course of business
which materially and adversely affects the Borrower's ability to repay the
Borrower's Liabilities or any other indebtedness of the Borrower or the
Collateral; or
8. Enter into or be a party to any transaction or arrangement with
any Affiliate (including, without limitation, the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any
Affiliate), except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business
-10-
<PAGE>
and upon fair and reasonable terms no less favorable to the Borrower than would
obtain in a comparable arm's-length transaction with a person other than an
Affiliate. (Affiliate means any person (i) which directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
with the Borrower, (ii) which beneficially owns or holds, directly or
indirectly, 5% or more of any class of the voting stock of the Borrower or (iii)
5% or more of the voting stock of which is beneficially owned or held, directly
or indirectly, by the Borrower (or in case of a person which is not a
corporation, 5% or more of the equity interest). The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting stock, by contract or otherwise);
B. Affirmative Covenants. The Borrower shall:
---------------------
1. Operate its business and properties in accordance with all
applicable laws, regulations and ordinances of the United States of
America, of any state, city, town, municipality, county or other
jurisdiction, and of any agency or instrumentality of any of the foregoing,
including, without limitation, any law, regulation or ordinance relating to
occupational health or safety or protection of the environment (including
Hazardous Substances);
2. Timely file all material tax returns and reports required to be
filed by it with any govenmental entity, and timely pay all taxes,
assessments, fees and other charges upon the Borrower and upon its
properties, assets, income and franchises which are shown on such returns
and reports as due and payable;
3. Notify the Bank immediately, in writing, if it becomes aware or
receives notice of the existence or alleged existence of any Hazardous
Substance on any property owned, leased or operated by the Borrower;
4. Maintain its principal banking accounts at the Bank at all times
during the term of this Agreement and until all of the Borrower's
Liabilities have been paid;
5. At all times (including, without limitation, on the date of this
Agreement) be solvent and generally paying its debts as they mature, own
property which, at a fair valuation, is greater than the sum of its debts
and have capital sufficient to carry on its business and transactions and
all businesses and transactions in which it is about to engage; and
6. Prepare and keep proper books of account and financial statements
and cause to be furnished to the Bank the financial statements and
certificates specified below. All financial statements furnished to the
Bank by the Borrower pursuant to this Agreement shall be accompanied by a
certificate of the chief financial officer of the Borrower to the effect
that such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
any inconsistencies as to which the Borrower's certified public accountants
concur and which are consistent with generally accepted accounting
principles) and present fairly and accurately the financial condition and
results of operations of the Borrower as of and for the period ending on
the date as of which such financial statements are presented. The Borrower
shall notify its outside accountants and auditors of the Bank's reliance on
statements to be issued by them for the Borrower and shall require such
accountants and auditors to confirm such reliance to the Bank.
Financial Statements and Certificates to be Furnished to Bank
-------------------------------------------------------------
(a) As soon as available but not later than 120 days after
the close of each fiscal year of the Borrower, the financial
statements of the Borrower for such fiscal year (including at
least a balance sheet as of the end of, and the related statement
of income for, such fiscal year, and a statement of changes in
capital for such year) audited or reviewed by independent
certified public accountants selected by the Borrower and
acceptable to the Bank.
(b) Concurrently with the delivery of the financial
statements described in Subparagraph (a) above, a certificate or
certificates of the chief executive officer of the Borrower and
the aforesaid certified public accountants certifying to the Bank
that (in the case of such certified public accountants, based
upon their examination of the affairs of the Borrower performed
in connection with their audit or review of said financial
statements) they are not aware of the existence of any Event of
Default, or Unmatured Event of Default, under this Agreement or,
if they are aware of any such Event, the nature thereof and the
steps being taken to remedy it.
(c) As soon as available but not later than 30 days after
the end of each fiscal quarter (or each calender month if the
Bank shall so request), the financial statements of the Borrower
for such period (including at least a balance sheet as of the end
of, and the related statement of income for, such period) and the
portion of Borrower's fiscal year then ended.
(d) Such other data and information (financial and
otherwise) as the Bank, from time to time, may request bearing
upon or related to the Borrower's financial condition, results of
operations or business or the Collateral.
Notwithstanding the foregoing, (i) with the written consent of the Bank,
the financial statements required to be furnished by Subparagraph (a) above need
not be audited or reviewed by independent public accountants; (ii) the Bank
reserves the right to require that the financial statements described in
Subparagraph (a) above be audited by independent
-11-
<PAGE>
public accountants selected by the Borrower and acceptable to the Bank; and
(iii) if the Borrower has any subsidiaries, all references to financial
statements in this Agreement, unless otherwise directed by the Bank, shall be
deemed to refer to the consolidated financial statements of the Borrower and its
subsidiaries.
ARTICLE VIII EVENTS OF DEFAULT: REMEDIES OF BANK
------------
EVENTS OF DEFAULT
- -----------------
Each of the following shall constitute an "Event of Default" hereunder:
A. If principal of or interest on any Note, or if any other of the
Borrower's Liabilities to the Bank or, is not paid when due; or
B. If the Borrower breaches any of the covenants, terms, conditions or
provisions of this Agreement and such breach continues for a period of 30 days
after notice thereof has been given by the Bank to the Borrower; provided,
however, that the Borrower shall not be in default hereunder if the breach is of
such a nature that it does not materially adversely affect the financial
condition or business operation of the Borrower and the Borrower has undertaken
efforts and continues such efforts to cure the breach within a reasonable period
of time; or
C. If any representation or warranty of the Borrower contained in this
Agreement or in any document or instrument delivered pursuant to this Agreement
is untrue or incorrect; or
D. If a default shall occur under any guarantee, instrument or document
furnished to the Bank in connection with this Agreement, or under any other
agreement between the Borrower and the Bank, and such default shall not be cured
or corrected within the time, if any, prescribed therein, and if not so
prescribed within 30 days after notice thereof has been given by the Bank to the
Borrower; or
E. If the Borrower becomes insolvent or generally fails to pay, or admits
in writing its inability to pay, debts as they become due; or the Borrower
applies for, consents to or acquiesces in the appointment of a trustee, receiver
or other custodian for the Borrower or any property or assets of the Borrower,
or makes a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Borrower or for a substantial part of the
property or assets of the Borrower and is not discharged with 60 days; or any
bankruptcy, reorganization, debt arrangement, or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation proceeding,
is commenced in respect of the Borrower and if such case or proceeding is not
commenced by the Borrower, it is consented to or acquiesced in by the Borrower
or remains for 60 days undismissed; or the Borrower takes any corporate action
authorize, or in furtherance of, any of the foregoing; or
F. If the Borrower is in default in respect of any other indebtedness of
the Borrower to the Bank; or
G. If notice is given by the Bank to the Borrower that, in the opinion of
the Bank, any legal, governmental, arbitration or other proceeding which has
been instituted with respect to the Borrower or any of its property or assets is
likely to materially and adversely affect the financial condition, results of
operations or business of the Borrower and such legal or government proceeding
is not dismissed within 30 days after such notice is given by the Bank; or
H. If any guarantee of any of the Borrower's Liabilities is terminated or
limited for any reason, including, without limitation, because of revocation or
the death of any guarantor.
"Unmatured Event of Default" means an event, act or occurrence which, if
it continues uncured will, with the giving of notice or the lapse of time, or
with both thereof, constitute an Event of Default.
REMEDIES IN THE EVENT OF DEFAULT
- --------------------------------
If an Event of Default shall occur, or if the Bank shall otherwise deem
itself to be insecure for the reasons provided under the Illinois Uniform
Commercial Code (Article I, Section 1-208), which shall be considered an Event
of Default under this Agreement, then the Bank may, at its option, exercise any
one or more of the following rights and remedies:
A. The Bank may discontinue making any further loans under this Agreement;
B. The Bank may declare the entire unpaid amount of the Borrower's
Liabilities to be immediately due and payable;
C. Except as may otherwise be required by law, the Bank (a) may sell all
or any of the Collateral at public or private sale or sales upon such terms and
conditions as the Bank deems proper (and the Bank may purchase any or all of the
Collateral at any such sale) and apply the net proceeds of such sale, after
deducting all costs, expenses and attorneys' fees incurred at any time in the
collection of the Borrower's Liabilities and in the protection and sale of the
Collateral, first to the payment of the Borrower's Liabilities and then to the
payment of any other liabilities of the Borrower to the Bank, and shall return
any remaining proceeds to the Borrower; provided that the Borrower shall remain
liable for any Borrower's Liabilities or other amounts remaining unpaid after
such application and interest thereon; and (b) may take such other actions as it
may deem appropriate or in its interest with respect to the Collateral
including, without limitation, (i) transfer the whole or any part of the
Collateral into its name or the name of a nominee, (ii) collect any amounts due
on the Collateral directly from the persons obligated thereon, (iii) exercise
any voting or other rights with respect to any Collateral consisting of
securities, (iv) take possession and control of the Collateral and any proceeds
thereof, (v) sue or make any compromise or settlement with respect to any of the
Collateral; and
12
<PAGE>
D. The Bank may exercise from time to time any rights and remedies
available to it under applicable laws, including, without limitation, the
Illinois Uniform Commercial Code and the commercial code of any other applicable
state. In addition to and not in limitation of all rights of offset that the
Bank may have under applicable law, the Bank shall, upon the occurrence of an
Event of Default, have the right to appropriate and apply to the payment of and
to set-off against the Borrower's Liabilities any and all balances, credits,
deposits, accounts or money of the Borrower then or thereafter received or held
by or under the control of the Bank. Except as may otherwise be required by law,
including with respect to notice of any sale of Collateral, the Borrower hereby
waives, in connection with this Agreement and the Borrower's Liabilities, any
right under or benefit of any law (whether or not intended for its advantage or
protection), that would restrict or limit the right or ability of the Bank to
obtain payment of the Borrowers Liabilities, including any law that would
restrict or limit the Bank in the exercise of its right to appropriate at any
time hereafter any indebtedness owing from the Bank to the Borrower and any
deposits or other property of the Borrower in the possession or control of the
Bank and apply the same toward or set-off the same against the payment of the
Borrower's Liabilities.
WAIVER
THE BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE
BORROWER'S LIABILITIES.
ARTICLE IX MISCELLANEOUS
A. The Borrower hereby waives demand, presentment and protest, and notice
of demand, presentment, protest, nonpayment or dishonor, with respect to the
Notes and the Borrower's Liabilities, and with respect to any notes, checks or
other negotiable instruments which may be included in the Collateral or held by
the Bank with respect to which the Borrower is an endorser, drawer, surety or
other responsible party, and the Borrower hereby consents to any and every
renewal or extension of time that may be granted with respect to such
instruments.
B. If the Borrower shall cease to be indebted to the Bank for loans made
pursuant to this Agreement, any loan or advance made thereafter by the Bank to
the Borrower, secured by any Collateral, shall nevertheless be governed by the
terms of this Agreement without the necessity of any further act, understanding
or writing by the parties hereto, except as may otherwise be agreed to in
writing by the Bank and the Borrower.
C. The Borrower shall pay all reasonable costs of collection of the
Borrower's Liabilities, all reasonable costs in connection with the use,
custody, protection and sale of the Collateral and all reasonable costs paid or
incurred in enforcing or preserving any of the Bank's rights hereunder or in
connection with any transaction or proceeding in which the Bank may become
concerned or involved by reason of its interest in this Agreement or any
Borrower's Liabilities or any action by the Borrower, in each case including
reasonable attorneys' fees, all promptly on demand of the Bank or other person
incurring the same. The Borrower shall also pay interest on the foregoing
amounts at the highest Default Rate provided hereunder. Any such costs may be
deducted by the Bank from any money received under this Agreement or on any
Note.
D. The Bank shall not (by act, delay, omission or otherwise) be deemed to
have waived any of its rights or remedies hereunder, or any provision hereof,
unless such waiver is in writing signed by the Bank, and any such waiver shall
be effective only to the extent specifically set forth therein; and a waiver by
the Bank of any right or remedy under this Agreement on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy which the
Bank would otherwise have had on any further occasion.
E. The Borrower warrants and represents that (a) each of the loans and
other Borrower's Liabilities under this Agreement is being incurred as a
business loan to a business and is a transaction within the scope of Section
4(1)(c) of the Illinois Interest Act (Ill. Rev. Stat., Ch. 17, par. 6404(1)(c)),
and none of such loans or Borrower's Liabilities violates the provisions of the
usury laws or any other laws governing interest rates of Illinois or any other
state having jurisdiction over such loan or Liabilities, this Agreement or any
transaction contemplated hereby; and (b) each of the loans and other Borrower's
Liabilities under this Agreement is primarily for a business, commercial or
agricultural purpose and does not consist of or involve any credit offered or
extended to a consumer primarily for personal, family or household purposes, and
none of such loans or Borrower's Liabilities is subject to Regulation Z of the
Board of Governors of the Federal Reserve System.
F. The Borrower shall do and perform all further acts and deeds and shall
execute and deliver to the Bank all instruments, documents, assignments,
assurances or other writings that may be necessary or desirable to the Bank to
carry out the terms and intent of this agreement or effectuate the rights of the
Bank hereunder.
G. The Borrower releases the Bank from any and all causes of action,
claims or rights which the Borrower may now or hereafter have for, or which may
arise from, any loss or damage caused by or resulting from: (a) any failure of
the Bank to protect, enforce or collect in whole or in part any of the
Collateral; (b) the Bank's notification to any Obligor of the Bank's security
interest in the Accounts; (c) the Bank's directing any Obligor to pay any sums
owing to the Borrower directly to the Bank; and (d) any other act or omission to
act on the part of the Bank, its officers, agents or employees, except for gross
negligence or willful misconduct.
H. The Borrower agrees to indemnify and save the Bank, its officers,
directors, employees and agents, harmless of, from and against any liability,
loss, damage or expense (including attorneys' fees) to which the Bank or any of
such persons may become subject, arising from or based upon (a) any violation,
or claim of violation, by the Borrower of any laws, regulations or ordinances
relating to Hazardous Substances, or (b) any Hazardous Substances located or
disposed of on or released or transported from any property owned, leased or
operated by the Borrower, or any claim of any of the foregoing.
- 13 -
<PAGE>
I. TO INDUCE THE BANK TO ACCEPT THIS AGREEMENT, THE NOTES AND ANY OTHER
AGREEMENTS OR DOCUMENTS DELIVERED TO THE BANK IN CONNECTION HEREWITH, THE
BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO THE BANK'S SOLE AND ABSOLUTE
ELECTION, ALL LEGAL ACTIONS OR PROCEEDINGS IN ANY MANNER OR RESPECT ARISING OUT
OF OR RELATED TO THIS AGREEMENT, THE NOTES, ANY OTHER BORROWER'S LIABILITIES,
ANY AGREEMENTS OR DOCUMENTS DELIVERED TO THE BANK IN CONNECTION HEREWITH OR THE
COLLATERAL SHALL BE BROUGHT AND LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE
CITY AND STATE WHERE THE BANK'S PRINCIPAL PLACE OF BUSINESS IS LOCATED; AND THE
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE AND HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY SUCH LEGAL ACTION OR PROCEEDING.
J. If any provision of this Agreement or the application thereof to any
person or circumstance is held invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and the invalid or unenforceable
provision of this Agreement shall be severable in any such instance.
K. The Bank may furnish any information concerning the Borrower in the
possession of the Bank from time to time to additional lenders and participants
and prospective additional lenders and participants.
L. The Bank may assign its rights and delegate its obligations under this
Agreement and further may assign, or sell participation in, all or any part of
the Credit Facility, its commitments or any other interest herein or in the
Notes to an affiliate or to another person or entity regularly engaged in the
making or buying of commercial loans (including, without limitation, any fund,
bank, savings and loan association, insurance company or commercial finance
company).
M. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Borrower and the Bank, provided that this
Agreement may not be assigned by the Borrower without the prior written consent
which consent may not be unreasonably withheld by the Bank.
N. This Agreement shall be construed in accordance with the laws (without
regard to the conflicts of laws provisions) of the State of Illinois.
O. All notices or other communications hereunder shall be in writing,
shall be given either by hand delivery or by certified or registered mail
addressed to the Borrower or the Bank, as the case may be, at the addresses
indicated in the first paragraph of this Agreement, to the attention of the
person or persons indicated below the signatures to this Agreement, and shall be
deemed given when so delivered or delivery is refused by the addressee. The
Bank may, at its option, rely upon notice or other communications received from
the Borrower by facsimile (FAX) communication. Either party to this Agreement
may change the name or address to which notices shall be sent to it, by written
notice to the other party given in accordance with this Paragraph.
P. This Agreement may be amended from time to time by amendments duly
executed by the Borrower and the Bank; provided that any amendment hereto signed
by the Borrower shall be binding upon the Borrower.
Q. If this Agreement (including any counterpart hereof) is signed by more
than one Borrower, the liability of each Borrower shall be joint and several,
and each reference herein to the Borrower shall be deemed to refer to each such
Borrower. No release, discharge or modification of the obligations of, or the
Collateral provided by, any person liable under this Agreement shall affect the
obligations of any other person under this Agreement.
R. This Agreement includes (a) the Loan Supplements, if any, indicated by
checkmark on page 2 hereof and (b) the Riders (whether or not elsewhere referred
to herein), if any, which are indicated by checkmark below:
Indicate applicable Riders by checking corresponding boxes.
Appropriate officers of the Bank and the Borrower should also sign each
applicable Rider on such Rider.
[X] RIDER A ASSETS EXCLUDED FROM COLLATERAL
[X] RIDER B REQUEST FOR ADVANCE (ACCOUNTS REVOLVING LOAN)
[NO] RIDER C REQUEST FOR ADVANCE (INVENTORY REVOLVING LOAN)
[X] RIDER D MACHINERY AND EQUIPMENT
[NO] RIDER E PERMITTED ENCUMBRANCES
[NO] RIDER F FINANCIAL COVENANTS
ADDENDUM #1
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly signed this 20th day of November 1992.
Western Intermodal Services, Ltd.
--------------------------------------
(Borrower)
By:
-----------------------------------
Its: CFO
-------------------
Send notices to attention of:
Michael Kelly 935 W. 175th St. Homewood, IL 6
-----------------------------------------------------
Telephone: (708) 799-4990
--- --------
ACCEPTED:
LAKE SHORE NATIONAL BANK
- ----------------------------
(Bank)
By: John J. Prxxxx
-------------------------
Its: 2nd V.P.
Send notices to attention of:
Commercial Loan Department
-15-
<PAGE>
RIDER A
to
LOAN AND SECURITY AGREEMENT
ASSETS EXCLUDED FROM COLLATERAL
Describe any property or assets which are to be
excluded from the Collateral.
This Rider A constitutes a part of the Loan and Security Agreement dated as
of November 20, 1992 between Lake Shore National Bank and the undersigned
Borrower. Terms capitalized herein have the same meanings as in such Loan and
Security Agreement.
The following property and assets are excluded from the Collateral:
All Collateral as described in Article II A.6. not in transit, in
possession or control of or assigned to or owned or held by Lake
Shore National Bank.
Dated: November 20, 1992
----------------------
LAKE SHORE NATIONAL BANK Western Intermodal Services, Ltd.
----------------------------------
(Borrower)
By: By:
--------------------------- ---------------------------
Its: 2nd V.P. Its: CFO
---------------------- ----------------------
<PAGE>
RIDER B
to
LOAN AND SECURITY AGREEMENT
REQUEST FOR ADVANCE (ACCOUNTS REVOLVING LOAN)
Attach a copy of the Bank's current form of Accounts
Receivable Certificate and Loan Application.
This Rider B constitutes a part of the Loan and Security Agreement dated as
of November 20, 1992 between Lake Shore National Bank and the undersigned
Borrower. Terms capitalized herein have the same meanings as in such Loan and
Security Agreement.
Each request for an Accounts Revolving Loan shall be made by providing the
Bank with at least one Business Day's written notice on the attached certificate
and application.
Dated: November 20, 1992
----------------------
LAKE SHORE NATIONAL BANK Western Intermodal Services, Ltd.
----------------------------------
(Borrower)
By: By:
--------------------------- ---------------------------
Its: 2nd V.P. Its: CFO
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ACCOUNTS RECEIVABLE CERTIFICATE AND LOAN APPLICATION
- ----------------------------------------------------
(To be submitted with each new advance and Weekly / Monthly - Circle one) No:__________________________
Date:__________________________
To: [LOGO] LAKE SHORE BANK 605 N. Michigan Avenue
LAKE SHORE NATIONAL BANK Chicago, Illinois 60611
This report and the representations contained herein are made to induce the Bank
to continue to extend credit and to make loans to the Company under the
provisions of a loan and security agreement and promissory note, and any and all
other agreements executed by the Company and given to the Bank. The Company
hereby acknowledges, confirms, and agrees that the Bank has a security interest
in the Collateral described in the loan and security agreement and in any other
such agreements hereinabove described, the terms and conditions of which are
incorporated herein by reference thereto, as security for the payment of the
loans herein described, and also for any and all obligations of the Company to
the Bank of every kind and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE COLLATERAL
------------------------------
<S> <C> <C>
1. BEGINNING COLLATERAL BALANCE PER A/R CONTROL (Line 11 of last report). $__________________
ADDITIONS TO COLLATERAL:
2. NEW INVOICES (dated from ___________ to ___________ and numbered
from__________ to __________). $____________________
3. LESS: CREDIT MEMOS (dated from___________to ____________ and
numbered from _________ to ____________). ____________________
4. NET A/R DEBIT (Per Sales Journal). $____________________
$____________________
5. SUBTOTAL
DEDUCTIONS FROM COLLATERAL
6. ACTUAL CASH AND CHECKS (dated from __________ to __________). $____________________
7. ADD: DISCOUNTS AND ALLOWANCES
____________________
8. TOTAL A/R CREDIT (Per Cash Receipts Journal). $____________________
9. SUBTOTAL $____________________
10. ADJUSTMENTS TO COLLATERAL - DEBIT (CREDIT) (Per Other Journals). Include Journal ____________________
Entries, Field Auditor Adjustments to A/R, and Non-A/R Cash Items.
11. ENDING COLLATERAL BALANCE PER A/R CONTROL (Line 1 of next report). $____________________
12. LESS: RESERVE FOR INELIGIBLE ACCOUNTS (as set by Bank). ____________________
13. NET ELIGIBLE COLLATERAL $____________________
14. LOAN AVAILABILITY (Multiply Line 13 by ______%. Do not exceed $____________). $____________________
=================================================================================================================================
ACCOUNTS RECEIVABLE LOAN
------------------------
15. BEGINNING LOAN BALANCE (Line 19 of last report). $____________________
16. LOAN PAYMENTS (Total of all loan payments since last report). ____________________
17. SUBTOTAL - NEW LOAN BALANCE (If balance exceeds line 14, a payment is required). $____________________
18. ADD: ADDITIONAL LOAN REQUESTED ____________________
19. ENDING LOAN BALANCE (Should not exceed Line 14). $____________________
================================================================================================================================
</TABLE>
CERTIFICATION: The undersigned hereby represents and warrants that he is the
owner of the Company or the duly authorized officer or agent of the Company,
and, as such is duly authorized to execute this Report and Loan Application and
to make the agreements contained herein; and that he has full knowledge of the
statements, facts and figures set forth in this report and in this Certification
and that they are true in substance and in fact.
Company
-------------------------------------
- ------------------------------------ By
FOR BANK USE ONLY: -------------------------------------
- ------------------------------------ (Authorized Signature) (Title)
LINE AMOUNT $ ____________ Required Reserve_____________________
INCLUDES ____________ Effective Date_______________________
____________ Approved by:_________________________
Officer
____________
____________ -------------------------------------
____________ FIELD AUDITOR
ENDING A/R BALANCE ____________ ______________ ______________
Initial Date
TOTAL $ ____________ -------------------------------------
RATE OF ADVANCE ____________ Form C reviewed and approved by
- ------------------------------------ -------------------------------------
Note Teller Officer
<PAGE>
RIDER D
to
LOAN AND SECURITY AGREEMENT
DESCRIPTION AND LOCATION OF MACHINERY AND EQUIPMENT
---------------------------------------------------
Describe generally the Borrower's Machinery and Equipment;
if a Machinery and Equipment Term Loan is to be made, insert
or attach a Schedule containing a specific list of the
Machinery and Equipment, including a legal description of
any real estate to which it is or is to be attached.
This Rider D constitutes a part of the Loan and Security Agreement dated as
of November 20, 1992 between Lake Shore National Bank and the undersigned
Borrower. Terms capitalized herein have the same meanings as in such Loan and
Security Agreement.
1. All of the Borrower's Machinery and Equipment as described on
attachment-"A" and its location or locations are as follows:
935 W. 175th St., Homewood, IL
SEE ATTACHMENT A
2. If a Machinery and Equipment Term Loan is to be made, a legal
description of any real estate to which such Machinery and Equipment
is or is to be attached hereto.
Dated: November 20, 1992
-----------------------------
LAKE SHORE NATIONAL BANK Western Intermodal Services, Ltd.
------------------------------------
(Borrower)
By: /s/ By: /s/
-------------------------------- ---------------------------------
Its: 2nd V.P. Its: CFO
<PAGE>
Debtor: Secured Party:
Western Intermodal Services, Ltd. Lake Shore National Bank
935 W. 175th St. 605 N. Michigan Ave.
Homewood, IL 60430 Chicago, Illinois 60611
As agreed upon in Security Agreement dated November 20, 1992 by and between Lake
Shore National Bank (secured party) and Western Intermodal Services, Ltd.
(debtor), 935 W. 175th St., Homewood, IL 60430.
Quantity Serial # Description
IBM Equipment 1 9406 E45 System Unit
8MB STD Storage 1 2601 Magnetic Tape Dr.
9346 Contr.
1 6110 Magnetic Tape
Storage Contr.
2 6112 Magnetic Tape
Storage Contr.
1 6221 ECSS Six-Line Expansion
1 6232 Eight Line
Comm Subsystem
1 8110 Magnetic Tape
Storage Contr. 6110
1 8505 I/O Card Unit Conversion
1 9081 Locking Power Cord
1 9865 EIA 232/V.24 one line
50E
1 2621 Removal Media Device
Attch
1 5728 RGI AS400 RPG400
1 5728 PW1 AS400 Appl Dev Tools
1 5728 QUI AS400 Query
1 5728 PC1 AS400 PC Support
1 5728 MGI Sys Migration Aid
1 5728 PTI Performance Tools
1 5756 070 Discover Education
and any other related software
Western Intermodal Services, Ltd.
- ---------------------------------
By:
-----------------------------
<PAGE>
American National Bank
and Trust Company of Chicago
PROMISSORY NOTE (SECURED)
$3,000,000.00 Chicago, Illinois May 31, 1996
Due May 31, 1997
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of THREE MILLION AND 00/100 DOLLARS
($3,000,000.00), or such lesser principal sum as may then be owed by Borrower to
Bank hereunder, which sum shall be due and payable on May 31, 1997.
Borrower's obligations and liabilities to Bank under this Note, and all
other obligations and liabilities of Borrower to Bank (including without
limitation all debts, claims and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, including those evidenced in rate
hedging agreements designed to protect the Borrower from the fluctuation of
interest rates, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under this Note, any agreement, instrument or document
heretofore, now or from time to time hereafter executed and delivered to Bank by
or on behalf of Borrower, or by oral agreement or operation of law or otherwise
shall be defined and referred to herein as "Borrower's Liabilities."
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid, computed as follows: at
a daily rate equal to the daily rate equivalent of 0.0% per annum (computed on
the basis of a 360-day year and actual days elapsed) in excess of the rate of
interest announced or published publicly from time to time by Bank as its prime
or base rate of interest (the "Base Rate"); provided, however, that in the event
that any of Borrower's Liabilities are not paid when due, the unpaid amount of
Borrower's Liabilities shall bear interest after the due date until paid at a
rate equal to the sum of the rate that would otherwise be in effect plus 3%.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day of
each month, and at maturity, commencing with the last day of June, 1996, or as
billed by Bank to Borrower, at Bank's principal place of business, or at such
other place as Bank may designate from time to time hereafter. After maturity,
accrued interest on all of Borrower's Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
To secure the prompt payment to Bank of Borrower's Liabilities and the
prompt, full and faithful performance by Borrower of all of the provisions to be
kept, observed or performed by Borrower under this Note and/or any other
agreement, instrument or document heretofore, now and/or from time to time
hereafter delivered by or on behalf of Borrower to Bank, Borrower grants to Bank
a security interest in and to the following property: (a) all of Borrower's now
existing and/or owned and hereafter arising or acquired monies, reserves,
deposits, deposit accounts and interest or dividends thereon, securities, cash,
cash equivalents and other property now or at any time or times hereafter in the
possession or under the control of Bank or its bailee for any purpose: (b)
Certain business assets of Western Intermodal Services, Ltd., an Illinois
corporation, pursuant to Amended and Restated Loan and Security Agreement dated
November 20, 1992 as amended from time to time by and between Borrower and Bank;
and (c) all substitutions, renewals, improvements, accessions or additions
thereto, replacements, offspring, rents, issues, profits, returns, products and
proceeds thereof, including without limitation proceeds of insurance policies
insuring the foregoing collateral (all of the foregoing property is referred to
herein individually and collectively as "Collateral").
1
<PAGE>
Regardless of the adequacy of the Collateral, any deposits or other sums at
any time credited by or payable or due from Bank to Borrower, or any monies,
cash, cash equivalents, securities, instruments, documents or other assets of
Borrower in the possession or control of Bank or its bailee for any purpose, may
be reduced to cash and applied by Bank to or setoff by Bank against Borrower's
Liabilities.
Borrower agrees to deliver to Bank immediately upon Bank's demand, such
additional collateral as Bank may request from time to time should the value of
the Collateral (in Bank's sole and exclusive opinion) materially decline,
deteriorate, depreciate or become impaired, or should Bank deem itself
materially insecure for any reason whatsoever, including without limitation a
change in the financial condition of Borrower or any party liable with respect
to Borrower's Liabilities, and does hereby grant to Bank a continuing security
interest in such other collateral, which shall be deemed to be a part of the
Collateral. Borrower shall execute and deliver to Bank, at any time upon Bank's
demand, all agreements, instruments, documents and other written matter that
Bank may request, in form and substance acceptable to Bank, to perfect and
maintain perfected Bank's security interest in the Collateral or any additional
collateral. Borrower agrees that a carbon, photographic or photostatic copy, or
other reproduction, of this Note or of any financing statement, shall be
sufficient as a financing statement.
In the Event of Default (as defined hereinbelow) Bank may take, and
Borrower hereby waives notice of, any action from time to time that Bank may
deem necessary or appropriate to maintain or protect the Collateral, and Bank's
security interest therein, and in particular Bank may at any time (i) transfer
the whole or any part of the Collateral into the name of the Bank or its
nominee, (ii) collect any amounts due on Collateral directly from persons
obligated thereon, (iii) take control of any proceeds and products of
Collateral, and/or (iv) sue or make any compromise or settlement with respect to
any Collateral. Borrower hereby releases Bank from any and all causes of action
or claims which Borrower may now or hereafter have for any asserted loss or
damage to Borrower claimed to be caused by or arising from: (a) Bank's taking
any action permitted by this paragraph; (b) any failure of Bank to protect,
enforce or collect in whole or in part any of the Collateral; and/or (c) any
other act or omission to act on the part of Bank, its officers, agents or
employees, except for willful misconduct.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of the Borrower's Liabilities when due and payable or declared
due and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's
Liabilities fails or neglects to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Note; (c)
occurrence of a default or event of default under any agreement, instrument or
document heretofore, now or at any time hereafter delivered by or on behalf of
Borrower to Bank; (d) occurrence of a default or an event of default under any
agreement, instrument or document heretofore, now or at any time hereafter
delivered to Bank by any guarantor of Borrower's Liabilities or by any person or
entity which has granted to Bank a security interest or lien in and to some or
all of such person's or entity's real or personal property to secure the payment
of Borrower's Liabilities; (e) if the Collateral or any other of Borrower's
assets are attached, seized, subjected to a writ, or are levied upon or become
subject to any lien or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors; (f) if a notice of lien,
levy or assessment is filed of record or given to Borrower with respect to all
or any of Borrower's assets by any federal, state or local department or agency;
(g) if Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
become due, if a petition under Title 11 of the United States Code or any
similar law or regulation is filed by or against Borrower or any such guarantor,
if Borrower or any such guarantor shall make an assignment for the benefit of
creditors, if any case or proceeding is filed by or against Borrower or any such
guarantor for its dissolution or liquidation, or if Borrower or any such
guarantor is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; (h) the death or
incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets or the
Collateral; (i) the revocation, termination or cancellation of any guaranty of
Borrower's Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k)
if Borrower or any guarantor of Borrower's Liabilities is in default in the
payment of any obligations, indebtedness or other liabilities to any third party
and such default is declared and is not cured within the time, if any, specified
therefor in any
2
<PAGE>
agreement governing the same; (1) if any material statement, report or
certificate made or delivered by Borrower, any of Borrower's partners, officers,
employees or agents or any guarantor of Borrower's Liabilities is not true and
correct; or (m) if Bank is insecure for a material reason.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower: (i) all of Borrower's
Liabilities shall be immediately due and payable; (ii) Bank may exercise any one
or more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code of the relevant jurisdiction and any other applicable law upon
default by a debtor; (iii) Bank may enter, with or without process of law and
without breach of the peace, any premises where the Collateral is or may be
located, and may seize or remove the Collateral from said premises and/or remain
upon said premises and use the same for the purpose of collecting, preparing and
disposing of the Collateral; and/or (iv) Bank may sell or otherwise dispose of
the Collateral at public or private sale for cash or credit, provided, however,
that Borrower shall be credited with the net proceeds of any such sale only when
the same are actually received by Bank.
Upon an Event of Default, Borrower, immediately upon demand by Bank, shall
assemble the Collateral and make it available to Bank at a place or places to be
designated by Bank which is reasonably convenient to Bank and Borrower.
All of Bank's rights and remedies under this Note are cumulative and non-
exclusive. The acceptance by Bank of any partial payment made hereunder after
the time when any of Borrower's Liabilities become due and payable will not
establish a custom or waive any rights of Bank to enforce prompt payment hereof.
Bank's failure to require strict performance by Borrower of any provision of
this Note shall not waive, affect or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Any waiver of an Event of
Default hereunder shall not suspend, waive or affect any other Event of Default
hereunder. Borrower and every endorser waive presentment, demand and protest and
notice of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note, and hereby ratify and
confirm whatever Bank may do in this regard. Borrower further waives any and all
notice or demand to which Borrower might be entitled with respect to this Note
by virtue of any applicable statute or law (to the extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any and all costs,
fees and expenses (including reasonable attorneys' fees, costs and expenses)
incurred by Bank (i) in enforcing any of Bank's rights hereunder, and (ii) in
representing Bank in any litigation, contest, suit or dispute, or to commence,
defend or intervene or to take any action with respect to any litigation,
contest, suit or dispute (whether instituted by Bank, Borrower or any other
person) in any way relating to this Note, Borrower's Liabilities or the
Collateral, and to the extent not paid the same shall become part of Borrower's
Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank and to
have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Advances under this Note may be made by Bank upon oral or written request
of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which Bank
in good faith believes to be made by an Authorized Person, regardless of whether
such requests are in fact made by an Authorized Person. Any such advances shall
be conclusively presumed to have been made by Bank to or for the benefit of
Borrower. Borrower does hereby irrevocably confirm, ratify and approve all such
advances by Bank and agrees to indemnify Bank against any and all losses and
expenses (including reasonable attorneys' fees) and shall hold Bank harmless
with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
3
<PAGE>
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR
(ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES
THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
935 West 175th Street WESTERN INTERMODAL SERVICES, LTD.,
Homewood, Illinois 60430 an Illinois corporation
By: /s/ Michael A. Kelly
------------------------------
Its: CFO
----------------------------
36-3026724
- ----------
FEIN
4
<PAGE>
Exhibit 10.7
American National Bank
and Trust Company of Chicago
================================================================================
GUARANTY
================================================================================
WHEREAS, Area Transportation Company, a corporation organized under the laws of
Illinois; with principal offices located at 935 West 175th Street, Homewood,
Illinois 60430 (hereafter referred to as the "Borrower"), desires or may desire
at some time and/or from time to time to obtain financial accommodation from
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (hereafter referred to as
the "Bank"); and
WHEREAS, the undersigned guarantor is either a corporation or company,
desires to induce the Bank, at its option, at any time, or from time to time, to
extend financial accommodation to the Borrower, and represents to the Bank that
it is organized under the laws of the state of DELAWARE, and that the Borrower,
(a) is engaged is business as a corporate affiliate or subsidiary of the
undersigned, and/or (b) is engaged in selling, marketing, using or otherwise
dealing in goods supplied to it by the undersigned, or supplies to the
undersigned goods sold, marketed, used or otherwise disposed of by the
undersigned, and/or (c) expects to derive advantage by assisting the Borrower in
procuring financial assistance from the Bank; or the undersigned is a(n)
individual(s) or partnership desiring to induce the Bank at its option, at any
time, or from time to time, to extend financial accommodation to the Borrower
(said undersigned corporation, company, individual(s) or partnership, as the
case may be, is severally hereinafter referred to as the "undersigned").
1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of advances, credit
or other financial accommodation heretofore, now or hereafter at any time
extended to the Borrower by the Bank, the undersigned (jointly and severally if
there is more than one guarantor) hereby unconditionally guarantee(s) the full
and prompt payment to the Bank at maturity, whether by acceleration or
otherwise, and at all times thereafter of any and all "Indebtedness".
"Indebtedness" shall mean obligations and liabilities of every kind and nature
of the Borrower to the Bank (including all indebtedness, obligations and
liabilities of partnerships, created or arising while the Borrower is or was a
member thereof), including principal and interest, however evidenced, whether
now existing or hereafter created or arising, directly or indirectly, primary or
secondary, absolute or contingent, due or to become due, or joint or several,
and however owned, held or acquired, whether through discount, overdraft,
returned checks, purchase, direct loan or as collateral, or otherwise.
The undersigned further unconditionally guarantees the prompt, full and
faithful performance and discharge by the Borrower of all of the terms,
conditions, agreements, representations and warranties on the part of the
Borrower contained in any agreement, or in any modification or addenda thereto
or substitution thereof in connection with any advance, credit or financial
accommodation afforded by the Bank to the Borrower.
The undersigned further agree(s) to pay all expenses, including, without
limitation, legal fees and court costs paid or incurred by the Bank in
endeavoring to collect the Indebtedness, or any part thereof, in enforcing this
guaranty, arising out of any post-judgment proceedings, or in defending any suit
based on any act or omission of the Bank with respect to the Indebtedness,
collateral, or this guaranty or in connection with any Recovery Claim
hereinbelow defined (hereafter, collectively referred to as "Expenses").
2. The term "Guaranteed Debt," as used herein, shall mean the amount listed
below plus all Expenses and all interest on the Indebtedness.
Guaranteed Debt is limited to Ten Million Six Hundred Eighty Seven Thousand Four
Hundred Fifteen and 88/100 Dollars ($10,687,415.88), plus all Expenses and all
interest on the Indebtedness.
3. In case of the death, incompetence, dissolution, liquidation or insolvency
(however evidenced) of the Borrower, a principal of the Borrower, or any
guarantor of the Indebtedness or in case any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution, liquidation or receivership proceeding, is instituted by or against
the Borrower, or any of the undersigned or any other guarantor of the
Indebtedness or the inability of the Borrower or any of the undersigned to pay
debts as they
<PAGE>
mature, or in case of the assignment by the Borrower or any of the undersigned
for the benefit of creditors, then upon the occurrence of any such event, all
Guaranteed Debt then existing shall at the option of the Bank, without notice to
anyone, immediately become due or accrued and be payable from the undersigned
(or any thereof if more than one guarantor).
4. All payments received from whatever source shall be applied toward the
payment of the Indebtedness in such order of application as the Bank may in its
sole discretion, from time to time elect, and this determination shall be
conclusive upon the undersigned.
5. This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect with respect
to each guarantor until written notice shall have been actually received by the
Bank by first class or certified mail, of its discontinuance as to such
guarantor, or of the death or dissolution of such guarantor, and also until all
Guaranteed Debt created or existing before receipt of such notice shall have
been fully paid. In case of any such discontinuance, or death or dissolution of
any guarantor or guarantors and notice thereof to the Bank, this guaranty shall
nevertheless continue and remain in force against the other guarantor or
guarantors until discontinued as to such other guarantor or guarantors as herein
provided. No compromise, settlement, release or discharge of, or indulgence with
respect to, or failure, negligence or omission to enforce or exercise any right
against, any one or more guarantors or the fact that at any time or from time to
time, all the Guaranteed Debt may have been paid in full, shall release or
discharge the undersigned. In the event of the death of the undersigned, this
guaranty shall continue as to all Indebtedness theretofore incurred by the
Borrower even though said Indebtedness is renewed or the time of maturity of
Indebtedness is extended without the consent of the executors or administrators
of the undersigned. This guaranty shall be valid, irrespective of the validity,
regularity or enforceability of any instrument, writing or agreement relating to
any Indebtedness, whether or not such Indebtedness is due or to become due
before or after any bankruptcy or insolvency proceeding involving the Borrower.
6. The liability hereunder shall in no way be affected or impaired by any of
the following, any or all of which may be done or omitted by the Bank in its
sole discretion without notice to anyone and irrespective of whether the
Guaranteed Debt shall be increased or decreased thereby (and said Bank is hereby
expressly authorized in its sole discretion to make from time to time, without
notice to anyone): any sale, pledge, surrender, compromise, settlement,
exchange, release, renewal, extension, modification, election with respect to
any collateral under Section 1111 or any other provision or section of the
Bankruptcy Code now existing or hereinafter amended; or other disposition of or
with respect to any of said Guaranteed Debt or any security or collateral
therefor, whether or not such disposition is commercially reasonable or
accomplished in a commercially reasonable manner; and such liability shall in no
way be affected or impaired by any acceptance by the Bank of any security for,
or other guarantors or obligors of, any of the Guaranteed Debt, or by any
forbearance or indulgence by the Bank in the collection of, or any failure,
negligence or omission on its part to realize upon any thereof, or to enforce
any claims against any person or persons primarily or secondarily liable
thereon, or upon any collateral or security therefor or to enforce any lien upon
or right or appropriation of any moneys, credits or property of the Borrower in
the possession and control of the Bank, or by an application of any payments or
credits on the Guaranteed Debt. Any act or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever shall not in any
manner affect or impair this guaranty nor the liability thereunder. The
undersigned hereby consents to all acts and omissions of the Bank set forth
herein.
7. In order to hold the undersigned liable hereunder and to enforce this
guaranty, there shall be no obligation on the part of the Bank at any time to
resort for payment to the Borrower, or to any other guarantor, or any person,
firm or corporation liable for the Guaranteed Debt, or to any collateral,
security, property, liens or other rights or remedies of the Bank in respect to
the Guaranteed Debt or any part thereof, all of which is hereby expressly waived
by the undersigned.
8. All diligence in collection, and any presentment for payment, demand,
protest and/or notice, as to any and everyone, of protest, dishonor, default or
nonpayment, and notice of the creation and existence of any and all of the
Guaranteed Debt, and of any security therefor, and of the acceptance of this
guaranty, or extensions of credit or indulgences hereunder or of any other
matters or things whatsoever relating hereto are expressly waived.
9. The granting of additional credit from time to time by the Bank to the
Borrower in excess of the amount to which the right of recovery under this
guaranty is limited or in excess of the amount extended to the Borrower at
<PAGE>
the time this guaranty is executed by the undersigned, without notice to the
undersigned, is hereby expressly authorized and shall in no way affect or impair
this guaranty.
10. To secure payment of the Guaranteed Debt, the undersigned grants to Bank a
security interest in all property of the undersigned, including any and all
cash, negotiable instruments, documents of title, chattel paper, securities
certificates of deposit, deposit accounts, other cash equivalents and other
assets delivered currently herewith or now or at any time hereafter in transit
to, or in the possession or control of the Bank, or any agent or bailee of Bank,
and all proceeds of all such property. The undersigned agrees that the Bank
shall have the rights and remedies of a secured party under the Uniform
Commercial Code of Illinois with respect to all of the aforesaid property,
including, without limitation thereof, the right to sell or otherwise dispose of
any or all of such property. THE UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM
OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION
BY THE BANK IN ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER
MAY HAVE, AGAINST THE BORROWER OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY
MANNER. As further security, any and all debts and liabilities now or hereafter
arising and owing to any of the undersigned by the Borrower, or any other party
liable to the Bank are hereby subordinated to the Bank's claims and are hereby
assigned to the Bank. The undersigned ratifies and confirms whatever the Bank
may do pursuant to the terms hereof and with respect to any collateral for the
Guaranteed Debt, and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law. The Bank may, without notice to anyone,
apply or set off any balances, credits, deposits, accounts, moneys or other
indebtedness at any time credited by or due from the Bank to any of the
undersigned against the Guaranteed Debt. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such disposition.
11. Should a claim ("Recovery Claim") be made upon the Bank at any time for
recovery of any amount received by the Bank in payment of the Guaranteed Debt
(whether received from the Borrower, the undersigned pursuant hereto, or
otherwise) and should the Bank repay all or part of said amount by reason of (i)
any judgment, decree, or order of any court or administrative body having
jurisdiction over the Bank or any of its property; or (ii) any settlement or
compromise of any such Recovery Claim effected by the Bank with the claimant
(including the Borrower), the undersigned shall remain jointly and severally
liable to the Bank for the amount so repaid to the same extent as if such amount
had never originally been received by the Bank, notwithstanding any termination
hereof or the return of this document to any of the undersigned or the
cancellation of any note, this guaranty or other instrument evidencing any of
the Indebtedness.
12. In the event the Bank shall sell, assign or transfer the Indebtedness or
Guaranteed Debt, or any part thereof, or grant participations therein, each and
every immediate or remote successive assignee, transferee, holder of or
participant therein, of all or any part of the Indebtedness or Guaranteed Debt
shall have the right to enforce this guaranty by suit or otherwise for the
benefit such assignee, transferee, holder or participant, as fully as if such
assigned transferee, holder or participant were herein by name specifically
given such rights, powers and benefits; but the Bank shall have an unimpaired,
prior and superior right to enforce this guaranty for its benefit as to so much
of the Indebtedness or Guaranteed Debt as it has not been sold, assigned or
transferred.
13. No release or discharge of any one or more of the undersigned (if there is
more than one guarantor), or of any other person, whether primarily or
secondarily liable for and obligated with respect to the Guaranteed Debt, or the
institution of bankruptcy, receivership, insolvency, reorganization, dissolution
or liquidation proceedings by or against any such guarantor or person, or the
entry of any restraining or other order in any such proceeding, shall release or
discharge the undersigned or any other guarantor of the Guaranteed Debt, or any
other person, firm or corporation liable to the Bank for the Guaranteed Debt,
unless and until all of the Guaranteed Debt shall have been fully paid and this
guaranty stamped "Cancelled" and returned to the undersigned.
14. No delay on the part of the Bank in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the Bank
of any right or remedy shall preclude any other or further exercise thereof, or
the exercise of any other right or remedy. No action of the Bank permitted
hereunder shall in any way affect or impair the rights of the Bank and the
obligation of the undersigned under this guaranty.
<PAGE>
15. To the extent that the Borrower or any of the undersigned is a corporation,
limited liability company or partnership, all references herein to the Borrower
and to the undersigned, respectively, shall be deemed to include any successor
or successors, whether immediate or remote, to such corporation, limited
liability company or partnership.
16. This guaranty has been delivered at Chicago, Illinois, and shall be
construed according to the laws of the State of Illinois, in which state it
shall be performed by the undersigned. All actions arising directly or
indirectly as a result or in consequence of this guaranty shall, in the sole and
absolute discretion of the Bank, be instituted and litigated only in courts
having situs in the City of Chicago, Illinois, and the undersigned hereby
consents to the jurisdiction of any State or Federal Court located and having
its situs in said city and waives any right to transfer or change the venue of
any litigation.
17. Wherever possible, each provision of this guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
18. It is agreed that the undersigned's liability hereunder is several and is
independent of any other guaranties at any time in effect with respect to all or
any part of the Indebtedness and that the undersigned's liability hereunder may
be enforced regardless of the existence of any such guaranties.
19. This guaranty, and each and every part hereof, shall be binding upon the
undersigned (jointly and severally if there is more than one guarantor) and upon
the heirs, legal representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and assigns.
20. If the undersigned guarantor is a corporation, then and in such event, the
undersigned guarantor expressly represents and warrants unto the Bank that the
execution and delivery of this guaranty has been duly authorized by resolutions
heretofore duly adopted by its Board of Directors in accordance with law and its
by-laws, that said resolutions have not been amended nor rescinded, are in full
force and effect, that the officers of the undersigned executing and delivering
this guaranty, for and on behalf of the undersigned, are duly authorized and
empowered so to act. The Bank in accepting this guaranty is expressly relying
upon the aforesaid representations and warranties.
21. This guaranty constitutes the entire agreement between the parties relating
to the subject matter hereof and is the final and complete expression of their
intent. No prior or contemporaneous negotiations, promises, agreements,
covenants or representations of any kind or nature, whether made orally or in
writing, have been made by the parties, or any of them, in negotiations leading
to this guaranty or relating to the subject matter hereof, which are not
expressly contained herein, or which have not become merged and finally
integrated into this guaranty; it being the intention of the parties hereto that
in the event of any subsequent litigation, controversy or dispute concerning the
terms and provisions of this guaranty, no party shall be permitted to offer to
introduce oral or extrinsic evidence concerning the terms and conditions hereof
that are not included or referred to herein and not reflected in writing. This
guaranty can only be changed, modified, waived or discharged if consented to in
a writing duly signed and delivered on behalf of the Bank. No conditions exist
to the legal effectiveness of this guaranty.
<PAGE>
22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS GUARANTY OR AN AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN
CONNECTION WITH OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned at Homewood, IL, effective this 26th day of
June, 1996.
935 W. 75th Street ALTERNATIVE DISTRIBUTION SYSTEMS, INC.
- ------------------------ a(n) Delaware corporation
Homewood, IL 60430
- ------------------------ By: /s/
Address ---------------------------------
Its: CFO
--------------------------------
<PAGE>
[LOGO] EXHIBIT 10.8
American National Bank
and Trust Company of Chicago
GUARANTY
WHEREAS, Western Intermodal Services, Ltd., a corporation organized under the
laws of Illinois; with principal offices located at 935 West 175th Street,
Homewood, Illinois 60430 (hereafter referred to as the "Borrower"), desires or
may desire at some time and/or from time to time to obtain financial
accommodation from AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
(hereafter referred to as the "Bank"); and
WHEREAS, the undersigned guarantor is either a corporation or company,
desiring to induce the Bank, at its option, at any time, or from time to time,
to extend financial accommodation to the Borrower, and represents to the Bank
that it is organized under the laws of the state of Delaware, and that the
Borrower (a) is engaged in business as a corporate affiliate or subsidiary of
the undersigned, and/or (b) is engaged in selling, marketing, using or otherwise
dealing in goods supplied to it by the undersigned, or supplies to the
undersigned goods sold, marketed, used or otherwise disposed of by the
undersigned, and/or (c) expects to derive advantage by assisting the Borrower in
procuring financial assistance from the Bank; or the undersigned is a(n)
individual(s) or partnership desiring to induce the Bank at its option, at any
time, or from time to time, to extend financial accommodation to the Borrower
(said undersigned corporation, company, individual(s) or partnership, as the
case may be, is severally hereinafter referred to as the "undersigned").
1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of advances, credit
or other financial accommodation heretofore, now or hereafter at any time
extended to the Borrower by the Bank, the undersigned (jointly and severally if
there is more than one guarantor) hereby unconditionally guarantee(s) the full
and prompt payment to the Bank at maturity, whether by acceleration or
otherwise, and at all times thereafter of any and all "Indebtedness".
"Indebtedness" shall mean obligations and liabilities of every kind and nature
of the Borrower to the Bank (including all indebtedness, obligations and
liabilities of partnerships, created or arising while the Borrower is or was a
member thereof), including principal and interest, however evidenced, whether
now existing or hereafter created or arising, directly or indirectly, primary or
secondary, absolute or contingent, due or to become due, or joint or several,
and however owned, held or acquired, whether through discount, overdraft,
returned checks, purchase, direct loan or as collateral, or otherwise.
The undersigned further unconditionally guarantees the prompt, full and
faithful performance and discharge by the Borrower of all of the terms,
conditions, agreements, representations and warranties on the part of the
Borrower contained in any agreement, or in any modification or addenda thereto
or substitution thereof in connection with any advance, credit or financial
accommodation afforded by the Bank to the Borrower.
The undersigned further agree(s) to pay all expenses, including, without
limitation, legal fees and court costs paid or incurred by the Bank in
endeavoring to collect the Indebtedness, or any part thereof, in enforcing this
guaranty, arising out of any post-judgment proceedings, or in defending any suit
based on any act or omission of the Bank with respect to the Indebtedness,
collateral, or this guaranty or in connection with any Recovery Claim
hereinbelow defined (hereafter, collectively referred to as "Expenses").
2. The term "Guaranteed Debt," as used herein, shall mean the amount listed
below plus all Expenses and all interest on the Indebtedness. Guaranteed Debt is
limited to THREE MILLION AND 00/100 DOLLARS ($3,000,000.00), plus all Expenses
and all interest on the Indebtedness.
3. In case of the death, incompetence, dissolution, liquidation or insolvency
(however evidenced) of the Borrower, a principal of the Borrower, or any
guarantor of the Indebtedness or in case any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution, liquidation or receivership proceeding, is instituted by or against
the Borrower, or any of the undersigned or any other guarantor of the
Indebtedness or the inability of the Borrower or any of the undersigned to pay
debts as they mature, or in case of the assignment by the Borrower or any of the
undersigned for the benefit of creditors, then upon the occurrence of any such
event, all Guaranteed Debt then existing shall at the option of the Bank,
without
<PAGE>
notice to anyone, immediately become due or accrued and be payable from the
undersigned (or any thereof if more than one guarantor).
4. All payments received from whatever source shall be applied toward the
payment of the Indebtedness in such order of application as the Bank may in its
sole discretion, from time to time elect, and this determination shall be
conclusive upon the undersigned.
5. This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect with respect
to each guarantor until written notice shall have been actually received by
the Bank by first class or certified mail, of its discontinuance as to such
guarantor, or of the death or dissolution of such guarantor, and also until all
Guaranteed Debt created or existing before receipt of such notice shall have
been fully paid. In case of any such discontinuance, or death or dissolution of
any guarantor or guarantors and notice thereof to the Bank, this guaranty shall
nevertheless continue and remain in full force against the other guarantor or
guarantors until discontinued as to such other guarantor or guarantors as herein
provided. No compromise, settlement, release or discharge of, or indulgence with
respect to, or failure, negligence or omission to enforce or exercise any right
against, any one or more guarantors or the fact that at any time or from time to
time, all the Guaranteed Debt may have been paid in full, shall release or
discharge the undersigned. In the event of the death of the undersigned, this
guaranty shall continue as to all Indebtedness theretofore incurred by the
Borrower even though said Indebtedness is renewed or the time of maturity of
Indebtedness is extended without the consent of the executors or administrators
of the undersigned. This guaranty shall be valid, irrespective of the validity,
regularity or enforceability of any instrument, writing or agreement relating to
any Indebtedness, whether or not such Indebtedness is due or to become due
before or after any bankruptcy or insolvency proceeding involving the Borrower.
6. The liability hereunder shall in no way be affected or impaired by any of
the following, any or all of which may be done or omitted by the Bank in its
sole discretion without notice to anyone and irrespective of whether the
Guaranteed Debt shall be increased or decreased thereby (and said Bank is hereby
expressly authorized in its sole discretion to make from time to time, without
notice to anyone): any sale, pledge, surrender, compromise, settlement,
exchange, release, renewal, extension, modification, election with respect to
any collateral under Section 1111 or any other provision or section of the
Bankruptcy Code now existing or hereinafter amended; or other disposition of or
with respect to any of said Guaranteed Debt or any security or collateral
therefor, whether or not such disposition is commercially reasonable or
accomplished in a commercially reasonable manner; and such liability shall in no
way be affected or impaired by any acceptance by the Bank of any security for,
or other guarantors or obligors of, any of the Guaranteed Debt, or by any
forbearance or indulgence by the Bank in the collection of, or any failure,
negligence or omission on its part to realize upon any thereof, or to enforce
any claims against any person or persons primarily or secondarily liable
thereon, or upon any collateral or security therefor or to enforce any lien upon
or right of appropriation of any moneys, credits or property of the Borrower in
the possession and control of the Bank, or by an application of any payments or
credits on the Guaranteed Debt. Any act or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever shall not in any
manner affect or impair this guaranty nor the liability thereunder. The
undersigned hereby consents to all acts and omissions of the Bank set forth
herein.
7. In order to hold the undersigned liable hereunder and to enforce this
guaranty, there shall be no obligation on the part of the Bank at any time to
resort for payment to the Borrower, or to any other guarantor, or any person,
firm or corporation liable for the Guaranteed Debt, or to any collateral,
security, property, liens or other rights or remedies of the Bank in respect to
the Guaranteed Debt or any part thereof, all of which is hereby expressly waived
by the undersigned.
8. All diligence in collection, and any presentment for payment, demand,
protest and/or notice, as to any and everyone, of protest, dishonor, default or
nonpayment, and notice of the creation and existence of any and all of the
Guaranteed Debt, and of any security therefor, and of the acceptance of this
guaranty, or extensions of credit or indulgences hereunder or of any other
matters or things whatsoever relating hereto are expressly waived.
9. The granting of additional credit from time to time by the Bank to the
Borrower in excess of the amount to which the right of recovery under this
guaranty is limited or in excess of the amount extended to the Borrower at the
time this guaranty is executed by the undersigned, without notice to the
undersigned, is hereby expressly authorized and shall in no way affect or impair
this guaranty.
<PAGE>
10. To secure payment of the Guaranteed Debt, the undersigned grants to Bank a
security interest in all property of the undersigned, including any and all
cash, negotiable instruments, documents of title, chattel paper, securities,
certificates of deposit, deposit accounts, other cash equivalents and other
assets delivered currently herewith or now or at any time hereafter in transit
to, or in the possession or control of the Bank, or any agent or bailee of Bank,
and all proceeds of all such property. The undersigned agrees that the Bank
shall have the rights and remedies of a secured party under the Uniform
Commercial Code of Illinois with respect to all of the aforesaid property,
including, without limitation thereof, the right to sell or otherwise dispose of
any or all of such property. THE UNDERSIGNED WAIVES EVERY DEFENSE, COUNTERCLAIM
OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION
BY THE BANK IN ENFORCING THIS GUARANTY, INCLUDING, WITHOUT LIMITATION, EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER
MAY HAVE, AGAINST THE BORROWER OR ANY OTHER PARTY LIABLE TO THE BANK IN ANY
MANNER. As further security, any and all debts and liabilities now or hereafter
arising and owing to any of the undersigned by the Borrower, or any other party
liable to the Bank are hereby subordinated to the Bank's claims and are hereby
assigned to the Bank. The undersigned ratifies and confirms whatever the Bank
may do pursuant to the terms hereof and with respect to any collateral for the
Guaranteed Debt, and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law. The Bank may, without notice to anyone,
apply or set off any balances, credits, deposits, accounts, moneys or other
indebtedness at any time credited by or due from the Bank to any of the
undersigned against the Guaranteed Debt. Any notification of intended
disposition of any property required by law shall be deemed reasonable and
properly given if given at least five (5) calendar days before such disposition.
11. Should a claim ("Recovery Claim") be made upon the Bank at any time for
recovery of any amount received by the Bank in payment of the Guaranteed Debt
(whether received from the Borrower, the undersigned pursuant hereto, or
otherwise) and should the Bank repay all or part of said amount by reason of (i)
any judgment, decree, or order of any court or administrative body having
jurisdiction over the Bank or any of its property; or (ii) any settlement or
compromise of any such Recovery Claim effected by the Bank with the claimant
(including the Borrower), the undersigned shall remain jointly and severally
liable to the Bank for the amount so repaid to the same extent as if such amount
had never originally been received by the Bank, notwithstanding any termination
hereof or the return of this document to any of the undersigned or the
cancellation of any note, this guaranty or other instrument evidencing any of
the Indebtedness.
12. In the event the Bank shall sell, assign or transfer the Indebtedness or
Guaranteed Debt, or any part thereof, or grant participations therein, each and
every immediate or remote successive assignee, transferee, holder of or
participant therein, of all or any part of the Indebtedness or Guaranteed Debt
shall have the right to enforce this guaranty by suit or otherwise for the
benefit of such assignee, transferee, holder or participant, as fully as if such
assigned transferee, holder or participant were herein by name specifically
given such rights, powers and benefits; but the Bank shall have an unimpaired,
prior and superior right to enforce this guaranty for its benefit as to so much
of the Indebtedness or Guaranteed Debt as it has not been sold, assigned or
transferred.
13. No release or discharge of any one or more of the undersigned (if there is
more than one guarantor), or of any other person, whether primarily or
secondarily liable for and obligated with respect to the Guaranteed Debt, or the
institution of bankruptcy, receivership, insolvency, reorganization, dissolution
or liquidation proceedings by or against any such guarantor or person, or the
entry of any restraining or other order in any such proceeding, shall release or
discharge the undersigned or any other guarantor of the Guaranteed Debt, or any
other person, firm or corporation liable to the Bank for the Guaranteed Debt,
unless and until all of the Guaranteed Debt shall have been fully paid and this
guaranty stamped "Cancelled" and returned to the undersigned.
14. No delay on the part of the Bank in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by the Bank
of any right or remedy shall preclude any other or further exercise thereof, or
the exercise of any other right or remedy. No action of the Bank permitted
hereunder shall in any way affect or impair the rights of the Bank and the
obligation of the undersigned under this guaranty.
15. To the extent that the Borrower or any of the undersigned is a corporation,
limited liability company or partnership, all references herein to the Borrower
and to the undersigned, respectively, shall be deemed to include any successor
or successors, whether immediate or remote, to such corporation, limited
liability company or partnership.
<PAGE>
16. This guaranty has been delivered at Chicago, Illinois, and shall be
construed according to the laws of the State of Illinois, in which state it
shall be performed by the undersigned. All actions arising directly or
indirectly as a result or in consequence of this guaranty shall, in the sole and
absolute discretion of the Bank, be instituted and litigated only in courts
having situs in the City of Chicago, Illinois, and the undersigned hereby
consents to the jurisdiction of any State or Federal Court located and having
its situs in said city and waives any right to transfer or change the venue
of any litigation.
17. Wherever possible, each provision of this guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
18. It is agreed that the undersigned's liability hereunder is several and is
independent of any other guaranties at any time in effect with respect to all or
any part of the Indebtedness and that the undersigned's liability hereunder may
be enforced regardless of the existence of any such other guaranties.
19. This guaranty, and each and every part hereof, shall be binding upon the
undersigned (jointly and severally if there is more than one guarantor) and upon
the heirs, legal representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and assigns.
20. If the undersigned guarantor is a corporation, then and in such event, the
undersigned guarantor expressly represents and warrants unto the Bank that the
execution and delivery of this guaranty has been duly authorized by resolutions
heretofore duly adopted by its Board of Directors in accordance with law and its
by-laws, that said resolutions have not been amended nor rescinded, are in full
force and effect, that the officers of the undersigned executing and delivering
this guaranty, for and on behalf of the undersigned, are duly authorized and
empowered so to act. The Bank in accepting this guaranty is expressly relying
upon the aforesaid representations and warranties.
21. This guaranty constitutes the entire agreement between the parties relating
to the subject matter hereof and is the final and complete expression of their
intent. No prior or contemporaneous negotiations, promises, agreements,
covenants or representations of any kind or nature, whether made orally or in
writing, have been made by the parties, or any of them, in negotiations leading
to this guaranty or relating to the subject matter hereof, which are not
expressly contained herein, or which have not become merged and finally
integrated into this guaranty; it being the intention of the parties hereto that
in the event of any subsequent litigation, controversy or dispute concerning the
terms and provisions of this guaranty, no party shall be permitted to offer to
introduce oral or extrinsic evidence concerning the terms and conditions hereof
that are not included or referred to herein and not reflected in writing. This
guaranty can only be changed, modified, waived or discharged if consented to in
a writing duly signed and delivered on behalf of the Bank. No conditions exist
to the legal effectiveness of this guaranty.
22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS GUARANTY OR AN AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
IN CONNECTION HEREWITH, OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN
CONNECTION WITH OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned at Chicago, Illinois, effective this 26th
day of June, 1996.
Address ALTERNATIVE DISTRIBUTION SYSTEMS, INC.,
935 W. 175th Street a(n) DELAWARE corporation
- -------------------
Homewood, IL 60430
- ------------------- By: /s/ Michael A. Kelly
------------------------------------
Its: CFO
------------------------------------
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF ALTERNATIVE
DISTRIBUTION SYSTEMS, INC.
<TABLE>
<CAPTION>
Percentage Jurisdiction of
Subsidiary Ownership Incorporation
- ---------- --------- -------------
<S> <C> <C>
Area Transportation Company 100% Illinois
Freight Connections International, Ltd. 100% Illinois
Independent Contractor Services, Inc. 100% Illinois
Roll & Hold Warehousing & Distribution Corp. 100% Illinois
Western Intermodal Services, Ltd. 100% Illinois
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in this Registration Statement on Form S-1
and the related Prospectus of our report dated January 27, 1997 on the
consolidated financial statements of Alternative Distribution Systems, Inc. and
to the reference to our firm under the heading "Experts" included in this
Registration Statement and the related Prospectus.
Oak Brook, Illinois
- --------------------------------------------------------------------------------
The above represents the form of consent we expect to issue upon completion
of the transaction discussed in Note 13 to the consolidated financial
statements.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
February 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
December 31, 1995 and December 31, 1996 consolidated balance sheets and the
consolidated statements of income for the years ended December 31, 1995 and
1996, and the notes thereto, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 1536 840
<SECURITIES> 0 0
<RECEIVABLES> 5946 6148
<ALLOWANCES> 48 71
<INVENTORY> 0 0
<CURRENT-ASSETS> 8413 9233
<PP&E> 31522 39073
<DEPRECIATION> 9951 10505
<TOTAL-ASSETS> 30986 38321
<CURRENT-LIABILITIES> 9833 18938
<BONDS> 12283 13669
<COMMON> 0 33
0 0
0 0
<OTHER-SE> 7482 0
<TOTAL-LIABILITY-AND-EQUITY> 30986 38321
<SALES> 59421 67473
<TOTAL-REVENUES> 59552 67655
<CGS> 48293 54109
<TOTAL-COSTS> 55661 61861
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 14 23
<INTEREST-EXPENSE> 835 1089
<INCOME-PRETAX> 0 4395
<INCOME-TAX> 0 1755
<INCOME-CONTINUING> 0 2640
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 2640
<EPS-PRIMARY> 0 .79
<EPS-DILUTED> 0 .79
</TABLE>
