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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-21084
CHAMPION INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
West Virginia 55-0717455
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Route 2, Kyle Industrial Park
Industrial Lane, P.O. Box 2968
Huntington, West Virginia 25728
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (304) 528-2700
Securities registered pursuant to Section 12(b) of Act: None
Securities registered pursuant to Section 12(g) of Act: Common Stock, $1.00 par
value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or
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for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of January 14, 2000, was $18,389,956 of Common Stock, $1.00
par value. The outstanding common stock of the Registrant at the close of
business on January 14, 2000 consisted of 9,713,913 shares of Common Stock,
$1.00 par value.
Total number of pages including cover page - 171
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registration statement on
Form S-2/A No. 333-47585, filed on March 16, 1998, are incorporated by reference
into Part IV, Item 14. Portions of the Registrant's definitive proxy statement
dated February 17, 2000 with respect to its Annual Meeting of Shareholders to be
held on March 20, 2000 are incorporated by reference into Part III, Items 10-13.
Exhibit Index located on pages 28-34.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report or in documents
incorporated herein by reference, including without limitation statements
including the word "believes," "anticipates," "intends," "expects" or words of
similar import, constitute "forward-looking statements" within the meaning of
section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements of the Company expressed or implied by such
forward-looking statements. Such factors include, among others, general economic
and business conditions, changes in business strategy or development plans, and
other factors referenced in this Annual Report, including without limitations
under the captions "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Business." Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
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PART I
ITEM 1 - BUSINESS
HISTORY
Champion Industries, Inc. ("Champion" or the "Company") is a major
commercial printer, business forms manufacturer and office products and office
furniture supplier in regional markets east of the Mississippi River. The
Company's sales offices and production facilities are located in Huntington,
Charleston, Parkersburg, Clarksburg, and Morgantown, West Virginia; Lexington
and Owensboro, Kentucky; Baton Rouge, New Orleans and Gonzales, Louisiana;
Cincinnati and Belpre, Ohio; Jackson, Mississippi; Baltimore, Maryland;
Kingsport and Knoxville, Tennessee; Timmonsville, South Carolina; Evansville,
Indiana; Bridgeville and Altoona, Pennsylvania; and Asheville, North Carolina.
The Company's sales force of approximately 120 salespeople sells printing
services, business forms management services, office products and office
furniture.
The Company was chartered as a West Virginia corporation on July 1, 1992.
Prior to the public offering of the Company's Common Stock on January 28, 1993
(the "Offering"), the Company's business was operated by The Harrah and Reynolds
Corporation ("Harrah and Reynolds"), doing business as Chapman Printing Company,
together with its wholly-owned subsidiaries, The Chapman Printing Company, Inc.
and Stationers, Inc. Incident to the Offering, Harrah and Reynolds and the
Company entered into an Exchange Agreement, pursuant to which, upon the closing
date of the Offering: (i) Harrah and Reynolds contributed to the Company
substantially all of the operating assets of its printing division, including
all inventory and equipment (but excluding any real estate and vehicles) and all
issued and outstanding capital stock of its subsidiaries, The Chapman Printing
Company, Inc. and Stationers, Inc.; (ii) the Company assumed certain of the
liabilities relating to the operations of the printing divisions of Harrah and
Reynolds and its subsidiaries, The Chapman Printing Company, Inc. and
Stationers, Inc., excluding debts associated with real estate, certain accounts
payable to affiliates and certain other liabilities; and (iii) Harrah and
Reynolds was issued 2,000,000 shares of Common Stock of the Company.
The Company and its predecessors have been headquartered in Huntington
since 1922. Full scale printing facilities, including web presses for
manufacturing business forms, and sales and customer service operations are
located in Huntington. The Company's Charleston division was established in 1974
through the acquisition of the printing operations of Rose City Press. Sales and
customer service operations, as well as the Company's largest pre-press
departments, are located in Charleston. The Parkersburg division opened in 1977
and was expanded by the acquisitions of Park Press and McGlothlin Printing
Company. In addition to sales and customer service operations, this division
houses a large full-color printing facility and a state-of-the-art studio, with
scanners, electronic color retouching equipment and 4-, 5- and 6-color presses.
The Lexington division commenced operations in 1983 upon the acquisition
of the Transylvania Company. This location includes a pre-press department,
computerized composition facilities, a press room and bindery department, as
well as sales and customer service operations.
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The Company acquired Stationers, Inc. ("Stationers"), an office product,
office furniture and retail bookstore operation located in Huntington, in 1987
and consolidated its own office products and office furniture operations with
Stationers. On August 30, 1991, Stationers, Inc. sold the assets, primarily
inventory and fixtures, of its retail bookstore operation. In July 1993,
Stationers expanded through acquisition and began operations in Marietta, Ohio,
under the name "Garrison Brewer."
The Bourque Printing division ("Bourque") commenced operations in June,
1993, upon the acquisition of Bourque Printing, Inc. in Baton Rouge, Louisiana.
This location includes a pre-press department, computerized composition
facilities, a pressroom with up to 4-color presses and a bindery department, as
well as sales and customer service operations. Bourque was expanded through the
acquisition of Strother Forms/Printing in Baton Rouge in 1993 and through the
acquisition of the assets of E. S. Upton Printing Company, Inc. in New Orleans
in 1996.
The Dallas Printing division ("Dallas") commenced operations in
September, 1993, upon the acquisition of Dallas Printing Company, Inc. in
Jackson, Mississippi. This location includes a pre-press department,
computerized composition facilities, a pressroom with up to 4-color presses and
a bindery department, as well as sales and customer service operations.
On November 2, 1993, a wholly-owned subsidiary of the Company chartered
to effect such acquisition purchased selected assets of Tri-Star Printing, Inc.,
a Delaware corporation doing business as "Carolina Cut Sheets" in the
manufacture and sale of business forms in Timmonsville, South Carolina. The
Company's subsidiary has changed its name to "Carolina Cut Sheets, Inc."
Carolina Cut Sheets manufactures single-part business forms for sale to dealers
and through the Company's other divisions.
On February 25, 1994, Bourque acquired certain assets of Spectrum Press
Inc. ("Spectrum"), a commercial printer located in Baton Rouge, Louisiana.
On June 1, 1994, the Company acquired certain assets of Premier Data
Graphics, a distributor of business forms and data supplies located in
Clarksburg, West Virginia.
On August 30, 1994, Dallas acquired certain assets of Premier Printing
Company, Inc. ("Premier Printing") of Jackson, Mississippi.
On June 1, 1995, in exchange for issuance of 52,383 shares of its Common
stock, the Company acquired U.S. Tag & Ticket Company, Inc. ("U.S. Tag"), a
Baltimore, Maryland based manufacturer of tags used in the manufacturing,
shipping, postal, airline and cruise industries.
On November 13, 1995, in exchange for $950,000 cash and the issuance of
66,768 shares of its Common stock, the Company acquired Donihe Graphics, Inc.
("Donihe"), a high-volume color printer based in Kingsport, Tennessee.
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On February 2, 1996, Bourque purchased various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. ("Upton") for approximately
$750,000 in cash.
On July 1, 1996, the Company acquired Smith & Butterfield Co., Inc.
("Smith & Butterfield"), an office products company located in Evansville,
Indiana and Owensboro, Kentucky. Smith & Butterfield is operated as a division
of Stationers, Inc. The Company issued 66,666 shares of common stock valued at
$1,200,000 in exchange for all of the issued and outstanding shares of common
stock of Smith & Butterfield.
On August 21, 1996, the Company purchased the assets of The Merten
Company ("Merten"), a commercial printer headquartered in Cincinnati, Ohio, for
cash and assumption of liabilities aggregating $2,535,295.
On December 31, 1996, the Company acquired all outstanding capital stock
of Interform Corporation ("Interform"), a business form manufacturer in
Bridgeville, Pennsylvania, for $2,500,000 in cash which was financed by a bank.
On May 21, 1997, the Company acquired all outstanding common shares of
Blue Ridge Printing Co., Inc. of Asheville, North Carolina and Knoxville,
Tennessee ("Blue Ridge") in exchange for 277,775 shares of the Company's common
stock. The transaction has been accounted for as a pooling of interests.
On February 2, 1998, the Company acquired all outstanding common shares
of Rose City Press ("Rose City") of Charleston, West Virginia, in exchange for
75,722 shares of the Company's common stock valued at $1,250,000.
On May 18, 1998, the Company acquired all outstanding common shares of
Capitol Business Equipment, Inc. ("Capitol"), doing business as Capitol Business
Interiors, of Charleston, West Virginia, in exchange for 72,202 shares of the
Company's common stock valued at $1,000,000.
On May 29, 1998, the Company acquired all outstanding common shares of
Thompson's of Morgantown, Inc. and Thompson's of Barbour County, Inc.
(collectively, "Thompson's") of Morgantown, West Virginia, in exchange for
45,473 shares of the Company's common stock valued at $600,000.
Rose City, Capitol and Thompson's are operated as divisions of
Stationers.
On June 1, 1999, the Company acquired all of the issued and outstanding
common stock of Independent Printing Service, Inc. ("IPS") of Evansville,
Indiana. IPS is operated as a division of Smith & Butterfield. This transaction
was accounted for under the purchase method.
On July 16, 1999, the Company's Blue Ridge subsidiary acquired certain
assets and assumed certain liabilities of AIM Printing ("AIM") of Knoxville,
Tennessee. This transaction was accounted for under the purchase method.
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On November 30, 1999, the Company acquired all of the issued and
outstanding common stock of Diez Business Machines ("Diez") of Gonzales,
Louisiana. This transaction was accounted for as a purchase. Diez is operated as
a subsidiary of Stationers.
BUSINESS
Champion is engaged in the commercial printing and office products and
furniture supply business in regional markets east of the Mississippi River. The
Company's sales force sells a full range of printing services, business forms,
office products and office furniture. Management views these sales activities as
complementary since frequent customer sales calls required for one of its
products or services provide opportunities to cross-sell other products and
services. The Company believes it benefits from significant customer loyalty and
customer referrals because it provides personal service, quality products,
convenience and selection with one-stop shopping.
The Company's printing services range from the simplest to the most
complex jobs, including business cards, books, tags, brochures, posters, 4- to
6-color process printing and multi-part, continuous and snap-out business forms.
The Company's state-of-the-art equipment enables it to provide computerized
composition, art design, paste-up, stripping, film assembly and color scanner
separations. The Company also offers complete bindery and letterpress services.
The printing operations contributed $92.4 million, or 74% of the Company's total
revenues for the fiscal year ended October 31, 1999.
The Company provides a full range of office products and office furniture
primarily in the budget and middle price ranges, and also offers office design
services. The Company publishes a catalog of high volume, frequently ordered
items purchased directly from manufacturers. These catalog sales account for the
bulk of sales volume and afford sales personnel flexibility in product selection
and pricing. Medium to large volume customers are offered levels of pricing
discounts. In addition, the Company offers a broad line of general office
products through major wholesalers' national catalogs. The Company has
implemented an Internet e-commerce site, which allows customers to order online
office products, furniture and forms. The e-commerce site includes the office
products and office furniture catalog and may be accessed at the Company's web
page at www.champion-industries.com. The Company believes that this site will
allow customers to access data concerning their company's purchase habits so as
to better control expenditures for office products and eliminate large in-house
inventories. The Company is a member of a major office products purchasing
organization. Members benefit from volume discounts, which permit them to offer
competitive prices and improve margins. The Company's office furniture business
focuses on the budget to middle price range lines, although upscale lines are
offered as well. Office products, office furniture and office design operations
contributed $32 million, or 26% of the Company's total revenues for the fiscal
year ended October 31, 1999.
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ORGANIZATION
Champion's two lines of business are comprised of twenty-one operating
divisions. The Huntington headquarters provides centralized financial management
and administrative services to each of its two business segments.
Commercial Printing
Ten commercial printing divisions are located in Huntington, Charleston
and Parkersburg, West Virginia; Lexington, Kentucky; Baton Rouge and New
Orleans, Louisiana; Jackson, Mississippi; Cincinnati, Ohio; Kingsport,
Tennessee; and Asheville, North Carolina. Each has a sales force, a customer
service operation and a pre-press department that serve the customers in their
respective geographic areas. Although each customer's interface is solely with
its local division's personnel, its printing job may be produced in another
division using the equipment most suited to the quality and volume requirements
of the job. In this way, for example, Champion can effectively compete for high
quality process color jobs in Lexington by selling in Lexington, printing in
Cincinnati and binding in Huntington. The full range of printing resources is
available to customers in the entire market area without Champion having to
duplicate equipment in each area.
Interform Corporation, doing business as Interform Solutions and located
in Bridgeville, Pennsylvania, manufactures business forms and related products
which it sells through a network of independent distributors concentrated in
Eastern Pennsylvania, New Jersey and metropolitan New York, and directly through
its own distributor, the Consolidated Graphics Communications division in
Pittsburgh, Pennsylvania.
Carolina Cut Sheets, Inc., located in Timmonsville, South Carolina,
manufactures single sheet business forms which are sold to other commercial
printers and dealers and through the Company's other divisions.
The Huntington, West Virginia division of Chapman Printing Company
manufactures single sheet and multi-part, snap-out and continuous business forms
for sale through many of the Company's commercial printing divisions.
U.S. Tag, located in Baltimore, Maryland, manufactures and sells tags
used in the manufacturing, shipping, postal, airline and cruise industries
throughout the United States through dealers and the Company's other divisions.
Office Products, Office Furniture and Office Design
Stationers, located in Huntington, Clarksburg (doing business as
"Champion-Clarksburg"), Charleston (through its Rose City division), Morgantown
(through its Thompson's division), West Virginia and Belpre, Ohio (doing
business as "Garrison Brewer"), provides office products and office furniture
primarily to customers in the Company's West Virginia, Ohio and Kentucky market
areas. Products are sold by printing division salespeople and delivered in bulk
daily to each division, or shipped directly to customers.
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Smith & Butterfield, located in Evansville, Indiana and Owensboro,
Kentucky, provides office products and office furniture primarily to customers
in the Company's Indiana and Kentucky market areas. Products are sold by Smith &
Butterfield sales personnel and delivered to customers daily.
Diez, located in Gonzales, Louisiana, provides office products and office
furniture primarily to customers in the Company's Louisiana market area.
Stationers, through its Capitol division, offers office design services
throughout West Virginia and eastern Kentucky.
PRODUCTS AND SERVICES
Printing Services
Champion's primary business is commercial printing and business forms
manufacturing. The Company, unlike most of its regional competitors, offers the
full range of printing production processes, enabling the Company to provide
customers a one-stop, one-vendor source without the time and service constraints
of subcontracting one or more aspects of production. Major production areas
include: (i) printing of business cards, letterhead, envelopes, and one, two, or
three color brochures; (ii) process color manufacturing of brochures, posters,
advertising sheets and catalogues; (iii) die cutting and foil stamping; (iv)
bindery services, including trimming, collating, folding and stitching the final
product; (v) forms printing, encompassing roll-to-roll computer forms, checks,
invoices, purchase orders and similar forms in single-part, multi-part,
continuous and snap-out formats; (vi) tag manufacturing; and (vii) high volume
process color webprinting of brochures and catalogs.
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The capabilities of the Company's various printing divisions are stated below.
<TABLE>
<CAPTION>
High
Sales & Volume
Customer Sheet Full Full
Division Service Pre-Press Printing Color Color
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Huntington * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Charleston * *
- ------------------------------------------------------------------------------------------------------------------------------------
Parkersburg * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Bourque Printing, Inc. * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Dallas Printing Company, Inc. * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Carolina Cut Sheets, Inc. * *
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Tag & Ticket Company, Inc. * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Donihe Graphics, Inc. * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Upton Printing * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
The Merten Company * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Interform Corporation * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Blue Ridge Printing Co., Inc. * * * *
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</TABLE>
Office Products, Office Furniture and Office Design
Champion provides its customers with a wide range of product offerings in
two major categories: supplies, such as file folders, paper products, pens and
pencils, computer paper and laser cartridges; and furniture, including budget
and middle price range desks, chairs, file cabinets and computer furniture.
Office supplies are sold primarily by Company salespeople through the Company's
own catalogs. Office furniture is primarily sold from catalogs and supplied from
in-house stock. Special orders constitute a small portion of sales. The Capitol
division of Stationers provides interior design services to commercial
customers. The design services include space planning, purchasing and
installation of office furniture, and management of design projects.
MANUFACTURING AND DISTRIBUTION
The Company's pre-press facilities have desktop publishing, typesetting,
laser imagesetting and scanning/retouching equipment, and complete layout,
design, stripping and plate processing operations. Sheet printing equipment (for
printing onto pre-cut, individual sheets) includes single
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color duplicators, single to six color presses and envelope presses. Rotary
equipment (for printing onto continuous rolls of paper) includes multi-color
business form web presses, carbon and multi-part collators, and a high-speed
5-color half-web press.
Binding equipment consists of hot-foil, embossing and die cutting
equipment, perforators, folders, folder-gluers, scoring machines,
collator/stitcher/ trimmers for saddle stitching, automatic and manual perfect
binders, numbering machines and mailing equipment.
Each of the Company's offices is linked with overnight distribution of
products and on-line electronic telecommunications permitting timely transfer of
various production work from facility to facility as required. While the Company
maintains a fleet of delivery vehicles for intracompany and customer deliveries,
it utilizes the most cost effective and expeditious means of delivery, including
common carriers.
Requirements for the Company's press runs are determined shortly before
the runs are made and, therefore, backlog is not a meaningful measure in
connection with the Company's printing business.
The Company's inventory goal is to have approximately 60% of the office
product items the Company sells in stock. Another 30% are ordered on a daily
basis and received overnight. The remaining 10% are items that come direct from
manufacturers and may take one week from placement of order to delivery to
customer. Office furniture sales are made primarily from the Company's in-house
stock. However, special orders from manufacturers may require up to 90 days for
delivery.
CUSTOMERS
The Company believes that its reputation for quality, service,
convenience and selection allows it to enjoy significant loyalty from its
customers. Champion's marketing strategy is to focus on manufacturers,
institutions, financial services companies and professional firms. Consistent
with customary practice in the commercial printing and office products
industries, the Company ordinarily does not have long-term contracts with its
customers, although a number of high volume customers issue yearly purchase
orders. These purchase orders, which are typically for office products but may
include printing services, are for firm prices adjustable for paper price
changes. Depending upon customer satisfaction with price and service, these
purchase orders may be renewed for another year or up to three years without
repeating the full bidding process.
During the fiscal year ended October 31, 1999, no single customer
accounted for more than 1% of the Company's total revenues. Due to the
project-oriented nature of customers' printing requirements, sales to particular
customers may vary significantly from year to year depending upon the number and
size of their projects.
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SUPPLIERS
The Company has not experienced difficulties in obtaining materials in
the past and does not consider itself dependent on any particular supplier for
supplies. The Company has negotiated Company-wide paper purchasing agreements
directly with paper manufacturers and is a member of a major office products
buying group, which management believes provides the Company with a competitive
advantage.
COMPETITION
The markets for the Company's printing services and office products are
highly competitive, with success based primarily on price, quality, production
capability, capacity for prompt delivery and personal service.
Champion's printing competitors are numerous and range in size from very
large national companies with substantially greater resources than the Company
to many smaller local companies. In recent years, despite consolidation within
the printing industry, there has been a substantial increase in technological
advances in new equipment, resulting in excess capacity and highly competitive
pricing. The Company has remained competitive by maintaining its printing
equipment at state-of-the-art levels and emphasizing personal attention to
customers.
Large national and regional mail order discount operations provide
significant competition in the office products and office furniture business.
The economics afforded by membership in a national purchasing association and by
purchasing directly from manufacturers, and the high level of personal services
to customers, contribute substantially to the Company's ability to compete in
the office supply and office furniture market segments.
ENVIRONMENTAL REGULATION
The Company is subject to the environmental laws and regulations of the
United States and the states in which it operates concerning emissions into the
air, discharges into waterways and the generation, handling and disposal of
waste materials. The Company's past expenditures relating to environmental
compliance have not had a material effect on the Company and are included in
normal operating expenses. These laws and regulations are constantly evolving,
and it is impossible to predict accurately the effect they may have upon the
capital expenditures, earnings and competitive position of the Company in the
future. Based upon information currently available, management believes that
expenditures relating to environmental compliance will not have a material
impact on the financial position of the Company.
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GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS
The Company's operations and the majority of its customers are located
east of the Mississippi River. The Company and its profitability may be more
susceptible to the effects of unfavorable or adverse local or regional economic
factors and conditions than a company with a more geographically diverse
customer base.
SEASONALITY
Historically, the Company has experienced a greater portion of its annual
sales and net income in the second and fourth quarters than in the first and
third quarters. The second quarter generally reflects increased orders for
printing of corporate annual reports and proxy statements. A post-Labor Day
increase in demand for printing services and office products coincides with the
Company's fourth quarter.
EMPLOYEES
On October 31, 1999, the Company had approximately 900 employees.
The Company's subsidiary, Interform Corporation, is party to a collective
bargaining agreement with the United Steelworkers of America, AFL-CIO-CLC on
behalf of its Local Union 8263 covering all production and maintenance employees
(totaling 89 employees at October 31, 1999) at its Bridgeville, Pennsylvania
facility. The Company believes relations with the union and covered employees
are good.
EXECUTIVE OFFICERS OF CHAMPION
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH CHAMPION;
NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT LAST FIVE YEARS
- ---- --- --------------------------------------------------
<S> <C> <C>
Marshall T. Reynolds 63 President, Chief Executive Officer and Chairman of the Board of
Directors of the Company from December 1992 to present; President and general
manager of Harrah and Reynolds, predecessor of the Company from 1964 (and sole
shareholder from 1972) to 1993; Chairman of the Board of Directors of Broughton
Foods Company from November 1996 to June 1999; Director (from 1983 to November
1993) and Chairman of the Board of Directors (from 1983 to November 1993) of Banc
One West Virginia Corp. (formerly Key Centurion Bancshares, Inc.).
</TABLE>
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<TABLE>
<S> <C> <C>
Michael D. McKinney 46 Vice President and General Sales Manager of the Company since September
1995; Vice President and Division Manager - Huntington of the Company from December
1992 to September 1995; Division Manager - Huntington of Harrah and Reynolds from
October 1991 to 1992; Division Manager - Lexington of Harrah and Reynolds from
August 1982 to October 1991.
Ronald W. Taylor 42 Vice President and Division Manager - Lexington division of the Company
from December 1992 to present; Division Manager - Lexington of Harrah and Reynolds
from January 1992 to December 1992; Sales Representative, Lexington Division of
Harrah and Reynolds from 1986 to January 1992.
J. Mac Aldridge 58 Vice President and Division Manager - Stationers since December 1992;
Vice President of Company and Division Manager - Huntington from September 1995 to
October 1997; President and General Manager of Stationers since November 1989;
Sales Representative of Huntington Division of Harrah and Reynolds from July 1983
to October 1989.
Gary A. Blackshire 47 Vice President of the Company since December 1992; Division Manager -
Merten since September 1998; Division Manager - Charleston since December 1992;
Division Manager - Charleston of Harrah and Reynolds from April 1992 to December
1992; Sales Representative of Charleston Division of Harrah and Reynolds from 1975
until April 1992.
R. Douglas McElwain 52 Vice President and Division Manager - Bourque Printing division of the
Company since December 1993; General Manager of Bourque Printing from June 1993 to
December 1993; Sales Representative of Charleston Division of Harrah and Reynolds
and Company from 1986 until June 1993.
Toney K. Adkins 50 Vice President-Administration of the Company since November, 1995;
President, KYOWVA Corrugated Container Company, Inc. from 1991 to 1996.
</TABLE>
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<TABLE>
<S> <C> <C>
Todd R. Fry 34 Chief Financial Officer of the Company since November, 1999; Treasurer
and Chief Financial Officer of Broughton Foods Company from September 1997 to June
1999; Coopers & Lybrand L.L.P. from 1991 to September 1997.
Walter R. Sansom 70 Secretary of the Company since December 1992; Production Coordinator of
the Company since December 1992 and of Harrah and Reynolds from August 1968 to
December 1992.
Theodore J. Nowlen 45 Vice President of the Company since March 1999; President of Interform
since May 1998; Vice President of Marketing and Technology of Interform from
January 1996 to May 1998; Vice President of Technology of Interform from September
1991 to January 1996; Manager of Information Systems of Interform from April 1983
to September 1991.
James A. Rhodes 43 Vice President of the Company since March 1999; President of
Consolidated Graphic Communications Division of Interform since February 1999;
Vice President of Sales of Consolidated Graphic Communications from 1996 to 1999;
General Sales Manager - East of Consolidated Graphic Communications from 1995 to
1996.
</TABLE>
ITEM 2 - PROPERTIES
The Company conducts its operations from twenty-five (25) different
physical locations, nineteen (19) of which are leased, and six (6) of which are
owned in fee simple by Company subsidiaries. The properties leased, and certain
of the lease terms are set forth below:
<TABLE>
<CAPTION>
Division Occupying Square Annual Expiration
Property Property Feet Rental Of Term
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2450 1st Avenue Chapman Printing-
Huntington, West Virginia (1) Huntington 85,000 $116,400 2008
1945 5th Avenue Stationers 37,025 60,000 2007
Huntington, West Virginia (1)
615-619 4th Avenue Stationers 59,641 21,600 2003
Huntington, West Virginia (1)
405 Ann Street Chapman Printing - Parkersburg 36,614 57,600 2003
Parkersburg, West Virginia (1)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
1563 Hansford Street Chapman Printing - Charleston 21,360 49,920 2003
Charleston, West Virginia (1)
890 Russell Cave Road Chapman Printing - Lexington 20,135 57,600 2000
Lexington, Kentucky (1)
214 Stone Road Stationers - Garrison Brewer 15,146 42,000 2004
Belpre, Ohio (1)
2800 Lynch Road Smith & Butterfield 42,375 116,640 2004
Evansville, Indiana (1)
113-117 East Third St. Smith & Butterfield 8,500 14,400 2002
Owensboro, Kentucky (1)
1901 Mayview Road Interform Corporation 120,000 316,000 2003
Bridgeville, Pennsylvania (1)
736 Carondelet Street Upton Printing 15,000 62,700 2000
New Orleans, Louisiana
5600 Jefferson Highway Upton Printing 11,250 47,250 2000
Harahan, Louisiana
1515 Central Parkway The Merten Company 40,000 97,200 2001
Cincinnati, Ohio (1)
2217 Robb Street U.S. Tag 26,000 52,000 2000
Baltimore, Maryland (1)
Palmetto Industrial Park Carolina Cut Sheets 16,200 35,724 monthly
Timmonsville, S. Carolina
711 Indiana Avenue Stationers-Capitol 22,000 96,000 2003
Charleston, West Virginia (1)
Kirk and Chestnut Streets Stationers-Thompson's 9,000 19,356 2003
Morgantown, West Virginia
Route 2, Kyle Industrial Park Champion Headquarters 9,000 78,000 2003
Huntington, West Virginia
1733 North Airline Highway Stationers-Diez 5,800 12,000 2000
Gonzalez, Louisiana
</TABLE>
(1) Lease is "triple net", whereby Company pays for all utilities, insurance,
taxes, repairs and maintenance, and all other costs associated with
properties.
The Dallas Printing Division owns, and operates from, a single-story
masonry structure of approximately 19,600 square feet at 321-323 East Hamilton
Street, Jackson, Mississippi.
15
<PAGE> 16
The Bourque Printing Division owns, and operates from, a single-story
building of approximately 18,501 square feet at 13112 South Choctaw Drive, Baton
Rouge, Louisiana.
Stationers' Clarksburg operation is conducted from a single-story masonry
building of approximately 20,800 square feet owned by the Company at 700 N.
Fourth Street, Clarksburg, West Virginia.
Donihe owns, and operates from, a single-story steel building of
approximately 38,500 square feet situated on roughly 14.5 acres at 766 Brookside
Drive, Kingsport, Tennessee.
Blue Ridge owns, and operates from, (i) a two-story masonry building of
approximately 9,066 square feet and a contiguous 1,692 square foot former
residential structure at 544 and 560 Haywood Road, Asheville, North Carolina,
and (ii) a two-story steel building of approximately 12,500 square feet on
approximately 3 acres at 1485 Amherst Road, Knoxville, Tennessee.
The Company consolidated Stationers' Rose City division operations with
those of the Chapman Printing - Charleston division at its Hanford Street
location during fiscal year 1999. The former Rose City facility, consisting of
(i) two masonry buildings (2 story and 5 story) of approximately 20,900 square
feet in the aggregate, at 811-813 Virginia Street, East, and (ii) an adjacent 6
story brick warehouse of approximately 42,500 square feet, in Charleston, West
Virginia, is currently held for sale.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Champion common stock has traded in the over-the-counter market on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") National Market System since the Offering under the symbol "CHMP."
16
<PAGE> 17
The following table sets forth the high and low closing prices for
Champion common stock for the period indicated. The range of high and low
closing prices are based on data from NASDAQ and do not include retail mark-up,
mark-down or commission.
<TABLE>
<CAPTION>
FISCAL YEAR 1999 FISCAL YEAR 1998
HIGH LOW HIGH LOW
------------------------- -----------------------------
<S> <C> <C> <C> <C>
First quarter $11.13 $ 9.00 $ 19.50 $ 16.00
Second quarter 9.00 6.00 17.00 13.00
Third quarter 8.63 6.63 14.56 10.50
Fourth quarter 6.81 4.25 12.50 9.25
</TABLE>
At the close of business on January 14, 2000, there were 532 shareholders
of record of Champion common stock.
The following table sets forth the quarterly dividends per share declared
on Champion common stock.
<TABLE>
<CAPTION>
FISCAL YEAR 2000 FISCAL YEAR 1999 FISCAL YEAR 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
First quarter $.050 $.050 $.050
Second quarter - .050 .050
Third quarter - .050 .050
Fourth quarter - .050 .050
</TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the five
years in the period ended October 31, 1999 have been derived from the Audited
Consolidated Financial Statements of the Company. The information set forth
below should be read in conjunction with the Audited Consolidated Financial
Statements, related notes, and the information contained in Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere herein.
17
<PAGE> 18
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Printing $ 92,405 $ 95,003 $ 87,979 $ 49,242 $ 35,371
Office products and office furniture 31,954 28,058 20,406 17,115 14,532
---------- ---------- ---------- ---------- ----------
Total revenues 124,359 123,061 108,385 66,357 49,903
Cost of sales:
Printing 65,021 66,699 59,850 33,015 22,251
Office products and office furniture 21,764 18,616 13,289 11,077 9,670
---------- ---------- ---------- ---------- ----------
Total cost of sales 86,785 85,315 73,139 44,092 31,921
---------- ---------- ---------- ---------- ----------
Gross profit 37,574 37,746 35,246 22,265 17,982
Selling, general and administrative expense 31,387 29,872 28,079 16,197 12,788
---------- ---------- ---------- ---------- ----------
Income from operations 6,187 7,874 7,167 6,068 5,194
Interest income 157 245 20 25 11
Interest expense (1,228) (1,507) (1,586) (693) (252)
Other income 211 241 737 224 113
---------- ---------- ---------- ---------- ----------
Income before income taxes 5,327 6,853 6,338 5,624 5,066
Income taxes (2,134) (2,702) (2,571) (2,252) (2,060)
---------- ---------- ---------- ---------- ----------
Net income $ 3,193 $ 4,151 $ 3,767 $ 3,372 $ 3,006
========== ========== ========== ========== ==========
Earnings per share:
Basic $ 0.33 $ 0.45 $ 0.45 $ 0.41 $ 0.37
Diluted 0.33 0.45 0.45 0.40 0.37
Dividends per share 0.20 0.20 0.19 0.152 0.122
Weighted average common shares outstanding:
Basic 9,714,000 9,142,000 8,383,000 8,324,000 8,147,000
Diluted 9,714,000 9,172,000 8,441,000 8,356,000 8,177,000
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
AT OCTOBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 2,464 $ 9,773 $ 912 $ 2,461 $ 1,390
Working capital 30,573 35,108 18,935 13,579 11,148
Total assets 73,321 74,505 60,346 44,063 28,643
Long-term debt 9,933 13,993 15,156 7,561 2,405
Shareholders' equity 46,560 45,310 26,850 24,641 19,794
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a commercial printer, business forms manufacturer and
office products and office furniture supplier in regional markets east of the
Mississippi River. The Company has grown through strategic acquisitions and
internal growth. Through such growth, the Company has realized regional
economies of scale, operational efficiencies, and exposure of its core products
to new markets. The Company has acquired fourteen printing companies and seven
office products and office furniture companies since its initial public offering
on January 28, 1993.
The Company's largest acquisition since the initial public offering was
the purchase of Interform on December 31, 1996. The addition of Interform sales
to the printing segment increased the printing component of the Company's
revenue mix. Through sales to independent distributors, and through its own
distributor, Consolidated Graphic Communications, Interform provides the Company
access to the large northeastern markets of Pennsylvania, New Jersey and New
York.
The Company's net revenues consist primarily of sales of commercial
printing, business forms, tags, other printed products, office supplies, office
furniture, data products and office design services. The Company recognizes
revenues when products are shipped or services are rendered to the customer. The
Company's revenues are subject to seasonal fluctuations caused by variations in
demand for its products.
The Company's cost of sales primarily consists of raw materials,
including paper, ink, pre-press supplies and purchased office supplies,
furniture and data products, and manufacturing costs including direct labor,
indirect labor and overhead. Significant factors affecting the Company's cost of
sales include the costs of paper in both printing and office supplies, the costs
of labor and other raw materials.
19
<PAGE> 20
The Company's operating costs consist of selling, general and
administrative expenses. These costs include salaries, commissions and wages for
sales, customer service, accounting, administrative and executive personnel,
rent, utilities, and equipment maintenance.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information
derived from the Company's Consolidated Income Statements, including certain
information presented as a percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
($ IN THOUSANDS)
----------------------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Printing $ 92,405 74.3% $ 95,003 77.2% $ 87,979 81.2%
Office products and office furniture 31,954 25.7 28,058 22.8 20,406 18.8
--------- ------ --------- ------ --------- ------
Total revenues 124,359 100.0 123,061 100.0 108,385 100.0
Cost of sales:
Printing 65,021 52.3 66,699 54.2 59,850 55.2
Office products and office furniture 21,764 17.5 18,616 15.1 13,289 12.3
--------- ------ --------- ------ --------- ------
Total cost of sales 86,785 69.8 85,315 69.3 73,139 67.5
--------- ------ --------- ------ --------- ------
Gross Profit 37,574 30.2 37,746 30.7 35,246 32.5
Selling, general and administrative expenses 31,387 25.2 29,872 24.3 28,079 25.9
--------- ------ --------- ------ --------- ------
Income from operations 6,187 5.0 7,874 6.4 7,167 6.6
Other income (expense):
Interest income 157 0.1 245 0.2 20 0.0
Interest expense (1,228) (1.0) (1,507) (1.2) (1,586) (1.4)
Other income 211 0.2 241 0.2 737 0.7
--------- ------ --------- ------ --------- ------
Income before income taxes 5,327 4.3 6,853 5.6 6,338 5.9
Income taxes (2,134) (1.7) (2,702) (2.2) (2,571) (2.4)
--------- ------ --------- ------ --------- ------
Net income $ 3,193 2.6% 4,151 3.4% $ 3,767 3.5%
========= ====== ========= ====== ========= ======
</TABLE>
The following discussion and analysis presents the significant changes in
the financial position and results of operations of the Company and should be
read in conjunction with the Audited Consolidated Financial Statements and notes
thereto included elsewhere herein.
20
<PAGE> 21
YEAR ENDED OCTOBER 31, 1999 COMPARED TO YEAR ENDED OCTOBER 31, 1998
Revenues
Consolidated net revenues were $124.4 million for the year ended October
31, 1999 compared to $123.1 million in the prior fiscal year. This change
represents a growth in revenues of $1.3 million or 1.1%. Printing revenues
declined by $2.6 million or 2.7% from $95.0 million in 1998 to $92.4 million in
1999. Office products and office furniture revenue increased $3.9 million or
13.9% from $28.1 million in 1998 to $32.0 million in 1999. The increase in
revenues for the office products and office furniture segment was primarily
attributable to the Rose City, Capitol and Thompson acquisitions, which
contributed an additional $3.3 million in revenue in 1999 over 1998 as these
acquisitions were included for a full year in 1999 versus partial periods in
1998. Gross margin dollars remained relatively stable with a modest increase in
office products and furniture offsetting a slight decline in printing.
Cost of Sales
Total cost of sales for the year ended October 31, 1999 totaled $86.8
million compared to $85.3 million in the previous year. This change represented
an increase of $1.5 million or 1.7% in cost of sales. Printing cost of sales
decreased $1.7 million or 2.5% to $65.0 million in 1999 compared to $66.7
million in 1998. Printing cost of sales were impacted by sluggish sales in many
of the geographical areas served by the Company. Office products and office
furniture cost of sales increased $3.1 million or 16.9% to $21.8 million from
$18.6 million in 1998, primarily due to acquisitions.
Operating Expenses and Income
Selling, general and administrative (S,G&A) expenses increased $1.5
million to $31.4 million in 1999 from $29.9 million in 1998. S,G&A as a
percentage of net sales represented 25.2% of net sales in 1999 compared with
24.3% of net sales in 1998. This increase is related, in part, to increases in
corporate overhead expenses, depreciation on newly acquired equipment and
expenses of Rose City, Capitol and Thompson. The results of operations for the
year ended October 31, 1999 include Rose City, Capital and Thompson for the
entire year while they were only included for a partial year in 1998. In
addition, expenses of a partial year for the AIM Printing and IPS acquisitions
are included in 1999.
Other Income/Expense
Interest expense decreased $279,000 to $1.2 million in 1999 from $1.5
million in 1998 as a result of a reduction in debt. Interest income decreased
$87,000 to $158,000 in 1999 from $245,000 in 1998. The additional income in 1998
was due to higher average funds invested as a result of a stock offering in
April of 1998.
21
<PAGE> 22
Income Taxes
Income taxes as a percentage of income before taxes were 40.1% in 1999
compared with 39.4% in 1998. This increase was primarily caused by a change in
the geographic profitability mix of our operations which resulted in higher
effective tax rates at the state level.
Net income
For reasons set forth above, net income for 1999 decreased $958,000 to
$3.2 million, or $0.33 per share on a basic and diluted basis, from $4.2 million
for 1998, or $0.45 per share on a basic and diluted basis.
YEAR ENDED OCTOBER 31, 1998 COMPARED TO YEAR ENDED OCTOBER 31, 1997
Revenues
Consolidated net revenues were $123.1 million for the year ended October
31, 1998 compared to $108.4 million in the prior fiscal year. This change
represented a growth in revenues of $14.7 million or 13.5%. Printing revenues
increased $7.0 million or 8.0% during the same period from $88.0 million in 1997
to $95.0 million in 1998. Approximately $5.3 million of this growth was due to
the inclusion of Interform Corporation for the full fiscal year of 1998, whereas
fiscal year 1997 included only ten months of Interform's operations. Internal
growth accounted for the remaining $1.7 million increase in printing revenues.
Office products and office furniture revenues increased $7.7 million or 37.5%
from $20.4 million in fiscal year 1997 to $28.1 million in fiscal year 1998. The
increase in office products and office furniture revenue was achieved through
the 1998 acquisitions disclosed in Note 9 to the Consolidated Financial
Statements (the "1998 acquisitions") and internal growth. The 1998 acquisitions
contributed approximately $6.0 million in this growth with internal growth
accounting for the remaining $1.7 million.
Cost of Sales
Total cost of sales for the year ended October 31, 1998 totaled $85.3
million compared to $73.1 million in the previous year. This change represented
an increase of $12.2 million or 16.7% in cost of sales. Printing cost of sales
increased 11.4% in fiscal year 1998 to $66.7 million from $59.9 million in
fiscal year 1997, due primarily to sales volume and the impact of the Interform
acquisition as discussed above. Office products and office furniture cost of
sales increased 40.1% in fiscal year 1998 to $18.6 million from $13.3 million in
fiscal year 1997, primarily due to the 1998 acquisitions.
Operating Expenses and Income
Selling, general and administrative (S,G&A) expenses decreased as a
percentage of revenues in fiscal year 1998 to 24.3% from 25.9% in fiscal year
1997, due primarily to management's effort to control overall expenses. With the
growth in revenue and the reduction in S,G&A expenses as a percentage of
revenues, income from operations increased 9.9% in fiscal year 1998 to $7.9
million from $7.2 million in fiscal year 1997.
22
<PAGE> 23
Other Income/Expense
Interest expense decreased $79,000 from $1.6 million in fiscal year 1997
to $1.5 million in fiscal year 1998 primarily as a result of the lower interest
rate environment during the second half of 1998 and the reduction of notes
payable and long-term debt. Interest income increased $225,000 from $20,000 in
fiscal year 1997 to $245,000 in fiscal year 1998 as a result of investing the
residual net proceeds from an April 1998 stock offering in a money market
account. Other income decreased $496,000 from $737,000 in fiscal year 1997 to
$241,000 in fiscal year 1998, primarily due to a $330,000 one-time recognition
of deferred gain from the previous sale of Stationers' bookstore operations
included in fiscal year 1997.
Income taxes
Income taxes as a percentage of income before income taxes decreased
slightly from 40.6% in fiscal year 1997 to 39.4% as a result of tax attributes
associated with acquired businesses.
Net Income
Net income for the year ended October 31, 1998 increased 10.2% to $4.2
million from the net income reported in the prior year of $3.8 million. Basic
and diluted earnings per share remained the same for fiscal years 1998 and 1997
at $0.45 per share as a result of the additional shares issued in the April 1998
stock offering discussed below.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1999, the Company had $2.5 million of cash and cash
equivalents, a decrease of $7.3 million from the prior year. Working capital as
of October 31, 1999 was $30.6 million, a decrease of $4.5 million from October
31, 1998. The decrease in cash and cash equivalents and working capital was
primarily the result of long-term debt reductions and capital expenditures. In
April 1998, the Company completed an offering of 1,091,993 common shares. The
net proceeds (net of underwriting discounts, commissions and offering expenses)
to the Company from the April 1998 offering approximated $14.1 million. The
proceeds from the offering were used to pay down debt of approximately $5.9
million in 1998 and $4.7 million in 1999 with the remaining portion of the
proceeds used for acquisitions and capital expenditures.
The Company has historically used cash generated from operating
activities and debt to finance capital expenditures and the cash portion of the
purchase price of acquisitions. Management plans to continue making significant
investments in equipment and to seek appropriate acquisition candidates.
However, to fund the Company's continued expansion of operations, additional
financing may be necessary. The Company has available a line of credit totaling
$10 million (see Note 3 to the Consolidated Financial Statements for additional
information). For the foreseeable future, management believes it can fund
operations, meet debt service requirements, and make the planned capital
expenditures based on the available cash and cash equivalents, cash flow from
operations, and lines of credit.
23
<PAGE> 24
Cash Flows from Operating Activities
Cash flows from operating activities for the years ended October 31,
1999, 1998 and 1997 were $4.2 million, $4.2 million and $2.0 million.
The reduction in deferred revenue in the year ended October 31, 1998 was
from an acquired company that had previously required advance payments on
certain large transactions. Cash flows from operating activities for the fiscal
year 1998 compared to 1997 increased primarily due to increased net income,
depreciation and amortization, and the improvement in the management of accounts
receivable and inventories.
Cash Flows from Investing Activities
Cash flows used in investing activities were ($4.9) million, ($1.5)
million, and ($2.0) million for the years ended October 31, 1999, 1998 and 1997.
Cash flows used in investing activities increased in 1999 compared to 1998 due
to cash utilized for the purchase of property and equipment including the
implementation of a new enterprise-wide resource management system, and the net
effect of cash used in the purchase of businesses in 1999 over cash received
from the purchase of businesses in 1998. Cash flows used in investing activities
decreased in 1998 compared to 1997 as a result of the increase in proceeds from
sales of assets and the cash received from acquired businesses. This decrease
was partially offset by the additional investment in property and equipment of
$1.0 million.
Cash Flows from Financing Activities
Cash flows (used in) provided by financing activities for the years ended
October 31, 1999, 1998 and 1997 were ($6.6) million, $6.1 million and ($1.5)
million. In 1998, as a result of a stock offering, the Company received net
proceeds of $14.1 million. As a result of the offering, debt was paid down both
in 1999 and in 1998 in the amounts of $5.9 million and $4.7 million. Dividends
paid in 1999, 1998 and 1997 were $1.9 million, $1.8 million and $1.6 million.
INFLATION AND ECONOMIC CONDITIONS
Management believes that the effect of inflation on the Company's
operations has not been material and will continue to be immaterial for the
foreseeable future. The Company does not have long-term contracts; therefore, to
the extent permitted by competition, it has the ability to pass through to its
customers most cost increases resulting from inflation, if any.
SEASONALITY
Historically, the Company has experienced a greater portion of its annual
sales and net income in the second and fourth quarters than in the first and
third quarters. The second quarter generally reflects increased orders for
printing of corporate annual reports and proxy statements. A post-Labor Day
increase in demand for printing services and office products coincides with the
Company's fourth quarter.
24
<PAGE> 25
INFORMATION SYSTEMS AND YEAR 2000 ASSESSMENT UPDATE
Prior to 1999, the Company had put into place a Company-wide program to
assess the need to modify or replace portions or all of its information systems
to maintain its competitiveness and enable the proper processing of transactions
relating to the Year 2000 and beyond. As a result of this assessment, management
purchased and is in the implementation phase of a new information system for the
printing divisions. This new system encompasses estimating, sales, purchasing,
production and financial reporting. Implementation began in 1999 and is expected
to be substantially completed by the end of the fiscal Year 2000.
The Company had completed all system related modifications regarding Year
2000 compliance prior to December 31, 1999 and did not experience any Year 2000
related problems. The foregoing assessments of the Year 2000 are based on
information available at the present time. The Company will continue to monitor
and evaluate compliance with the Year 2000 date issue.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and other information required by this item are
contained in the financial statements and footnotes thereto listed in the index
on page F-1 of this report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is contained on
pages 2 through 4 and page 13 of the Company's definitive Proxy Statement, dated
February 17, 2000, with respect to the Annual Meeting of Shareholders to be held
on March 20, 2000, which will be filed pursuant to regulation 14(a) of the
Securities Exchange Act of 1934 and which is incorporated herein by reference.
25
<PAGE> 26
ITEM 11 - EXECUTIVE COMPENSATION
The information called for by this item is contained on pages 6 through
10 of the Company's definitive Proxy Statement, dated February 17, 2000, with
respect to the Annual Meeting of Shareholders to be held on March 20, 2000,
which will be filed pursuant to regulation 14(a) of the Securities Exchange Act
of 1934 and which is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item is contained on pages 4 and 5 of
the Company's definitive Proxy Statement, dated February 17, 2000, with respect
to the Annual Meeting of Shareholders to be held on March 20, 2000, which will
be filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is contained on page 12 of the
Company's definitive Proxy Statement, dated February 17, 2000, with respect to
the Annual Meeting of Shareholders to be held on March 20, 2000, which will be
filed pursuant to regulation 14(a) of the Securities Exchange Act of 1934 and
which is incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed for this part of the report are filed as a separate
section following the signature page. Reference is made to the Audited
Consolidated Financial Statements and Schedule II Table of Contents on
Page F-1.
(1) See Page No. F-1.
(2) Schedules, other than Schedule II listed on page F-1, are omitted
because of the absence of conditions under which they are
required.
26
<PAGE> 27
3. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION REFERENCE
- ------ ----------- ---------
<S> <C> <C>
(3) 3.1 Articles of Incorporation Filed as Exhibit 3.1 to Form 10-Q dated June 16, 1997,
filed on June 16, 1997, incorporated herein by reference.
3.2 Bylaws Filed as Exhibit 3.2 to Registration Statement on Form S-1,
File No. 33-54454, filed on November 10, 1992, incorporated
herein by reference.
(4) Instruments defining the See Exhibit 3.1 above.
rights of security holders,
including debentures.
(10) Material Contracts Realty Lease dated January 28, 1993 between ADJ Corp. and
Company regarding 2450 1st Avenue, Huntington, West
Virginia, filed as Exhibit 10.1 to Form 10-K dated January
27, 1994, filed January 31, 1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993 between The Harrah and
Reynolds Corporation and Company regarding 615 4th Avenue,
Huntington, West Virginia, filed as Exhibit 10.2 to Form
10-K dated January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993 between ADJ Corp. and
Company regarding 617-619 4th Avenue, Huntington, West
Virginia, filed as Exhibit 10.3 to Form 10-K dated January
27, 1994, filed January 31, 1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993 between The Harrah and
Reynolds Corporation and Company regarding 1945 5th Avenue,
Huntington, West Virginia, filed as Exhibit 10.4 to Form
10-K dated January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
</TABLE>
27
<PAGE> 28
<TABLE>
<S> <C> <C>
Realty Lease dated January 28, 1993 between Printing
Property Corp. and Company regarding 405 Ann Street,
Parkersburg, West Virginia, filed as Exhibit 10.5 to Form
10-K dated January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993 between Printing
Property Corp. and Company regarding 890 Russell Cave Road,
Lexington, Kentucky, filed as Exhibit 10.6 to Form 10-K
dated January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993 between BCM Company,
Ltd. and Company regarding 1563 Hansford Street,
Charleston, West Virginia, filed as Exhibit 10.7 to Form
10-K dated January 27, 1994, filed January 31, 1994, is
incorporated herein by reference.
Lease dated April 11, 1994 between Terry and Anis Wyatt and
Stationers Inc. regarding 214 Stone Road, Belpre, Ohio,
filed as Exhibit 10.1 to Form 10-K dated January 26, 1995,
filed January 27, 1995, is incorporated herein by
reference.
Form of Indemnification Agreement between Company and all
directors and executive officers, filed as Exhibit 10.4 to
Registration Statement on Form S-1, File No. 33-54454,
filed on November 10, 1992, is incorporated herein by
reference.
Lease Agreement dated June 1, 1995 between Owl Investors
Joint Venture and U.S. Tag & Ticket Company, Inc. regarding
2217 Robb Street, Baltimore, Maryland filed as Exhibit 10.1
to Form 10-K dated January 26, 1996, filed January 26,
1996, is incorporated herein by reference.
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
Lease Agreement dated June 1, 1972 between Earl H. and
Elaine D. Seibert and Smith & Butterfield Co., Inc.
regarding 113-117 East Third Street, Owensboro, Kentucky,
filed as Exhibit 10.3 to Form 10-K dated January 28, 1997,
filed January 28, 1997, is incorporated herein by
reference.
Agreement of Lease dated August 21, 1996 between Marion B.
and Harold A. Merten, Jr. and CM Acquisition Corp. (now The
Merten Company) regarding 1515 Central Parkway, Cincinnati,
Ohio, filed as Exhibit 10.4 to Form 10-K dated January 28,
1997, filed January 28, 1997, is incorporated herein by
reference.
$12,500,000 Term Loan Credit Agreement by and among
Champion Industries, Inc. and the Banks Party thereto and
PNC Bank, National Association, as Agent, dated as of March
31, 1997, as amended by Amendment No. 1 to Credit Agreement
dated August 1, 1997, filed as Exhibit 10.1 to Form 10-K
dated January 29, 1998, filed January 29, 1998, is
incorporated herein by reference.
Commercial Gross Lease between M. Field Gomila et al and
Bourque Printing dba Upton Printing dated October 29, 1997,
regarding 740 and 746 Carondolet Street, New Orleans,
Louisiana, filed as Exhibit 10.3 to Form 10-K dated January
29, 1998, filed January 29, 1998, is incorporated herein by
reference.
$5,600,000 Term Loan Credit Agreement by and among the
Company and its subsidiaries and PNC Bank, National
Association, dated as of March 13, 1998, together with
promissory note and representative security agreement
attendant thereto, filed as Exhibit 10.1 to Form 10-K dated
January 25, 1999 is incorporated herein by reference.
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C> <C>
Agreement of Lease between The Tilson Group and Capitol
Business Equipment, Inc. dated May 18, 1998, regarding 711
Indiana Avenue, Charleston, West Virginia, filed as Exhibit
10.2 to Form 10-K dated January 25, 1999, is incorporated
herein by reference.
Agreement of Lease between Mildred Thompson and Thompson's
of Morgantown, Inc. dated May 28, 1998, regarding Kirk and
Chestnut Streets, Morgantown, West Virginia, filed as
Exhibit 10.3 to Form 10-K dated January 25, 1999, is
incorporated herein by reference.
Lease Agreement between The Equitable Life Assurance
Society of the United States and Champion Industries, Inc.,
d/b/a Upton Printing, dated October 27, 1997, regarding
5600 Jefferson Highway, Harahan, Louisiana, filed as
Exhibit 10.4 to Form 10-K dated January 25, 1999, is
incorporated herein by reference.
Executive Compensation Company's 1993 Stock Option Plan, effective March 22, 1994,
Plans and Arrangements filed as Exhibit 10.14 to Form 10-K dated January 27, 1994,
filed January 31, 1994, is incorporated herein by reference.
Deferred Compensation Agreement dated July 1, 1993 between
Blue Ridge Printing Co., Inc. and Glenn W. Wilcox, Sr.,
filed as Exhibit 10.4 to Form 10-K dated January 29, 1998,
filed January 29, 1998, is incorporated herein by
reference.
Split Dollar Life Insurance Agreement dated July 1, 1993
between Blue Ridge Printing Co., Inc. and Glenn W. Wilcox,
Sr., filed as Exhibit 10.5 to Form 10-K dated January 29,
1998, filed January 29, 1998, is incorporated herein by
reference.
(10.1) Agreement of Lease between ADJ Corp and Champion Industries,
Inc. dated January 1, 1999, regarding Industrial Lane in
Kyle Industrial Park.
Page Exhibit (10.1)-p1
----------------------
</TABLE>
30
<PAGE> 31
<TABLE>
<S> <C> <C>
(10.2) $10,000,000 revolving credit agreement by and among the
Company and its subsidiaries and National City Bank dated
as of April 1, 1999.
Page Exhibit (10.2)-p1
----------------------
(10.3) Lease Agreement dated November 1, 1999 between Randall M.
Schulz, successor trustee of The Butterfield Family Trust
No. 2 and Smith & Butterfield Co., Inc. regarding 2800
Lynch Road, Evansville, Indiana.
Page Exhibit (10.3)-p1
----------------------
(10.4) Agreement of Lease dated September 25, 1998 between Ronald
H. Scott and Frank J. Scott t/d/b/a St. Clair Leasing Co.
and Interform Corporation, regarding 1901 Mayview Road,
Bridgeville, Pennsylvania.
Page Exhibit (10.4)-p1
----------------------
(21) Subsidiaries of the Registrant Exhibit 21 Page Exhibit 21-p1
(23) Consent of Ernst & Young LLP Exhibit 23 Page Exhibit 23-p1
(27) Financial Data Schedule Exhibit 27 Page Exhibit 27-p1
</TABLE>
(b) Champion filed the following reports on Form 8-K during the last quarter
of the period covered by this report:
None.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHAMPION INDUSTRIES, INC.
By /s/ Marshall T. Reynolds
----------------------------------
Marshall T. Reynolds
President and Chief Executive Officer
By /s/ Todd R. Fry
----------------------------------
Todd R. Fry
Chief Financial Officer
Date: January 25, 2000
32
<PAGE> 33
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ Robert H. Beymer January 25, 2000
---------------------------------------------
Robert H. Beymer, Director
/s/ Philip E. Cline January 20, 2000
---------------------------------------------
Philip E. Cline, Director
/s/ Harley F. Mooney, Jr. January 19, 2000
---------------------------------------------
Harley F. Mooney, Jr., Director
/s/ Todd L. Parchman January 20, 2000
---------------------------------------------
Todd L. Parchman, Director
/s/ A. Michael Perry January 21, 2000
---------------------------------------------
A. Michael Perry, Director
/s/ Marshall T. Reynolds January 25, 2000
---------------------------------------------
Marshall T. Reynolds, Director
/s/ Neal W. Scaggs January 18, 2000
---------------------------------------------
Neal W. Scaggs, Director
/s/ Glenn W. Wilcox, Sr. January 19, 2000
---------------------------------------------
Glenn W. Wilcox, Sr., Director
33
<PAGE> 34
CHAMPION INDUSTRIES, INC.
Audited Consolidated Financial Statements and Schedule
October 31, 1999
CONTENTS
Report of Independent Auditors (Item 8)......................................F-2
Audited Consolidated Financial Statements and Schedule (Item 8)
Consolidated Balance Sheets............................................F-3
Consolidated Income Statements.........................................F-5
Consolidated Statements of Shareholders' Equity........................F-6
Consolidated Statements of Cash Flows..................................F-7
Notes to Consolidated Financial Statements.............................F-8
Schedule II--Valuation and Qualifying Accounts (Item 14a).............F-22
F-1
<PAGE> 35
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Champion Industries, Inc.
We have audited the accompanying consolidated balance sheets of Champion
Industries, Inc. and Subsidiaries as of October 31, 1999 and 1998, and the
related consolidated income statements, statements of shareholders' equity, and
cash flows for each of the three years in the period ended October 31, 1999. Our
audits also included the financial statement schedule listed in the index at
Item 14(a). These financial statements and the schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based upon our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 consolidated financial position of
Champion Industries, Inc. and Subsidiaries at October 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
Charleston, West Virginia
December 19, 1999
F-2
<PAGE> 36
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
---------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,463,554 $ 9,773,193
Accounts receivable, net of allowance of $1,448,000 and $1,329,000 24,041,919 21,234,593
Inventories 14,072,694 12,760,204
Other current assets 828,189 478,306
Deferred income tax assets 849,181 935,004
---------------------------------------
Total current assets 42,255,537 45,181,300
Property and equipment, at cost:
Land 984,889 984,889
Buildings and improvements 6,308,530 5,564,062
Machinery and equipment 32,861,577 29,195,512
Equipment under capital leases 1,600,000 2,137,400
Furniture and fixtures 2,353,191 1,943,399
Vehicles 2,621,696 2,438,462
---------------------------------------
46,729,883 42,263,724
Less accumulated depreciation (20,667,666) (17,335,378)
---------------------------------------
26,062,217 24,928,346
Cash surrender value of officers' life insurance 956,769 935,169
Goodwill, net of accumulated amortization 3,317,849 3,026,106
Other assets 728,833 434,407
---------------------------------------
5,003,451 4,395,682
---------------------------------------
Total assets $ 73,321,205 $ 74,505,328
=======================================
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 37
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
----------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,521,282 $ 3,175,743
Accrued payroll and commissions 1,768,345 1,541,586
Taxes accrued and withheld 905,854 597,886
Accrued income taxes 677,119 175,202
Accrued expenses 885,864 716,582
Current portion of long-term debt:
Notes payable 3,607,354 3,477,473
Capital lease obligations 316,598 388,954
----------------------------
Total current liabilities 11,682,416 10,073,426
Long-term debt, net of current portion:
Notes payable 9,222,191 12,966,038
Capital lease obligations 710,433 1,026,517
Deferred income tax liabilities 4,318,571 4,341,150
Other liabilities 827,725 788,462
----------------------------
Total liabilities 26,761,336 29,195,593
Commitments and contingencies
Shareholders' equity:
Common stock, $1 par value, 20,000,000 shares authorized;
9,713,913 shares issued and outstanding 9,713,913 9,713,913
Additional paid-in capital 22,242,047 22,242,047
Retained earnings 14,603,909 13,353,775
----------------------------
Total shareholders' equity 46,559,869 45,309,735
----------------------------
Total liabilities and shareholders' equity $73,321,205 $74,505,328
============================
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 38
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Printing $ 92,404,925 $ 95,002,726 $ 87,978,709
Office products and office furniture 31,953,877 28,058,762 20,405,929
---------------------------------------------------------------------
Total revenues 124,358,802 123,061,488 108,384,638
Cost of sales:
Printing 65,021,151 66,699,561 59,849,596
Office products and office furniture 21,763,787 18,615,734 13,289,403
---------------------------------------------------------------------
Total cost of sales 86,784,938 85,315,295 73,138,999
Gross Profit 37,573,864 37,746,193 35,245,639
Selling, general and administrative expenses 31,387,527 29,871,573 28,079,009
---------------------------------------------------------------------
Income from operations 6,186,337 7,874,620 7,166,630
Other income (expense):
Interest income 157,691 244,753 20,116
Interest expense (1,228,157) (1,507,387) (1,586,418)
Other 210,912 241,392 737,097
---------------------------------------------------------------------
(859,554) (1,021,242) (829,205)
---------------------------------------------------------------------
Income before income taxes 5,326,783 6,853,378 6,337,425
Income taxes (2,133,872) (2,702,274) (2,570,644)
---------------------------------------------------------------------
Net income $ 3,192,911 $ 4,151,104 $ 3,766,781
=====================================================================
Earnings per share:
Basic $0.33 $0.45 $0.45
Diluted 0.33 0.45 0.45
Dividends paid per share 0.20 0.20 0.19
Weighted average shares outstanding:
Basic 9,714,000 9,142,000 8,383,000
Diluted 9,714,000 9,172,000 8,441,000
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 39
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1996 8,382,682 $ 8,382,682 $ 7,442,502 $ 8,815,536 $ 24,640,720
Net income for 1997 - - - 3,766,781 3,766,781
Dividends ($0.19 per share) - - - (1,567,803) (1,567,803)
Stock options exercised 2,441 2,441 11,310 - 13,751
Cash paid in lieu of fractional shares (193) (193) (3,484) - (3,677)
------------------------------------------------------------------------------
Balance, October 31, 1997 8,384,930 8,384,930 7,450,328 11,014,514 26,849,772
Net income for 1998 - - - 4,151,104 4,151,104
Dividends ($0.20 per share) - - - (1,811,843) (1,811,843)
Stock issued in acquisitions 193,397 193,397 1,564,894 - 1,758,291
Stock options exercised 43,593 43,593 184,274 - 227,867
Stock offering, net of issuance expenses 1,091,993 1,091,993 13,042,551 - 14,134,544
------------------------------------------------------------------------------
Balance, October 31, 1998 9,713,913 9,713,913 22,242,047 13,353,775 45,309,735
Net income for 1999 - - - 3,192,911 3,192,911
Dividends ($0.20 per share) - - - (1,942,777) (1,942,777)
------------------------------------------------------------------------------
Balance, October 31, 1999 9,713,913 $ 9,713,913 $ 22,242,047 $ 14,603,909 $ 46,559,869
==============================================================================
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 40
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,192,911 $ 4,151,104 $ 3,766,781
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 3,892,312 3,620,925 3,179,515
Loss (gain) on sale of assets 41,004 (52,914) (371,041)
Deferred income taxes 33,436 616,334 334,409
Deferred compensation 18,190 56,894 82,285
Bad debt expense 529,747 274,191 373,165
Changes in assets and liabilities:
Accounts receivable (2,971,599) (646,319) (2,063,815)
Inventories (1,197,359) (489,321) (1,758,510)
Other current assets (347,433) (164,028) 152,345
Accounts payable (86,112) (1,038,947) 236,195
Accrued payroll 205,028 (628,118) 616,772
Taxes accrued and withheld 290,324 (58,872) (235,161)
Accrued income taxes 501,917 (264,549) (946,031)
Deferred revenue - (1,059,975) -
Accrued expenses 118,853 (108,610) (1,383,537)
-------------------------------------------------------------
Net cash provided by operating activities 4,221,219 4,207,795 1,983,372
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,078,328) (3,195,260) (2,163,775)
Proceeds from sales of assets 301,454 513,282 163,103
Businesses acquired, net of cash received (788,941) 1,159,356 254,676
Change in other assets (342,755) 33,798 (297,364)
-------------------------------------------------------------
Net cash used in investing activities (4,908,570) (1,488,824) (2,043,360)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) borrowings on notes payable - (2,758,757) 1,575,000
Proceeds from long-term debt 45,613 1,815,465 1,306,919
Principal payments on long-term debt (4,725,124) (5,465,344) (2,812,791)
Dividends paid (1,942,777) (1,811,843) (1,567,803)
Proceeds from stock offering, net of issuance expenses - 14,134,544 -
Proceeds for exercise of stock options - 227,867 13,751
Cash paid in lieu of fractional shares - - (3,677)
-------------------------------------------------------------
Net cash (used in) provided by financing activities (6,622,288) 6,141,932 (1,488,601)
-------------------------------------------------------------
Net (decrease) increase in cash (7,309,639) 8,860,903 (1,548,589)
Cash and cash equivalents at beginning of year 9,773,193 912,290 2,460,879
-------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,463,554 $ 9,773,193 $ 912,290
=============================================================
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 41
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Champion conform to accounting
principles generally accepted in the United States. The preparation of the
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from these estimates. The following is a summary of the more
significant accounting and reporting policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of Champion Industries, Inc.
and Subsidiaries (the "Company") include the accounts of The Chapman Printing
Company, Inc., Bourque Printing, Inc., Dallas Printing Company, Inc.,
Stationers, Inc., Carolina Cut Sheets, Inc., U.S. Tag & Ticket Company, Inc.,
Donihe Graphics, Inc., Smith and Butterfield Co., Inc., The Merten Company,
Interform Corporation, Blue Ridge Printing Co., Inc., CHMP Leasing, Inc., Rose
City Press, Capitol Business Equipment, Inc. Thompson's of Morgantown, Inc., and
Independent Printing Service, Inc.
Significant intercompany transactions have been eliminated in consolidation.
CASH EQUIVALENTS
Cash and cash equivalents consist principally of cash on deposit with banks,
repurchase agreements for government securities, and a money market account, all
highly liquid investments with an original maturity of three months or less. At
October 31, 1999 and 1998, the Company held overnight repurchase agreements for
$2,228,000 and $1,686,000 of government securities with stated interest rates of
3.85% and 4.07%. In addition, at October 31, 1998, the Company had invested
$5,238,000 in a money market account with a national financial institution that
earned 4.94% during October 1998.
INVENTORIES
Inventories are principally stated at the lower of first-in, first-out cost or
market. Manufactured finished goods and work-in-process inventories include
material, direct labor and overhead based on standard costs, which approximate
actual costs.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment and amortization of leasehold
improvements and equipment under capital leases are recognized primarily on the
straight-line and declining-balance methods in amounts adequate to amortize
costs over the estimated useful lives of the assets as follows:
Buildings and improvements 5 - 40 years
Machinery and equipment 5 - 10 years
Furniture and fixtures 5 - 10 years
Vehicles 3 - 5 years
F-8
<PAGE> 42
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company leases certain equipment under financing agreements that are
classified as capital leases. These leases are for a term of five years and
contain purchase options at the end of the original lease term. Amortization of
assets recorded under capital lease agreements is included in depreciation
expense.
Major renewals, betterments, and replacements are capitalized while maintenance
and repair costs are charged to operations as incurred. Upon the sale or
disposition of assets, the cost and related accumulated depreciation are removed
from the accounts with the resulting gains or losses reflected in income.
Depreciation expense approximated $3,674,000, $3,432,000, and $3,021,000 for the
years ended October 31, 1999, 1998 and 1997.
GOODWILL
The excess cost over fair value of net assets of acquired businesses, goodwill,
is being amortized by the straight-line method over 10 to 30 years. The carrying
value of goodwill is evaluated periodically for impairment. This evaluation
includes the review of operating performance and estimated future undiscounted
cash flows of the underlying businesses. Any impairment loss is recognized in
the period when it is determined that the carrying value of the goodwill may not
be recoverable. Accumulated amortization at October 31, 1999 and 1998
approximated $1,253,000 and $1,093,000. Amortization expense approximated
$160,000, $137,000, and $132,000 for the years ended October 31, 1999, 1998 and
1997.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the years
ended October 31, 1999, 1998 and 1997 approximated $693,000, $650,000 and
$646,000.
INCOME TAXES
Provisions for income taxes currently payable and deferred income taxes are
based on the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average shares of common stock outstanding for the period and excludes any
dilutive effects of stock options. Diluted earnings per share is computed by
dividing net income by the weighted average shares of common stock outstanding
for the period plus the shares that would be outstanding assuming the exercise
of dilutive stock options. The effect of dilutive stock options increased
weighted average shares outstanding by 500, 30,000 and 58,000 for the years
ended October 31, 1999, 1998 and 1997.
F-9
<PAGE> 43
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEGMENT INFORMATION
In 1999, the Company adopted Statement of Financial Accounting Standards (SFAS)
131, "Disclosures about Segments of an Enterprise and Related Information". SFAS
131 supercedes SFAS 14, "Financial Reporting For Segments of a Business
Enterprise", replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS 131 did not affect results of operations or financial
position, but did affect the disclosure of segment information (see "Segment
Information" Note10).
COMPREHENSIVE INCOME
In 1999, the Company adopted SFAS 130, "Reporting Comprehensive Income". SFAS
130 established standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. The adoption of this standard did not
affect the Company's financial statements.
COST OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
The Company adopted American Institute of Certified Public Accountants Statement
of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The SOP requires that certain external costs and
internal payroll and payroll-related costs be capitalized during the application
development and implementation stages of a software development project and
amortized over the software's useful life. Training and research and development
costs are to be expensed as incurred.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the current-year
Financial Statement presentation.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
--------------------------------------------
<S> <C> <C>
Printing:
Raw materials $ 3,267,880 $ 3,117,249
Work in process 2,357,856 2,112,007
Finished goods 4,205,061 3,621,439
Office products and office furniture 4,241,897 3,909,509
--------------------------------------------
$ 14,072,694 $ 12,760,204
============================================
</TABLE>
F-10
<PAGE> 44
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
-----------------------------
<S> <C> <C>
Unsecured term notes payable to a bank, due in monthly
principal installments of $148,810 plus interest at the prime
rate with the last note maturing April 2004 $ 8,035,714 $13,593,658
Installment notes payable to banks, due in monthly installments
totaling $76,530 with interest rates approximating the bank's
prime rate and the last note maturing October 2005,
collateralized by equipment, vehicles, inventory, and accounts
receivable 2,444,181 2,141,994
Unsecured installment notes payable to banks, due in monthly
installments totaling $1,700, with interest rates approximating
the bank's prime rate, with the last note maturing June 1999 - 13,133
Mortgage note payable to a bank, due in monthly installments of
$11,000, including interest at the prime rate with the note
maturing November 2005, collateralized by real estate - 694,726
Unsecured installment notes payable to a bank, due in monthly
installments of $82,921, plus interest at a fixed rate with the
note maturing May 2002, collateralized by real estate 2,349,650 -
Capital lease obligations, due in monthly installments totaling
$32,017 including interest at the bank's prime rate through
October 2002 1,027,031 1,415,471
-----------------------------
13,856,576 17,858,982
Less current portion 3,923,952 3,866,427
-----------------------------
Long-term debt, net of current portion $ 9,932,624 $13,992,555
=============================
</TABLE>
The unsecured term note agreements contain restrictive financial covenants
requiring the Company to maintain certain financial ratios.
F-11
<PAGE> 45
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Maturities of long-term debt for each of the next five years follows:
<TABLE>
<CAPTION>
NOTES CAPITAL
PAYABLE LEASES TOTAL
----------------------------------------------------------------
<S> <C> <C> <C>
2000 $ 3,607,354 $ 316,598 $ 3,923,952
2001 3,309,580 341,661 3,651,241
2002 2,684,637 368,772 3,053,409
2003 1,991,086 - 1,991,086
2004 1,107,649 - 1,107,649
Thereafter 129,239 - 129,239
----------------------------------------------------------------
$12,829,545 $1,027,031 $13,856,576
================================================================
</TABLE>
The Company has an unsecured revolving line of credit with a bank for borrowings
to a maximum of $10,000,000 with interest payable monthly at interest rates at
LIBOR plus 1% to 1.5%. The line of credit expires in January 2002 and contains
certain restrictive financial covenants. There were no borrowings outstanding
under this facility at October 31, 1999.
The prime rate, the base interest rate on the above loans, approximated 8.25%
and 8.0% at October 31, 1999 and 1998. Interest paid during the years ended
October 31, 1999, 1998 and 1997 approximated $1,230,000, $1,588,000 and
$1,511,000.
The Company's non-cash activities for 1999 and 1998 included equipment purchases
of approximately $589,000 and $579,000, which were financed by a bank.
4. EMPLOYEE BENEFIT PLANS
The Company had a Profit Sharing Plan that covered all eligible employees and
qualified as a Savings Plan under Section 401(k) of the Internal Revenue Code.
Effective January 1, 1998, the Profit Sharing Plan was merged into The Champion
Industries, Inc. 401(k) Plan (the "Plan"). The Plan covers all eligible
employees who satisfy the age and service requirements. Each participant may
elect to contribute up to 15% of annual compensation, and the Company is
obligated to contribute 100% of the participant's contribution not to exceed 2%
of the participant's annual compensation. The Company may make discretionary
contributions to the Plan. The Company's expense under these Plans was
approximately $369,000, $311,000 and $158,000 for the years ended October 31,
1999, 1998 and 1997.
The Company's 1993 Stock Option Plan provides for the granting of both incentive
and non-qualified stock options to management personnel for up to 762,939 shares
of the Company's common stock. The option price per share for incentive stock
options shall not be lower than the fair market value of the common stock at the
date of grant. The option price per share for non-qualified stock options shall
be at such price as the Compensation Committee of the Board of Directors may
determine at its sole discretion. All options to date are incentive stock
options. Exercise prices for
F-12
<PAGE> 46
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
options outstanding as of October 31, 1999 ranged from $6.88 to $18.50. Options
vest immediately and may be exercised within five years from the date of grant.
The weighted average remaining contractual life of those options is 2.3 years. A
summary of the Company's stock option activity and related information for the
years ended October 31 follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
1999 PRICE 1998 PRICE 1997 PRICE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 158,424 $15.89 179,532 $12.52 146,973 $11.12
Granted 43,000 6.88 42,000 18.50 35,000 17.90
Exercised - - (43,593) 6.30 (2,441) 5.63
Forfeited (20,562) 13.07 (19,515) 11.88 - -
------------------- ------------------ -----------------
Outstanding-end of year 180,862 13.94 158,424 15.89 179,532 12.52
=================== ================== =================
Weighted average fair value of
options granted during the year $ 1.83 $ 4.51 $ 4.63
=================== ================== =================
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of
6.00%, 6.00% and 6.04%; dividend yields of 2.91%, 1.08% and 1.10%; volatility
factors of the expected market price of the Company's common stock of 32.5%,
21.2% and 23.6%; and a weighted-average expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. Accordingly, the
following pro forma disclosures are not likely to be representative of the
effects on reported net income for future years.
F-13
<PAGE> 47
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following pro forma information has been determined as if the Company had
accounted for its employee stock options under the fair value method. For
purposes of pro forma disclosures, the estimated fair value of the options is
expensed in the year granted since the options vest immediately. The Company's
pro forma information for the years ended October 31 follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $ 3,114,000 $ 3,962,000 $ 3,605,000
=====================================================================
Pro forma basic and diluted earnings per share $ 0.32 $ 0.43 $ 0.43
=====================================================================
</TABLE>
The Company has deferred compensation agreements with two employees of Blue
Ridge Printing Co., Inc. providing for payments totaling approximately
$1,000,000 over a ten year period after retirement. The Company had accrued
approximately $651,000 and $609,000 at October 31, 1999 and 1998 relating to
these agreements. The amount expensed for these agreements for the years ended
October 31, 1999, 1998 and 1997 approximated $42,000, $53,000, and $82,000. To
assist in funding the deferred compensation agreements, the Company has invested
in life insurance policies which had cash surrender values of $500,000 at
October 31, 1999 and 1998.
5. INCOME TAXES
Income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
-----------------------------------------------------------------
<S> <C> <C> <C>
Current expense:
Federal $ 1,655,446 $ 1,662,406 $ 1,783,878
State 444,990 423,534 452,357
Deferred expense 33,436 616,334 334,409
-----------------------------------------------------------------
$ 2,133,872 $ 2,702,274 $ 2,570,644
=================================================================
</TABLE>
F-14
<PAGE> 48
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
-------------------------------------------
<S> <C> <C>
Assets:
Allowance for doubtful accounts $ 579,214 $ 531,611
Deferred compensation 260,212 243,412
Net operating loss carryforward of acquired companies 81,334 253,461
Accrued vacation 187,042 207,693
Other accrued liabilities 100,417 117,995
-------------------------------------------
Gross deferred tax assets 1,208,219 1,354,172
Liabilities:
Property and equipment 4,633,174 4,631,527
Other assets 44,435 128,791
-------------------------------------------
Gross deferred liability 4,677,609 4,760,318
-------------------------------------------
Net deferred tax liabilities $ 3,469,390 $ 3,406,146
===========================================
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of federal benefit 5.5 4.1 4.7
Other 0.6 1.3 1.9
-----------------------------------------------------
Effective tax rate 40.1% 39.4% 40.6%
=====================================================
</TABLE>
Income taxes paid during the years ended October 31, 1999, 1998 and 1997
approximated 1,755,000, $2,393,000 and $3,024,000.
The Company has available for income tax purposes net operating loss
carryforwards from acquired companies of approximately $1,619,000, of which
$622,000 expires in 2011, $899,000 in 2012 and $98,000 in 2013.
6. RELATED PARTY TRANSACTIONS AND OPERATING LEASE COMMITMENTS
The Company leases operating facilities from entities controlled by its
President, his family and affiliates. The terms of these leases, which are
accounted for as operating leases, range from five to fifteen years.
F-15
<PAGE> 49
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of significant related party transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C>
Rent expense paid to affiliated entities for
operating facilities $ 428,000 $ 363,000 $ 363,000
Sales of office products, office furniture and
printing services to affiliated entities 667,000 447,000 462,000
</TABLE>
Historically, the Company either purchased a new vehicle or entered into a new
vehicle lease with unrelated entities. These leases are on a month-to-month
basis. Other vehicle rent expense to unrelated entities totaled $168,000,
$231,000 and $262,000 for the years ended October 31, 1999, 1998 and 1997.
In addition, the Company leases property and equipment from unrelated entities
under operating leases. Rent expense amounted to $742,000, $779,000 and $489,000
for the years ended October 31, 1999, 1998 and 1997.
Under the terms and conditions of the above-mentioned leases, the Company pays
all taxes, assessments, maintenance, repairs or replacements, utilities and
insurance.
Future minimum rental commitments for all noncancelable operating leases with
initial terms of one year or more consisted of the following at October 31,
1999:
<TABLE>
<S> <C>
2000 $ 1,045,000
2001 967,000
2002 754,000
2003 617,000
2004 418,000
Thereafter 526,000
--------------------
$ 4,327,000
====================
</TABLE>
In order to minimize premium costs, the Company participates in a self-insurance
program for employee health care benefits with affiliates controlled by its
President. The Company is allocated costs based on its proportionate share to
provide such benefits to its employees. The Company's expense related to this
program for the years ended October 31, 1999, 1998 and 1997 was approximately
$1,961,000, $2,049,000 and $1,960,000.
7. DEFERRED GAIN
On August 30, 1991, Stationers, Inc. sold assets of its retail bookstore
consisting primarily of inventory and fixtures. The assets sold represented a
separate area of Stationers' retail location and thus the transaction was
considered to be a disposal of a portion of a product line incident to the
F-16
<PAGE> 50
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
evolution of its overall business. Stationers, Inc. unconditionally guaranteed a
bank loan of the purchaser amounting to $600,000. Accordingly, the gain from the
sale of $591,835 was deferred and recognized as the purchaser made payments on
the purchaser's bank loan and the note receivable. In 1997, Stationers was
released from this guarantee, and the remaining gain was recognized. The gain
recognized for the year ended October 31, 1997 was $330,000.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to the environmental laws and regulations of the United
States and the states in which it operates concerning emissions into the air,
discharges into the waterways and the generation, handling and disposal of waste
materials. The Company's past expenditures relating to environmental compliance
have not had a material effect on the Company and are included in normal
operating expenses. These laws and regulations are constantly evolving, and it
is impossible to predict accurately the effect they may have upon the capital
expenditures, earnings, and competitive position of the Company in the future.
Based upon information currently available, management believes that
expenditures relating to environmental compliance will not have a material
impact on the financial position of the Company.
9. ACQUISITIONS
On November 30, 1999, the Company acquired all of the issued and outstanding
common stock of Diez Business Machines, Inc. of Gonzales, Louisiana. This
transaction was accounted for under the purchase method of accounting.
On July 16, 1999, the Company acquired certain assets and assumed certain
liabilities of AIM Printing of Knoxville, Tennessee. On June 1, 1999, the
Company acquired all of the issued and outstanding common stock of Independent
Printing Service, Inc. of Evansville, Indiana. These transactions were accounted
for under the purchase method of accounting.
On May 29, 1998, the Company acquired all of the outstanding common stock of
Thompson's of Morgantown, Inc. and Thompson's of Barbour County, Inc.
(collectively referred to as "Thompson"), both companies doing business as
Thompson's Office Furniture and Supplies of Morgantown and Philippi, West
Virginia, in exchange for 45,473 shares of its common stock with a market value
at the time of acquisition of $600,000.
On May 18, 1998, the Company acquired all of the outstanding common shares of
Capitol Business Equipment, Inc. (Capitol), doing business as Capitol Business
Interiors of Charleston, West Virginia, in exchange for 72,202 shares of its
common stock with a market value at the time of acquisition of $1,000,000.
The Capitol and Thompson transactions were accounted for under the pooling of
interests method. However, prior period financial statements were not restated
due to the immaterial effect on Champion's consolidated financial statements.
Accordingly, Capitol's and Thompson's operations are included in these
consolidated financial statements since their acquisition date.
F-17
<PAGE> 51
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On February 2, 1998, the Company acquired all of the outstanding common stock of
Rose City Press (Rose City) of Charleston, West Virginia, an office products
company, in exchange for 75,722 shares of its common stock with a market value
at the time of acquisition of $1,250,000. The transaction was accounted for
under the purchase method and Rose City's operations are included in these
consolidated financial statements since the acquisition date.
Pro forma financial information related to these acquisitions has not been
presented because such information would not be materially different from
amounts reported herein.
On December 31, 1996, the Company acquired all of the outstanding common stock
of Interform Corporation (Interform) in exchange for cash of $2,500,000,
obtained through bank financing. This acquisition was accounted for under the
purchase method. At December 31, 1996, Interform held for sale one of its former
facilities which was recorded at its estimated fair value. This facility was
sold in December 1997 for its estimated fair market value.
The Interform acquisition has been accounted for under the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based upon their fair values at the acquisition
date. The operating results of Interform are included in the Consolidated Income
Statements since its acquisition date.
The following summarizes the unaudited consolidated pro forma results of
operations for the year ended October 31, 1997, assuming the acquisition of
Interform, accounted for under the purchase method, had been consummated at the
beginning of the year.
<TABLE>
<S> <C>
Revenues $ 113,710,000
Net income $ 3,661,000
Diluted earnings per share $ 0.43
Diluted weighted average shares outstanding 8,441,000
</TABLE>
10. INDUSTRY SEGMENT INFORMATION
In 1999, the Company adopted SFAS 131. The accounting policies of the segments
are the same as those described in the "Summary of Significant Accounting
Policies." The Company evaluates the performance of its segments based on an
operating profit basis prior to interest expense, interest income or other
income.
The Company operates principally in two industry segments organized on the basis
of product lines: the production, printing and sale, principally to commercial
customers, of printed materials (including brochures, pamphlets, reports, tags,
continuous and other forms); and the sale of office products and office
furniture including interior design services. The Company employs
F-18
<PAGE> 52
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
approximately 900 people, approximately 90 of whom are covered by a collective
bargaining agreement which expires on May 31, 2001. The Company believes its
relations with employees is satisfactory.
The table below presents information about reported segments for the years
ending October 31:
<TABLE>
<CAPTION>
OFFICE PRODUCTS
1999 PRINTING & FURNITURE TOTAL
---- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 101,162,938 $ 34,033,078 $ 135,196,016
Elimination of intersegment revenue (8,758,013) (2,079,201) (10,837,214)
---------------------------------------------------------------------------
Consolidated revenues $ 92,404,925 $ 31,953,877 $ 124,358,802
===========================================================================
Operating income 4,451,565 1,734,772 6,186,337
Depreciation & amortization 3,648,497 243,815 3,892,312
Capital expenditures 3,884,818 193,510 4,078,328
Identifiable assets 58,155,475 15,165,730 73,321,205
OFFICE PRODUCTS
1998 PRINTING & FURNITURE TOTAL
---- ---------------------------------------------------------------------------
Revenues $ 101,634,492 $ 31,620,682 $ 133,255,174
Elimination of intersegment revenue (6,631,766) (3,561,920) (10,193,686)
---------------------------------------------------------------------------
Consolidated revenues $ 95,002,726 $ 28,058,762 $ 123,061,488
===========================================================================
Operating income 5,947,416 1,927,204 7,874,620
Depreciation & amortization 3,306,724 314,201 3,620,925
Capital expenditures 3,048,842 146,418 3,195,260
Identifiable assets 61,904,800 12,600,528 74,505,328
OFFICE PRODUCTS
1997 PRINTING & FURNITURE TOTAL
---- ---------------------------------------------------------------------------
Revenues $ 94,231,554 $ 23,997,849 $ 118,229,403
Elimination of intersegment revenue (6,252,845) (3,591,920) (9,844,765)
---------------------------------------------------------------------------
Consolidated revenues $ 87,978,709 $ 20,405,929 $ 108,384,638
===========================================================================
Operating income 6,065,034 1,101,596 7,166,630
Depreciation & amortization 2,955,739 223,776 3,179,515
Capital expenditures 1,812,896 350,879 2,163,775
Identifiable assets 52,577,247 7,768,466 60,345,713
</TABLE>
F-19
<PAGE> 53
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of total segment revenue, assets and operating income to
consolidated income before income taxes for the years ending October 31, 1999,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Total segment revenues $ 135,196,016 $ 133,255,174 $ 118,229,403
Elimination of intersegment revenue (10,837,214) (10,193,686) (9,844,765)
-------------------------------------------------------
Consolidated revenue $ 124,358,802 $ 123,061,488 $ 108,384,638
=======================================================
Operating Income:
Total segment operating income $ 6,186,337 $ 7,874,620 $ 7,166,630
Interest income 157,691 244,753 20,116
Interest expense (1,228,157) (1,507,387) (1,586,418)
Other income 210,912 241,392 737,097
-------------------------------------------------------
Consolidated income before income taxes $ 5,326,783 $ 6,853,378 $ 6,337,425
=======================================================
Identifiable assets:
Total segment identifiable assets $ 73,321,205 $ 74,505,328 $ 60,345,713
Elimination of intersegment assets - - -
-------------------------------------------------------
Total consolidated assets $ 73,321,205 $ 74,505,328 $ 60,345,713
=======================================================
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value. The fair value of revolving credit agreements and
long-term debt was estimated using discounted cash flows and it approximates
their carrying value.
F-20
<PAGE> 54
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended October 31, 1999 and 1998.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
1999 $29,230,000 $30,874,000 $30,037,000 $34,217,000
1998 29,634,000 31,181,000 30,765,000 31,481,000
GROSS PROFIT
1999 $ 8,621,000 $ 9,807,000 $ 8,915,000 $10,230,000
1998 8,366,000 9,755,000 9,168,000 10,457,000
NET INCOME
1999 $ 855,000 $ 1,136,000 $ 256,000 $ 945,000
1998 797,000 1,021,000 1,021,000 1,312,000
EARNINGS PER SHARE
Basic
1999 $ .09 $ .12 $ .03 $ 10
1998 .10 .12 .11 .14
Diluted
1999 $ .09 $ .12 $ .03 $ .10
1998 .09 .12 .11 .14
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic
1999 9,714,000 9,714,000 9,714,000 9,714,000
1998 8,386,000 8,819,000 9,647,000 9,708,000
Diluted
1999 9,714,000 9,714,000 9,716,000 9,714,000
1998 8,437,000 8,856,000 9,674,000 9,711,000
</TABLE>
F-21
<PAGE> 55
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years Ended October 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT BALANCES OF CHARGED TO BALANCE
BEGINNING ACQUIRED COSTS AND AT END
DESCRIPTION OF PERIOD COMPANIES EXPENSES DEDUCTIONS (1) OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
- ----
Allowance for doubtful accounts $1,329,027 $19,236 $529,747 ($429,976) $1,448,034
1998
- ----
Allowance for doubtful accounts $1,139,985 $59,515 $274,191 ($144,664) $1,329,027
1997
- ----
Allowance for doubtful accounts $548,284 $314,313 $373,165 ($95,777) $1,139,985
</TABLE>
(1) Uncollectable accounts written off, net of recoveries
F-22
<PAGE> 1
EXHIBIT 10.1
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE is made as of the 1st day of January, 1999,
between ADJ CORP., a West Virginia corporation, hereinafter called "Lessor," and
CHAMPION INDUSTRIES, INC., a West Virginia corporation, hereinafter called
"Lessee."
1. Demise of Premises. Lessor hereby demises and leases to Lessee and
Lessee hereby accepts and leases from Lessor, for the term and upon the terms
and conditions hereinafter set forth, the second floor, consisting of
approximately 8,400 square feet, and the front entry lobby area, consisting of
approximately 400 square feet (the "Demised Premises" or "Premises") of the
building situate upon the real property located on Industrial Lane in Kyle
Industrial Park, Route 2, Ohio River Road, Huntington, West Virginia, described
on Exhibit A attached hereto and made a part hereof ("the Building"), together
with the right to use, in common with others, the existing paved parking,
entryways and public stairways. Lessee acknowledges that Lessor retains the
right to apportion designated areas of the paved parking among its Building
tenants. Lessee further acknowledges the Premises and Building to be in adequate
condition at the commencement of this Lease.
Lessee acknowledges that Lessor has/will have a separate tenant for the
first floor of the Building whose net lease will provide that the first floor
tenant is responsible for all taxes, utilities, insurance, maintenance and
repair of the Building, except as specifically set forth herein to be an
obligation of the second floor Lessee. Thus, reference in this Lease Agreement
to the Lessor being obligated to pay for or provide any tax, utility, insurance,
maintenance or repair shall be read to include the payment or provision of such
by the first floor tenant.
2. Term. The term of this lease shall be sixty (60) months commencing
on January 1, 1999, and ending at 11:59 p.m. on December 31, 2003, both dates
inclusive, unless sooner terminated as hereinafter provided or unless renewed.
3. Rent. Lessee shall pay to Lessor, as rental for the occupation
and use of the Premises for and during the original term hereof, a total rental
of $390,000.00 payable monthly in advance in equal installments of $6,500.00
each for the original term of 60 months hereof, the first of such installments
being payable on the 1st day of January, 1999, and the remaining installments
being due and payable on the 1st day of each calendar month thereafter.
All rental shall be payable to Lessor at Post Office Box 4040,
Huntington, West Virginia, 25711, or at such other place as Lessor may direct in
writing.
4. Lien for Rent. Lessee covenants and agrees that Lessor shall have
and is hereby given a lien upon the leasehold estate herein created and upon all
of the property of Lessee of every kind and character which shall come upon the
Demised Premises at any time during the term of this lease or any extension
hereof to secure the payment of all of the rent and other sums whatsoever which
are or shall become due Lessor under the terms of this lease and such lien shall
be paramount to any other liens placed or suffered thereon by Lessee. For the
purpose of enforcing such lien, Lessor shall have and is hereby given the right
to distrain for all of such rent and other sums in the manner and form as
provided by the laws of the State of West Virginia. The lien and right given
<PAGE> 2
Lessor in this paragraph shall be cumulative and in addition to all other rights
and remedies which it now has or may hereafter have under this lease and the
laws of the State of West Virginia.
5. Construction and Alterations by Lessee. Lessee may after having
first obtained the written consent of Lessor, and at Lessee's full cost and
expense alter or construct improvements upon the Demised Premises, or make
alterations or site improvements to the Demised Premises, such as may be
necessary or incidental to the purposes and uses for which the Premises are
leased. All such improvements shall, at the option of Lessor, become a part of
the Demised Premises and shall be the sole property of Lessor upon the
termination of this Lease.
a. Mechanic's and Material Liens. The Lessor shall not be
liable for any labor or materials furnished to the Lessee and the mechanic's or
other lien for such labor and materials shall not attach to or effect the
Lessor's interest in the Demised Premises. The Lessee hereby agrees to pay any
mechanic's or other lien, or to discharge any such lien by bond or deposit or
provide an escrow deposit sufficient for that purpose upon request of the
Lessor, and failing to do so, the Lessor may, without having an obligation to do
so, upon giving fifteen (15) days written notice to the Lessee, pay or discharge
the same and the amount so paid or deposited together with interest at the rate
of eighteen (18%) percent per annum shall be deemed additional rent due
hereunder and payable when the next installment of rent shall become due.
b. The Lessee shall be responsible for obtaining all required
licenses, approvals or permits for any of the construction, alteration or
installation allowed by this lease. Lessee shall be solely responsible for all
work in connection with the alterations and construction and shall be solely
responsible for assuring that all work is completed in a good and workmanlike
manner and in conformity with all federal, state and local laws and regulations,
including, without limitation, the Americans With Disabilities Act, and shall
indemnify and hold Lessor harmless from any loss, cost or expense, including
attorney fees, in, arising out of, or relating to, Lessee's failure to comply
with the provisions of this paragraph.
c. Upon full compliance with all terms hereof, and at the
termination hereof, Lessee shall have the right and obligation to remove any and
all of its furniture, furnishings, or equipment then located on the Premises and
to dispose of the same. Lessee agrees that such removal of personal property
shall occur within ten (10) days after the termination or cancellation of this
lease or any extension thereof. Lessee shall notify Lessor in writing thirty
(30) days prior to termination of this lease by its terms or within five (5)
days after cancellation of this lease by Lessor or Lessee of its election to
remove said property or said property may, at Lessor's option, be and become the
property of Lessor. If Lessor shall elect not to retain the property it may be
removed by Lessor at Lessee's expense.6. Permissible Use. The Lessee shall
during the continuance of this lease, use said Demised Premises for office
administration purposes and shall neither use nor suffer the same to be used for
any other purpose without the prior written consent of the Lessor, which consent
shall not be unreasonably withheld. Lessee shall conduct and manage the Demised
Premises in proper and orderly manner and will not allow the Demised Premises or
any part thereof to be used for any illegal or immoral purpose and will not
carry on or permit upon said Demised Premises any offensive, noisy, or dangerous
trade, business, manufacture or occupation of a nuisance. Lessee shall not alter
the drainage of the Premises. Lessee agrees that if Lessee's actions have the
effect of creating a nuisance or interference with the lawful rights of any
other parties or may constitute a violation of any law, ordinance, rule,
regulation or the like, then Lessee shall be responsible for
Exhibit (10.1)-p2
<PAGE> 3
taking all corrective action in relation thereto and with respect to which
Lessor shall cooperate at Lessee's sole cost and expense.
Lessee hereby represents and warrants that no "Hazardous
Substances", as defined hereinafter, have been or will be discharged, dispersed,
released, stored, treated, generated, disposed of, or allowed to escape on the
Premises. For purposes of this lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the list of hazardous
substances adopted by the United States Environmental Protection Agency ("EPA")
and the list of toxic pollutants designated by Congress or the EPA or defined by
or in or pursuant to 42 U.S.C. Section 9601 or any other Federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect. The Lessee shall, at its expense, take all necessary
remedial action(s) in response to the presence of any Hazardous Substances in,
on, under or about the Premises. The Lessee shall be solely responsible for, and
shall indemnify and hold harmless the Lessor, its directors, officers,
employees, agents, successors and assigns from and against any loss, cost,
expense or liability of any kind directly or indirectly arising out of or
attributable to the use, generation, storage, release, threatened release,
discharge, disposal, or presence of Hazardous Substances in, on, under or about
the Premises, including, without limitation: (i) all foreseeable consequential
damages; (ii) the costs of any required or necessary repair, cleanup or
detoxification of the Premises, and the preparation and implementation of any
closure, remedial or other required plans; and (iii) all reasonable costs and
expenses incurred by the Lessor in connection with any of the matters addressed
in this paragraph, including but not limited to reasonable attorney's fees. The
Lessee shall, upon the request of Lessor, provide the Lessor with a bond or
letter of credit, in form and substance satisfactory to the Lessor, in an amount
sufficient to cover the cost of any required remedial action.
7. Maintenance of Premises. Lessee shall maintain all portions of the
Premises and adjoining areas in a clean, orderly, sanitary condition, free of
any unlawful obstructions. Lessee hereby assumes the full and sole
responsibility for the condition, operation, repair, replacement, maintenance
and management of the Premises except that Lessor shall be responsible for any
repairs or replacement to the fundamental structure (roof, exterior walls,
foundation) or utility systems (air conditioning/heat system, plumbing systems,
electrical circuitry). Lessee further agrees that it will commit no waste on the
Premises.
8. Compliance with Laws. The Lessee at its sole expense shall comply
with all laws, orders, and regulations of federal, state, county, and municipal
authorities, and with any direction of any public officer, pursuant to law,
which shall impose any duty upon the Lessor or the Lessee with respect to the
Demised Premises. The Lessee, at its sole expense, shall obtain all licenses or
permits which may be required for the conduct of its business within the
provisions of this Lease, or for the making of any permitted repairs,
alterations, improvements or additions, and the Lessor, where necessary, will
join with the Lessee in applying for all such permits or licenses.
9. Utilities. Lessor shall provide, at its cost, the following
utility and related services, if required: gas, water, electricity and refuse
removal. Except when due to the negligence of Lessor, Lessor shall not be liable
for any failure of any utility service or for injury to person (including death)
or damage to property resulting from steam, gas, water, heat, electricity, rain
or snow which may flow or leak from any part of the leased property or from any
pipes, appliances or plumbing works,
Exhibit (10.1)-p3
<PAGE> 4
from the street or subsurface or from any other place, or for interference with
light or other easements however caused.
10. Indemnity. Lessee during the term of this lease will
indemnify Lessor against and hold Lessor harmless from all claims, demands
and/or causes of action including all costs, expenses and attorneys fees of
Lessor incident thereto for (1) injury to or death of any person or loss of or
damage to any property, including the Premises, (2) failure by Lessee to perform
any covenant required to be performed by Lessee hereunder, (3) failure to comply
with any requirements of any governmental authority, (4) any mechanic's lien or
security agreement filed against the Premises, any equipment therein or any
materials used in the construction or alteration of any building or improvement
thereon, where such claims, demands, and/or causes of action arise from or are
incidental to the use of the Premises by Lessee, its officers, agents, servants,
employees and/or invitees.
11. Insurance. Lessee agrees that it will, at its cost and expense,
obtain and keep in force and effect in the names of both Lessor and Lessee, as
their respective interests may appear, general liability insurance against any
and all claims for personal injury or property damage occurring in, upon or
about the Premises during the term of this lease. Such insurance shall be
maintained for the purpose of protecting Lessor and Lessee pursuant to the
indemnity contained in the foregoing Section 10, but shall not be in
satisfaction of the indemnity obligations stated herein, and shall have limits
of liability of not less than One Million Dollars ($1,000,000) for injuries to
any number of persons in any one accident or occurrence or for damage to
property in any one accident or occurrence. Lessee will furnish to Lessor
appropriate and acceptable evidence of its compliance with the provisions of
this paragraph, such as certificates of insurance or copies of the policies.
Such certificates or policies shall provide that such insurance will not be
cancelled or materially amended unless fifteen (15) days prior written notice of
such cancellation or amendment is given to Lessor. The minimum limits of the
policies of insurance required to be carried by Lessee under this Lease, shall
be subject to increase for the remaining term, if Lessor, in the exercise of its
reasonable judgment shall deem the same necessary for its adequate protection.
Within sixty (60) days after demand therefor by Lessor, Lessee, shall furnish
Lessor with evidence that it has complied with such demand for increased
insurance.
12. Eminent Domain. In the event the entire Premises, or such portion
thereof as will make the Premises unsuitable for the purposes leased, shall be
taken by eminent domain or threat of eminent domain, the term of this lease
shall terminate on the date Lessee is required to surrender possession. In the
event that only a part of the Premises shall be so taken, then (i) if
substantial structural alteration or reconstruction of the improvements upon the
Premises shall, in the reasonable opinion of Lessor be necessary or appropriate
as a result of such taking, Lessor may, at its option, terminate this lease as
of the date Lessee surrenders possession of such portion of the Premises by
notifying Lessee in writing of such termination within sixty (60) days following
the date on which Lessor shall have received final notice of such taking, or
(ii) if Lessor does not elect to terminate this lease as aforesaid, this lease
shall be and remain unaffected by any such taking, except that the rent shall be
equitably abated in the proportion that the taken premises bears to the entire
Premises. In the event of termination of this lease as hereinabove provided,
rental and other charges shall be paid to the date Lessee surrenders possession
and any such payments made beyond that date shall be refunded by Lessor to
Lessee. In the event of any taking, in whole or in part, by eminent domain
Exhibit (10.1)-p4
<PAGE> 5
proceedings or threat of eminent domain proceedings, the entire award shall be
the property of the Lessor. Notwithstanding the foregoing provision, Lessee
shall have the right to make a separate claim with the condemning authority for
the value of Lessee's moving or relocation expenses, provided, however, that
such separate claim shall not reduce or adversely affect the amount of Lessor's
award.
13. Fire or Other Casualty Losses. In the event the Premises are
damaged or destroyed or rendered partially untenantable for their then use by
fire or other casualty without the fault of Lessee, Lessor shall repair and/or
rebuild the same as promptly as possible. Lessor's obligation hereunder is
merely to restore the Premises to substantially the same condition as existed
immediately prior to the happening of the casualty and shall not extend to the
repair or replacement of any improvements, additions, fixtures, installations or
exterior signs of the Lessee. If as a result of such partial destruction or
damage there is substantial interference with the operation of Lessee's business
in the Premises, the rent payable under this lease shall be abated in the
proportion that the portion of the Premises destroyed or rendered untenantable
bears to the total Premises. Such abatement shall continue for the period
commencing with such damage or destruction and ending with the completion by the
Lessor of the work of repair and/or reconstruction, if Lessor is obligated to
complete such work. If the damage or casualty was caused by the fault of the
Lessee, there shall be no abatement of rent.
Notwithstanding the foregoing, in the event that fifty percent (50%) or
more of the Premises or fifty percent (50%) or more of the buildings situate on
the Premises are destroyed or rendered untenantable by fire or other casualty,
Lessor shall have the option to terminate this lease effective as of the date of
such casualty and retain the insurance proceeds by giving to the Lessee within
forty-five (45) days after the happening of such casualty written notice of such
termination. If Lessor does not elect to terminate this lease, Lessor shall
repair and/or rebuild the Premises as promptly as possible as set forth above,
subject to any delay from causes beyond its reasonable control and the terms of
this lease shall continue in full force and effect, subject to equitable
abatement of rent as set forth above.
14. Assignment or Subletting. Lessee shall not assign, transfer,
mortgage, or pledge this lease and will not sublet the Premises or any part
thereof without first obtaining the Lessor's written approval. Lessor reserves
the right to sell its interest in the Premises and to assign or transfer this
lease upon the condition that in such event this lease shall remain in full
force and effect, subject to the performance by Lessee of all the terms,
covenants and condition on its part to be performed, and upon the further
condition that such assignee or transferee (except an assignee or transferee
merely for security) agrees to be bound to perform all terms, covenants and
conditions of this lease. Upon any such sale, assignment or transfer, other than
merely as security, Lessee agrees to look solely to the assignee or transferee
with respect to all matters in connection with this lease and Lessor shall be
released from any further obligations hereunder.
15. Events of Default. In the event that the rent, or any part
thereof, of any additional rental or other payment shall not be paid on any day
when such payment is due and such default shall continue for a period of ten
(10) days after written notice by Lessor to Lessee; or if Lessee should fail in
the performance of, breach or permit the violation of any of the covenants,
conditions, terms, or provisions contained in this lease which on the part of
the Lessee ought to be observed, performed or fulfilled and shall fail to cure
or make good such failure, breach or violation within thirty (30)
Exhibit (10.1)-p5
<PAGE> 6
days after written notice and demand from Lessor; or if the Demised Premises or
any part thereof shall be abandoned; or if Lessee shall be dispossessed
therefrom by or under the authority of anyone other than Lessor; or if Lessee
shall file any petition or institute any proceeding under an insolvency or
bankruptcy act (or any amendment or addition thereto hereafter made) seeking to
effect an arrangement or its reorganization or composition with its creditors;
or if in any proceedings based on the insolvency of Lessee or relating to
bankruptcy proceedings, a receiver or trustee shall be appointed for Lessee or
the Demised Premises and be not discharged within ninety (90) days; or if the
Lessee's estate created hereby shall be taken in execution or by any process of
law; or if Lessee shall admit in writing its inability to pay its obligations
generally as they become due, then, at the option of Lessor, this lease and
everything herein contained on the part of the Lessor to be kept and performed
shall cease, terminate and be at an end, and Lessor shall be entitled to have
again and repossess the Premises as its former estate and Lessee shall be put
out. This remedy of forfeiture shall be deemed cumulative and in addition to all
other remedies provided by law. In the event Lessor exercises its option to
terminate this lease, repossess the Premises and put Lessee out as herein
provided, this shall not relieve Lessee from its obligations to pay rent
provided to be paid herein for the remainder of the term of this lease and
Lessee shall remain liable to Lessor for any costs or expenses incurred by
Lessor in reletting the Premises and for the difference between the rent
received upon such reletting and the rent herein specified to be paid by Lessee
for the term hereof.
16. Surrender of Premises. Upon expiration of the term of this Lease
or any renewal term, or the sooner termination of this Lease or repossession of
the Premises as herein provided, the Lessee shall peaceably surrender possession
of the Premises in as good order and condition as they now are, reasonable wear
and tear excepted, and shall deliver all keys to the Premises to Lessor.
17. Right of Access of the Lessor. The Lessee further covenants and
agrees that the Lessor may have access to the Demised Premises at all reasonable
times and upon reasonable notice for the purpose of the examining or exhibiting
the same for sale.
18. Notices. All notices permitted or required to be given hereunder
shall be effectual if in writing signed by the party given notice and sent by
certified or registered U.S. mail, postage prepaid, to the other parties at the
following addresses:
Lessor: Post Office Box 4040
Huntington, West Virginia 25711
Lessee: Post Office Box 2968
Huntington, West Virginia 25728
19. Broker. Lessee and Lessor covenant, warrant and represent that
there was no broker instrumental in consummating this lease and that no
conversations or prior negotiations were held with any broker concerning the
renting of the Demised Premises. Lessee and Lessor each agree to hold the other
harmless against any claim for brokerage commission arising out of any
conversations or negotiations had by Lessee or Lessor with any broker.
20. Title and Warranty/Subordination. Lessor covenants and agrees with
Lessee that Lessor is the lawful owner of the Premises and that they are free
and clear of all other liens, claims and encumbrances whatsoever, except the
permitted encumbrances described below, zoning requirements, covenants,
conditions, easements and restrictions of record and non-delinquent taxes
Exhibit (10.1)-p6
<PAGE> 7
and assessments, and Lessor will defend the same against all other claims
whatsoever. Lessor further covenants and agrees that Lessee by paying the rents
and observing and keeping the covenants of this lease on its part to be kept,
shall peaceably and quietly hold, occupy and enjoy the Premises during the term
herein created, or any extension.
Upon request by the Lessor, Lessee shall subordinate its rights hereunder
to the lien of any mortgage or deed of trust, or the lien resulting from any
other method of financing or refinancing, now or hereafter in force against the
Premises, and to all advances made or hereafter to be made upon the security
thereof and will attorn to the mortgagee or beneficiary or their assigns in the
event of foreclosure; provided, however, that a condition precedent to Lessee's
attornment and requirement to subordinate hereunder shall be that Lessee, upon
any default in the terms of such financing by Lessor, shall have the right to
pay the rental due hereunder directly to the mortgagee, trustee or beneficiary
of such deed of trust or other persons to whom Lessor may be obligated under
such financing and, so long as Lessee does so pay the rentals as herein provided
and perform all of its obligations pursuant to this lease, this lease and all
Lessee's rights and options hereunder shall remain in full force and effect as
to such mortgagee, trustee or beneficiary or other financing obligee of Lessor.
Lessee shall, upon request of any party-in-interest, execute within ten (10)
days of Lessee's receipt, such instruments or certificates to carry out the
intent of this paragraph. Provided, however, that nothing contained in such
instruments or certificates required by Lessor or other party-in-interest shall
be in derogation of any rights granted to Lessee hereunder, nor expand Lessee's
obligations hereunder.
21. Zoning; Permits. Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease and all terms, covenants and conditions hereof are
in all respects subject and subordinate to all zoning restrictions affecting the
Premises, and the Lessee shall be bound by such restrictions. The Lessor does
not warrant that any licenses or permits which may be required for Lessee's
business to be conducted on the Premises will be granted, or if granted will be
continued in effect or renewed. Any failure to obtain licenses or permits or any
revocation thereof or failure to renew shall not release Lessee from continuing
performance of this Lease.
22. In the event the Lessor shall fail for a period of thirty (30)
days after written notice to comply with, keep and perform any of the agreements
herein contained on its part to be complied with, kept or performed, then at the
option of the Lessee this lease may be immediately terminated, but without
prejudice to any right of action or remedy which might otherwise be used by
Lessee to enforce its lawful rights in relation to any antecedent breach or
covenant or agreement herein contained. Waiver of any default shall not be
construed as a waiver of any subsequent default or condition of the lease to
which such default related.
23. Miscellaneous.
a. Wherever the words "Lessor" and "Lessee" appear in this
lease, they shall include the parties and their respective sublessee heirs,
devisees, executors, administrators, successors and assigns, and the provisions
of this agreement are binding upon them. Those words as may be used herein,
shall be construed to include the plural as well as the singular; and the
necessary grammatical changes required to make the provisions apply to either
corporations, partnerships, other entities, or individuals, masculine or
feminine, shall in all cases be assumed as though fully expressed. The neuter
gender has been used herein for convenience only.
Exhibit (10.1)-p7
<PAGE> 8
b. This lease expresses the entire agreement between the
parties hereto. No amendments, modification, or waiver of any provision hereof
shall be valid unless in writing and signed by all of the parties hereto.
c. This agreement shall be construed in accordance with the
laws of the State of West Virginia.
d. If any provisions or paragraphs or part thereof of this
agreement are held invalid or unenforceable, such invalidity or unenforceability
shall not effect the validity or enforceability of the other portions hereof,
all of which provisions are hereby declared severable.
e. This lease shall not be recorded. However, the parties
hereto mutually agree, upon the written request of either one to the other, to
execute a memorandum of this lease in recordable form for filing and recording
in the Office of the Clerk of the County Commission of the county in which the
Demised Premises are located.
IN WITNESS WHEREOF, the parties do hereunto set their hands to multiple
copies hereof, each of which shall constitute an original, by their respective
officers thereunto duly authorized all as of the day and year hereinabove set
forth.
LESSOR:
ADJ CORP.,
a West Virginia corporation
Dated: _______________, 1999 By:________________________________
Its:____________________________
LESSEE:
CHAMPION INDUSTRIES, INC.,
a West Virginia corporation
Dated: _______________, 1999 By:________________________________
Its President
Exhibit (10.1)-p8
<PAGE> 9
STATE OF WEST VIRGINIA,
COUNTY OF CABELL, TO-WIT:
The foregoing instrument was acknowledged before me this ____ day of
_______________, 1999, by _________________________,
________________________________ of ADJ Corp., a West Virginia corporation, on
behalf of said corporation.
My commission expires: ____________________________________.
-----------------------------------
NOTARY PUBLIC
[SEAL]
STATE OF WEST VIRGINIA,
COUNTY OF ______, TO-WIT:
The foregoing instrument was acknowledged before me this ____ day of
_______________, 1999, by _________________________, President of Champion
Industries, Inc., a West Virginia corporation, on behalf of said corporation.
My commission expires: ____________________________________.
-----------------------------------
NOTARY PUBLIC
[SEAL]
Exhibit (10.1)-p9
<PAGE> 1
EXHIBIT 10.2
$10,000,000
REVOLVING CREDIT AGREEMENT
BY AND BETWEEN
CHAMPION INDUSTRIES, INC.
AND
NATIONAL CITY BANK
DATED AS OF APRIL 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE (EXHIBIT (10.2)-p
------- ----------------------
<S> <C>
1. CERTAIN DEFINITIONS 3
1.1 CERTAIN DEFINITIONS. 3
1.2 CONSTRUCTION. 14
1.2.1 Number, Inclusion. 14
1.2.2 Determination. 14
1.2.3 NCB's Discretion and Consent. 14
1.2.4 Documents Taken as a Whole. 14
1.2.5 Headings. 14
1.2.6 Implied References to this Agreement. 14
1.2.7 Persons. 15
1.3. ACCOUNTING PRINCIPLES. 15
2. REVOLVING CREDIT COMMITMENT 15
2.1. REVOLVING CREDIT COMMITMENT. 15
2.2 REVOLVING CREDIT NOTE. 15
2.3 NOTICE OF BORROWING. 16
2.4 DISBURSEMENT OF FUNDS. 16
2.5. MANNER AND TIME OF PAYMENT. 16
2.6. USE OF PROCEEDS. 17
2.7. FACILITY FEE. 17
2.8. SETOFF. 17
3. INTEREST 17
3.1 INTEREST ON THE REVOLVING LOANS. 17
3.1.1 RATE OF INTEREST. 17
3.1.2 Interest Periods. 18
3.1.3 Interest Payments. 18
3.1.4 Conversion or Continuation. 18
3.1.5 Post-Maturity Interest. 19
3.1.6 Computation of Interest. 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.2 PREPAYMENTS. 20
3.2.1 Voluntary Prepayments. 20
3.2.2 Mandatory Prepayments. 20
3.3 SPECIAL PROVISIONS GOVERNING LIBOR RATE LOANS. 20
3.3.1 Determination of Interest Rate. 20
3.3.2 Substituted Rate of Borrowing. 20
3.3.3 Required Termination and Prepayment. 21
3.3.4. Options of Borrower. 21
3.3.5 Compensation. 22
3.3.6 LIBOR Rate Taxes. 22
3.3.7 Booking of LIBOR Rate Loans. 23
3.3.8 Assumptions Concerning Funding of LIBOR Rate Loans. 24
3.3.9 LIBOR Rate Loans After Default. 24
4. [THIS SECTION INTENTIONALLY OMITTED.] 24
5. REPRESENTATIONS AND WARRANTIES 24
5.1 REPRESENTATIONS AND WARRANTIES. 24
5.1.1 Organization and Qualification. 24
5.1.2 Capitalization and Ownership. 24
5.1.3 Subsidiaries. 24
5.1.4 Power and Authority. 25
5.1.5 Validity and Binding Effect. 25
5.1.6 No Conflict. 25
5.1.7 Litigation. 25
5.1.8 Title to Properties. 26
5.1.9 Financial Statements. 26
5.1.10 Use of Proceeds, Margin Stock. 26
5.1.11 Full Disclosure. 27
5.1.12 Taxes. 27
5.1.13 Consents and Approvals. 27
5.1.14 No Event of Default, Compliance with Instruments. 27
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc. 27
5.1.16 Insurance. 27
5.1.17 Compliance with Laws. 28
5.1.18 Material Contracts; Burdensome Restrictions. 28
5.1.19 Investment Companies; Regulated Entities. 28
5.1.20 Plans and Benefit Arrangements. 28
5.1.21 Employment Matters. 29
5.1.22 Environmental Matters. 30
5.1.23 Senior Debt Status. 31
5.2 UPDATES TO SCHEDULES. 31
6. CONDITIONS OF LENDING 31
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
6.1 OFFICER'S CERTIFICATE. 31
6.2 SECRETARY'S CERTIFICATE. 31
6.3 SUBSIDIARIES GUARANTY. 32
6.4 OPINION OF COUNSEL. 32
6.5 LEGAL DETAILS. 32
6.6 PAYMENT OF FEES. 32
6.7 OFFICER'S CERTIFICATE REGARDING MACS. 32
6.8 NO VIOLATION OF LAWS. 33
6.9 NO ACTIONS OR PROCEEDINGS. 33
7. COVENANTS 33
7.1 AFFIRMATIVE COVENANTS. 33
7.1.1 Preservation of Existence, Etc. 33
7.1.2 Payment of Liabilities, Including Taxes, Etc. 33
7.1.3 Maintenance of Insurance. 33
7.1.4 Maintenance of Properties and Leases. 34
7.1.5 Maintenance of Patents, Trademarks, Etc. 34
7.1.6 Visitation Rights. 34
7.1.7 Keeping of Records and Books of Account. 34
7.1.8 Plans and Benefit Arrangements. 34
7.1.9 Compliance with Laws. 34
7.1.10 Use of Proceeds. 35
7.2 NEGATIVE COVENANTS. 35
7.2.1 Indebtedness. 35
7.2.2 Liens. 36
7.2.3 Guaranties. 36
7.2.4 Loans and Investments. 36
7.2.5 Liquidations, Mergers, Consolidations and Acquisitions. 36
7.2.6 Dispositions of Assets or Subsidiaries. 37
7.2.7 Affiliate Transactions. 38
7.2.8 Continuation of or Change in Business. 38
7.2.9 Plans and Benefit Arrangements. 38
7.2.10 Fiscal Year. 39
7.2.11 Issuance of Stock. 39
7.2.12 Changes in Organizational Documents. 39
7.2.13 Capital Expenditures and Leases. 40
7.2.14 Minimum Fixed Charge Coverage Ratio. 40
7.2.15 Leverage Ratio. 40
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
7.2.16 Minimum Tangible Net Worth. 40
7.3 REPORTING REQUIREMENTS. 40
7.3.1 Quarterly Financial Statements. 40
7.3.2 Annual Financial Statements. 41
7.3.3 Certificate of the Borrower. 41
7.3.4 Notice of Default. 41
7.3.5 Notice of Litigation. 41
7.3.6 Certain Events. 41
7.3.7 Budgets, Forecasts, Other Reports and Information. 42
7.3.8 Notices Regarding Plans and Benefit Arrangements. 42
8. DEFAULT 43
8.1 EVENTS OF DEFAULT. 43
8.1.1 Payments Under Loan Documents. 44
8.1.2 Breach of Warranty. 44
8.1.3 Breach of Negative Covenants or Visitation Rights. 44
8.1.4 Breach of Other Covenants. 44
8.1.5 Defaults in Other Agreements or Indebtedness. 44
8.1.6 Final Judgments or Orders. 44
8.1.7 Loan Document Unenforceable. 45
8.1.8 Uninsured Losses; Proceedings Against Assets. 45
8.1.9 Notice of Lien or Assessment. 45
8.1.10 Insolvency. 45
8.1.11 Events Relating to Plans and Benefit Arrangements. 45
8.1.12 Cessation of Business. 46
8.1.13 Change of Control. 46
8.1.14 Involuntary Proceedings. 46
8.1.15 Voluntary Proceedings. 46
8.2 CONSEQUENCES OF EVENT OF DEFAULT. 46
8.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. 46
8.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. 47
8.2.3 Set-off. 47
8.2.4 Suits, Actions, Proceedings. 47
8.2.5 Application of Proceeds. 47
9. [THIS SECTION INTENTIONALLY OMITTED] 48
10.MISCELLANEOUS 48
10.1 [THIS SECTION INTENTIONALLY OMITTED] 48
10.2 NO IMPLIED WAIVERS, CUMULATIVE REMEDIES, WRITING REQUIRED. 48
10.3 REIMBURSEMENT AND INDEMNIFICATION OF NCB BY THE BORROWER; TAXES; 48
</TABLE>
<PAGE> 6
Exhibit (10.2)-p 1
<TABLE>
<S> <C>
10.4 HOLIDAYS. 49
10.5 NOTICES. 49
10.6 SEVERABILITY. 50
10.7 GOVERNING LAW. 50
10.8 PRIOR UNDERSTANDING. 50
10.9 DURATION, SURVIVAL. 50
10.10 SUCCESSORS AND ASSIGNS. 50
10.11 CONFIDENTIALITY. 50
10. 12 COUNTERPARTS. 51
10. 13 NCB'S CONSENT. 51
10. 14 EXCEPTIONS. 51
10.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL. 51
</TABLE>
<PAGE> 7
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE
SCHEDULE 1. 1 (B) - REVOLVING CREDIT COMMITMENT OF NCB AND ADDRESSES FOR
NOTICES
SCHEDULE 1. 1 (P) - PERMITTED LIENS
SCHEDULE 5.1.2 - CAPITALIZATION
SCHEDULE 5.1.3 - SUBSIDIARIES, PARTNERSHIPS AND LLC INTERESTS
SCHEDULE 5.1.20 EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.22 ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1 PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1. 1 (G) - SUBSIDIARIES GUARANTY
EXHIBIT 1. 1 (T) - REVOLVING CREDIT NOTE
EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE
<PAGE> 8
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is dated as of April 1, 1999, and
is made by and between CHAMPION INDUSTRIES, INC., a West Virginia corporation,
with offices at P.O. Box 2968, Kyle Industrial Park, Industrial Lane, Route 2,
Huntington, West Virginia 25728 ("Borrower") and NATIONAL CITY BANK, a national
banking association, with offices at 155 East Broad Street, Columbus, Ohio 43251
("NCB").
WITNESSETH:
WHEREAS, pursuant to a Credit Agreement dated as of March 31, 1997
(the "Term Loan Agreement"), PNC Bank, National Association ("PNC" or "Agent"),
in its capacity as agent for the banks signatory to the Term Loan Agreement (the
"Banks"), provided a term loan to the Borrower in the aggregate principal amount
of up to $12,500,000.00; and
WHEREAS, in addition to the foregoing, the Borrower has requested
NCB to provide a revolving loan facility to the Borrower in an aggregate
principal amount of up to $10,000,000.00 for the purpose of financing
acquisitions, capital expenditures and general working capital requirements; and
WHEREAS, NCB is willing to provide such a revolving credit
facility to the Borrower upon the terms and conditions hereinafter set forth;
and
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
Adjusted LIBOR Rate means, for any Interest Rate Determination
Date, the rate (rounded upward to the next highest one hundredth of one percent)
obtained by dividing (a) the LIBOR Rate for that date by (b) a percentage equal
to one hundred percent (100%) minus the stated maximum rate of all reserves
required to be maintained against "Eurocurrency liabilities" as specified in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extensions of credit or other assets that includes
loans by a non-United States office of NCB to United States residents).
Affiliate as to any Person shall mean any other Person (i) which
directly or indirectly controls, is controlled by, or is under common control
with such Person, (ii) which
Exhibit (10.2)-p 3
<PAGE> 9
beneficially owns or holds 5% or more of any class of the voting or other equity
interests of such Person, or (iii) 5% or more of any class of voting interests
or other equity interests of which is beneficially owned or held, directly or
indirectly, by such Person. Control, as used in this definition, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, including the power to
elect a majority of the directors or trustees of a corporation or trust, as the
case may be.
NCB's Facility Fee shall have the meaning assigned to that term in
Section 2.7.
Agreement shall mean this Revolving Credit Agreement, as the same
may be supplemented or amended from time to time, including all schedules and
exhibits.
Annual Statements shall have the meaning assigned to that term in
Section 5.1.9(i).
Applicable Margin means, with respect to NCB's Facility Fee under
Section 2.7 and any Prime Rate Loan or LIBOR Rate Loan, the applicable margin
set forth below, based on the Ratio calculated in accordance with GAAP as of the
last day of the most recently ended fiscal quarter of Borrower:
<TABLE>
<CAPTION>
Leverage Ratio LIBOR Prime Facility Fee
- -------------- ----- ----- ------------
<S> <C> <C> <C>
>2.25 to 1.00 1.50% 0% 0.20%
= or >1.50 to 1.00 but = or <2.25 to 1.00 1.25% -0.25% 0.15%
<1.50 to 1.00 1.00% -0.50% 0.125%
</TABLE>
Authorized Officer shall mean those individuals, designated by
written notice to NCB from the Borrower, authorized to execute notices, reports
and other documents on behalf of the Borrower required hereunder. The Borrower
may amend such list of individuals from time to time by giving written notice of
such amendment to NCB.
Banks shall mean the financial institutions from time to time
signatory to the Term Loan Agreement and their respective successors and assigns
as permitted thereunder, each of which is referred to herein as a Bank.
Benefit Arrangement shall mean at any time an "employee benefit
plan," within the meaning of Section 3(3) of ERISA, which is neither a Plan nor
a Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
Borrower shall have the meaning given in the preamble to this
Agreement.
Business Day shall mean any day other than a Saturday or Sunday or
a
Exhibit (10.2)-p 4
<PAGE> 10
legal holiday on which commercial banks are authorized or required to be closed
for business in Columbus, Ohio and on which dealings in dollar deposits are
carried on in the London interbank market.
Closing Date shall mean the effective date hereof.
Consideration shall mean with respect to any Permitted
Acquisition, the aggregate of (i) the net present value paid by any of the
Borrower, directly or indirectly, to the seller in connection therewith, (ii)
the Indebtedness incurred or assumed by any of the Borrower, whether in favor of
the seller or otherwise and whether fixed or contingent, (iii) any Guaranty
given or incurred by the Borrower in connection therewith, (iv) 50% of the value
of stock transferred, and (v) the net present value of any other consideration
given or obligation incurred by the Borrower in connection therewith.
Consolidated Cash Flow From Operations for any period of
determination shall mean the sum of net income, depreciation, amortization,
other non-cash charges to net income, interest expense and cash income tax
expense minus non-cash credits to net income, all measured on a rolling four
quarters basis in each case of the Borrower and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
Consolidated Tangible Net Worth shall mean as of any date of
determination total stockholders' equity less intangible assets of the Borrower
and its Subsidiaries as of such date determined and consolidated in accordance
with GAAP.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful
money of the United States of America.
Environmental Complaint shall mean any written complaint setting
forth a cause of action for personal or property damage or natural resource
damage or equitable relief, order, notice of violation, citation, request for
information issued pursuant to any Environmental Laws by an Official Body,
subpoena or other written notice of any type relating to, arising out of, or
issued pursuant to, any of the Environmental Laws or any Environmental
Conditions, as the case may be.
Environmental Conditions shall mean any conditions of the
environment, including the workplace, the ocean, natural resources (including
flora or fauna), soil, surface water, groundwater, any actual or potential
drinking water supply sources, substrata or the ambient air, relating to or
arising out of, or caused by, the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping, emptying,
discharging, injecting, escaping, leaching, disposal, dumping, threatened
release or other management or mismanagement of Regulated Substances resulting
from the use of, or operations on, any Property.
Environmental Laws shall mean all federal, state, local and
foreign Laws and regulations, including permits, licenses, authorizations,
bonds, orders, judgments, and
Exhibit (10.2)-p 5
<PAGE> 11
consent decrees issued, or entered into, pursuant thereto, relating to pollution
or protection of human health or the environment or employee safety in the
workplace.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with the Borrower, are treated as a single employer under Section 414 of the
Internal Revenue Code.
Event of Default shall mean any of the events described in Section
8. 1 and referred to therein as an "Event of Default."
Federal Funds Effective Rate for any day shall mean the rate per
annum (based on a year of 360 days and actual days elapsed and rounded upward to
the nearest 1/100 of 1%) announced by the Federal Reserve Bank of Cleveland (or
any successor) on such day as being the weighted average of the rates on
overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned to that term
in Section 5.1.9(i).
Fixed Charge Coverage Ratio shall mean the ratio of Consolidated
Cash Flow from Operations to Fixed Charges.
Funding Date means the date of the funding of a Loan.
GAAP shall mean generally accepted accounting principles as are in
effect from time to time, subject to the provisions of Section 1.3, and applied
on a consistent basis both as to classification of items and amounts.
Guaranty of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any performance
bond or other suretyship arrangement and any other form of assurance against
loss, except endorsement of negotiable or other instruments for deposit or
collection in the ordinary course of business and indemnities.
Exhibit (10.2)-p 6
<PAGE> 12
Indebtedness shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of (i) borrowed money, (ii) amounts
raised under or liabilities in respect of any note purchase or acceptance credit
facility, (iii) reimbursement obligations (contingent or otherwise) under any
letter of credit, currency swap agreement, interest rate swap, cap, collar or
floor agreement or other interest rate management device, (iv) any other
transaction (including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not represented by a promissory note
or other evidence of indebtedness and which are not more than thirty (30) days
past due), or (v) any Guaranty of Indebtedness for borrowed money.
Ineligible Security shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
Insolvency Proceeding shall mean, with respect to any Person, (a)
case, action or proceeding with respect to such Person (i) before any court or
any other Official Body under any bankruptcy, insolvency, reorganization or
other similar Law now or hereafter in effect,
or (ii) for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator, conservator (or similar official) of the Borrower or
otherwise relating to liquidation, dissolution, winding-up or relief of such
Person, or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors,
undertaken under any Law.
Interest Payment Date means, with respect to any LIBOR Rate Loan,
the last day of each Interest Period applicable to such Loan; provided that, in
all cases, "Interest Payment Date" shall also include each Interest Period
Anniversary Date for such Interest Period.
Interest Period shall have the meaning assigned to such term in
Section 3.1.2.
Interest Period Anniversary Date means, for each Interest Period
applicable to a LIBOR Rate Loan, each three (3)-month anniversary of the
commencement of that Interest Period.
Interest Rate Determination Date means each date for calculating
the LIBOR Rate for purposes of determining the interest rate in respect of an
Interest Period. The Interest Rate Determination Date shall be the first
Business Day prior to the first day of the related Interest Period for any LIBOR
Rate Loan.
Internal Revenue Code shall mean the Internal Revenue Code of
1986, as
Exhibit (10.2)-p 7
<PAGE> 13
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
Labor Contracts shall mean all employment agreements, employment
contracts, collective bargaining agreements and other agreements among the
Borrower or any Subsidiary of the Borrower and its employees.
Law shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
LIBOR Rate means, for any Interest Rate Determination Date, the
rate of interest (rounded upwards to the nearest one hundredth of one percent)
at which NCB was offered deposits in United States dollars in the London
Interbank LIBO Market as quoted as "British Bankers Assoc. Interest Settlement
Rates" reported in Telerate, page 3750 (or a similar reporting service if
Telerate no longer reports such rate) in immediately available funds comparable
to the principal amount of the LIBOR Rate Loan for which the LIBOR Rate is being
determined with maturities comparable to the Interest Period for which such
LIBOR Rate will apply as of approximately 10:00 a.m. (Ohio time) three (3)
Business Days prior to the commencement of such Interest Period.
LIBOR Rate Loans means Revolving Loans bearing interest at rates
determined in accordance with Section 3.1.1(ii).
LIBOR Rate Tax is defined in Section 3.3.6.
Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC Interests shall have the meaning given to such term in Section
5.1.3.
Loan or Loans means any one or more of the Revolving Loans.
Loan Documents shall mean this Agreement, the Revolving Note, and
any other instruments, certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time in accordance herewith or
therewith, and Loan Document shall mean any of the Loan Documents.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever
Exhibit (10.2)-p 8
<PAGE> 14
upon the validity or enforceability of this Agreement or any other Loan
Document, (b) is or could reasonably be expected to be material and adverse to
the business, properties, assets, financial condition, results of operations of
the Borrower and its Subsidiaries taken as a whole, (c) impairs materially or
could reasonably be expected to impair materially the ability of the Borrower
and its Subsidiaries taken as a whole to duly and punctually pay or perform
their Indebtedness, or (d) impairs materially or could reasonably be expected to
impair materially the ability of NCB or any of the Banks, to the extent
permitted, to enforce their legal remedies pursuant to this Agreement or any
other Loan Document.
Maturity or Maturity Date shall mean March 31, 2002.
Month with respect to an Interest Period, shall mean the interval
between the days in consecutive calendar months numerically corresponding to the
first day of such Interest Period. If any Interest Period begins on a day of a
calendar month for which there is no numerically corresponding day in the month
in which such Interest Period is to end, the final month of such Interest Period
shall be deemed to end on the last Business Day of such final month.
Multiemployer Plan shall mean any employee benefit plan which is a
multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which any Borrower or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
Multiple Employer Plans shall mean a Plan which has two or more
contributing sponsors (including any Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Notices shall have the meaning assigned to that term in Section
10.5.
Obligation shall mean any obligation or liability of the Borrower
to NCB, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due,
under or in connection with this Agreement, the Revolving Note, or any other
Loan Document.
Official Body shall mean any national, federal, state, local or
other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any (.
art, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
Partnership Interests shall have the meaning given to such term in
Section 5.1.3.
PBGC shall mean the Pension Benefit Guaranty Corporation
established
Exhibit (10.2)-p 9
<PAGE> 15
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisition shall have the meaning assigned to such term
in Section 7.2.5.
Permitted Investments shall mean:
(i) direct obligations of the United States of America
or any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve (12) months or
less from the date of acquisition;
(ii) commercial paper maturing in 180 days or less rated
not lower than A- 1, by Standard & Poor's or P-1 by Moody's Investors Service,
Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's on the date of
acquisition; and
(iv) Investments shown on Schedule 1. 1(P) pursuant to
this Agreement and in favor of the Agent.
Permitted Liens shall mean:
(i) Liens, security interests and mortgages (A) in favor
of NCB pursuant to this Agreement, (B) in favor of the Agent for the benefit of
the Banks party to the Term Loan Agreement, and (C) in favor of PNC Bank,
National Association, pursuant to a certain $5,600,000 Term Loan Agreement dated
March 13, 1998 with Borrower and its Subsidiaries.
(ii) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(iii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iv) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(v) Good-faith Pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of
Exhibit (10.2)-p 10
<PAGE> 16
borrowed money) or leases, not in excess of the aggregate amount due thereunder,
or to secure statutory obligations, or surety, appeal, indemnity, performance or
other similar bonds required in the ordinary course of business;
(vi) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use,
(vii) Liens on property leased by the Borrower or any
Subsidiary of the Borrower under capital and operating leases permitted in
Section 7.2.13 securing obligations of the Borrower or any Subsidiary of the
Borrower to the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement and
described on Schedule 1. 1 (P), as the debt underlying such Lien may be
refinanced or replaced (but the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien) and a
replacement Lien placed thereon;
(ix) Purchase Money Security Interests, provided that the
aggregate amount of loans and deferred payments secured by such Purchase Money
Security Interests shall not exceed $7,000,000 and any replacement or renewal
thereof as long as the principal amount secured thereby is not increased and no
additional assets become subject to such Lien (excluding for the purpose of this
computation any loans or deferred payments secured by Liens described on
Schedule 1. 1 (P));
(x) The following, (A) if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case they do not, in
the aggregate, materially impair the ability of the Borrower to perform its
Obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due and
payable and subject to interest or penalty, provided that the Borrower
maintains such reserves or other appropriate provisions as shall be
required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;
(2) Claims, Liens or encumbrances upon, and defects of title
to, real or personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute-
on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen,
carriers, or other statutory nonconsensual Liens.
Exhibit (10.2)-p 11
<PAGE> 17
(4) Liens resulting from final judgments or orders described in
Section 8.1.6; and
Person shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
Potential Default shall mean any event or condition which with
notice, passage of time or a determination by NCB would constitute an Event of
Default.
Prime Rate shall mean the greater of (i) the interest rate per
annum announced from time to time by NCB at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by NCB, or (ii) the Federal Funds Effective Rate plus 0.5% per annum.
Prime Rate Loans means Loans made by Bank bearing interest at
rates determined in accordance with Section 3.1.1(i).
Principal Office shall mean the principal banking office of NCB in
Columbus, Ohio.
Prohibited Transaction shall mean any prohibited transaction as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by the United
States Department of Labor.
Property shall mean all real property, both owned and leased, of
the Borrower or any Subsidiary of the Borrower.
Purchase Money Security Interest shall mean Liens upon tangible
property securing loans to the Borrower or any Subsidiary of the Borrower or
deferred payments by the Borrower or any Subsidiary of the Borrower for the
purchase of such tangible property.
Leverage Ratio shall mean the ratio of the Borrower's Total Senior
Indebtedness to Earnings Before Interest, Taxes, Depreciation, and Amortization
("EBITDA"). For purposes of the Leverage Ratio, Total Senior Indebtedness shall
be measured as of the end of each fiscal quarter and EBITDA shall be measured as
of the end of each fiscal quarter for the previous four fiscal quarters.
Exhibit (10.2)-p 12
<PAGE> 18
Regulated Substances shall mean any substance, including; any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive material,
refuse, garbage, wastes, chemicals, petroleum products, by-products, coproducts,
impurities, dust, scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes as now or
hereafter defined pursuant to any Environmental Laws, ordinances, rules,
regulations or other directives of any Official Body, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as promulgated by
the Board of Governors of the Federal Reserve System, as amended from time to
time.
Reportable Event shall mean a reportable event described in
Section 4043) of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
Revolving Loan or Revolving Loans shall have the meaning assigned
to that term in Section 2. 2.
Revolving Note or Revolving Credit Note shall mean the Revolving
Credit Note of the Borrower in the form of Exhibit 1.1(R) evidencing the
Revolving Loan or Revolving Loans, together with all amendments, extensions,
renewals, replacements refinancings or refunds thereof in whole or in part.
Section 20 Subsidiary shall mean the Subsidiary of the bank
holding company controlling NCB, which Subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
Shares shall have the meaning assigned to that term in Section
5.1.2.
Standard & Poor's shall mean Standard & Poor's Ratings Services.
Subsidiary of any Person at any time shall mean (i) any
corporation or trust of which more than 50%.(by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which more than 50% or more of the partnership interests
is at the time directly or indirectly owned by such Person or one or more of
such Person's Subsidiaries, (ii) any limited liability company of which such
Person is a member or of which more than 50% of the limited liability company
Exhibit (10.2)-p 13
<PAGE> 19
interests is at the time directly or indirectly owned by such Person or one or
more of such Person's Subsidiaries or (iv) any corporation, trust, partnership,
limited liability company or other entity which is controlled or capable of
being controlled by such Person or one or more of such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term in
Section 5.1.3.
Total Senior Indebtedness shall mean as to the Borrower and all of
its Subsidiaries, the sum of all borrowed money and all reimbursement
obligations under any letters of credit.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 NUMBER, INCLUSION.
references to the plural include the singular, the plural, the
part and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
1.2.2 DETERMINATION.
references to "determination" of or by NCB shall be deemed to
include, a good-faith estimate by NCB (in the case of quantitative
determinations) and a good-faith belief by NCB (in the case of qualitative
determinations) and such determination shall be conclusive absent manifest
error;
1.2.3 NCB'S DISCRETION AND CONSENT.
whenever NCB is granted the right herein to act in its or their
sole discretion or to grant or withhold, consent such right shall be exercised
reasonably and in good faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
the words "hereof," "herein," "hereunder," "hereto" and similar
terms in this Agreement or any other Loan Document refer to this Agreement or
such other Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
1.2.5 HEADINGS.
the section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding this Agreement
or such other Loan Document are for reference purposes only and shall not
control or affect the construction of this Agreement or such other Loan Document
or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the case may be,
unless otherwise specified;
Exhibit (10.2)-p 14
<PAGE> 20
1.2.7 PERSONS.
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement or such other Loan Document, as the case may be, and reference to
a Person in a particular capacity excludes such Person in any other capacity;
and
1.2.8 Modifications to Documents.
reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated.
1.3. Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 (and all defined terms used in the definition of any
accounting term used in Section 7.2 shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof applied on a
basis consistent with those used in preparing the Annual Statements referred to
in Section 5.1.9(i). In the event of any change after the date hereof in GAAP,
and if such change would result in the inability to determine compliance with
the financial covenants set forth in Section 7.2 based upon the Borrower's
regularly prepared financial statements by reason of the preceding sentence,
then the parties hereto agree to endeavor, in good faith, to agree upon an
amendment to this Agreement that would adjust such financial covenants in a
manner that would not affect the substance thereof, but would allow compliance
therewith to be determined in accordance with the Borrower's financial
statements at that time.
2. REVOLVING CREDIT COMMITMENT
2.1. Revolving Credit Commitment.
Subject to the terms and conditions hereof and relying upon the representations
and warranties herein set forth, NCB hereby agrees to lend to Borrower the
maximum sum of Ten Million and No/100 Dollars ($10,000,000.00) (the "Revolving
Credit Commitment"). Such Revolving Credit Commitment shall be available to
Borrower, subject to the limitations herein, in whole or in part and from time
to time until the Maturity Date, when the entire outstanding principal balance
of the Revolving Credit Commitment, together with all accrued but unpaid
interest thereon, shall become immediately due and payable. Interest on the
principal balance of the Revolving Credit Commitment from time to time
outstanding shall be due and payable in accordance with Section 3, below.
2.2 Revolving Credit Note.
Borrower shall execute and deliver to NCB a promissory note in the
form of Exhibit 1.1(R) attached hereto (the "Revolving Credit Note"). All
disbursements on the Revolving Credit Note shall be Revolving Loans and, unless
otherwise provided, shall be in amounts of not less than One Hundred Thousand
Dollars ($100,000.00). Amounts borrowed by Borrower under
Exhibit (10.2)-p 15
<PAGE> 21
the Revolving Credit Commitment may, subject to the limitations set forth in
Section 3.2.1 be repaid and may, subject to the limitations set forth in this
Agreement, until the Maturity Date, be reborrowed; provided, however, that at no
time may the principal balance outstanding under the Revolving Credit Note
exceed the amount of the Revolving Credit Commitment, and Borrower shall make
principal payments at such times and in such amounts necessary to comply with
this provision.
2.3 Notice of Borrowing.
Whenever Borrower desires to borrow under this Agreement for any
Revolving Loan other than a Prime Rate Loan, it shall deliver to NCB a notice of
borrowing no later than 2:00 p.m. (Ohio time) at least two (2) Business Days in
advance of the proposed Funding Date. For a Prime Rate Loan, Borrower shall give
NCB a notice of borrowing, by telephone, no later than 12:00 Noon (Ohio time) on
or before the proposed Funding Date. The notice of borrowing shall specify (i)
the proposed Funding Date (which shall be a Business Day), (ii) the amount of
each proposed Loan, (iii) whether such Loan is initially to consist of a Prime
Rate Loan, a LIBOR Rate Loan, or a combination thereof, (iv) if such Loan, or
any portion thereof, is initially to be a LIBOR Rate Loan, the amount thereof
and the initial Interest Period therefor; provided that the aggregate minimum
amount of LIBOR Rate Loans with a particular Interest Period included as a
portion of any such combination, if any, shall be Five Hundred Thousand Dollars
($500,000.00) and integral multiples of One Hundred Thousand Dollars
($100,000.00) in excess of that amount. Loans may be continued as or converted
into Prime Rate Loans and LIBOR Rate Loans in the manner provided in Section
3.1.4.
In lieu of delivering the above described notice of borrowing, Borrower
may give NCB telephonic notice by the required time of any proposed borrowing
under this Section 2.3; provided that such notice shall be promptly confirmed in
writing (except for Prime Rate Loans) by delivery of a notice of borrowing to
NCB on or prior to the Funding Date of the requested Loan. NCB shall not incur
any liability to Borrower in acting upon any telephonic notice referred to above
that NCB believes in good faith to have been given by a duly authorized officer
or other person authorized to borrow on behalf of Borrower or for otherwise
acting in good faith under this Section 2.3; and, upon funding of the Loans by
NCB in accordance with this Agreement pursuant to any such telephonic notice,
Borrower shall have effected Loans hereunder.
A notice of borrowing for a LIBOR Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Borrower shall be bound to make a borrowing in
accordance therewith.
2.4 Disbursement of Funds.
NCB shall make the proceeds of Revolving Loans available to Borrower
on such Funding Date by causing an amount of same day funds equal to the
proceeds of all such Revolving Loans for which notices of borrowing were
received by NCB to be credited to the account of Borrower at NCB.
2.5. Manner and Time of Payment.
All payments of principal, interest, and fees hereunder and under the
Revolving Credit Note shall be made by Borrower without defense, setoff, or
counterclaim and in same day
Exhibit (10.2)-p 16
<PAGE> 22
funds delivered to NCB not later than 2:00 p.m. (Ohio time) on the date due at
its office located at 155 East Broad Street, Columbus, Ohio, for the account of
NCB. Funds received by NCB after that time shall be deemed to have been paid by
Borrower on the next succeeding Business Day.
2.6. Use of Proceeds.
The proceeds of the Revolving Credit Note shall be used for the
purpose of financing acquisition, capital expenditures and general working
capital requirements.
2.7. Facility Fee.
As consideration for the Revolving Credit Commitment hereby extended,
Borrower shall pay NCB a facility fee on the total amount of the Revolving
Credit Commitment at a rate per annum equal to the Applicable Margin, payable
annually in advance commencing on the Closing Date and on each anniversary of
the Closing Date. Borrower shall be entitled to cancel the Revolving Credit
Commitment in whole or in part at any time prior to the Maturity Date, and such
cancellation shall be irrevocable.
2.8. Setoff.
Upon the occurrence and during the continuation of any Event of
Default, NCB shall have the right to set off against all obligations of Borrower
to NCB hereunder and under the Revolving Credit Note, whether matured or
unmatured, all funds of Borrower on deposit in accounts with NCB or its
affiliates, except for funds deposited or accounts maintained for the payment of
taxes, payroll, and employee contributions and any other funds or accounts in
which Borrower does not have a beneficial interest.
3. INTEREST
3.1 Interest on the Revolving Loans.
3.1.1 Rate of Interest.
The Revolving Loans shall bear interest on the unpaid principal amount
thereof from the date made through Maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Prime Rate or the Adjusted
LIBOR Rate. The applicable basis for determining the rate of interest with
respect to Revolving Loans shall be selected by Borrower at the time a notice of
borrowing is given pursuant to Section 2.3 or at the time a notice of conversion
continuation is given pursuant to Section 3.1.4. If on any day a Revolving Loan
is outstanding with respect to which a notice of borrowing has not been
delivered to NCB in accordance with the terms of this Agreement specifying the
basis for determining the rate of interest, then for that day that Revolving
Loan shall bear interest determined by reference to the Prime Rate. Revolving
Loans shall bear interest at all times prior to maturity as follows:
(i) if a Prime Rate Loan, then at the Prime Rate plus
the Applicable Margin, subject to possible periodic adjustment as
provided below; and
(ii) if a LIBOR Rate Loan, then at the sum of the
Adjusted LIBOR Rate plus the Applicable Margin, subject to possible
periodic adjustment as provided below.
Exhibit (10.2)-p 17
<PAGE> 23
3.1.2 INTEREST PERIODS.
In connection with each LIBOR Rate Loan, Borrower shall elect an
interest period (each an "Interest Period") to be applicable to such Loan, which
Interest Period shall be either a one (1), two (2), three (3) or six (6) month
period; provided that:
(i) the Interest Period for any Loan shall commence on
the date of such Loan;
(ii) if an Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided that, if any Interest
Period would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(iv) no Interest Period shall extend beyond the Maturity
Date; and
(v) no Interest Period with respect to any LIBOR Rate
Loan may extend beyond a date on which Borrower are required to make a
scheduled payment of principal of such Loan if and to the extent that
such scheduled principal repayment would result in or cause a
prepayment of any portion of a LIBOR Rate Loan.
3.1.3 INTEREST PAYMENTS.
Subject to Section 3.1.5, interest shall be payable on the
Revolving Loans as follows:
(i) interest on each Prime Rate Loan shall be payable in
arrears on the tenth (10th) day of each month, commencing April 10,
1999, upon any prepayment of any such Loan (to the extent accrued on
the amount being prepaid), upon any conversion/continuation, and at
Maturity; and
(ii) interest on each LIBOR Rate Loan shall be payable in
arrears on each Interest Payment Date applicable to that Loan, upon
any prepayment of that Loan (to the extent accrued on the amount being
prepaid), upon any conversion/continuation, and at Maturity.
3.1.4 CONVERSION OR CONTINUATION.
Subject to the provisions of Section 3.3, Borrower shall have the
option (i) to convert at any time all or any part of its outstanding Revolving
Loans equal to Five Hundred Thousand Dollars ($500,000.00) and integral
multiples of One Hundred Thousand Dollars ($100,000.00) in excess of that amount
from Revolving Loans bearing interest at a rate determined
Exhibit (10.2)-p 18
<PAGE> 24
by reference to one basis to Revolving Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a LIBOR Rate Loan, to continue all or any
portion of its outstanding Revolving Loans equal to Five Hundred Thousand
Dollars ($500,000.00) and integral multiples of One Hundred Thousand Dollars
($100,000.00) in excess of that amount as a LIBOR Rate Loan, and the succeeding
Interest Period(s) of such continued Loan shall commence on the last day of the
Interest Period of the Loan to be continued; provided, however, that, except as
otherwise provided in Section 3.3.4, a LIBOR Rate Loan may only be converted
into a Loan bearing interest determined by reference to an alternative basis on
the expiration date of an Interest Period applicable thereto; and provided,
further, that, unless NCB otherwise agrees, no outstanding Loan may be continued
as, or be converted into, a LIBOR Rate Loan when any Default or Event of Default
has occurred and is continuing.
Borrower shall deliver a notice of conversion/continuation to NCB
no later than 2:00 p.m. (Ohio time) at least two (2) Business Days in advance of
the proposed conversion/ continuation date. A notice of conversion/continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, and (iv) in the case of a
conversion to, or a continuation of, a LIBOR Rate Loan, the requested Interest
Period.
In lieu of delivering the above-described notice of
conversion/continuation, Borrower may give NCB telephonic notice by the required
time of any proposed conversion/continuation under this Section 3.1.4; provided
that such notice shall be promptly confirmed in writing by delivery of a notice
of conversion/continuation to NCB on or before the proposed
conversion/continuation date. NCB shall incur no liability to Borrower in acting
upon any telephonic notice referred to above that NCB believes in good faith to
have been given by a duly authorized officer or other person authorized to act
on behalf of Borrower or for otherwise acting in good faith under this Section
3.1.4; and, upon conversion/continuation by NCB in accordance with this
Agreement pursuant to any such telephonic notice, Borrower shall have effected
such converted/continued Loans hereunder.
Except as provided in Section 3.3.4, a notice of
conversion/continuation for conversion to, or continuation of, a LIBOR Rate Loan
(or telephonic notice in lieu thereof) shall be irrevocable on and after the
related Interest Rate Determination Date, and, upon delivering the notice of
conversion/ continuation, Borrower shall be bound to convert or to continue in
accordance therewith.
3.1.5 POST-MATURITY INTEREST.
Any principal payments on the Loans not paid within ten (10) days
after the date when due and, to the extent permitted by applicable law, any
interest payments on the Loans not paid within ten (10) days after the date when
due, in each case whether at stated Maturity, by notice of prepayment, by
acceleration, or otherwise, shall thereafter bear interest payable upon demand
at a rate equal to the sum of the Prime Rate plus three percentage points (3%)
per annum. NCB shall have the right to assess a late payment processing fee in
the amount of the greater of Twenty and No/100 Dollars ($20.00) or five percent
(5%) of the scheduled payment in the event of a default in payment that remains
uncured for a period of at least ten (10) days.
Exhibit (10.2)-p 19
<PAGE> 25
3.1.6 COMPUTATION OF INTEREST.
Interest on the Loans shall be computed on the basis of a three
hundred sixty (360) day year and the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of the Loan or the first day of an Interest Period, as the case may be,
shall be included, and the date of payment or the expiration date of an Interest
Period, as the case may be, shall be excluded; provided that, if a Loan is
repaid on the same day on which it is made, one day's interest shall be paid on
that Loan.
3.2 Prepayments.
3.2.1 VOLUNTARY PREPAYMENTS.
Borrower may, upon prior written or telephonic notice to NCB,
which notice, if telephonic, shall be promptly confirmed in writing to NCB, at
any time and from time to time prepay any Revolving Loan made to Borrower in
whole or in part in an aggregate minimum amount of Fifty Thousand Dollars
($50,000.00) and integral multiples of Ten Thousand Dollars ($10,000.00) in
excess of that amount. Except as otherwise provided in Section 3.3.5, all such
prepayments may be made without premium or penalty. If Borrower does not specify
the Loan to which a prepayment is to be applied, such prepayment shall be
applied to such Loans as NCB, in its sole discretion, shall select. Notice of
prepayment having been given as aforesaid, principal payments in the aggregate
amount specified in such notice shall become due and payable on the prepayment
date.
3.2.2 MANDATORY PREPAYMENTS.
Borrower shall make prepayments of Revolving Loans to the extent
necessary so that the outstanding principal amounts of the Revolving Loans at
any time do not exceed the Revolving Credit Commitment then in effect.
3.3 Special Provisions Governing LIBOR Rate Loans.
Notwithstanding other provisions of this Agreement, the following
provisions shall govern with respect to LIBOR Rate Loans as to the matters
covered:
3.3.1 DETERMINATION OF INTEREST RATE.
As soon as practicable after 10:00 a.m. (Ohio time) on the
Interest Rate Determination Date, NCB shall determine (which determination
shall, absent manifest error, be final, conclusive, and binding upon all
parties) the interest rate that shall apply to the LIBOR Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof to Borrower.
3.3.2 SUBSTITUTED RATE OF BORROWING.
In the event that, at any time, NCB shall have determined (which
determination shall be final, conclusive, and binding upon all parties, but,
with respect to the following clauses (i) and (ii)(B), shall be made only after
consultation with Borrower) that:
(i) by reason of any changes arising after the date of this
Agreement affecting the London Interbank LIBO Market or affecting the position
of NCB in such market, adequate and fair means do not exist for ascertaining the
applicable interest rate by reference to the
Exhibit (10.2)-p 20
<PAGE> 26
LIBOR Rate with respect to the LIBOR Rate Loans as to which an interest rate
determination is then being made; or
(ii) by reason of (A) any change after the date hereof in any
applicable law or governmental rule, regulation, or order (or any interpretation
thereof and including the introduction of any new law or governmental rule,
regulation, or order) or (B) other circumstances affecting NCB or the London
Interbank LIBO Market or the position of NCB in such market (such as for
example, but not limited to, official reserve requirements required by
Regulation D, to the extent not given effect in LIBOR Rate), the Adjusted LIBOR
Rate shall not represent the effective pricing to NCB for dollar deposits of
comparable amounts for the relevant period;
then, and in any such event, NCB shall promptly (and in any event as soon as
possible after being notified of a proposed borrowing, conversion, or
continuation) give notice (by telephone, confirmed in writing) to Borrower of
such determination. Thereafter, Borrower shall pay to NCB, upon written demand
therefor, such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as NCB in its sole
discretion shall reasonably determine) as shall be required to cause NCB to
receive interest with respect to the LIBOR Rate Loans at a rate per annum equal
the Applicable Margin in excess of the effective pricing to NCB for dollar
deposits to make or to maintain LIBOR Rate Loans; provided, however, that
Borrower shall not be required to pay such additional amounts in respect of any
periods that precede the second day following the date on which Borrower
receives notice from NCB as required by this Section 3.3.2. A certificate as to
additional amounts owed NCB, showing in reasonable detail the basis for the
calculation thereof, submitted in good faith to Borrower by NCB shall, absent
manifest error, be final, conclusive, and binding upon all of the parties
hereto.
3.3.3 REQUIRED TERMINATION AND PREPAYMENT.
In the event that on any date NCB shall have reasonably determined
(which determination shall be final, conclusive, and binding upon all parties)
that the making or continuation of its LIBOR Rate Loans has become unlawful by
compliance by NCB in good faith with any law, governmental rule, regulation, or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, NCB shall
promptly give notice (by telephone, confirmed in writing) to Borrower of that
determination. Subject to the prior withdrawal of a notice of borrowing or a
notice of conversion/continuation or prepayment (without premium or penalty) of
the LIBOR Rate Loans as contemplated by the following Section 3.3.4, the
obligation of NCB to make or to maintain its LIBOR Rate Loans during any such
period shall be terminated at the earlier of the termination of the Interest
Period then in effect or when required by law, and Borrower shall, no later than
the termination of the Interest Period in effect at the time any such
determination pursuant to this Section 3.3.3 is made or, earlier, when required
by law, repay the LIBOR Rate Loans, together with all interest accrued thereon
(without premium or penalty).
3.3.4. OPTIONS OF BORROWER.
In lieu of paying NCB such additional moneys as are required by
Section 3.3.2 or the prepayment required by Section 3.3.3, Borrower may exercise
any one of the following options; provided, that Borrower may in no event avoid
payment obligations that have
Exhibit (10.2)-p 21
<PAGE> 27
accrued under Section 3.3.2 or Section 3.3.3, as the case may be, as of the date
on which such option is exercised:
(i) if the determination by NCB relates only to LIBOR Rate
Loans then being requested by Borrower pursuant to a notice of borrowing or a
notice of conversion/continuation, Borrower may, by giving notice (by telephone,
confirmed in writing) to NCB no later than the date immediately prior to the
date on which such LIBOR Rate Loans are to be made, withdraw as to NCB that
notice of borrowing or such notice of conversion/continuation; or
(ii) upon written notice to NCB, Borrower may terminate the
obligations of NCB to make or to maintain Loans as, and to convert Loans into,
LIBOR Rate Loans; and in such event, Borrower shall, prior to the time any
payment pursuant to Section 3.3.3 is required to be made or, if the provisions
of Section 3.3.2 are applicable, at the end of the then current Interest Period,
convert all of the LIBOR Rate Loans into Prime Rate Loans in the manner
contemplated by Section 3.1.4 but without prepayment premium or penalty and
without satisfying the advance notice requirements therein.
3.3.5 COMPENSATION.
Except as otherwise provided above in this Section 3.3, Borrower
shall compensate NCB, upon written request by NCB (which request shall set forth
in reasonable detail the basis for requesting such amounts), for all reasonable
losses, expenses, and liabilities (including, without limitation, any interest
paid by NCB to lenders of funds borrowed by it to make or to carry its LIBOR
Rate Loans and any loss sustained by NCB in connection with the re-employment of
such funds) that NCB may sustain with respect to LIBOR Rate Loans: (i) if, for
any reason (other than default by NCB), a borrowing of any LIBOR Rate Loan does
not occur on a date specified therefor in a notice of borrowing, a notice of
conversion/continuation, or a telephonic request for borrowing or
conversion/continuation, or a successive Interest Period does not commence after
notice therefor is given pursuant to Section 3.1; (ii) if any prepayment of any
of the LIBOR Rate Loans occurs on a date that is not the last day of the
Interest Period applicable to that Loan; (iii) if any prepayment of any of the
LIBOR Rate Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (iv) as a consequence of any other default by Borrower to
repay LIBOR Rate Loans when required by the terms of this Agreement.
3.3.6 LIBOR RATE TAXES.
Borrower agrees to the following:
(i) Promptly upon notice from NCB and subject to the provisions
of Section 3.3.6(iii), Borrower will pay, prior to the date on which penalties
attach thereto, all present and future income, stamp, and other taxes, levies,
or costs and charges whatsoever imposed, assessed, levied, or collected on or in
respect of the Loans solely as a result of the interest rate being determined by
reference to the LIBOR Rate and/or the provisions of this Agreement relating to
the LIBOR Rate and/or the recording, registration, notarization, or other
formalization of any thereof and/or any payments of principal, interest, or
other amounts made on or in respect of a Loan when the interest rate is
determined by reference to the LIBOR Rate (all such taxes, levies, costs, and
charges being herein collectively called "LIBOR Rate Taxes"); provided, however,
that LIBOR Rate Taxes shall not include taxes imposed on or measured by the
overall income of NCB (whether gross or net income) by the United States of
America or any political subdivision or taxing authority thereof or therein, or
taxes on or measured by the overall income of any foreign branch or subsidiary
of NCB (whether
Exhibit (10.2)-p 22
<PAGE> 28
gross or not income) by any foreign country or subdivision thereof in which that
branch or subsidiary is doing business; and, that Borrower shall not be required
to pay any LIBOR Rate Taxes in respect of any periods that precede the second
day following the date on which Borrower receives notice from NCB as required by
this Section 3.3.6. Borrower shall also pay such additional amounts equal to
increases in taxes payable by NCB described in the first of the foregoing
provisos, which increases are attributable to payments made by Borrower
described in the immediately preceding sentence or this sentence. Promptly after
the date on which payment of any such LIBOR Rate Tax is due pursuant to
applicable law, Borrower will, at the request of NCB, furnish to NCB evidence,
in form and substance satisfactory to NCB, that Borrower has met their
obligation under this Section 3.3.6;
(ii) Borrower will indemnify NCB against, and reimburse NCB on
demand for, any LIBOR Rate Taxes (as determined by NCB in its good faith
discretion) that Borrower is obligated to pay pursuant to Section 3.3.6(i). NCB
shall provide Borrower with appropriate receipts for any payments or
reimbursements made by Borrower pursuant to this Section 3.3.6(ii);
(iii) In lieu of paying the amounts specified in Section
3.3.6(i), Borrower may exercise any one of the following options; provided,
however, that Borrower may in no event avoid payment obligations that have
accrued under Section 3.3.6(i) as of the date on which said option is exercised:
(a) If the determination by NCB relates only to
LIBOR Rate Loans then being requested by Borrower pursuant
to a notice of borrowing or a notice of
conversion/continuation, Borrower may by giving notice (by
telephone, confirmed in writing) to NCB no later than the
date immediately prior to the date on which such LIBOR Rate
Loans are to be made, withdraw the notice of borrowing or
such notice of conversion/continuation; or
(b) Upon written notice to NCB, Borrower may
terminate the obligations of NCB to make or to maintain
Loans as, and to convert Loans into, LIBOR Rate Loans; and
in such event Borrower shall, prior to the time any payment
pursuant to Section 3.3.6(i) is required to be made,
convert all of the LIBOR Rate Loans into Prime Rate Loans
in the manner contemplated by Section 3.1.4, but without
prepayment premium or penalty and without satisfying the
advance notice requirements therein.
3.3.7 BOOKING OF LIBOR RATE LOANS.
NCB may make, carry, or transfer LIBOR Rate Loans at, to, or for
the account of, any of its branch offices or the office of an affiliate of NCB.
Exhibit (10.2)-p 23
<PAGE> 29
3.3.8 ASSUMPTIONS CONCERNING FUNDING OF LIBOR RATE LOANS.
Calculation of all amounts payable to NCB under this Section 3.3
shall be made as though NCB had actually funded its relevant LIBOR Rate Loan
through the purchase of a deposit offered in the London Interbank LIBO Market
bearing interest at a LIBOR Rate in an amount equal to the amount of that LIBOR
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such deposit from an offshore office of NCB to a
domestic office of NCB in the United States of America; provided, however, that
NCB may fund each LIBOR Rate Loan in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section 3.3.
3.3.9 LIBOR RATE LOANS AFTER DEFAULT.
Unless NCB shall otherwise agree, after the occurrence of and
during the continuance of an Event of Default, Borrower may not elect or have a
Loan be made or maintained as, or converted to, a LIBOR Rate Loan after the
expiration of any Interest Period then in effect for that Loan.
4. [This Section Intentionally Omitted.]
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower represents and warrants to NCB on the date of this
Agreement as follows:
5.1.1 ORGANIZATION AND QUALIFICATION.
The Borrower is a corporation, duly organized, validly existing
and in good standing under the laws of the State of West Virginia. The Borrower
has the lawful power to own or lease its properties and to engage in the
business it presently conducts or proposes to conduct. The Borrower is duly
licensed or qualified and in good standing in all other jurisdictions where the
property owned or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary.
5.1.2 CAPITALIZATION AND OWNERSHIP.
The authorized capital stock of the Borrower consists of
20,000,000 shares of Common Stock, $1 par value, of which 9,713,913 shares
(referred to herein as the "Shares") are issued and outstanding. All of the
Shares have been validly issued and are fully paid and nonassessable. There are
no options, warrants or other rights outstanding to purchase any such shares
except as indicated on Schedule 5.1.2.
5.1.3 SUBSIDIARIES.
Schedule 5.1.3 states the name of each of the Borrower's
Subsidiaries, its jurisdiction of incorporation, its authorized capital stock,
the issued and outstanding shares (referred to herein as the "Subsidiary
Shares") and the owners thereof if it is a corporation, its outstanding
partnership interests (the "Partnership Interests") if it is a partnership and
its outstanding limited liability company interests, interests assigned to
managers thereof and the voting rights associated therewith (the "LLC
Interests") if it is a limited liability company. The
Exhibit (10.2)-p 24
<PAGE> 30
Borrower and each Subsidiary of the Borrower has good and marketable title to
all of the Subsidiary Shares, Partnership Interests and LLC Interests it
purports to own, free and clear in each case of any Lien. All Subsidiary Shares,
Partnership Interests and LLC Interests have been validly issued, and all
Subsidiary Shares are fully paid and nonassessable. All capital contributions
and other consideration required to be made or paid in connection with the
issuance of the Partnership Interests and LLC Interests have been made or paid,
as the case may be. There are no options, warrants or other rights outstanding
to purchase any such Subsidiary Shares, Partnership Interests or LLC Interests
except as indicated on Schedule 5.1.3.
5.1.4 POWER AND AUTHORITY.
The Borrower has full power to enter into, execute, deliver and
carry out this Agreement and the other Loan Documents to which it is a party, to
incur the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
5.1.5 VALIDITY AND BINDING EFFECT.
This Agreement has been duly and validly executed and delivered by
the Borrower, and each other Loan Document which the Borrower is required to
execute and deliver on or after the date hereof will have been duly executed and
delivered by the Borrower on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of the Borrower which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against the Borrower in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or general equitable principles.
5.1.6 NO CONFLICT.
Neither the execution and delivery of this Agreement or the other
Loan Documents by the Borrower nor the consummation of the transactions herein
or therein contemplated or compliance with the terms and provisions hereof or
thereof by any of them will conflict with, constitute a default under or result
in any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership, partnership
agreement, certificate of formation, limited liability company agreement or
other organizational documents of the Borrower or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
the Borrower or any of its Subsidiaries is a party or by which the Borrower or
any of its Subsidiaries is bound or to which it is subject, or result in the
creation or enforcement of any Lien, charge or encumbrance whatsoever upon any
property (now or hereafter acquired) of the Borrower or any of its Subsidiaries.
5.1.7 LITIGATION.
There are no actions, suits, proceedings or investigations pending
or, to the knowledge of the Borrower, threatened against the Borrower or any
Subsidiary of the Borrower at law or equity before any Official Body which
individually or in the aggregate may result in any Material Adverse Change.
Neither the Borrower nor any of its Subsidiaries is in material
Exhibit (10.2)-p 25
<PAGE> 31
violation of any order, writ, injunction or any decree of any Official Body
which may result in any Material Adverse Change.
5.1.8 TITLE TO PROPERTIES.
The Borrower and each of its Subsidiaries has good and marketable
title to or valid leasehold interest in all properties, assets and other rights
which it purports to own or lease or which are reflected as owned or leased on,
its books and records, free and clear of all Liens and encumbrances except
Permitted Liens, and subject to the terms and conditions of the applicable
leases. All leases of property are in full force and effect without the
necessity for any consent which has not previously been obtained upon
consummation of the transactions contemplated hereby.
5.1.9 FINANCIAL STATEMENTS.
(i) Annual Statements. The Borrower has delivered to NCB
copies of its audited consolidated year-end financial statements for and as of
the end of the three fiscal years ended October 31, 1998 (the "Annual
Statements"). The Annual Statements were compiled from the books and records
maintained by the Borrower's management, are correct and complete and fairly
represent the consolidated financial condition of the Borrower and its
Subsidiaries as of their dates and the results of operations for the fiscal
periods then ended and have been prepared in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments.
(ii) [This Section Intentionally Omitted.]
(iii) Accuracy of Financial Statements. Neither the
Borrower nor any Subsidiary of the Borrower has any material liabilities,
contingent or otherwise, or forward or long-term commitments that are not
disclosed in the Annual Statements or in the notes thereto and which under GAAP
were required to be disclosed therein, and except as disclosed therein there are
no unrealized or anticipated losses from any commitments of the Borrower or any
of its Subsidiaries which are reasonably likely to cause a Material Adverse
Change. Since October 31, 1998, no Material Adverse Change has occurred.
5.1.10 USE OF PROCEEDS, MARGIN STOCK.
The Borrower intends to use the proceeds of the Loans in
accordance with Section 2.4 hereof. Neither the Borrower nor any of its
Subsidiaries engages or intends to engage principally, or as one of its
important activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U). No part of the proceeds of the Revolving
Loan has been or will be used, immediately, incidentally or ultimately, to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System. Neither the Borrower nor any of its
Subsidiaries holds or intends to hold margin stock in such amounts that more
than 25% of the reasonable value of the assets of the Borrower or Subsidiary of
the Borrower are or will be represented by margin stock.
Exhibit (10.2)-p 26
<PAGE> 32
5.1.11 FULL DISCLOSURE.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to NCB in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading.
5.1.12 TAXES.
All federal, state, local and other tax returns required to have
been filed with respect to the Borrower and each Subsidiary of the Borrower have
been filed, and payment or adequate provision has been made for the payment of
all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the
extent that such taxes, fees, assessments and other charges are not material and
are being contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate provisions, if any,
as shall be required by GAAP shall have been made. There are no agreements or
waivers extending the statutory period of limitations applicable to any federal
income tax return of the Borrower or any Subsidiary of the Borrower for any
period.
5.1.13 CONSENTS AND APPROVALS.
No consent, approval, exemption, order or authorization of or a
registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by the Borrower.
5.1.14 NO EVENT OF DEFAULT, COMPLIANCE WITH INSTRUMENTS.
No event has occurred and is continuing and no condition exists or
will exist after giving effect to the borrowings or other extensions of credit
to be made on the Closing Date under or pursuant to the Loan Documents which
constitutes an Event of Default or Potential Default. Neither the Borrower nor
any Subsidiaries of the Borrower is in material violation of (i) any term of its
certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability company
agreement or other organizational documents or (ii) any material agreement or
instrument to which it is a party or by which it or any of its properties may be
subject or bound.
5.1.15 PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
The Borrower and each Subsidiary of the Borrower owns or possesses
all the material patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises, permits and rights necessary to own and
operate its properties and to carry on its business as presently conducted and
planned to be conducted by such Borrower or Subsidiary, without known possible,
alleged or actual conflict with the rights of others.
5.1.16 INSURANCE.
The Borrower maintains policies and bonds provide adequate
coverage from reputable and financially sound insurers in amounts sufficient to
insure the assets and risks
Exhibit (10.2)-p 27
<PAGE> 33
of the Borrower and each Subsidiary of the Borrower in accordance with prudent
business practice in the industries of the Borrower and its Subsidiaries. No
notice has been given or claim made and no grounds exist to cancel or avoid any
such policy or bonds or to reduce the coverage provided hereby.
5.1.17 COMPLIANCE WITH LAWS.
The Borrower and its Subsidiaries are in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in Section 5.1.22) in all jurisdictions in which the
Borrower or any of its Subsidiaries is presently or will be doing business.
5.1.18 MATERIAL CONTRACTS; BURDENSOME RESTRICTIONS.
All material agreements relating to the business operations of the
Borrower and its Subsidiaries, including all employee benefit plans and Labor
Contracts are valid, binding and enforceable upon such Borrower or Subsidiary
and each of the other parties thereto in accordance with their respective terms,
and there is no default thereunder, to the Borrower's knowledge, with respect to
parties other than such Borrower or Subsidiary. Neither the Borrower nor any of
its Subsidiaries is bound by any contractual obligation, or subject to any
restriction in any organization document, or any requirement of Law which is
reasonably likely to result in a Material Adverse Change.
5.1.19 INVESTMENT COMPANIES; REGULATED ENTITIES.
Neither the Borrower nor any of its Subsidiaries is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940 or under the "control" of an "investment company" as such terms are
defined in the Investment Company Act of 1940 and shall not become such an
"investment company" or under such "control." Neither the Borrower nor any of
its Subsidiaries is subject to any other Federal or state statute or regulation
limiting its ability to incur Indebtedness for borrowed money.
5.1.20 PLANS AND BENEFIT ARRANGEMENTS.
Except as set forth on Schedule 5.1.20:
(i) The Borrower and each other member of the ERISA
Group are in compliance in all material respects with any applicable provisions
of ERISA with respect to all Benefit Arrangements, Plans and Multiemployer
Plans. There has been no Prohibited Transaction with respect to any Benefit
Arrangement or any Plan or, to the best knowledge of the Borrower, with respect
to any Multiemployer Plan or Multiple Employer Plan, which is material. The
Borrower and all other members of the ERISA Group have made when due any and all
payments required to be made under any agreement relating to a Multiemployer
Plan or a Multiple Employer Plan or any Law pertaining thereto. With respect to
each Plan and Multiemployer Plan, the Borrower and each other member of the
ERISA Group (i) have fulfilled in all material respects their obligations under
the minimum funding standards of ERISA, (ii) have not incurred any liability to
the PBGC, and (iii) have not had asserted against them any penalty for failure
to fulfill the minimum funding requirements of ERISA.
(ii) To the best of the Borrower's knowledge, each
Exhibit (10.2)-p 28
<PAGE> 34
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) Neither the Borrower nor or any other member of the
ERISA Group has instituted or intends to institute proceedings to terminate any
Plan.
(iv) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan.
(vi) Neither the Borrower nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower nor any other member of the ERISA Group has been notified
by any Multiemployer Plan or Multiple Employer Plan that such Multiemployer Plan
or Multiple Employer Plan has been terminated within the meaning of Title IV of
ERISA and, to the best knowledge of the Borrower, no Multiemployer Plan or
Multiple Employer Plan is reasonably expected to be reorganized or terminated,
within the meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, the Borrower and all other members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is funded other than with insurance,
the Borrower and all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer
Plans have been administered in accordance with their terms and applicable Law.
5.1.21 EMPLOYMENT MATTERS.
The Borrower and each of its Subsidiaries is in compliance with
the Labor Contracts and all applicable federal, state and local labor and
employment Laws including those related to equal employment opportunity and
affirmative action, labor relations, minimum wage, overtime, child labor,
medical insurance continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material Adverse Change. There are no outstanding
grievances, arbitration awards or appeals therefrom arising out of the Labor
Contracts or current or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at facilities of the Borrower or any of its Subsidiaries
which in any case would constitute a Material Adverse Change. The Borrower has
delivered to NCB true and correct copies of each of the Labor Contracts (if
any).
Exhibit (10.2)-p 29
<PAGE> 35
5.1.22 ENVIRONMENTAL MATTERS.
Except as disclosed on Schedule 5.1.22:
(i) Neither the Borrower nor any of its Subsidiaries has
received any material Environmental Complaint from any Official Body or private
Person alleging that such Borrower or Subsidiary or any prior or subsequent
owner of any of the Property is a potentially responsible party under the
Comprehensive Environmental Response, Cleanup and Liability Act, 42 U.S.C.
Section 9601, et seq., and the Borrower has no reason to believe that such an
Environmental Complaint might be received. There are no pending or, to the
Borrower's knowledge, threatened Environmental Complaints relating to the
Borrower or Subsidiary of the Borrower or, to the Borrower's knowledge, any
prior or subsequent owner of any of the Property pertaining to, or arising out
of, any material Environmental Conditions.
(ii) There are no circumstances at, on or under any of
the Property that constitute a breach of or non-compliance with any of the
Environmental Laws, and there are no past or present Environmental Conditions
at, on or under any of the Property or, to the Borrower's knowledge, at, on or
under adjacent property, that prevent compliance with the Environmental Laws at
any of the Property.
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon or
thereunder contain or use Regulated Substances except in substantial compliance
with Environmental Laws. There are no processes, facilities, operations,
equipment or other activities at, on or under any of the Property, or, to the
Borrower's knowledge, at, on or under adjacent property, that currently result
in the release or threatened release of Regulated Substances onto any of the
Property, except to the extent that such releases or threatened releases are not
a substantial breach of or otherwise not a violation of the Environmental Laws.
(iv) There are no aboveground storage tanks, underground
storage tanks or underground piping associated with such tanks, used for the
management of Regulated Substances at, on or under any of the Property that (a)
do not have, to the extent required by Environmental Laws, a full operational
secondary containment system in place, and (b) are not otherwise in compliance
with all Environmental Laws. There are no abandoned underground storage tanks or
underground piping associated with such tanks, previously used for the
management of Regulated Substances at, on or under any of the Property that have
not either been closed in place in accordance with Environmental Laws or removed
in compliance with all applicable Environmental Laws and no contamination
associated with the use of such tanks exists on any of the Property that is not
in compliance with Environmental Laws.
(v) The Borrower and each of its Subsidiaries has all
material permits, licenses, authorizations, plans and approvals necessary under
the Environmental Laws for the conduct of the business of such Borrower or
Subsidiary as presently conducted. The Borrower and each of its Subsidiaries has
submitted all material notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which pertain to past and
current operations on any of the Property.
Exhibit (10.2)-p 30
<PAGE> 36
(vi) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances at, on, or under any of the Property and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances have been done
materially in accordance with the Environmental Laws.
5.1.23 SENIOR DEBT STATUS.
(i) The Obligations of the Borrower under this
Agreement, the Revolving Note and each of the other Loan Documents to which it
is a party do rank and will rank at least pari passu in priority of payment with
all other Indebtedness of the Borrower except Indebtedness of the Borrower to
the extent secured by Permitted Liens. There is no Lien upon or with respect to
any of the properties or income of the Borrower or any of its Subsidiaries which
secures indebtedness or other obligations of any Person except for Permitted
Liens.
5.2 Updates to Schedules.
Should any of the information or disclosures provided on any of
the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide NCB in writing with such revisions
or updates to such Schedule as may be necessary or appropriate to update or
correct same; provided, however, that no Schedule shall be deemed to have been
amended, modified or superseded by any such correction or update, nor shall any
breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby, unless
and until NCB, in its reasonable discretion, shall have accepted in writing such
revisions or updates to such Schedule.
6. CONDITIONS OF LENDING
The obligation of NCB to make each Revolving Loan hereunder is subject
to the performance by each of the Borrower of its Obligations to be performed
hereunder at or prior to the making of each such Revolving Loan and to the
satisfaction of the following further conditions:
6.1 Officer's Certificate.
The representations and warranties of the Borrower contained in
Section 5 and in each of the other Loan Documents shall be true and accurate on
and as of the Closing Date and each subsequent date when a Revolving Loan is
made with the same effect as though such representations and warranties had been
made on and as of such date (except representations and warranties which relate
solely to an earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to therein
and except changes in representations and warranties that, in the determination
of NCB are not reasonably likely to result in a Material Adverse Change), and
the Borrower shall have performed and complied with all covenants and conditions
hereof and thereof, no Event of Default or Potential Default shall have occurred
and be continuing or shall exist; and there shall be delivered to NCB a
certificate of the Borrower, dated the Closing Date, and dated the first day of
each succeeding fiscal quarter of the Borrower, to be delivered within five (5)
Business Days thereafter, to each such effect and signed by one of the following
officers: the Chief Executive Officer, President, Chief Financial Officer,
Secretary or Assistant Secretary of the Borrower.
6.2 Secretary's Certificate.
There shall be delivered to NCB a certificate dated the Closing
Date NCB
Exhibit (10.2)-p 31
<PAGE> 37
and signed by the Secretary or an Assistant Secretary of the Borrower,
certifying as appropriate as to:
(i) all action taken by the Borrower in connection with
this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of the Borrower for purposes of this Agreement and the true signatures of
such officers, on which NCB may conclusively rely; and
(iii) copies of its organizational documents, including
its certificate of incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, and limited liability company
agreement as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing (or subsistence) of the Borrower in each state where organized
or qualified to do business and a bring-down certificate by facsimile dated the
Closing Date.
6.3 Subsidiaries Guaranty.
There shall be delivered to NCB, a Subsidiaries Guaranty in the
form attached hereto as Exhibit 6.3.
6.4 Opinion of Counsel.
There shall be delivered to NCB a written opinion of Huddleston,
Bolen, Beatty, Porter & Copen, counsel for the Borrower, dated the Closing Date
and in form and substance satisfactory to NCB and its counsel as to such other
matters incident to the transactions contemplated herein as NCB may reasonably
request.
6.5 Legal Details.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to NCB and counsel for NCB, and NCB shall
have received all such other counterpart originals or certified or other copies
of such documents and proceedings in connection with such transactions, in form
and substance satisfactory to NCB and said counsel, as NCB or said counsel may
reasonably request.
6.6 Payment of Fees.
The Borrower shall have paid or caused to be paid to NCB, counsel
fees, and all other fees, costs and expenses accrued through the Closing Date
for which NCB is entitled to be reimbursed.
6.7 Officer's Certificate Regarding MACs.
Since October 31, 1998, no Material Adverse Change shall have
occurred; prior to the Closing Date, there shall have been no material change in
the management of the Borrower or any Subsidiary of the Borrower, and there
shall have been delivered to NCB a certificate of the Borrower dated the Closing
Date and dated the first day of each succeeding fiscal quarter, to be delivered
within five (5) Business Days thereafter, to each such effect, signed behalf of
the Borrower by any one of the Chief Executive Officer, President, Chief
Financial Officer, Secretary or Assistant Secretary of the Borrower.
Exhibit (10.2)-p 32
<PAGE> 38
6.8 No Violation of Laws.
The making of the Revolving Loan shall not contravene any Law
applicable to the Borrower or to NCB.
6.9 No Actions or Proceedings.
No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or which, in
NCB's reasonable judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower, covenants and agrees that until payment in full of the
Revolving Loan, and interest thereon, and satisfaction of all of the Borrower's
other Obligations under the Loan Documents, the Borrower shall comply at all
times with the following affirmative covenants:
7.1.1 PRESERVATION OF EXISTENCE, ETC.
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain its legal existence as a corporation, limited partnership or limited
liability company and its license or qualification and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary, except as otherwise
expressly permitted in Section 7.2.5.
7.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.
The Borrower shall, and shall cause each of its Subsidiaries to,
duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made, but only to the extent that failure to discharge any such liabilities
would not result in any additional liability which would adversely affect to a
material extent the financial condition of the Borrower or Subsidiary of the
Borrower.
7.1.3 MAINTENANCE OF INSURANCE.
The Borrower shall, and shall cause each of its Subsidiaries to,
insure its properties and assets against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including fire, extended
coverage, property damage, workers' compensation, public liability and business
interruption insurance) and against other risks (including errors and omissions)
in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the extent
customary, all as reasonably determined by NCB.
Exhibit (10.2)-p 33
<PAGE> 39
7.1.4 MAINTENANCE OF PROPERTIES AND LEASES.
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain in good repair, working order and condition (ordinary wear and tear
excepted) in accordance with the general practice of other businesses of similar
character and size, all of those properties useful or necessary to its business,
and from time to time, the Borrower will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
7.1.5 MAINTENANCE OF PATENTS, TRADEMARKS, ETC.
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect all patents, trademarks, service marks, trade
names, copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of its properties and business if the
failure so to maintain the same would constitute a Material Adverse Change.
7.1.6 VISITATION RIGHTS.
The Borrower shall, and shall cause each of its Subsidiaries to,
permit any of the officers or authorized employees or representatives of NCB to
visit and inspect any of its properties and to examine and make excerpts from
its books and records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as often as NCB may
reasonably request, provided that NCB shall provide the Borrower with reasonable
notice prior to any visit or inspection.
7.1.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.
The Borrower shall, and shall cause each Subsidiary of the
Borrower to, maintain and keep proper books of record and account which enable
the Borrower and its Subsidiaries to issue financial statements in accordance
with GAAP and as otherwise required by applicable Laws of any Official Body
having jurisdiction over the Borrower or any Subsidiary of the Borrower, and in
which full, true and correct entries shall be made in all material respects of
all its dealings and business and financial affairs.
7.1.8 PLANS AND BENEFIT ARRANGEMENTS.
The Borrower shall, and shall cause each member of the ERISA Group
to, comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where any such failure would
not result in a Material Adverse Change. Without limiting the generality of the
foregoing, the Borrower shall cause all of its Plans and all Plans maintained by
any member of the ERISA Group to be funded in accordance with the minimum
funding requirements of ERISA and shall make, and cause each member of the ERISA
Group to make, in a timely manner, all contributions due to Plans, Benefit
Arrangements and Multiemployer Plans except where such failure would not result
in a Material Adverse Change.
7.1.9 COMPLIANCE WITH LAWS.
The Borrower shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws, including all Environmental Laws, in all
respects, provided that it shall not be deemed to be a violation of this Section
7.1.9 if any failure to comply with any Law would
Exhibit (10.2)-p 34
<PAGE> 40
not result in fines, penalties, remediation costs, other similar liabilities or
injunctive relief any of which would constitute a Material Adverse Change.
7.1.10 USE OF PROCEEDS.
7.1.10.1 General.
The Borrower will use the proceeds of the Revolving Loan only to
provide for financing acquisitions, capital expenditures and general working
capital requirements.
7.1.10.2 Margin Stock.
The Borrower shall not use the proceeds of the Revolving Loan to
purchase or carry margin stock as more fully provided in Section 5. 1. 10.
7.1.10.3 Section 20 Subsidiaries.
The Borrower will not, directly or indirectly, use any portion of
the proceeds of the Revolving Loan (i) knowingly to purchase any Ineligible
Securities from a Section 20 Subsidiary during any period in which such Section
20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to
purchase during the underwriting or placement period Ineligible Securities being
underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make
payment of principal or interest on Ineligible Securities underwritten or
privately placed by as Section 20 Subsidiary and issued by or for the benefit of
Borrower or any Affiliate of the Borrower.
7.2 Negative Covenants.
The Borrower covenants and agrees that until payment in full of the
Revolving Loan, and interest thereon and satisfaction of all of the Borrower's
other Obligations hereunder, the Borrower shall comply with the following
negative covenants:
7.2.1 INDEBTEDNESS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule 7.2.1
(including any extensions, renewals or refinancings thereof), provided there is
no increase in the amount thereof or other significant change in the terms
thereof unless otherwise specified on Schedule 7.2.1;
(iii) Capitalized and operating leases as and to the
extent permitted under Section 7.2.13;
(iv) Indebtedness secured by Purchase Money Security
Interests not exceeding $7,000,000;
Exhibit (10.2)-p 35
<PAGE> 41
(v) the existing $12,500,000 unsecured term loan
facility with PNC and the Banks pursuant to the Term Loan Agreement;
(vi) the existing $2,000,000 unsecured revolving credit
facility with Bank One, West Virginia; and
(vii) the existing $5,600,000 secured term loan facility
with PNC Bank, National Association.
7.2.2 LIENS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.
7.2.3 GUARANTIES.
Except for the Term Loan Agreement, the Borrower shall not, and
shall not permit any of its Subsidiaries to, at any time, directly or
indirectly, become or be liable in respect of any Guaranty, or assume,
guarantee, become surety for, endorse or otherwise agree, become or remain
directly or contingently liable upon or with respect to any obligation or
liability of any other Person, except for the Guaranty of the Obligations of the
Borrower provided by each Subsidiary of the Borrower pursuant to the
Subsidiaries Guaranty.
7.2.4 LOANS AND INVESTMENTS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms
in the ordinary course of business;
(ii) advances to employees to meet expenses incurred by
such employees in the ordinary course of business;
(iii) Permitted Investments;
(iv) loans, advances and investments in Affiliates of the
Borrower.
7.2.5 LIQUIDATIONS, MERGERS, CONSOLIDATIONS AND ACQUISITIONS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
provided that
Exhibit (10.2)-p 36
<PAGE> 42
(1) any Affiliate of the Borrower may consolidate or merge into
another Affiliate of the Borrower which is wholly-owned by the Borrower, and
(2) the Borrower may acquire, whether by purchase or by merger,
(A) all of the ownership interests and voting rights of another Person or (B)
substantially all of assets of another Person or of a business or division of
another Person (each a "Permitted Acquisition"), provided that each of the
following requirements is met:
(i) the board of directors or other equivalent governing
body of such Person shall have approved such Permitted Acquisition and the Loan
Parties shall have delivered to the Banks written evidence of such approval
prior to such Permitted Acquisition,
(ii) the Borrower is acquiring the ownership interests in
such Person, such Person shall execute a Subsidiaries Guaranty in favor of NCB
and the Banks in the form attached hereto as Exhibit 1. 1 (G) on or before the
date of such Permitted Acquisition,
(iii) the business acquired, or the business conducted by
the Person whose ownership interests are being acquired, as applicable, shall be
substantially the same as one or more line or lines of business conducted by the
Borrower and shall comply with Section 7.2.8,
(iv) immediately prior to and after giving effect to such
Permitted Acquisition, (A) no payment default exists, (B) no violation of
Section 7.2 exists, (C) NCB has not sent a notice of a violation of Section 7.1
which has not been cured and (D) no Event of Default exits,
(v) the Borrower shall provide the most recent available
balance sheet and annual income statement for the acquired company at least five
(5) Business Days prior to the Permitted Acquisition. Additionally, if the
acquired company, or if the total of all acquired companies acquired within any
fiscal year if treated as a single acquisition, would constitute a "Significant
Subsidiary" as that term is defined in Reg. Section 210.1-02(w) of Regulation
S-X (17 CFR Part 210), Borrower shall provide a proforma consolidating balance
sheet as of the most recent fiscal quarter and consolidating income statement
for the most recent fiscal quarter and consolidating income statement for the
most recent year-to-date period and for the prior year to include the acquired
company and demonstrate on a proforma basis that it shall be in compliance with
all the covenants contained in this Agreement after giving effect to such
Permitted Acquisition by delivering at least five (5) Business Days prior to
such Permitted Acquisition a certificate evidencing such compliance. Subject to
the above limitations, Permitted Acquisitions may include any merger or
acquisition, whether accounted for under GAAP as a purchase or a pooling of
interests and regardless of whether the value of the Consideration paid or
received is comprised of cash, common stock, preferred stock, assets or
partnership interests, estimated value of earn-outs or other means,
7.2.6 DISPOSITIONS OF ASSETS OR SUBSIDIARIES.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, sell and leaseback, abandon or otherwise
transfer or dispose of, voluntarily or
Exhibit (10.2)-p 37
<PAGE> 43
involuntarily, any of its properties or assets, tangible or intangible
(including sale, assignment, discount or other disposition of accounts, contract
rights, chattel paper, equipment or general intangibles with or without recourse
or of capital stock, shares of beneficial interest, partnership interests or
limited liability company interests of a Subsidiary of the Borrower), except:
(i) transactions involving the sale of inventory in the
ordinary course of business;
(ii) any sale, transfer or lease of assets in the
ordinary course of business which are no longer necessary or required in the
conduct of the Borrower's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
Subsidiary of the Borrower to the Borrower; or
(iv) any sale, transfer or lease of assets in the
ordinary course of business which are replaced by substitute assets acquired or
leased within the parameters of Section 7.2.13.
7.2.7 AFFILIATE TRANSACTIONS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services to any Affiliate of
the Borrower or other Person) unless such transaction is not otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon fair and reasonable arm's-length terms and conditions which are fully
disclosed to NCB and is in accordance with all applicable Law.
7.2.8 CONTINUATION OF OR CHANGE IN BUSINESS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than commercial printing, and
certain leasing businesses in support thereof, and the supplying of office
products and office furniture, substantially as conducted and operated by such
Borrower or Subsidiary during the present fiscal year, and such Borrower or
Subsidiary shall not permit any material change in such business.
7.2.9 PLANS AND BENEFIT ARRANGEMENTS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to:
(i) fail to satisfy the minimum funding requirements of
ERISA and the Internal Revenue Code with respect to any Plan where such failure
is likely to result in a Material Adverse Change;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which would constitute a Material
Adverse Change;
Exhibit (10.2)-p 38
<PAGE> 44
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that any Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto, where such failure is likely to result in a Material
Adverse Change;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a Material Adverse Change;
(vii) terminate, or institute proceedings to terminate,
any Plan, where such termination is likely to result in a Material Adverse
Change;
(viii) make any amendment to any Plan with respect to which
security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code, where such failure is likely to result in a Material Adverse
Change.
7.2.10 FISCAL YEAR.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, change its fiscal year from the twelve-month period beginning
November 1 and ending October 31.
7.2.11 ISSUANCE OF STOCK.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, issue any additional shares of its capital stock or any
options, warrants or other rights in respect thereof except that the Borrower
may issue stock: (a) as all or part of the Consideration for a Permitted
Acquisition; (b) pursuant to the provisions of Borrower's 1993 Stock Option Plan
or any successor plan providing for employee stock options; or ( c) incident to
any stock split or dividend.
7.2.12 CHANGES IN ORGANIZATIONAL DOCUMENTS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), by-laws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational documents
in the event such change would be adverse to NCB as determined by NCB in its
sole discretion, without obtaining the prior written consent of NCB. The
Borrower will provide true and correct copies of all amendments to
organizational documents to NCB at the time annual financial
Exhibit (10.2)-p 39
<PAGE> 45
statements are delivered.
7.2.13 CAPITAL EXPENDITURES AND LEASES.
Borrower shall not, and shall not permit any of its Subsidiaries
to, make any capital expenditures, as defined by GAAP, including the purchase or
lease of any assets which if purchased would constitute fixed assets or which if
leased would constitute a capitalized lease, other than capital expenditures in
the aggregate not to exceed 15% per annum of Borrower's total shareholder equity
(as defined by GAAP) for the previous fiscal year ended, and all such capital
expenditures and leases shall be made under usual and customary terms and in the
ordinary course of business.
7.2.14 MINIMUM FIXED CHARGE COVERAGE RATIO.
The Borrower shall not permit the ratio of Consolidated Cash Flow
from Operations divided by Fixed Charges, calculated as of the end of each
fiscal quarter for the previous four fiscal quarters then ended, to be less than
1.05 to 1.00 through October 31, 1999, and to be less than 1.10 to 1.0
thereafter.
7.2.15 LEVERAGE RATIO.
The Borrower shall not at any time permit the ratio of Total
Senior Indebtedness divided by EBITDA to be greater than:
2.50 to 1.0 as of October 31, 1998
2.50 to 1.0 as of October 31, 1999
2.25 to 1.0 as of October 31, 2000 and
2.0 to 1.0 as of October 31 of each year thereafter.
7.2.16 MINIMUM TANGIBLE NET WORTH.
The Borrower shall not at any time permit Consolidated
Tangible Net Worth to be less than the sum of (i) 90% of Tangible Net Worth on
the Closing Date, (ii) an amount equal to 50% of the Consolidated Net Income and
(iii) 100% of the proceeds of all stock issued by the Borrower or any of its
Subsidiaries.
7.3 Reporting Requirements.
The Borrower covenants and agrees that until payment in full of
the Revolving Loan and interest thereon and satisfaction of all of the
Borrower's other Obligations hereunder and under the other Loan Documents the
Borrower will furnish or cause to be furnished to NCB:
7.3.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters in each
fiscal year, financial statements of the Borrower, consisting of a consolidated
balance sheet as of the end of such fiscal quarter and related consolidated
statements of income and cash flows for the fiscal quarter then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end audit adjustments) by the Chief Executive Officer, President
or Chief Financial Officer of the Borrower as having been prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and
Exhibit (10.2)-p 40
<PAGE> 46
period in the previous fiscal year.
7.3.2 ANNUAL FINANCIAL STATEMENTS.
As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, financial statements of the
Borrower consisting of a consolidated and a consolidating balance sheet as of
the end of such fiscal year, and related consolidated and consolidating
statements of income, retained earnings and cash flows for the fiscal year then
ended, all in reasonable detail and setting forth in comparative form the
financial statements as of the end of and for the preceding fiscal year, and
certified by independent certified public accountants of nationally recognized
standing. The certificate or report of accountants shall be free of
qualifications (other than any consistency qualification that may result from a
change in the method used to prepare the financial statements as to which such
accountants concur).
7.3.3 CERTIFICATE OF THE BORROWER.
Concurrently with the financial statements of the Borrower
furnished to NCB pursuant to Sections 7.3.1 and 7.3.2, a certificate of the
Borrower signed by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower, in the form of Exhibit 7.3.3, to the effect that,
except as described pursuant to Section 7.3.4, (i) the representations and
warranties of the Borrower contained in Section 5 and in the other Loan
Documents are true on and as of the date of such certificate with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which expressly relate solely
to an earlier date or time) and the Borrower has performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
such financial statements with all financial covenants contained in Section 7.2.
7.3.4 NOTICE OF DEFAULT.
Promptly after any executive officer of the Borrower has learned
of the occurrence of an Event of Default or Potential Default, a certificate
signed on behalf of the Loan parties by an executive officer of the Borrower
setting forth the details of such Event of Default or Potential Default and the
action which the Borrower proposes to take with respect thereto.
7.3.5 NOTICE OF LITIGATION.
Promptly after the commencement thereof, notice of all actions,
suits, proceedings or investigations before or by any Official Body or any other
Person against the Borrower or any of its Subsidiaries which involve a claim or
series of claims in excess of $1,000,000 or which if adversely determined would
constitute a Material Adverse Change.
7.3.6 CERTAIN EVENTS.
Written notice to NCB:
(i) at least ten (10) calendar days after closing, with
respect to any proposed sale or transfer of assets pursuant to Section
7.2.6(iv), and
Exhibit (10.2)-p 41
<PAGE> 47
(ii) within the restrictions set forth in Section 7.2.12,
any amendments to the organizational documents of the Borrower,
7.3.7 BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION.
Promptly upon their becoming available to the Borrower:
(i) the annual budget and any forecasts of the Borrower,
(ii) any reports including reports on the internal
control structure the Borrower based upon any audit of the Borrower,
(iii) any reports, notices or proxy statements generally
distributed by the Borrower to its stockholders on a date no later than the date
supplied to such stockholders,
(iv) regular or periodic reports, including Forms 10-K,
10-Q and 8-K, registration statements and prospectuses, filed by the Borrower
with the Securities and Exchange Commission,
(v) upon NCB's reasonable request, a copy of any order
in any proceeding to which the Borrower or any of its Subsidiaries is a party
issued by any Official Body, and
(vi) such other reports and information as any of NCB may
from time to time reasonably request. The Borrower shall also notify NCB
promptly of the enactment or adoption of any Law which may result in a Material
Adverse Change.
7.3.8 NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS.
7.3.8.1 Certain Events.
Promptly upon becoming aware of the occurrence thereof,
notice (including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of
(i) any Reportable Event with respect to the Borrower or
any other member of the ERISA Group (regardless of whether the obligation to
report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject the
Borrower or any other member of the ERISA Group to a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, any Benefit Arrangement or
any trust created thereunder where such civil penalty or tax is likely to result
in a Material Adverse Change,
(iii) any assertion of material withdrawal liability with
respect to any Multiemployer Plan,
Exhibit (10.2)-p 42
<PAGE> 48
(iv) any partial or complete withdrawal from a
Multiemployer Plan by the Borrower or any other member of the ERISA Group under
Title IV of ERISA (or assertion thereof), where such withdrawal is likely to
result in material withdrawal liability,
(v) any cessation of operations (by the Borrower or any
other member of the ERISA Group) at a facility in the circumstances described in
Section 4062(e) of ERISA,
(vi) withdrawal by the Borrower or any other member of
the ERISA Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or any other member of the
ERISA Group to make a payment to a Plan required to avoid imposition of a Lien
under Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA, or
(ix) any change in the actuarial assumptions or funding
methods used for any Plan, where the effect of such change is to materially
increase or materially reduce the unfounded benefit liability or obligation to
make periodic contributions.
7.3.8.2 Notices of Involuntary Termination and Annual Reports.
Promptly after receipt thereof, copies of (a) all notices
received by the Borrower or any other member of the ERISA Group of the PBGC's
intent to terminate any Plan administered or maintained by the Borrower or any
member of the ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b) at the request of NCB each annual report (IRS Form 55OO series)
and all accompanying schedules, the most recent actuarial reports, the most
recent financial information concerning the financial status of each Plan
administered or maintained by the Borrower or any other member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of the Borrower or any other member of the ERISA Group in which any of
their personnel participate or from which such personnel may derive a benefit,
and each Schedule B (Actuarial Information) to the annual report filed by the
Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
7.3.8.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form 5310,
or any successor or equivalent form to Form 5310, filed with the PBGC in
connection with the termination of any Plan.
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any
one or more of the following events or conditions (whatever the reason therefor
and whether voluntary,
Exhibit (10.2)-p 43
<PAGE> 49
involuntary or effected by operation of Law):
8.1.1 PAYMENTS UNDER LOAN DOCUMENTS.
The Borrower shall fail to pay any principal of the Revolving Loan
(including mandatory prepayments or the payment due at maturity), or shall fail
to pay any interest on the Revolving Loan after such principal or interest
becomes due in accordance with the terms hereof or thereof, or the Borrower
fails to pay any other amount owing hereunder or under the other Loan Documents
after the date provided in an invoice or other notice of payment due.
8.1.2 BREACH OF WARRANTY.
Any representation or warranty made at any time by any of the
Borrower herein or in any other Loan Document, or in any certificate, other
instrument or statement furnished pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading in any material respect as of the
time it was made or furnished;
8.1.3 BREACH OF NEGATIVE COVENANTS OR VISITATION RIGHTS.
A default shall occur in the observance or performance of any
covenant contained in Section 7.1.6 or Section 7.2;
8.1.4 BREACH OF OTHER COVENANTS.
Any of the Loan Parties shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of thirty
(30) Business Days after the Chief Executive Officer, President, Chief Financial
Officer or Corporate Secretary of the Borrower becomes aware of the occurrence
thereof (such grace period to be applicable only in the event such default can
be remedied by corrective action of the Borrower as determined by NCB in its
sole discretion);
8.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.
A default or event of default shall occur at any time under the
terms of any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which the Borrower or Subsidiary of the Borrower
may be obligated as a borrower or guarantor in excess of $750,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits (because of
nonpayment) or causes the acceleration of any indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
8.1.6 FINAL JUDGMENTS OR ORDERS.
Any final judgments or orders for the payment of money in excess
of $100,000 in the aggregate shall be entered against the Borrower or any of its
Subsidiaries by a court having jurisdiction in the premises, which judgment is
not discharged, vacated, bonded or stayed pending appeal within a period of
thirty (30) days from the date of entry;
Exhibit (10.2)-p 44
<PAGE> 50
8.1.7 LOAN DOCUMENT UNENFORCEABLE.
Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS.
Any assets of the Borrower or its Subsidiaries are attached,
seized, levied upon or subjected to a writ or distress warrant; or such come
within the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors and the same is not cured within thirty (30) days
thereafter;
8.1.9 NOTICE OF LIEN OR ASSESSMENT.
A notice of Lien or assessment, other than a Permitted Lien, is
filed of record with respect to all or any part of the assets of the Borrower or
any of its Subsidiaries by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, or any taxes or debts owing at any time
or times hereafter to any one of these becomes payable and the same is not paid
within thirty (30) days after the same becomes payable;
8.1.10 INSOLVENCY.
The Borrower or any Subsidiary of the Borrower ceases to be solvent or
admits in writing its inability to pay its debts as they mature;
8.1.11 EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS.
Any of the following occurs: (i) any Reportable Event, which NCB
determines in good faith constitutes grounds for the termination of any Plan by
the PBGC or the appointment of a trustee to administer or liquidate any Plan,
shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC, shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, NCB determines in good faith that
the amount of the Borrower's liability is likely to exceed 10% of its
Consolidated Net Worth; (v) the Borrower or any member of the ERISA Group shall
fail to make any contributions when due to a Plan or a Multiemployer Plan; (vi)
the Borrower or any other member of the ERISA Group shall make any amendment to
a Plan with respect to which security is required under Section 307 of ERISA;
(vii) the Borrower or any other member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) the Borrower or any
other member of the ERISA Group shall withdraw (or shall be deemed under Section
4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix) any
applicable Law is adopted, changed or interpreted by any Official Body with
respect to or otherwise affecting one
Exhibit (10.2)-p 45
<PAGE> 51
or more Plans, Multiemployer Plans or Benefit Arrangements and, with respect to
any of the events specified in (v), (vi), (vii), (viii) or (ix), NCB determines
in good faith that any such occurrence would be reasonably likely to materially
and adversely affect the total enterprise represented by the Borrower and the
other members of the ERISA Group,
8.1.12 CESSATION OF BUSINESS.
The Borrower or Subsidiary of the Borrower ceases to conduct its
business as contemplated, except as expressly permitted under Section 7.2.5 or
7.2.6, or the Borrower or Subsidiary of the Borrower is enjoined, restrained or
in any way prevented by court order from conducting all or any material part of
its business and such injunction, restraint or other preventive order is not
dismissed within thirty (30) days after the entry thereof,
8.1.13 CHANGE OF CONTROL.
(i) Any person or group of persons (within the meaning of Sections
13 (a) or 14(a) of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership of (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) 33% or more of the
voting capital stock of the Borrower; or (ii) Marshall T. Reynolds shall cease
to have beneficial ownership of at least 40% of the voting capital stock of the
Borrower.
8.1.14 INVOLUNTARY PROCEEDINGS.
A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
the Borrower or Subsidiary of the Borrower in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official) of the
Borrower or Subsidiary of the Borrower for any substantial part of its property,
or for the winding-up or liquidation of its affairs, and such proceeding shall
remain undismissed or unstayed and in effect for a period of thirty (30)
consecutive days or such court shall enter a decree or order granting any of the
relief sought in such proceeding; or
8.1.15 VOLUNTARY PROCEEDINGS.
The Borrower or Subsidiary of the Borrower shall commence a
voluntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall consent to
the appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any action in furtherance of any of the
foregoing.
8.2 Consequences of Event of Default.
8.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY OR
REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Sections 8.1.1 through
8.1.13 shall occur and be continuing, NCB under no further obligation to make
Loans hereunder and NCB,
Exhibit (10.2)-p 46
<PAGE> 52
may by written notice to the Borrower, declare the unpaid principal amount of
the Revolving Note then outstanding and all interest accrued thereon, any unpaid
fees and all other Indebtedness of the Borrower to the Banks hereunder and
thereunder to be forthwith due and payable, and the same shall thereupon become
and be immediately due and payable to NCB without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived, and
8.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Section 8.1.14 or 8.1.15
shall occur, NCB shall be under no further obligation to make Revolving Loans
hereunder and the unpaid principal amount of the Revolving Note then outstanding
and all interest accrued thereon, any unpaid fees and all other Indebtedness of
the Borrower to NCB hereunder and thereunder shall be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived; and
8.2.3 SET-OFF.
If an Event of Default shall occur and be continuing, NCB, any
participant of NCB which has agreed in writing to be bound by the provisions of
Section 9.13 and any branch, Subsidiary or Affiliate of NCB or any such
participant anywhere in the world shall have the right, in addition to all other
rights and remedies available to it, without notice to such Loan Party, to
set-off against and apply to the then unpaid balance of all the Revolving Loans
and all other Obligations of the Borrower hereunder or under any other Loan
Document any debt owing to, and any other funds held in any manner for the
account of, the Borrower by such Bank or participant or by such branch,
Subsidiary or Affiliate, including all funds in all deposit accounts (whether
time or demand, general or special, provisionally credited or finally credited,
or otherwise) now or hereafter maintained by the Borrower for its own respective
account (but not including funds held in custodian or trust accounts) with NCB
or participant or such branch, Subsidiary or Affiliate. Such right shall exist
whether or not NCB shall have made any demand under this Agreement or any other
Loan Document, whether or not such debt owing to or funds held for the account
of such Loan Party is or are matured or unmatured and regardless of the
existence or adequacy of any Guaranty or any other security, right or remedy
available to NCB; and
8.2.4 SUITS, ACTIONS, PROCEEDINGS.
If an Event of Default shall occur and be continuing, NCB, if owed
any amount with respect to the Revolving Note, may proceed to protect and
enforce its rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement or the Revolving Note, including as permitted by
applicable Law the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of NCB; and
8.2.5 APPLICATION OF PROCEEDS.
From and after the date on which NCB has taken any action pursuant
to this Section 8.2 and until all Obligations of the Borrower have been paid in
full, any and all proceeds received by NCB from the exercise of any other remedy
by NCB, shall be applied as follows:
Exhibit (10.2)-p 47
<PAGE> 53
(i) first, to reimburse NCB for out-of pocket costs,
expenses and disbursements, including reasonable attorneys' and paralegals' fees
and legal expenses, incurred by NCB in connection with realizing on the
Collateral or collection of any Obligations of any of the Borrower under any of
the Loan Documents;
(ii) second, to the repayment of all Indebtedness then
due and unpaid of the Borrower to the Banks incurred under this Agreement or any
of the other Loan Documents, whether of principal, interest, fees, expenses or
otherwise, in such manner as NCB may determine in its discretion; and
(iii) the balance, if any, as required by Law.
9. [This Section Intentionally Omitted]
10. MISCELLANEOUS
10.1 [This Section Intentionally Omitted]
10.2 No Implied Waivers, Cumulative Remedies, Writing Required.
No course of dealing and no delay or failure of NCB in exercising any
right, power, remedy or privilege under this Agreement or any other Loan
Document shall affect any other or future exercise thereof or operate as a
waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of NCB under this Agreement and any
other Loan Documents are cumulative and not exclusive of any rights or remedies
which they would otherwise have. Any waiver, permit, consent or approval of any
kind or character on the part of NCB of any breach or default under this
Agreement or any such waiver of any provision or condition of this Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing.
10.3 Reimbursement and Indemnification of NCB by the Borrower; Taxes;
The Borrower unconditionally agrees to pay or reimburse NCB and hold
NCB harmless against (a) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements, including fees and expenses of
counsel (including the allocated costs of staff counsel), appraisers and
environmental consultants, incurred by NCB (i) in connection with the
development, negotiation, preparation, printing, execution, syndication,
interpretation and performance of this Agreement and the other Loan Documents,
(ii) relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv) in any workout or restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against NCB, in any way relating to or arising out
of this Agreement or any other Loan Documents or any action taken or omitted by
NCB hereunder or thereunder, provided that
Exhibit (10.2)-p 48
<PAGE> 54
the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from NCB's gross negligence or
willful misconduct, or if the Borrower was not given notice of the subject claim
and the opportunity to participate in the defense thereof, at its expense
(except that the Borrower shall remain liable to the extent such failure to give
notice does not result in a loss to the Borrower), or if the same results from a
compromise or settlement agreement entered into without the consent of the
Borrower, which shall not be unreasonably withheld. At the Borrower's reasonable
request, an officer of the Borrower may discuss initial budgets developed by
counsel for NCB (as long as such counsel determines that no privilege will be
waived as a result of such discussions). Nothing in this Section 10.3 prevents
the Borrower from obtaining its own counsel and controlling its own defense in
any action.
The Borrower agrees unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar impositions now or
hereafter determined by NCB to be payable in connection with this Agreement or
any other Loan Document, and the Borrower agrees unconditionally to save NCB
harmless from and against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or delay in paying
any such taxes, fees or impositions.
10.4 Holidays.
Whenever payment of the Revolving Loan to be made or taken hereunder
shall be due on a day which is not a Business Day such payment shall be due on
the next Business Day and such extension of time shall be included in computing
interest and fee, except that the Revolving Loan shall be due on the Business
Day preceding the Maturity Date if the Maturity Date is not a Business Day.
Whenever any payment or action to be made or taken hereunder (other than payment
of the Loans) shall be stated to be due on a day which is not a Business Day,
such payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.1.2 with respect to Interest Periods), and such
extension of time shall not be included in computing interest or fees, if any,
in connection with such payment or action.
10.5 Notices.
All notices, requests, demands, directions and other communications
(as used in this Section 10.5, collectively referred to as "notices") given to
or made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on Schedule 1. 1 (B) hereof or in accordance with
any subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of
hand-delivered notice, when hand-delivered, (e) in the case of telephone, when
telephoned, provided, however, that in order to be effective, telephonic notices
must be confirmed in writing no later than the next day by letter, facsimile or
telex, (d) if given by mail, four (4) days after such communication is deposited
in the mail with first-class postage prepaid, return receipt requested, and (e)
if given by any other means (including by air courier), when delivered;
provided, that notices to NCB shall not be effective until received and
provided, further, that any notices of a Potential Default or an Event of
Default shall be sent by facsimile or overnight delivery service.
Exhibit (10.2)-p 49
<PAGE> 55
10.6 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.7 Governing Law.
This Agreement shall be deemed to be a contract under the Laws of the
State of Ohio and for all purposes shall be governed by and construed and
enforced in accordance with the internal laws of the State of Ohio without
regard to its conflict of laws principles.
10.8 Prior Understanding.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.9 Duration, Survival.
All representations and warranties of the Borrower contained herein or
made in connection herewith shall survive the making of the Revolving Loan and
shall not be waived by the execution and delivery of this Agreement, any
investigation by NCB, the making of the Revolving Loan, or payment in full of
the Revolving Loan. All covenants and agreements of the Borrower contained in
Sections 7.1, 7.2 and 7.3 herein shall continue in full force and effect from
and after the date hereof until payment in full of the Revolving Loan. All
covenants and agreements of the Borrower contained herein relating to the
payment of principal, interest, premiums, additional compensation or expenses
and indemnification, including those set forth in the Revolving Note, and
Sections 2, 3 and 10.3, shall survive payment in full of the Revolving Loan.
10.10 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of NCB and the Borrower and their respective successors and assigns,
except that (i) the Borrower may not assign or transfer any of its rights and
Obligations hereunder.
10.11 Confidentiality.
NCB agrees to keep confidential all information obtained from the
Borrower or its Subsidiaries which is nonpublic and confidential or proprietary
in nature (including any information the Borrower specifically designate as
confidential), except as provided below, and to use such information only in
connection with this Agreement and for the purposes contemplated hereby. NCB
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii), to assignees
and participants as contemplated by Section 10. 10 provided that they shall
execute an agreement in favor of the Borrower covering the matters set forth in
this Section 10.12, (iii) to the extent requested by any bank regulatory
authority or, with notice to the Borrower, as otherwise required by applicable
Law or by any subpoena or similar legal process, or in connection with any
investigation or proceeding arising out of the transactions contemplated by this
Agreement, (iv) if it becomes publicly available other than as a result of a
breach of this Agreement or becomes available from a source
Exhibit (10.2)-p 50
<PAGE> 56
not bound by confidentiality restrictions, or (v) if the Borrower shall have
consented to such disclosure.
10.12 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
10.13 NCB's Consent.
Except as otherwise provided in the Loan Documents, whenever NCB's
consent is required to be obtained under this Agreement or any of the other Loan
Documents as a condition to any action, inaction, condition or event, NCB shall
be authorized to give or withhold such consent in its reasonable discretion.
10.14 Exceptions.
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
10.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
THE BORROWER HEREBY IRREVOCABLY FURTHER CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF FRANKLIN COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO, AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT THE
ADDRESS PROVIDED FOR IN SECTION 10.5 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY OBJECTION TO
JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN
AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. THE
BORROWER, NCB AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANN ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.
Exhibit (10.2)-p 51
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
CHAMPION INDUSTRIES, INC.,
a West Virginia corporation
By:
------------------------------------------
David B. McClure
Vice President and Chief Financial Officer
NATIONAL CITY BANK
By:
------------------------------------------
David B. Yates
Vice President and Regional Manager
Regional Banking Division
Exhibit (10.2)-p 52
<PAGE> 58
SCHEDULE 1.1 (B)
REVOLVING CREDIT COMMITMENT OF NCB AND ADDRESSES FOR NOTICES
PART I - COMMITMENT OF NCB AND ADDRESSES FOR NOTICES TO NCB
<TABLE>
<CAPTION>
BANK COMMITMENT
- ---- ----------
<S> <C>
Name: National City Bank $10,000,000.00
Address: 155 E. Broad Street
3rd Floor
Columbus, OH 43251-0030
Attention: David B. Yates, Vice President
Telephone (614) 463-8889
Telecopy: (614) 463-7959
With a Copy to:
Allen L. Handlan, Esq.
Kegler, Brown, Hill & Ritter, Co. L.P.A.
65 East State Street; Suite 1800
Columbus, Ohio 43215
Telephone: (614) 462-5400
Telecopy: (614) 464-2634
PART 2 - ADDRESSES FOR NOTICES TO BORROWER:
BORROWER:
Champion Industries, Inc.
P.O. Box 2968
Kyle Industrial Park
Industrial Lane
Route 2
Huntington, West Virginia 25728
Attention: David B. McClure, Vice President
and Chief Financial Officer
Telephone: (304) 528-2700
Telecopy: (304) 528-2765
SCHEDULE 1.1 (P)
</TABLE>
Exhibit (10.2)-p 53
<PAGE> 59
PERMITTED LIENS
SCHEDULE 5.1.2
CAPITALIZATION
SCHEDULE 5.1.3
SUBSIDIARIES, PARTNERSHIPS AND LLC INTERESTS
SCHEDULE 5.1.20
EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.22
ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1
PERMITTED INDEBTEDNESS
EXHIBIT 1.1(G)
SUBSIDIARIES GUARANTY
EXHIBIT 1.1(T)
REVOLVING CREDIT NOTE
EXHIBIT 7.3.3
QUARTERLY COMPLIANCE CERTIFICATE
Exhibit (10.2)-p 54
<PAGE> 1
EXHIBIT (10.3)
LEASE
TRUSTEE OF THE BUTTERFIELD FAMILY TRUST NO. 2
LANDLORD
AND
SMITH & BUTTERFIELD CO., INC.
TENANT
BAMBERGER, FOREMAN, OSWALD AND HAHN, LLP
<PAGE> 2
LEASE
TRUSTEE OF THE BUTTERFIELD FAMILY TRUST NO. 2
LANDLORD
AND
SMITH & BUTTERFIELD CO., INC.
TENANT
ARTICLE NO. PAGE NO.
- --------------------------------------------------------------------------------
ARTICLE I - RENT 2
ARTICLE II - USE OF PREMISES 4
ARTICLE III - MAINTENANCE AND REPAIRS 4
ARTICLE IV - ALTERATIONS 4
ARTICLE V - INSURANCE 5
ARTICLE VI - TAXES 6
ARTICLE VII - OPTIONS TO EXTEND TERM 6
ARTICLE VIII - DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS 7
ARTICLE IX - EMINENT DOMAIN 8
ARTICLE X - UTILITY SERVICES 9
ARTICLE XI - ASSIGNMENT AND SUBLETTING 9
ARTICLE XII - QUIET ENJOYMENT 9
ARTICLE XIII - REMEDIES 10
ARTICLE XIV - NOTICES 12
ARTICLE XV - MISCELLANEOUS PROVISIONS 12
<PAGE> 3
LEASE
TRUSTEE OF THE BUTTERFIELD FAMILY TRUST NO. 2
LANDLORD
AND
SMITH & BUTTERFIELD CO., INC.
TENANT
THIS INDENTURE OF LEASE, made and entered into as of the 1st day of
November, 1999, by and among RANDALL M. SCHULZ, TRUSTEE U/A DATED JULY 31, 1976,
EXECUTED BY RUTH LANE BUTTERFIELD, AS TRUSTOR, AND CREATING "THE BUTTERFIELD
FAMILY TRUST NO. 2" (which said trust is hereinafter referred to as "LANDLORD")
and SMITH & BUTTERFIELD CO., INC., an Indiana corporation having its principal
office and place of business at 2800 Lynch Road, Evansville, Vanderburgh County,
Indiana (hereinafter referred to as "TENANT"), WITNESSETH THAT:
LANDLORD, in consideration of the rents reserved to it and of the
covenants and agreements hereinafter contained and set forth to be kept and
performed by TENANT, does hereby lease, let, rent and demise unto TENANT, and
TENANT does hereby take and hire of and from LANDLORD the real estate
improvements situated in Vanderburgh County, Indiana, more particularly
described on the attached Exhibit A, and common areas including parking, more
particularly described on the attached Exhibit B (hereafter the "Leased
Premises").
The Leased Premises are hereby demised, together with and including all
improvements situated thereon and all rights appurtenant thereto, but subject,
nevertheless, to easements, rights-of-way and party wall agreements of record.
TO HAVE AND TO HOLD said Leased Premises unto said TENANT for a term of
five (5) years, commencing November 1, 1999, and terminating as of the close of
business on the last day of October, 2004 (with options to extend said term as
hereinafter set forth), all upon and subject to the limitations, terms,
covenants, provisions and conditions hereinafter set forth.
Exhibit (10.3)-p 3
<PAGE> 4
This indenture of lease is made upon and subject to the foregoing and
the following limitations, terms, covenants, provisions and conditions, to-wit:
I.
RENT
For the purpose hereof, the term "lease year" means and refers to the
period of time from November 1 of one year to and including the last day of Oct.
of the next following calendar year. TENANT covenants and agrees to pay to
LANDLORD, without demand, at LANDLORD'S office in the City of Evansville,
Indiana or at such other place as LANDLORD may from time to time designate in
writing, on the days and in the manner herein prescribed for the payment
thereof, rent for the Leased Premises as follows:
A. With respect to the initial term of this Lease, rental shall be
in the amount of One Hundred Twenty-One Thousand Six Hundred
Forty Dollars ($121,640.00) per lease year, payable in equal
monthly installments in advance;
B. If TENANT shall exercise the first renewal option granted by
Section VII of this Lease, rental hereunder for each year of the
first (1st) five (5) year renewal period (commencing November 1,
2004) shall be adjusted to be at the annual rate and amount
determined by multiplying the sum of One Hundred Twenty-One
Thousand Six Hundred Forty and No/100 ($121,640.00) Dollars
(i.e., the annual rental for the initial term of this Lease) by
a fraction, the numerator of which shall be the amount of the
Revised Consumer Price Index for Urban Wage Earners and Clerical
Workers for all Items and Major Group Figures of the United
States Bureau of Labor Statistics 1982-84 = 100 (hereinafter the
"CPI-W Index"), for the month of September, 2004, and the
denominator of which shall be the CPI-W Index for the month of
November, 1999; provided, however, that the annual rental for
the first (1st) renewal term shall not be less than the annual
rental for the initial term of this Lease. The formula for
computing the annual rent for the first renewal term is as
follows:
<TABLE>
<S> <C>
Annual Rent for each = CPI-W Index for September, 2004 X $121,640
-------------------------------
Year of First Renewal Term CPI-W Index for November, 1999
</TABLE>
Exhibit (10.3)-p 4
<PAGE> 5
C. If TENANT shall exercise the second (2nd) renewal option granted
by Section VII of this Lease, rental hereunder for each year of
the second (2nd) five (5) year renewal term (commencing November
1, 2009) shall be adjusted to be at the annual rate and amount
determined by multiplying the annual rental for the initial term
of this Lease by a fraction, the numerator of which shall be the
amount of the CPI-W Index for the month of September, 2009, and
the denominator of which shall be the CPI-W Index for the month
of November, 1999; provided, however, that the annual rental for
the second (2nd) renewal term shall not be less than the annual
rental for the first (1st) renewal term of this Lease. The
formula for computing the annual rent for the second (2nd)
renewal term is as follows:
<TABLE>
<S> <C>
Annual Rent for Each = CPI-W Index for September, 2009 X $121,640
-------------------------------
Year of Second Renewal Term CPI-W Index for November, 1999
</TABLE>
D. The rental for each lease year shall be payable in equal monthly
installments monthly in advance. All such rental and other
amounts payable by TENANT to LANDLORD hereunder shall be payable
and paid without relief from valuation or appraisement laws in
lawful money of the United States of America, together with
reasonable attorney's fees for collection (in case of default)
and together with interest at the prime rate charged by Citizens
Bank of Mid-America, Evansville, Indiana, plus Two percent (2%)
(at the time interest becomes due and payable).
E. The term "CPI-W Index", as used herein, shall mean the 1991
Revised Consumer Price Index for Urban Wage Earners and Clerical
Workers for all Items and Major Group Figures of the United
States Bureau of Labor Statistics 1982-84 = 100. In case
publication of the CPI-W Index of the United States Bureau of
Labor Statistics is discontinued, but is replaced by a new index
prepared and published by a department, bureau or agency of the
United States Government and which may be appropriately
converted for comparison with the above-mentioned Index, such
rental adjustment shall be made in the manner provided by said
governmental agency for conversion of one index to the other.
Exhibit (10.3)-p 5
<PAGE> 6
II.
USE 0F PREMISES
The Leased Premises are leased and let unto TENANT for use by TENANT in
connection with the operation of its business as now or hereafter conducted;
provided, however, that the Leased Premises shall not be used for any purposes
in violation of any applicable law or ordinance.
III.
MAINTENANCE AND REPAIRS
The Leased Premises are accepted by TENANT in their present condition
and state of repair. LANDLORD shall have no obligation to maintain or repair the
Leased Premises.
The improvements, including the loading dock, upon said real estate
shall be kept in good order, operating condition and state of repair by TENANT
and shall also be maintained in a clean, sanitary and safe condition in
accordance with all directions, rules and regulations or applicable laws or
ordinances, all at TENANT'S sole cost and expense; and at the expiration of the
term or any extension of the term hereof, TENANT shall surrender the Leased
Premises in as good condition and state of repair as exists on the date of the
commencement of the term of this Lease, reasonable wear and tear, loss by fire
and other insured casualty excepted.
TENANT acknowledges the existence of a party wall on part of the
southern boundary of the Leased Premises and agrees to keeping said common wall
in good repair and to share one-half the expense of any repair or maintenance
required on such wall. TENANT also will take reasonable measures necessary to
provide appropriate security and to prevent access through said party wall.
IV.
ALTERATIONS
TENANT, at its sole cost and expense, may make such interior,
non-structural alterations of the improvements upon the Leased Premises as it
may desire. Alterations which would in any manner affect the structure of the
building shall be made only pursuant to the express written consent of LANDLORD.
TENANT shall have no right to cause or permit the imposition of any lien upon
the title to the Leased Premises, and TENANT undertakes and agrees to indemnify
and save LANDLORD harmless of and from any and all
Exhibit (10.3)-p 6
<PAGE> 7
such liens or claims of liens and expenses in connection with or by reason of
any such lien or claim of lien.
V.
INSURANCE
During the term hereof, TENANT, at its sole cost and expense, shall
procure and maintain in full force and effect insurance upon and with respect to
the Leased Premises as follows:
A. Fire and extended coverage insurance, including earthquake
coverage, in amounts and written by insurance companies approved
by LANDLORD; and TENANT acknowledges that it has been informed
that LANDLORD may require such insurance to the full extent of
the replacement value of the improvements on the Leased
Premises; and
B. Liability insurance in the amount of not less than One Million
Two Hundred Fifty Thousand Dollars ($1,250,000.00) plus umbrella
liability coverage in the amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00), both with respect to injuries
to or the deaths of persons arising by reason of any one
occurrence and in the amount of One Hundred Twenty-Five Thousand
Dollars ($125,000.00) with respect to claims for damages to
property or with such other limits as shall be approved in
writing by LANDLORD, which insurance shall be maintained in
companies reasonably approved by LANDLORD. The above-mentioned
umbrella liability insurance may have a deductible feature in an
amount not more than Ten Thousand Dollars ($10,000.00) with
respect to each occurrence.
Both LANDLORD and TENANT shall be designated as named insureds in all
such policies in accordance with their respective interests. Copies of such
insurance policies and proof of payment of premiums shall be furnished to
LANDLORD, and evidence of renewal of such insurance from time to time shall be
furnished at least thirty (30) days prior to expiration of then current
policies. Each of such policies shall contain a provision that the same shall
not be canceled until at least fifteen (15) days after notice in writing by
certified mail to LANDLORD.
VI.
TAXES
Exhibit (10.3)-p 7
<PAGE> 8
In addition to other amounts payable by TENANT to LANDLORD in accordance
with other provisions of this Lease, TENANT covenants and agrees to directly pay
or reimburse LANDLORD on account of all ad valorem taxes with respect to the
Leased Premises payable during the term or any extension of the term of this
Lease. In the year this Lease terminates, the ad valorem taxes with respect to
the Leased Premises shall be prorated on a calendar year basis with the TENANT
paying the prorated portion of the taxes assessed and payable the following year
for the period beginning January 1 of the year of termination through the date
of termination and the LANDLORD paying the prorated portion of the taxes for the
period from the date of termination through December 31 of the year of
termination. TENANT shall have the right to contest assessments and
reassessments of said real estate, all at TENANT'S sole cost and expense; but no
such contest shall in any manner jeopardize LANDLORD'S title to said real
estate.
VII.
OPTIONS TO EXTEND TERM
TENANT shall have and is hereby given and granted an option to extend
the term of this Lease for a period of five (5) years commencing November 1,
2004, which option may be exercised by TENANT, if TENANT is not in default
hereunder, by the giving of written notice of such election to LANDLORD not less
than twelve (12) months prior to the expiration of this Lease. In case said
option is exercised, the same terms, conditions, covenants and provisions of
this Lease applicable to the original five (5) year term shall apply to the
extended term, including, without limitation, the rental adjustment provisions
of Section I-B of this Lease. In addition, the insurance amounts referenced in
Section V-B shall be increased by such amount as LANDLORD and TENANT agree is
required to properly protect LANDLORD from liability arising out of TENANT'S use
of the Leased Premises. If LANDLORD and TENANT shall be unable to agree upon the
amount of increase in required liability insurance coverage, then the matter
shall be resolved through mediation proceedings to be held in Evansville,
Indiana, with each party paying one-half (1/2) of the cost thereof.
If TENANT shall have exercised the option granted by the preceding
grammatical paragraph, then TENANT shall have, and is hereby given and granted,
an additional option to extend the term of this Lease for a period of five (5)
years commencing November 1, 2009, which option may be exercised by TENANT, if
TENANT is not in default hereunder, by giving written notice of such election to
LANDLORD not less than twelve (12) months prior to the expiration of the first
(1st) five (5) year extended term of this Lease. In case such option is
exercised, the same terms, conditions, covenants and provisions of this Lease
applicable during the first (1st) five (5) year extended term shall apply to the
second (2nd) five (5) year extended term, including, without limitation, the
rental payable pursuant to the
Exhibit (10.3)-p 8
<PAGE> 9
provisions of Section I-C of this Lease. In addition, the insurance amounts
referenced in Section V-B shall be increased by such amount as LANDLORD and
TENANT agree is required to properly protect LANDLORD from liability arising out
of TENANT'S use of the Leased Premises. If LANDLORD and TENANT shall be unable
to agree upon the amount of increase in required liability insurance coverage,
then the matter shall be resolved through mediation proceedings to be held in
Evansville, Indiana, with each party paying one-half (1/2) of the cost thereof.
VIII.
DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS
In case the whole or any part of the improvements situated upon the
Leased Premises shall be partially or totally destroyed by fire or other insured
casualty during the term of this Lease, the same shall be restored by LANDLORD
without unnecessary delay; provided, however, that all proceeds of insurance
(required to be maintained by TENANT) shall be made available to LANDLORD for
such purposes and provided further that LANDLORD'S obligation hereunder shall
not exceed the amount of such insurance proceeds, and any excess of cost of
repair or restoration over the amount of such proceeds shall be paid and borne
by TENANT. LANDLORD shall complete any restoration of the Leased Premises
promptly, but in any event within six (6) months following the occurrence of the
casualty unless delayed for cause beyond LANDLORD'S control, including inclement
weather and acts of god. In the event of damage or destruction requiring major
restoration within six (6) months and LANDLORD has not been delayed by cause
beyond LANDLORD'S control, then in addition to any other remedy TENANT may have,
TENANT shall be entitled to a refund of that fractional portion of rentals paid
during such six (6) month period of which the numerator shall be the floor area
of the Leased Premises which was not used by TENANT during the six (6) month
period and the denominator shall be the total floor area of the Leased Premises.
Notwithstanding the foregoing, in case the damage or destruction occurs
during the last year of the initial term of this Lease and TENANT did not
previously exercise its option to extend the term of this Lease for an
additional five (5) year term or in case such damage or destruction occurs
during the last year of the first (1st) five (5) year extended term of this
Lease and TENANT has not previously exercised its right to further extend the
term of this Lease, then either LANDLORD or TENANT may terminate this Lease by
the giving of written notice to that effect to the other within thirty (30) days
following the date of the occurrence of such damage or destruction; and in case
of such termination all proceeds of insurance with respect to the improvements
upon the Leased Premises shall be paid to and shall be the property absolutely
of LANDLORD. In case of termination under the provisions of this Article, TENANT
shall be relieved of liability hereunder referable to the period of
Exhibit (10.3)-p 9
<PAGE> 10
time subsequent to the date of such damage or destruction and prorated amounts
shall be refunded.
There shall be no abatement of rental on account of or by reason of
damage to or destruction of the Leased Premises unless this Lease is terminated
in accordance with the foregoing provisions of this Article.
IX.
EMINENT DOMAIN
In case the whole of the Leased Premises shall be taken by any public
authority under the power of eminent domain or conveyed by LANDLORD under the
threat of such taking, the term of this Lease shall cease from the date the
possession of the Leased Premises is required for the public purpose for which
the same is taken or conveyed. In case a part of the Leased Premises shall be
taken by any public authority under the power of eminent domain or conveyed by
LANDLORD under the threat of such taking and such taking is not such as to
destroy the usefulness of the Leased Premises for the operation of TENANT'S
business thereon, this Lease shall remain in full force and effect and there
shall be no reduction or abatement of rental. If, however, a partial taking does
destroy the usefulness of the Leased Premises for the purpose of operation of
TENANT'S business thereon, TENANT shall have the right, exercisable by the
giving of notice to LANDLORD within ten (10) days after TENANT has been notified
of such taking or conveyance, either to terminate this Lease or to continue in
the remainder of the Leased Premises under and pursuant to the terms and
provisions of this Lease.
For the purposes hereof the condemnation (or conveyance under threat
thereof) of land along the south side of the Leased Premises for purposes of
widening of Lynch Road shall not be cause for termination of this Lease so long
as TENANT is not deprived of access to the Leased Premises.
In case of a complete termination of this Lease under the circumstances
provided in this Article, the portion of any prepaid payments by LANDLORD to
TENANT or by TENANT to LANDLORD which is referable to a period of time
subsequent to such termination shall be refunded. LANDLORD agrees that he will
promptly furnish to TENANT copies of any notices served upon LANDLORD by any
public authority notifying LANDLORD of any proposed condemnation of any part of
the Leased Premises.
X.
UTILITY SERVICES
Exhibit (10.3)-p 10
<PAGE> 11
TENANT undertakes and agrees to pay the cost of all utility services
desired or required by it in connection with its use and occupancy of the Leased
Premises, and all such utilities shall be separately metered to and billed to
TENANT. LANDLORD shall have no obligation with respect to or on account of the
furnishing of any utility services to the Leased Premises.
XI.
ASSIGNMENT AND SUBLETTING
After first securing the written consent of LANDLORD, which consent
shall not be unreasonably withheld or delayed, TENANT shall have the right to
assign this Lease or to sublet any part or all of the Leased Premises for any
lawful purpose, but no such assignment nor subletting shall release or discharge
TENANT of liability hereunder.
XII.
QUIET ENJOYMENT
If and so long as TENANT shall pay the rent and other payments payable
by it in accordance with the terms and provisions of this Lease and shall keep,
perform and observe all of the covenants and provisions hereof to be kept and
performed by TENANT, TENANT shall quietly enjoy the Leased Premises in
accordance with the terms and provisions of this Lease.
XIII.
REMEDIES
Neither this Lease nor any interest therein nor any estate hereby
created shall pass to any trustee, receiver or assignee for the benefit of
creditors or be otherwise transferable by operation of law.
The estate and term of TENANT shall cease in the event TENANT is
adjudicated a bankrupt or a receiver of its property is appointed. LANDLORD may
terminate this Lease by ten (10) days' written notice to TENANT upon the
happening of any one or more of the following events which shall be deemed a
default by TENANT and a breach of this Lease:
A. The making by TENANT of an assignment for the benefit of
creditors;
B. The levying of a writ of execution or attachment for or against
the property of
Exhibit (10.3)-p 11
<PAGE> 12
the TENANT, unless the same is vacated, discharged or satisfied
within ten (10) days after written request by LANDLORD; or
C. The doing or permitting by TENANT of any act which creates a
mechanic's lien or a claim therefor against the Leased Premises,
if such lien or claim is not satisfied or discharged, or
indemnified against to LANDLORD'S satisfaction, within ten (10)
days after written notice by LANDLORD.
In case rental payable by TENANT to LANDLORD shall be and remain unpaid
for ten (10) days following written notice from LANDLORD to TENANT that the
rental has not been paid, TENANT shall violate or default in the performance of
any of the other covenants, agreements, stipulations or conditions herein set
forth to be kept and performed by TENANT and such violation or default shall
continue for a period of fifteen (15) days after written notice of such
violations or default without TENANT in good faith having commenced to rectify
the same with reasonable diligence, LANDLORD at his option may declare this
Lease terminated and canceled and may re-enter the Leased Premises, with or
without process of law, using such force as may be necessary to remove all
chattels therefrom and LANDLORD shall not be liable by reason of any such
re-entry. No such re-entry by LANDLORD shall constitute a waiver of TENANT'S
liability to LANDLORD on account of any breach of this Lease by TENANT.
In the event any party hereto shall be required to resort to litigation
for the purpose of enforcing against the other party any rights arising
hereunder and shall be successful in such litigation, the judgment in such
litigation shall include an allowance to the successful party for all such
party's costs and expenses including reasonable attorney's fees paid or incurred
in connection with such litigation.
In the event of the termination of this Lease for any cause or in the
event of the abandonment, vacation or surrender of the Leased Premises by
TENANT, any property of TENANT remaining in or upon the Leased Premises and not
removed by TENANT within thirty (30) days from and after such termination,
abandonment, vacation or surrender shall be deemed to have been permanently
abandoned and may be used or disposed of by LANDLORD in such manner as it shall
deem fit and proper under the circumstances without liability to TENANT. For
each day [not to exceed thirty (30) days] following the termination of the Lease
or TENANT'S abandonment, vacation or surrender of the Leased Premises which
TENANT permits its property to remain on the Leased Premises, TENANT shall pay
to LANDLORD a "storage fee" in an amount equal to the per diem rental payable by
TENANT to LANDLORD during the calendar month preceding such termination,
abandonment, vacation or surrender.
In the event any party hereto shall fail, refuse or neglect to do any
act or perform any
Exhibit (10.3)-p 12
<PAGE> 13
covenant or agreement in this Lease contained and set forth to be done, kept and
performed by such party and such default shall not be cured or action commenced
in good faith within fifteen (15) days following written demand to the
defaulting party to rectify or cure such default, the other party hereto may do
such act or perform such covenant or agreement and shall be entitled to
reimbursement from the defaulting party to the extent of the costs and expenses
incurred together with interest at the prime rate as charged by Civitas Bank,
with offices in Evansville, Indiana, plus one percent (1%) (at the time such
interest is payable hereunder) from the date of the payment of any such costs or
expenses. If any such required reimbursement is not made promptly, the party who
shall have incurred such cost or expense may deduct the amount thereof from any
amounts accruing and payable to the defaulting party or may pursue any other
available remedy for the collection of such costs and expenses.
All rights and remedies herein enumerated shall be cumulative and the
enumeration of specific rights and remedies shall not preclude the exercise or
prosecution of any other right or remedy afforded by law, and such rights and
remedies may be exercised and enforced concurrently and whenever and as often as
the occasion therefor arises. The failure of any party to exercise any right or
remedy at a time when such party is entitled so to do shall not preclude such
party from exercising, or constitute a waiver of, such right or remedy with
respect to any continuing or other default or defaults of the other party or
parties hereto.
XIV.
NOTICES
Any notice required or permitted pursuant to the terms and provisions of
this Lease shall be deemed fully given or served only if transmitted by
certified mail or registered mail with return receipt requested, addressed to
TENANT at the Leased Premises and to LANDLORD at 21 S.E. Third Street, Suite
500, P. O. Box 3677, Evansville, Indiana 47735-3677. LANDLORD or TENANT may by
like written notice, at any time and from time to time, designate a different
address to which notices shall subsequently be transmitted to him or it, as the
case may be.
XV.
MISCELLANEOUS PROVISIONS
A. In case TENANT remains in possession of the Leased Premises with
the consent of LANDLORD after the expiration of this Lease and
without the execution of a new lease, it shall be deemed to be
occupying the Leased Premises as a tenant from month-to-month
subject to all the conditions, provisions, terms and obligations
of this Lease insofar as the same are
Exhibit (10.3)-p 13
<PAGE> 14
applicable to a month-to-month tenancy.
B. TENANT agrees to indemnify and save LANDLORD harmless against
any and all claims, demands, costs and expenses including
reasonable attorneys' fees arising from or connected with the
use and occupancy of the Leased Premises by TENANT and from and
against any act or negligence of TENANT, its agents,
contractors, servants, employees, invitees or licensees in or
about the Leased Premises.
C. LANDLORD shall have the right to enter upon the Leased Premises
at all reasonable times for the purpose of inspecting the same.
D. TENANT acknowledges that it is aware that LANDLORD is composed
of the Trustee of an inter vivos trust and that the undersigned
Trustee of said trust executes this Lease solely in his capacity
as such Trustee and that said Trustee shall not have any
personal liabilities hereunder or otherwise as LANDLORD of the
Leased Premises.
E. Parking and use of parking areas will be subject to easement and
rights-of-way of record affecting title to the leased property,
and will be subject to the further understandings referenced in
Exhibit B of the Lease.
F. The terms, covenants and conditions hereof shall extend to and
be binding upon the respective successors and assigns of the
parties.
G. This Lease supersedes and replaces all prior existing leases
between the parties or any of them.
Exhibit (10.3)-p 14
<PAGE> 15
IN WITNESS WHEREOF, LANDLORD has hereunto set his hand and seal and
TENANT has caused the execution hereof by its duly authorized officers, all as
of the day and date first above written.
-------------------------------------------
RANDALL M. SCHULZ, SUCCESSOR TRUSTEE
U/A DATED JULY 31, 1976, AND CREATING "THE
BUTTERFIELD FAMILY TRUST NO. 2"
"LANDLORD"
SMITH & BUTTERFIELD CO., INC.
BY:
---------------------------------------
ITS:
---------------------------------------
ATTEST:
- --------------------------------
SECRETARY
"TENANT"
STATE OF INDIANA )
) SS:
COUNTY OF VANDERBURGH )
Before me, the undersigned, a Notary Public in and for said County and
State, personally appeared the within-named RANDALL M. SCHULZ, AS SUCCESSOR
TRUSTEE U/A DATED JULY 31, 1976 AND CREATING "THE BUTTERFIELD FAMILY TRUST NO.
2" and acknowledged the execution of the above and foregoing Lease.
WITNESS my hand and notarial seal this ________ day of ________________,
1999.
My County of Residence __________________________________________________
Exhibit (10.3)-p 15
<PAGE> 16
is Vanderburgh County, Notary Public
State of Indiana and ________
My Commission Expires: --------------------------------
- ----------------------- (Printed)
STATE OF INDIANA )
) SS:
COUNTY OF VANDERBURGH )
Before me, the undersigned, a Notary Public in and for said County and
State, came SMITH & BUTTERFIELD CO., INC., an Indiana corporation, by
____________________, its _________________, and its Secretary, who as such
officers, respectively, acknowledged for and on behalf of said corporation the
execution of the above and foregoing Lease.
WITNESS my hand and notarial seal this ________ day of ________________,
1999.
My County of Residence
-----------------------------------
is Vanderburgh County, Notary Public
State of Indiana and
My Commission Expires:
-----------------------------------
- ----------------------------- (Printed)
Exhibit (10.3)-p 16
<PAGE> 17
EXHIBIT A
LEGAL DESCRIPTION OF
STRUCTURAL IMPROVEMENTS
LEASED BY SMITH & BUTTERFIELD CO., INC.
DESCRIPTION OF SMITH & BUTTERFIELD OFFICE BUILDING
Part of the Southwest Quarter of the Southeast Quarter of the Northeast Quarter
and part of the Southeast Quarter of the Southwest Quarter of the Northeast
Quarter, all in Section Ten (10), Township Six (6) South, Range Ten (10) West,
more particularly described as follows:
Commencing at the Southwest corner of the Southwest Quarter of the Southeast
Quarter of the Northeast Quarter of said Section Ten (10), thence South 89
degrees 13 minutes East along the South line of said quarter quarter section a
distance of 140 feet; thence North 0 degrees 47 minutes East a distance of
410.11 feet; thence North 89 degrees 14 minutes 38 seconds West a distance of
Ten and two tenths (10.2) feet to a point in the center line of the North wall
of the metal building occupied by Qualex and the South wall of the building
occupied by Smith & Butterfield; thence continue North 89 degrees 14 minutes 38
seconds West along the centerline of said wall, for 148.25 feet to the Northwest
corner of the Qualex building; thence continue North 89 degrees 14 minutes 38
seconds West for 67.96 feet; thence North 00 degrees 47 minutes East for 9.0
feet; thence North 89 degrees 14 minutes 38 seconds West for 22.0 feet; thence
North 00 degrees 47 minutes East for 110.85 feet; thence South 89 degrees 14
minutes 38 seconds East for 333.89 feet; thence South 00 degrees 47 minutes West
for 119.85 feet; thence North 89 degrees 14 minutes 38 seconds West for 95.68
feet to the place of beginning.
Exhibit (10.3)-p 17
<PAGE> 18
EXHIBIT B
COMMON AREAS
The Butterfield Family Trust, Randall M. Schulz, Successor Trustee, U/A dated
June 1, 1970, executed by Sidney Butterfield, as Trustor, and Butterfield Family
Trust No. 2, Randall M. Schulz, Successor Trustee, U/A dated July 31, 1976,
executed by Ruth Lane Butterfield, as Trustor, and the Ruth B. Thomas Trust,
Randall M. Schulz, Successor Trustee, U/A dated September 29, 1980, executed by
Ruth B. Thomas, as Trustor, own certain real estate and improvements described
as follows:
DESCRIPTION
Part of the Southwest Quarter of the Northeast Quarter and part of the Southeast
Quarter of the Northeast Quarter of Section Ten (10), Township Six (6) South,
Range Ten (10) West in Vanderburgh County, Indiana, more particularly described
as follows:
Beginning at the Southeast corner of the Southwest Quarter of the
Northeast Quarter of said section in Lynch Road; from said place of
beginning thence North Eighty-Nine (89) degrees twelve (12) minutes
West, along the South line of said quarter quarter section, in Lynch
Road, for one hundred twenty-four (124.0) feet; thence North zero (00)
degrees six (06) minutes West for six hundred fifty-nine and
twenty-three hundredths (659.23) feet; thence South eighty-nine (89)
degrees, twenty-one (21) minutes, thirty (30) seconds East for five
hundred forty-two and eighteen hundredths (542.18) feet; thence South
zero (00) degrees twenty-five (25) minutes, forty-two (42) seconds West
for six hundred sixty and fifty-three hundredths (660.53) feet to a
point in Lynch Road on the South line of the Southeast quarter of the
Northeast quarter of Section Ten (10), Township Six (6) South Range Ten
(10) West thence North eighty-nine (89) degrees thirteen (13) minutes
West along the South line of said quarter quarter section in Lynch Road
for four hundred twelve and eight hundredths (412.08) feet to the place
of beginning and containing a gross area of 8.167 acres and a net area
of 7.798 acres exclusive of the thirty (30) feet of right-of-way off the
South side thereof for Lynch Road.
The above described real estate is subject to all easements of record.
Exhibit (10.3)-p 18
<PAGE> 19
Butterfield Family Trust No. 2 owns certain structural improvements described in
Exhibit A of the Lease with Smith & Butterfield Co., Inc. effective beginning
November 1, 1999. The Butterfield Family Trust and the Ruth B. Thomas Trust own
certain structural improvements described in Exhibit C currently leased to
Qualex, Inc. effective beginning November 1, 1991.
All of the real estate described in this Exhibit B, except for the structural
improvements described in Exhibit A and Exhibit C of this Lease shall constitute
the "Common Area" which area is included in this Lease and is available for the
TENANT'S use as parking, ingress, egress, loading and other vehicular activity
associated with the TENANT'S business purposes, subject to the following:
1.All easements and rights of way of record affecting the title to the
Leased Premises;
2. Of the two hundred and forty-two (242) parking spaces available,
forty-two (42) will be for the use of TENANT and two-hundred
(200) will be available for the occupants of the improvements
leased from the Butterfield Family Trust and The Ruth B. Thomas
Trust. Seven (7) of the above referenced forty-two (42) spaces
will be located on the southern border, east end of the
improvements described in Exhibit A;
3. All costs of maintenance or replacement of the surface of the
combined parking areas shall be paid for by TENANT at the rate
of seventeen and thirty-five one hundredths percent (17.35%),
and the same percentage will apply to other costs associated
with the "Common Area";
4. Notwithstanding 3. above, TENANT will have exclusive use and
responsibility for maintenance and repair of the loading dock
located on the southern border, west-end, of its leased
improvements. The occupant of the improvements leased from the
Butterfield Family Trust and The Ruth B. Thomas Trust will have
like usage and responsibilities for the loading dock located on
the western border of their leased improvements.
Exhibit (10.3)-p 19
<PAGE> 20
EXHIBIT C
LEGAL DESCRIPTION OF
STRUCTURAL IMPROVEMENTS
LEASED BY QUALEX, INC.
DESCRIPTION OF QUALEX BUILDING
Part of the Southwest Quarter of the Southeast Quarter of the Northeast Quarter
and part of the Southeast Quarter of the Southwest Quarter of the Northeast
Quarter, all in Section Ten (10), Township Six (6) South, Range Ten (10) West,
more particularly described as follows:
Commencing at the Southwest corner of the Southwest Quarter of the Southeast
Quarter of the Northeast Quarter of said Section Ten (10); thence South 89
degrees 13 minutes East along the South line of said quarter quarter section a
distance of 140 feet; thence North 0 degrees 47 minutes East, a distance of
59.41 feet; thence North 89 degrees, 15 minutes 15 seconds West for 10.2 feet to
the Southeast corner of a metal building; thence North 0 degrees 47 minutes
East, along the East wall of a metal building for 350.7 feet to the center of
the North wall of a metal building; thence North 89 degrees 14 minutes 38
seconds West along the centerline of said wall, for 148.25 feet; thence South 00
degrees 47 minutes West along the West wall of a metal building, for 200.0 feet;
thence North 89 degrees 15 minutes 15 seconds West, along said wall for 2.23
feet; thence South 00 degrees 47 minutes West, along the said West wall, for
150.20 feet to the Southwest corner of the building; thence South 89 degrees 15
minutes 15 seconds West, along the South side of the metal building for the
150.5 feet to the place of beginning.
Exhibit (10.3)-p 20
<PAGE> 1
EXHIBIT (10.4)
REAL ESTATE LEASE AGREEMENT
THIS REAL ESTATE LEASE AGREEMENT, dated the 25th day of September, 1998 by and
between RONALD H. SCOTT and FRANK J. SCOTT t/d/b/a St. Clair Leasing Co., a
Pennsylvania partnership (together "Lessor") and INTERFORM CORPORATION, a
Pennsylvania Corporation t/d/b/a INTERFORM SOLUTIONS , a Subsidiary of Champion
Industries, Inc., ("Lessee").
WITNESSETH:
That in consideration of the rents hereinafter agreed to be paid by Lessee to
Lessor, and in consideration of the covenants of the respective parties hereto
to be performed at the time and in the manner hereinafter provided, Lessor does
hereby lease and demise unto Lessee, and Lessee does hereby hire and take from
Lessor, that certain lot, piece or parcel of land situated, lying and being in
the Township of South Fayette, Allegheny County, Pennsylvania, as set forth on
the drawing marked Exhibit "A" hereby attached and made a part hereof with two
one (1) story metal buildings containing approximately 103,000 square feet (the
Premises"). Lessee is herein granted ingress and egress to and from the premises
and the crosshatched area indicated on Exhibit A".
TO HAVE AND TO HOLD the Premises, together with the tenements, hereditaments,
appurtenances, improvements, buildings and assessments thereunto belonging or in
any
Exhibit (10.4)-p 1
<PAGE> 2
wise appertaining, subject to the terms and conditions herein stated, for a term
of sixty months commencing on the first day of October, 1998 and terminating on
the last day of September 2003 (the "Term").
AND IN CONSIDERATION OF THE LETTING AND HIRING OF SAID PREMISES, AS HEREINABOVE
PROVIDED, THE PARTIES HERETO HEREBY COVENANT AND AGREE AS FOLLOWS:
1. Lessee does hereby agree to pay to Lessor as rent for the said leased
premises the sum of TWO HUNDRED SIXTY-SIX THOUSAND TWO HUNDRED FORTY DOLLARS
($266,240.00) during each and every year, payable in equal monthly installments
of TWENTY-TWO THOUSAND ONE HUNDRED EIGHTY-SIX DOLLARS and 66/100 ($22,186.66) in
advance, without further demand, on the 1st day of every month during the Term
("the Rent").
It s understood and agreed that except as explicitly provided herein the monthly
Rent provided for herein shall be absolutely net to Lessor through the term of
this Lease, free of any and all Taxes, costs, expenses, liabilities, charges or
other deductions whatsoever with respect to the Premises and or the ownership,
leasing, operation, maintenance, repair, rebuilding, use or occupation thereof,
or with respect to any interest of Lessor therein, it being the intention of the
parties hereto that Lessee hereby assumes during the term of this Lease every
obligation relating to the Premises that the ownership thereof
Exhibit (10.4)-p 2
<PAGE> 3
would entail and which, but for this Lease, would be borne by Lessor. This Lease
is a net lease and, notwithstanding any law, all rentals and other amounts
payable under this Lease by Lessee shall be paid without offset, counterclaim,
abatement or defense, except as otherwise explicitly provided herein.
2. During the Term, Lessee agrees to pay, when due, all charges for
electricity, gas, heat, telephone, water, sewerage, or for setting and repairing
meters, or other utility services and costs related to the Premises or any part
thereof, which shall during the Term be levied, assessed or imposed or become
due and payable.
3. Lessee will pay when due and payable all Real Estate Taxes and
municipal assessments and payments on the entire Premises which shall during the
Term be levied, assessed, or imposed upon the Premises, or any structure erected
thereon.
4. Lessee shall also pay, directly to the authority charged with
collection therof, before any penalty, interest or cost may be impose: (a) all
taxes upon or measured by rents, personal property taxes, assessments, levies,
fees, and all other government levies and charges of every kinds whatsoever,
whether or not now customary or within the contemplation of the parties hereto
and regardless of whether the same shall be general or special, ordinary or
extraordinary, foreseen or unforeseen, which are, at any time prior to or during
the Term, imposed or levied upon or assessed against (i) the Premises, (ii) any
Rent or other sum payable hereunder, or (iii) this Lease or the leasehold estate
hereby
Exhibit (10.4)-p 3
<PAGE> 4
created, or which arise in respect of the operation,
possession or use of the Premises; (b) all gross receipts, or similar taxes
imposed or levied upon, assessed against or measured in whole or in part by any
Rent or other sum payable hereunder; (c) all sales, value added, use and similar
taxes at any time levied, assessed or payable on account of the leasing or use
of the Premises by Lessee ("Taxes"). Notwithstanding anything to the contrary
contained in this Lease, Lessee shall not be required to pay any single business
or similar taxes imposed, levied or assessed against Lessor. If any
Tax may legally be paid in installments, Lessee may elect to pay such Tax in
installments. Lessee shall furnish Lessor proof of payment of all Taxes on or
before the due date thereof. Nothing contained in this Lease, however, shall
require Lessee to pay any income, profits or revenue tax or charge upon the rent
payable by Lessee under this Lease. At the expiration or earlier termination of
the Term: (a) Lessee shall pay to Lessor, as additional rent, an amount equal to
the portion of any Tax payment which is allocable to any period included within
the Term but which is not yet due and payable, and (b) Lessee shall be allowed a
credit equal to the portion of any Tax payment paid by Lessee which is
allocable' to any period not included within the Term, provided that no such
credit shall be made to Lessee if a default then exists. Subject to the
reimbursement of taxes described in Section 5, Lessee shall pay all real estate
taxes on Building No.3, which building is shown on "Exhibit A" attached hereto.
5. Lessor agrees to reimburse Lessee for the taxes actually paid by
Lessee
Exhibit (10.4)-p 4
<PAGE> 5
associated with the Premises described on "Exhibit A" as Building No. 3 at an
amount equal to the square foot rate paid for the Premises and such Buildings
times the square footage of the third building. (Example: Total tax cost divided
by the total square footage of all structures equals the tax cost per square
foot times the square footage of Building No. 3 equals the reimbursement
factor.) Lessor agrees to pay Lessee within fourteen (14) days of proof of tax
payment or Lessee may deduct Lessor's portion from the subsequent lease payment.
6. Lessee covenants and agrees to maintain, at its sole cost and
expense, at all times during the Term, public liability insurance for the
Premises, including broad form property damage, blanket contractual and personal
injuries coverage in an amount not less than $1,000,000.00 per occurrence and
$3,000,000.00 in the aggregate for injury or death to persons, and not less that
$500,000.00 for property damage.
7. Lessee shall keep the Premises insured against the loss or damage by
fire, with extended coverage, and against loss from such other hazards as may be
required by Lessor, and in no event will property insurance be in an amount less
than the full replacement cost of all buildings or other improvements now or
hereafter erected on the Premises. The Lessee shall take out and maintain such
boiler insurance as may be reasonably required by the Lessor. Lessee shall make
Lessor an additional insured under Lessee's
Exhibit (10.4)-p 5
<PAGE> 6
comprehensive general liability insurance policies applicable to the Premises by
means of an additional insured endorsement, a copy of which shall be furnished
to Lessor, so that to the extent of said insurance coverage, Lessor is defended
from and insured against any and all claims, suits;, losses, liabilities, costs
and expenses, resulting from injury (including death) to the person or damage to
or loss of the property of anyone (including employees of Lessee) arising out of
or in connection with occupancy or use by Lessee, its employees, agents,
contractors or business guests of the Premises, any adjacent areas and any other
property of Lessor. Said additional insured endorsement shall provide that the
insurance afforded for Lessor is primary and any other valid and collectible
insurance available Lessor shall be excess. Lessee shall furnish Lessor with a
certificate or certificates of insurance covering said insurance so maintained
by Lessee, stipulating that such insurance shall not be canceled without at
least thirty (30) days' prior written notice to Lessor.
8. If the Premises or any portion thereof shall be damaged by fire or
any other casualty, such Premises or portion thereof shall, as soon as possible,
be repaired and/or rebuilt in good workmanlike manner, so that the restored
Premises are substantially similar to the construction of the Premises
immediately prior to such fire or other casualty, by and at the expense of the
Lessor. Until the repairs and/or rebuilding shall have been completed, the Rent
shall be proportionately abated according to the part of the demised premises
which shall be rendered untenantable by reason of fire. However, if the Premises
shall be substantially or completely destroyed by fire or any other
Exhibit (10.4)-p 6
<PAGE> 7
casualty, then either party may, within thirty (30) days after the occurrence of
the damage, cancel and terminate this Lease by giving notice to the other party
and, if such notice shall be given, the term of this Lease shall expire on the
tenth day after such notice shall be given, with the same effect as if that day
were the date herein specified for the expiration of the Term, and Lessee shall
vacate the Premises and surrender the same to the lessor. If a dispute arises as
to the amount of rent due under this clause, the dispute shall be submitted to
arbitration. Lessor and Lessee shall both designate one arbitrator , and these
two arbitrators shall designate a third arbitrator. In the event that they shall
fail to agree on an arbitrator within ten days after their designation, the
third arbitrator shall be designated by the American Arbitration Association.
The decision of a majority of this board shall be final and binding on all
parties. Lessor shall, not be liable for any consequential damages in connection
with such fire or other casualty , including but not limited to damage,
compensation or reason of inconvenience or annoyance arising from the necessity
of repairing any portion of the building, the interruption in the use of the
Premises, or the termination of this Lease by reason of the destruction of the
Premises.
9. If the Premises or any necessary or substantial part thereof is taken
by eminent domain, this Lease shall terminate on the date of such taking and the
rent shall be apportioned as of that date. In any taking or condemnation
proceedings, Lessee shall have the right to be a party an to lodge a claim
against the condemning authority for any award it may be allowed by law,
including, without limitation, an award for its trade fixtures, business and
personal property and moving and relocation expenses; provided, however,
Exhibit (10.4)-p 7
<PAGE> 8
that nothing herein shall entitle Lessee to any share in the award which Lessor
would be entitled to receive if the Premises had never been subject to this
Lease, except for Lessee's interest in its personal property, trade fixtures and
equipment and its interest in the products being stored on the Premises and its
leasehold interests in the Premises subject to reduction for the termination of
its liability for rent as stated above. Lessor shall promptly notify Lessee of
any actual or contemplated taking of which it has knowledge.
10. Except as provided in Article 7, Lessee agrees that it will during
the term of this Lease keep and maintain all buildings and improvements erected
upon the demised premises, both outside and inside, in good order and repair, at
Lessee's sole cost and expense, making all repairs and replacements, which are
necessary to so maintain said buildings and improvements , so that at all times
the said buildings and improvements shall be in good order, condition and
repair, reasonable wear and tear excepted. Lessee will provide for snow removal
from the sidewalks, parking areas, loading dock areas and roadways assigned
under this lease.
11. Lessee agrees that it will, during the Term, or any extension or
renewal thereof, at its own expense, observe and comply with all valid laws,
orders, regulations, rules, ordinances and requirements of the Federal, State,
County and other municipal governments, or any subdivision thereof, having
jurisdiction over the Premises and of the Board of Fire Underwriters or any
other body exercising similar functions. Lessee agrees
Exhibit (10.4)-p 8
<PAGE> 9
to pay all costs, expenses, claims, fines, penalties and other losses that may
arise out of or be imposed because of the failure of Lessee to comply therewith.
Lessee may in good faith contest in its own name, or when necessary, in Lessor's
name, but at Lessee's expense (and Lessor agrees in the latter case to sign any
necessary or appropriate papers) the validity of any law, order, regulation,
rules, ordinance or other requirement, or the applicability thereof to the
Premises, and may postpone compliance therewith until after the end of such
contest.
12. Lessee agrees to comply with all present and future statutes, laws,
ordinances, enactments, rules, regulations, orders, decrees, directives,
mandates, standards, interpretations, or other similar requirements of any
federal, state or local government, court or public authority prohibiting,
regulating or otherwise relating to environmental pollution and environmental
control of any kind, including, but not limited to, air pollution, water
pollution, land pollution, groundwater pollution, noise pollution, solid waste
pollution, toxic substance control and pollution from the release of oil into
the environment ("Environmental Requirements"), including but not limited ,
Environmental Requirements under the Federal Water Pollution Control Act; the
Federal Clean Air Act; the Federal Resource Conservation & Recovery Act; the
Federal Noise Control Act; the Federal Safe Drinking Water Act; the Federal
Toxic Substances Control Act, the Comprehensive Environmental Response
Compensation Liability Act; including any amendments to the foregoing statutes,
and the state
Exhibit (10.4)-p 9
<PAGE> 10
counterparts of such statutes and regulations, which are applicable to or arise
out of or are in connection with or relate to Lessee's use or occupancy of the
Premises. Lessee further agreed to establish or continue a program to assure
that all present and future applicable Environmental Requirements shall be
monitored and met in connection with its performance under this Lease. Lessee
will comply with said Environmental Requirements at its sole expense and will
hold harmless, indemnify and defend Lessor from and against any claims, suits,
damages, losses, costs and expenses, including reasonable attorneys' fees, made
against or sustained by Lessor as a result of Lessee's failure to comply with
any Environmental Requirements.
Lessor and Lessee are entering into this Lease on the understanding that
Lessee's planned use and occupancy of the Premises will not require a permit
under the Federal Resource Conservation and Recovery Act (RCRA) or state program
authorized under that Act. Lessee is prohibited from engaging in activities on
the Premises for which a permit under RCRA or the state counterpart is required.
To the extent required by law, Lessee agrees to comply with all applicable
federal, state, and local requirements with respect to communication of hazards
in the workplace to employees and the provision of information regarding
hazardous substances to the community. Such requirements include, but not
limited to, the Hazard Communication Standard adopted pursuant to the Federal
Occupational Safety and Health Act and all applicable requirements of the
Federal Emergency Planning and Community Right-to Know Act of 1986 (Title III of
Superfund Amendments and Reauthorization Act of 1986), and any regulations
adopted thereunder.
Exhibit (10.4)-p 10
<PAGE> 11
If, due to statutory or regulatory changes, some or all of the activities
conducted by Lessee on the Premises must be permitted under RCRA, or state
counterpart, Lessee shall notify Lessor, in writing, of the change and shall
indicate whether it desires to seek a permit to continue conducting the affected
activities. Lessee shall not apply for a permit prior to obtaining Lessor's
written consent, which consent Lessor shall have the absolute right to withhold
for any reason or no reason. Lessor shall respond in writing to indicate whether
or not it will consent to Lessee's filing an application for such a permit. If
Lessor withholds its consent, Lessee shall cease using the Premises for those
activities requiring a RCRA permit.
Lessee understands that as between Lessor and Lessee, Lessee shall be solely
liable, regardless of fault, for any and all damages, including death, personal
injury, property damage or damage to natural resources, resulting from any
release into the environment of any of the substances it manages on the Premises
during the term of this Lease and any extensions thereof. Accordingly, in
addition to the indemnity obligations of Lessee set forth in this Lease,
including Article 13 below, Lessee will indemnify, defend and hold harmless
Lessor from and against any claims, suits, damages, losses, costs and expenses,
including reasonable attorneys' fees made against or sustained by Lessor as a
result of any such release into the environment.
13. Lessee will indemnify, defend and hold harmless Lessor from and
against any and all claims, suits, losses, liabilities, costs and expenses,
including reasonable attorneys' fees, resulting from injury (including death) to
the person or damage to or loss of the property of anyone (including Lessor and
Lessee and Employees of Lessor and Lessee)
Exhibit (10.4)-p 11
<PAGE> 12
arising out of or in connection with occupancy or use by Lessee, its employees,
agents, contractors or business guests of the Premises, any adjacent areas and
any other property of Lessor, except to the extent that such claims, suits,
damages, losses and liabilities result from the gross negligence or willful
misconduct of Lessor, its employees or agents.
14. In the event that Lessee shall be in default in the performance of
any of the terms, covenants or provisions herein contained, Lessor may
immediately or at any times thereafter perform the same for the account of
Lessee and any amount paid or expense or liability incurred by Lessor in the
performance of the same shall be deemed to be additional rent payable by Lessee
for the Premises and the same may, at the option of Lessor, be added to any Rent
then due or thereafter falling due hereunder.
15. (a) Lessee may at any time or times during the Term, at its own cost
and expense, make any alterations, rebuilding replacement changes, additions and
improvements to the Premises and to the buildings thereon provided that:
(i) the same shall be performed in a workmanlike manner and
shall not weaken or impair the structural strength nor
lessen the value of the buildings thereon or any other
portion of the Premises as they are at the commencement
of the term hereof;
(ii) before the commencement of any such work, Lessee shall
certify to Lessor in writing, the nature of the
alteration to be made, as well as the cost thereof as
estimated by Lessee;
(iii) before the commencement of such work, said plans and/or
specifications shall be filed with or approved by all municipal
or other
Exhibit (10.4)-p 12
<PAGE> 13
governmental departments or authorities having jurisdiction
thereof, and all work shall be done subject to and in accordance
with the requirements of law and local regulations;
(iv) the same shall be made according to plans and
specifications which shall have first been approved in writing
by Lessor; and
(v) Lessee shall pay the increased premium, if any changed by
the insurance companies carrying insurance policies on said
buildings to cover additional risk during the course of such
work.
(b) All such alterations, rebuilding, replacements, changes, additions
and improvements made by Lessee shall be and become part of the realty,
and upon the expiration, forfeiture or termination of this Lease or any
extension or renewal thereof, for any reason whatsoever, shall become
the sole and absolute property of Lessor, unless Lessor and Lessee
otherwise agree in writing at the time that such alteration, rebuilding
replacement, change addition or improvement is made.
(c) Lessee shall not remove, damage or destroy the buildings,
improvements, equipment, fixtures or appurtenances and /or any part of
any
Exhibit (10.4)-p 13
<PAGE> 14
of them in or upon the demised premises at the commencement of the term
hereof or which hereafter by put in or upon the Premises without the
consent of the Lessor.
16. Lessee may, with the prior approval of the Lessor first had and
obtained, assign this Lease or sublet all or part of the Premises for a term or
terms which will expire not later than the date of expiration of the Term or
other termination of this Lease, provided however, that such sublease or
assignment shall be subject to the covenants and conditions contained in this
Lease and the following further conditions:
(a) Neither the assignment or sublease nor acceptance of rent by
Lessor from any assignee or sublessee shall relieve, release or in any manner
affect the liability of Lessee hereunder;
(b) Any assignee or sublessee shall assume and agree to perform
all of the terms, conditions and agreements of this Lease on the part of the
Lessee to be performed, and shall be and become jointly and severally liable
with Lessee for the performance thereof, including payment of Rent and any
additional rent hereunder.
(c) A duplicate original of the sublease and /or the instrument
of assignment and assumption, duly executed and acknowledged by Lessor promptly
after the making of the assignment of sublease;
(d) Any assignment or sublease under this Article shall be to a
financially responsible corporation, firm or partnership as determined by Lessor
in its sole discretion; and
Exhibit (10.4)-p 14
<PAGE> 15
(e) Any assignment of, or attempt to assign this Lease contrary
to the provisions herein, shall give Lessor, at its option, the right to
terminate this Lease, and it shall be entitled to all rights and remedies of
repossession under the laws of Pennsylvania, free from any rights or claims of
the Lessee.
(f) Lessor's consent to such sublease or assignment may not be
unreasonably withheld or denied. Lessor reserves the right to evaluate the
financial strength of the subtenant..
17. This Lease and all its terms, covenants and conditions are, and each
of them is, subject and subordinate to any and all mortgages and to mortgage
bonds and judgments, entered thereon, now or hereafter placed upon the Premises
and /or upon the land, and /or buildings erected thereon to the same effect as
if any such mortgage and /or accompanying bond and judgment thereon had been
fully executed and recorded before the execution of said Lease. It being the
intent of this paragraph that any such mortgage, whether a first or second
mortgage, placed upon the aforesaid dernised premises, and /or upon the land,
and/or buildings erected thereon, shall be valid lien upon both and legal and
equitable title to the aforesaid premises, and or buildings, as if the said
Lease were not in existence.
18. If, during the term of this Lease, Lessee shall neglect or refuse to
pay any installment of Rent due for the period of five (5) days after notice of
such default sent to Lessee by certified mail; or should an execution issue
against Lessee and a levy be made against the personal property of Lessee and
the same be not bonded, stayed, satisfied, or remedied within (10) days of the
said execution and levy, or before the said property is sold, whichever is
sooner, either at public or private sale, pursuant to said execution; or should
Lessee file in any court pursuant to
Exhibit (10.4)-p 15
<PAGE> 16
any statue either of the United States or any state, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of all or a portion of Lessee's property; or should such a petition be so filed
against Lessee and not be dismissed within a period of ninety (90) days after
the date of filing thereof; or should Lessee make an assignment for the benefit
of creditors, or a bill in equity or other proceeding for the appointment of a
receiver for Lessee is granted; or if proceeding for reorganization or for
composition with creditors under any state or federal law be instituted by or
against Lessee, and if instituted against Lessee shall be connected to by it or
remain undismissed for a period of ninety (90) days after the date of filing
thereof; then, and in each case, at the option of Lessor, exercisable by notice
to Lessee, the rent for the expired balance of the Term shall at once become due
and collectible, by distress or otherwise, and all personal property owned by
Lessee removed from the Premises shall, for six months after such removal, be
liable to distress and may be distrained and sold or Lessor may in each of said
cases, without notice or demand, enter into and upon the Premises or any part
thereof in the name of the whole, and repossess the same as of their former
estate, and expel Lessee and those claiming under them and remove their effects,
forcibly, if necessary, without being taken or deemed to be guilty of any manner
of trespass, and thereupon this Lease shall absolutely determine without
prejudice to any remedies which may otherwise be used by Lessor for arrears of
Rent or breach of Lessee's covenants herein contained.
It is understood and agreed, however, that if Lessee shall be required
to pay the entire Rent for any unexpired balance of the Term, or any renewal
thereof, and if Lessor shall dispossess Lessee and take possession of the
Premises, as set forth in Article 19 of this Lease,
Exhibit (10.4)-p 16
<PAGE> 17
that, in such an event, if Lessor shall relent the Premises, or any part of the
same, for the unexpired balance of the Term for which it has already received
Rent payment in full from Lessee, the Rent received by Lessor from such releting
(less any costs expended in securing said rentals) shall be turned over to
Lessee.
19. If Lessee shall fail to pay Rent due hereunder for a period of five
(5) days after notice of default sent to Lessee by certified mail, or if Lessee
fails to cure within thirty (30) days after written notice shall have been given
to Lessee by Lessor, except as otherwise set forth in Article 18 hereof, then
Lessee shall, at the option of Lessor exerciseable by notice to Lessee, be
nontenant, subject to dispossession by Lessor without further notice or process
of law, with release of errors and damages, and Lessor may re-enter the Premises
and dispossess Lessee without thereby becoming a trespasser.
20. Lessee hereby accepts notice to quit, remove from and surrender up
possession of Premises to Lessor, its successors or assigns, at the end of the
Term, whenever it may be determined, whether by forfeiture or otherwise, without
any further notice to that effect, all further notices being hereby waived. This
waiver of notice to quit is to apply either at the end of the original Term of
the Lease, or any renewal thereof, or at the end of any subsequent year or month
in case Lessee holds over, and at the time the Term is ended by forfeiture.
21. At the end of the Term, whether the same shall be determined by an
amicable action of ejectment may be entered in the Court of Common Pleas of
Allegheny County (after fifteen (15) days prior written notice given Lessee), in
which Lessor, its successors or assigns, shall be plaintiff, and Lessee, its
successors or assigns and all who come into
Exhibit (10.4)-p 17
<PAGE> 18
possession during the Term or forfeiture or expiration of the Term, as in the
Lease provided, it is agreed that continuance of this Lease, or under Lessee,
shall be defendants, and that judgment may be entered thereupon in favor of the
plaintiff, without leave of court, for the Premises, to have the same force and
effect as if a summons in ejectment had been regularly issued, legally served
and returned, and that a writ of possession for all costs may be issued
forthwith, waiving all errors and defects whatsoever in entering said judgment,
also waiving right of appeal, writ of error, or stay upon any writs of habere
facias possession which may issue upon these same. Lessee hereby empowers any
attorney to appear
for it in said amicable action in ejectment for the demised premises in any
court having jurisdiction.
22. LESSEE, TO THE EXTENT PERMITTED BY LAW UPON RECEIPT OF SEVEN (7) DAYS PRIOR
NOTICE FROM LESSOR OF ITS INTENT TO ENTER JUDGMENT OF CONFESSION, HEREBY
IRREVOCABLY AND UNCONDITIONALLY AUTHORIZES THE PROTHONOTARY, CLERK OF COURT, OR
ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH OF PENNSYLVANIA, OR ANY
OTHER JURISDICTION, AS ATTORNEY FOR LESSEE TO APPEAR FOR LESSEE IN SUCH COURT
AND, WITH OR WITHOUT ONE OR MORE COMPLAINTS FILED, CONFESS JUDGMENT OR JUDGMENTS
AGAINST LESSEE IN FAVOR OF LESSOR, AND ITS SUCCESSORS AND ASSIGNS, AT ANY TIME
FOLLOWING THE OCCURRENCE OF AN EVENT OF DEFAULT HEREUNDER, TOGETHER WITH COSTS
OF SUIT AND ATTORNEYS COMMISSION OF TEN PERCENT (10%) OF THE UNPAID AMOUNT
Exhibit (10.4)-p 18
<PAGE> 19
HEREUNDER, WITH RELEASE OF ALL ERRORS AND WAIVER OF ANY RIGHT TO A STAY OF
EXECUTION, FOR WHICH THIS LEASE OR VERIFIED COPY HEREOF SHALL BE SUFFICIENT
WARRANT, AND INQUISITION AND EXTENSION UPON ANY LEVY ON REAL ESTATE IS HEREBY
WAIVED AND CONDEMNATION AGREED TO. THE AUTHORITY TO ENTER JUDGMENT SHALL NOT BE
EXHAUSTED BY ONE EXCUSE HEREOF, BUT TO THE EXTENT PERMITTED BY LAW, SHALL
CONTINUE FROM TIME TO TIME UNTIL FULL PAYMENT OF ALL AMOUNTS HEREUNDER. THE
FOREGOING RIGHT AND REMEDY IS IN ADDITION TO AND NOT IN LIEU OF ANY OTHER RIGHT
OR REMEDY IS IN ADDITION TO LESSOR UNDER THIS LEASE OR OTHERWISE. LESSEE FURTHER
AGREES TO THE IMMEDIATE ISSUING OF A WRIT OF EXECUTION FOR THE AMOUNT OF SUCH
JUDGMENT AND COSTS, WITHOUT LEAVE OF COURT.
LESSEE EXPRESSLY ACKNOWLEDGES THAT THIS IS A COMMERCIAL TRANSACTION, THAT IT
UNDERSTANDS AND VOLUNTARILY AGREES TO THIS PROVISION FOR CONFESSION OF JUDGMENT,
AND THAT LESSEE IS WAIVING IMPORTANT LEGAL RIGHTS INCLUDING ANY RIGHT TO NOTICE
OR A HEARING WHICH MIGHT OTHERWISE BE REQUIRED BEFORE ENTRY OF JUDGMENT
HEREUNDER.
LESSEE ACKNOWLEDGES THAT IT HAS HAD ASSISTANCE OF COUNSEL IN THE REVIEW AND
EXECUTION OF THIS CONFESSION OF JUDGMENT AND THAT ITS MEANING AND EFFECT HAS
BEEN FULLY EXPLAINED TO THEM BY SUCH COUNSEL.
Exhibit (10.4)-p 19
<PAGE> 20
INITIALS
23. Lessor agrees that any and all equipment and fixtures which may be
placed or installed in the Premises by Lessee and which shall be designed for,
or used in, the conduct of Lessee's business in the Premises, shall at all times
- -be and remain the property of the Lessee. Lessee hereby undertakes and agrees
to remove all such equipment and fixtures prior to the expiration or other
termination of this Lease or any renewal thereof, and, at its sole expense, to
repair any and all damage to the Premises which shall have been occasioned
either by the installation or removal thereof. Any and all such equipment and
fixtures which shall remain in the Premises more than sixty (60) days after
termination of this Lease, shall be deemed abandoned by Lessee and shall become
the sole property of Lessor. Lessee agrees to pay a pro-rated daily storage fee
for any and all equipment remaining after the termination date of this Lease.
24. In case there shall at any time be filed against the Premises any
mechanic's or materialman's lien (with the exception of any lien filed for work
done or for materials supplied at the request of the Lessor) (in which case
Lessor shall promptly cause such lien to be discharged), Lessee will, within ten
(10) days after it shall have been received notice thereof, cause said lien to
be discharged either by paying the amount claimed or by bonding or otherwise;
provided however, that such discharge or bonding of record must be sufficient
(a) to permit Lessor to obtain title insurance with no exception for such lien;
and (b) to prevent the holder of the lien from causing a sale, foreclosure or
other title divestiture with respect to the Premises or any portion thereof. If
Lessee shall fail so to discharge or bond any such lien within such thirty
Exhibit (10.4)-p 20
<PAGE> 21
(30) day period, then in addition to any other right or remedy of Lessor, Lessor
may, but shall not be obligated to, procure the discharge of the same either by
paying the amount claimed to be due by pay the amount of the judgment, if any,
in favor of the lienor, with interest, costs and allowances. Any amount paid or
deposited by Lessor, including reasonable counsel fees, in defending such action
or in procuring the discharge of such lien, with all necessary disbursements in
connection therewith, together with the late charge from the date of payment or
deposit by Lessor, shall be payable by Lessee to Lessor as additional rent
within five (5) days of demand therefor.
25. At the expiration or other termination of the term hereof, Lessee
shall vacate and surrender to Lessor full and actual possession of the Premises
in a good state of repair, damage by the elements, and ordinary wear and tear
excepted.
26. Lessor hereby covenants that Lessee, upon payment of the Rent as
herein reserved and performing all the covenants and agreements herein contained
on the part of Lessee, shall and may peaceably and quietly have, hold and enjoy
the Premises hereby demised.
27. Subject to the security regulations of any government authority,
Lessee agrees that it will permit Lessor to have free access to the Premises, on
reasonable notice to Lessee for the purpose of inspecting the same or making
repairs that Lessee may neglect or refuse to make in accordance with the
provisions of this Lease, and also for the purpose of showing the Premises to
deposit or bonding, or Lessor shall be entitled, if it so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
persons considering purchase of the property or concerned with the placement of
a mortgage thereon.
Exhibit (10.4)-p 21
<PAGE> 22
28. In any case where, pursuant to the terms of this Lease, one party's
approval is required by the other, such approval shall not be unreasonably
withheld.
29. It is agreed by and between the parties that the premises leased
shall be used only to manufacture, store, market and sell printed materials and
other related products.
30. All notices required or desired to be given hereunder shall be in
writing and shall for the purpose of the Lease be deemed to have been duly
given.
(a) To Lessor if a copy thereof by certified mail, postage prepaid,
addressed to Lessor at 1040 St. Mellion Drive, Nevillewood, PA 15142 or to such
other address as Lessor may from time to time designate in writing to Lessee.
(b) To Lessee if a copy thereof be mailed by certified mail, postage
prepaid, addressed to Box A, Mayview & Scott Roads, Bridgeville, PA 15017,
Attn.: President.
All notices served by prepaid registered mail as aforesaid shall be
effective on the date they are so mailed.
31. The covenants, agreements and conditions contained in this Lease
shall run with the land and the Premises hereby leased and shall be binding upon
and insure to the benefit of the parties hereto and their respective successors
and assigns.
32. This Lease contains the entire agreement of the parties hereto with
respect to the letting and hiring of the Premises and such Lease may not be
amended, modified, released, surrendered or discharged, in whole or in part,
except by an instrument in writing signed by both of the parties hereto, their
successors or assigns.
33. Lessee may renew this Lease for an additional term of five (5)
years, at an annual
Exhibit (10.4)-p 22
<PAGE> 23
rental of Two hundred seventy-six thousand eight hundred eighty-nine and 60/100
dollars ($276,889.60) payable in advance in equal consecutive monthly
installments of TWENTY-THREE THOUSAND SEVENTY-FOUR AND 12/100 DOLLARS
($23,074.12) and an additional term of five (5) years thereafter at an annual
rental of TWO HUNDRED EIGHTYSEVEN THOUSAND NINE HUNDRED SIXTY-FIVE AND 20/ 100
DOLLARS ($287,965.20) payable in advance in equal monthly installments of
TWENTYTHREE THOUSAND NINE HUNDRED NINETY-SEVEN AND 10/100 DOLLARS ($23,997.10)
beginning on the first day of the month of such renewal term(s) and subject to
all the terms, covenants and conditions hereof provided that Lessee, in writing,
notifies Lessor of its intention to renew not later than one hundred eighty
(180) days prior to the termination date of the initial five year term, and
further provided that Lessee is not in default of any of the terms, covenants
and conditions of this Lease.
34. This Lease sets forth the entire agreement and understanding between
the parties as to the subject matter of this Lease and any and all prior or
contemporaneous proposals, negotiations, agreements, commitments and
representations, oral or written, are merged herein. This Lease may not be
modified or amended except by means of a writing duly executed by the parties
subsequent to the date hereof which states that it is intended to amend this
Lease.
35. Each provision hereof shall be separate and independent and if any
provision hereof or the application thereof to any person or circumstances shall
to any extent be invalid or unenforceable, the remaining provisions hereof, or
the application of such provision to persons or circumstances other than those
as to which it is invalid or unenforceable, as the case may be,
Exhibit (10.4)-p 23
<PAGE> 24
shall not be affected thereby, and each provision hereof shall be valid and
shall be enforced to the extent permitted by law. All provisions contained in
this Lease shall be binding upon, inure to the benefit of and be enforceable by,
the respective successors and assigns of Lessor and Lessee to the same extent as
if each such successor and assign were named as a party hereto. No waiver of any
provision hereof shall be deemed waiver of any other provision hereof or of any
subsequent breach of the same or any other provision.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound by
this Agreement, and Lessor has executed this Agreement by his Agent, thereunto
duly authorized, and Lessee has executed this Agreement on the day and year
above written.
Witness: ST. CLAIR LEASING CO.
[SIG] By /s/ RONALD H. SCOTT
- -------------------------- --------------------------
Ronald H. Scott, Partner
By /s/ FRANK J. SCOTT
--------------------------
FRANK J. SCOTT, PARTNER
Attest: INTERFORM CORPORATION
By [SIG] By [SIG]
------------------------------ ------------------------------
Title: Accounting Supervisor Ted Nowlen, President
--------------------------
Exhibit (10.4)-p 24
<PAGE> 25
EXHIBIT A
[SITE PLAN]
Exhibit (10.4)-p 25
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The Registrant, Champion Industries, Inc., a West Virginia corporation,
does business under the trade name "Chapman Printing Company". Its wholly owned
subsidiaries are:
1. The Chapman Printing Company, Inc., a West Virginia corporation.
2. Stationers, Inc., a West Virginia corporation (doing business in Ohio as
"Garrison Brewer").
3. Bourque Printing, Inc., a Louisiana corporation.
4. Dallas Printing Company, Inc., a Mississippi corporation.
5. Carolina Cut Sheets, Inc., a West Virginia corporation.
6. U.S. Tag & Ticket Company, Inc., a Maryland corporation.
7. Donihe Graphics, Inc., a Tennessee corporation.
8. Smith & Butterfield Co., Inc., an Indiana corporation.
9. The Merten Company, an Ohio corporation.
10. Interform Corporation, a Pennsylvania corporation.
11. CHMP Leasing, Inc., a West Virginia corporation.
12. Blue Ridge Printing Co., Inc., a North Carolina corporation.
13. Rose City Press, a West Virginia corporation
14. Capitol Business Equipment, Inc., a West Virginia corporation
15. Thompson's of Morgantown, Inc., a West Virginia corporation
16. Independent Printing Service, Inc., an Indiana corporation
17. Diez Business Machines, Inc., a Louisiana corporation
Exhibit 21-p1
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Annual Report (Form 10-K) of Champion
Industries, Inc. of our report dated December 19, 1999, with respect to the
consolidated financial statements of Champion Industries, Inc. and Subsidiaries
for the year ended October 31, 1999.
We also consent to the incorporation by reference in the Registration Statement
pertaining to the 1993 Stock Option Plan (Form S-8, No. 33-76790) of Champion
Industries, Inc. of our report dated December 19, 1999, with respect to the
consolidated financial statements of Champion Industries, Inc. and Subsidiaries
included in the Annual Report (Form 10-K) for the year ended October 31, 1999.
/s/ Ernst & Young LLP
Charleston, West Virginia
January 27, 2000
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<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
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