<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: November 30, 1997
---------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------
Commission file number: 0-2572
STEEL CITY PRODUCTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 55-0437067
------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
3513 CONCORD PIKE, SUITE 3527, WILMINGTON, DELAWARE
19803
---------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(302) 478-9170
---------------------------------------------------
(Registrant's telephone number, including area code)
1001 SANTERRE DRIVE, GRAND PRAIRIE, TEXAS, 75050
--------------------------------------------------------------
(Former name, former address, and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15all of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 [ ]
At January 1, 1998, 3,238,061 shares of the Registrant's Common Stock,
$0.01 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
STEEL CITY PRODUCTS, INC.
<TABLE>
<S> <C>
Balance Sheets at November 30, 1997 (unaudited)
and February 28, 1997................................................................. 3
Statements of Operations for the three month periods ended
November 30, 1997 and November 30, 1996 (unaudited).................................... 4
Statements of Operations for the nine month periods ended
November 30, 1997 and November 30, 1996 (unaudited).................................... 5
Statement of Stockholders' Equity for the nine months
ended November 30, 1997 (unaudited) .................................................. 6
Statements of Cash Flows for the nine month periods ended
November 30, 1997 and November 30, 1996 (unaudited).................................... 7
Notes to financial statements (unaudited)............................................... 8
</TABLE>
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<PAGE> 3
STEEL CITY PRODUCTS, INC.
BALANCE SHEETS
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
November 30, February 28,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................................................ $ 1 $ 2
Trade accounts receivable, less allowance of $373 and $389, respectively ........................ 2,750 2,558
Notes receivable - Oakhurst Company, Inc. ....................................................... 1,085 275
Inventories ..................................................................................... 2,487 3,327
Deferred tax asset, current portion ............................................................. 291 --
Other ........................................................................................... 104 145
-------- -------
Total current assets .................................................................. 6,718 6,307
-------- -------
Property and equipment, at cost ................................................................... 2,042 2,005
Less accumulated depreciation ................................................................... (1,043) (951)
-------- -------
999 1,054
-------- -------
Deferred tax asset, less valuation allowance of $51,300 ........................................... 709 1,000
Notes receivable - Oakhurst Company, Inc., long-term portion ...................................... -- 1,008
Advances to Oakhurst Company, Inc. ................................................................ 5,539 5,400
Other assets ...................................................................................... 623 528
-------- -------
6,871 7,936
-------- -------
$ 14,588 $15,297
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................................ $ 3,152 $ 4,085
Accrued compensation ............................................................................ 282 271
Current maturities of long-term obligations ..................................................... 1,615 755
Due to affiliate ................................................................................ 426 284
Other ........................................................................................... 115 180
-------- -------
Total current liabilities ............................................................. 5,590 5,575
-------- -------
Long-term obligations:
Long-term debt .................................................................................. 2,935 3,499
Other long-term obligations ..................................................................... 67 82
-------- -------
3,002 3,581
-------- -------
Commitments and contingencies .....................................................................
Stockholders' equity:
Preferred stock, par value $0.01 per share; authorized
5,000,000 shares, issued 1,938,526 shares;
liquidation preference $10,135 ............................................................... 19 19
Common stock, par value $0.01 per share; authorized
5,000,000 shares; issued 3,238,061 shares .................................................... 32 32
Additional paid-in capital ...................................................................... 43,824 43,824
Deficit (Reorganized on August 26, 1989) ........................................................ (37,878) (37,733)
Treasury stock, at cost, 207 common shares ...................................................... (1) (1)
-------- --------
Total stockholders' equity ............................................................ 5,996 6,141
-------- -------
$ 14,588 $15,297
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
STEEL CITY PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
November 30, November 30,
1997 1996
------------ ------------
<S> <C> <C>
Sales .............................................. $ 4,289 $ 4,264
Other income ....................................... 127 117
----------- -----------
4,416 4,381
----------- -----------
Cost of goods sold, including occupancy and
buying expenses .................................. 3,550 3,559
Operating, selling and administrative expenses ..... 928 933
Provision for doubtful accounts .................... 75 13
Interest expense ................................... 108 128
----------- -----------
4,661 4,633
----------- -----------
Net loss before undistributed earnings of investment
in affiliate and income taxes .................... (245) (252)
Undistributed earnings of investment in affiliate .. 49 46
Income tax expense ................................. -- (1)
----------- -----------
Net loss ........................................... (196) (207)
Effect of Series A Preferred Stock dividends ....... (253) (253)
----------- -----------
Net loss attributable to common stockholders ....... $ (449) $ (460)
=========== ===========
Per share amounts:
Net loss per share attributable to common
stockholders after preferred stock dividends ..... $ (0.14) $ (0.14)
=========== ===========
Weighted average number of shares outstanding
used in computing per share amount ............... 3,238,061 3,238,061
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
STEEL CITY PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
November 30, November 30,
1997 1996
------------ -----------
<S> <C> <C>
Sales ............................................. $ 14,038 $ 14,301
Other income ...................................... 392 389
------------ -----------
14,430 14,690
------------ -----------
Cost of goods sold, including occupancy and
buying expenses ................................. 11,396 11,678
Operating, selling and administrative expenses .... 2,877 2,950
Provision for doubtful accounts ................... 123 42
Interest expense .................................. 331 365
------------ -----------
14,727 15,035
------------ -----------
Net loss before income taxes and
undistributed earnings of investment in affiliate (297) (345)
Income tax expense ................................ -- (9)
Undistributed earnings of investment in affiliate . 152 165
------------ -----------
Net loss .......................................... (145) (189)
Effect of Series A Preferred Stock dividends ...... (759) (759)
------------ -----------
Net loss attributable to common stockholders ...... $ (904) $ (948)
============ ===========
Per share amounts:
Net loss per share attributable to common
stockholders after preferred stock dividends .... $ (0.28) $ (0.29)
============ ===========
Weighted average number of shares outstanding
used in computing per share amount .............. 3,238,061 3,238,061
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
STEEL CITY PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
---------------------- ---------------------- PAID-IN EARNINGS ---------------------
SHARES PAR VALUE SHARES PAR VALUE CAPITAL (DEFICIT) SHARES COST
--------- --------- --------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, February 28, 1997.... 1,938,526 $ 19 3,238,061 $ 32 $ 43,824 $(37,733) 207 $ (1)
Net loss for the period........ (145)
--------- --------- --------- --------- -------- -------- -------- -------
Balances, November 30, 1997.... 1,938,526 $ 19 3,238,061 $ 32 $ 43,824 $(37,878) 207 $ (1)
========= ========= ========= ========= ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 7
STEEL CITY PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................... $ (145) $ (189)
Adjustments to reconcile net loss
to net cash (used in) provided by operating activities:
Depreciation and amortization ........................... 144 208
Undistributed earnings of investment in affiliate ....... (152) (165)
Other changes in operating assets and liabilities:
Accounts receivable ..................................... (192) 142
Inventories ............................................. 840 1,556
Accounts payable ........................................ (933) (652)
Other ................................................... 148 206
------------ ------------
Net cash (used in) provided by operating activities of:
Continuing operations ........................................ (290) 1,106
Discontinued operations ...................................... (301) (264)
------------ ------------
Net cash (used in) provided by operating activities ............. (591) 842
------------ ------------
Cash flows from investing activities:
Advances to Oakhurst Company, Inc. ........................... (139) (3,107)
Collection of note receivable, Oakhurst Company, Inc. ........ 198 183
Additions to property and equipment .......................... (37) (2)
Other ........................................................ -- --
------------ ------------
Net cash provided by (used in) investing activities ............. 22 (2,926)
------------ ------------
Cash flows from financing activities:
Net borrowings under revolving credit agreement .............. 785 2,561
Proceeds from long-term borrowings ........................... -- 1,500
Principal payments on long-term obligations .................. (217) (1,852)
Deferred loan costs .......................................... -- (126)
------------ ------------
Net cash provided by financing activities ....................... 568 2,083
------------ ------------
Net decrease in cash and cash equivalents ....................... (1) (1)
Cash and cash equivalents at beginning of period ................ 2 3
------------ ------------
Cash and cash equivalents at end of period ...................... $ 1 $ 2
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
STEEL CITY PRODUCTS, INC.
NINE MONTHS ENDED NOVEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. All adjustments made are of a normal recurring nature.
While the Company believes that the disclosures presented herein are
adequate to make the information not misleading, it is suggested that these
unaudited financial statements be read in conjunction with the audited financial
statements for the fiscal year ended February 28, 1997 ("fiscal 1997") as filed
in the Company's Annual Report on Form 10-K.
2. SALE OF REAL ESTATE
In August 1997, the Company entered into an agreement to sell its
88,000 square foot warehouse in Pittsburgh, Pennsylvania for a gross purchase
price of approximately $2.8 million in cash. The transaction closed in December
1997. Accordingly, in the fourth quarter of the current fiscal year the Company
will record a pre-tax gain of approximately $1.8 million in connection with the
sale. In December 1997, after repayment of the term loan secured by the
property, the net proceeds of approximately $1.6 million were used to reduce
revolving debt and to cover the expenses of moving to newer, leased premises
comprising approximately 67,000 square feet.
3. REVOLVING DEBT
Oakhurst and its subsidiaries, including the Company, have available
financing under a revolving credit facility (the "Revolver") from an
institutional lender up to a maximum of $7 million, subject to defined levels of
the subsidiaries' accounts receivable and inventories. In September 1997,
Oakhurst and its subsidiaries reached an agreement to extend the Revolver beyond
its initial two year term to March 1999, and paid a fee of $35,000 in connection
with the renewal. The Credit Agreement provides for subsequent automatic renewal
terms of one year each upon payment of a renewal fee of 0.5% of the entire line,
unless earlier terminated as provided for in the Agreement.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Steel City Products, Inc. ("SCPI") is a special, limited purpose,
majority-owned subsidiary of Oakhurst Company, Inc. ("Oakhurst"). SCPI is
expected to concentrate on its historical line of business, while any future
growth and expansion opportunities are expected to be pursued by one or more
subsidiaries of Oakhurst. Through Oakhurst's ownership of SCPI, primarily in the
form of preferred stock, Oakhurst retains substantially all the value of SCPI,
and receives substantially all of the benefit of operations through dividends on
the preferred stock. Oakhurst's ownership of SCPI is designed to facilitate the
preservation and utilization of SCPI's and Oakhurst's net operating tax loss
carry-forwards and capital losses which amount to approximately $150 million and
$4 million, respectively.
In addition to cash derived from operations, SCPI's liquidity and
financing requirements are determined principally by the working capital needed
to support its level of business, together with the need for capital
expenditures and the cash required to repay its debt. SCPI also receives cash
payments pursuant to a note receivable from Oakhurst, and from time to time,
repayments of advances to Oakhurst. SCPI's working capital needs fluctuate
primarily due to the amounts of inventory it carries which can change
seasonally, the size and timeliness of payment of receivables from its customers
to which from time to time SCPI grants extended payment terms for their seasonal
inventory builds, and the amount of credit extended to SCPI by its suppliers.
SCPI participates in a cash concentration system together with all the
subsidiaries of Oakhurst. Available cash that is transferred to Oakhurst is
reflected as an addition to the advances to Oakhurst.
At November 30, 1997, SCPI's debt primarily consisted of a term loan of
approximately $1.1 million secured by a mortgage on SCPI's real estate (repaid
in December 1997, see below), and notes payable with outstanding principal
balances aggregating approximately $522,000 that were issued in connection with
the settlement of certain contingent liabilities related to SCPI's former retail
division. SCPI also has revolving debt of approximately $2.9 million (see below)
which was borrowed primarily to repay prior revolving debt of Oakhurst, and
which is offset entirely by advances receivable from Oakhurst that bear interest
at the same rate as the revolving debt.
Oakhurst and its subsidiaries, including SCPI, have available financing
under a revolving credit facility (the "Revolver") from an institutional lender
up to a maximum of $7 million, subject to defined levels of the subsidiaries'
accounts receivable and inventories. Management believes that the Revolver will
provide adequate funding for SCPI's working capital requirements in the next
fiscal year.
From time to time the information provided by the Company or statements
made by its employees may contain so-called "forward looking" information that
involves risks and uncertainties. In particular, statements contained in this
Item 2 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are not historical facts (including, but not
limited to statements concerning anticipated sales, profit levels, customers and
cash flows) are forward looking statements. The Company's actual future results
may differ significantly from those stated in any forward looking statements.
Factors that may cause such differences include, but are not limited to the
factors discussed above as well as the accuracy of the Company's internal
estimates of revenue and operating expense levels. Each of these factors and
others are discussed from time to time in the Company's Securities and Exchange
Commission filings.
- 9 -
<PAGE> 10
MATERIAL CHANGES IN FINANCIAL CONDITION
In August 1997, the Company entered into an agreement to sell its
88,000 square foot warehouse in Pittsburgh, Pennsylvania for a gross purchase
price of approximately $2.8 million in cash. The transaction closed in December
1997. Accordingly, in the fourth quarter of the current fiscal year SCPI will
record a pre-tax gain of approximately $1.8 million in connection with the sale.
In December 1997, after repayment of the term loan secured by the property, the
net proceeds of approximately $1.6 million were used to reduce revolving debt
and to cover the expenses of moving to newer, leased premises comprising 67,000
square feet.
In September 1997, Oakhurst and its subsidiaries reached an agreement
to extend the Revolver beyond its initial two year term to March 1999, and paid
a fee of $35,000 in connection with the renewal. The Credit Agreement provides
for subsequent automatic renewal terms of one year each upon payment of a
renewal fee of 0.5% of the entire line, unless earlier terminated as provided
for in the Agreement.
As of November 30, 1997, there had been no other material changes in
the Company's financial condition from February 28, 1997, discussed in Item 7 of
the Company's Annual Report on Form 10-K for fiscal 1997.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Operations include the results of SCPI's operating division, Steel City
Products, a distributor of automotive parts and accessories and of non-food pet
supplies based in Pittsburgh, Pennsylvania.
THREE MONTHS ENDED NOVEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED NOVEMBER
30, 1996
Compared to the third quarter of the prior year, sales reflected an
increase of $25,000. Sales to existing automotive customers decreased by
approximately $680,000, primarily as a result of bankruptcies, downsizing and
competitive pressures encountered by certain of SCPI's customers. The prior year
third quarter also included sales of approximately $75,000 relating to the
"Wing-tech" division, that was sold in the first quarter of the current fiscal
year. Partially offsetting these decreases were sales to new automotive
customers of approximately $480,000.
Sales of non-food pet supplies were $377,000 in the current year third
quarter, compared with $77,000 in the prior year third quarter. The increase in
sales of $300,000 resulted from new pet supply customers added during the
current fiscal year.
Gross profits increased by $34,000 in the third quarter compared with
the same quarter of the prior year, due principally to lower buying and
occupancy expenses of approximately $20,000, combined with a slight improvement
in gross margin.
Operating, selling and administrative expenses decreased by $5,000 when
compared to the prior year third quarter. Lower expenses resulting from the sale
of the Wing-tech division were offset by non-recurring expenses of approximately
$30,000 related to the move to new facilities.
There was an increase in the provision for doubtful accounts of $62,000
in the current year related to the bankruptcy of one of the Company's customers.
- 10 -
<PAGE> 11
NINE MONTHS ENDED NOVEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED NOVEMBER 30,
1996
Compared with the prior year, sales decreased by $263,000. Sales to
existing automotive customers decreased by $2.4 million, primarily as a result
of bankruptcies, downsizing and competitive pressures encountered by certain of
SCPI's customers. Partially offsetting this were sales to new automotive
customers of approximately $1.3 million. Current year revenues also include an
increase in sales of $42,000 by the Wing-tech division, that was sold in the
first quarter of the current year.
Sales of non-food pet supplies were $958,000 in the current year
period, compared with $95,000 in the prior year. Sales of pet supplies first
began in the second quarter of the prior year, and new customers have been added
in the current fiscal year.
Notwithstanding the net decrease in sales, gross profits increased by
$19,000 in the first nine months of the current year. The effect of the lower
levels of sales was offset by reductions in buying and occupancy expenses.
Operating, selling and administrative expenses decreased by $73,000
when compared to the prior year. Lower corporate and operating expenses and
management fees were partially offset by non-recurring moving expenses of
approximately $30,000 in the third quarter.
There was an increase in the provision for doubtful accounts of $81,000
in the current year related to the bankruptcies and liquidations of certain of
the Company's customers.
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<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter for which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Addendums to the Agreement of Sale and Purchase by and
between Steel City Products, Inc. and Bearing Service
Company of Pennsylvania dated October 18, 1997, and
December 17, 1997, respectively.
27. Financial Data Schedule (EDGAR transmission only)
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
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<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
STEEL CITY PRODUCTS, INC.
Date: January 13, 1997 By: /s/ Bernard H. Frank
------------------------------
Bernard H. Frank
Chief Executive Officer
Date: January 13, 1997 By: /s/ Mark Auerbach
------------------------------
Mark Auerbach
Chief Financial Officer
- 13 -
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10. Addendums to the Agreement of Sale and Purchase by and
between Steel City Products, Inc. and Bearing Service
Company of Pennsylvania dated October 18, 1997, and
December 17, 1997, respectively.
27. Financial Data Schedule (EDGAR transmission only)
</TABLE>
<PAGE> 1
EXHIBIT 10
ADDENDUM TO
AGREEMENT OF SALE AND PURCHASE
BY AND BETWEEN
STEEL CITY PRODUCTS, INC.
AND
BEARING SERVICE COMPANY OF PENNSYLVANIA
THIS ADDENDUM to Agreement of Sale and Purchase made this 18th
day of October, 1997, by and between STEEL CITY PRODUCTS, INC., (hereinafter
"Seller") and BEARING SERVICE COMPANY OF PENNSYLVANIA, (hereinafter "Buyer").
RECITALS:
1. Buyer and Seller are parties to an Agreement of Sale and
Purchase for the property known as 630 Alpha Drive, RIDC Park, O'Hara Township,
Allegheny County, Pennsylvania, the ("Property") dated August 18th, 1997, (the
"Agreement").
2. Pursuant to Article 17 of the Agreement, Buyer was to conduct
a due diligence inspection of the Property to determine that the Property is in
a condition acceptable to the Buyer.
3. Pursuant to paragraph 17.B., Buyer was required to deliver to
Seller on or before September 22, 1997, a waiver of the contingencies set forth
in 17.A.(3), A.(4), A.(5) or a notice terminating the Agreement as a result of
its inspection of the Property.
4. Buyer has completed its inspection of the Property and has
determined that certain defects exists, and certain conditions on the Property
render the Property incompatible with Buyer's intended use.
5. Buyer has determined that pursuant to its due diligence
inspection, that the building on the Property requires a new roof for which it
has received a bid for $101,600.00
2
<PAGE> 2
and Buyer has further determined that the building is in need of various other
repairs more particularly set forth on Exhibit "A" attached hereto and made a
part hereof, the estimated cost for which is $26,100.00.
6. Notwithstanding the foregoing, Buyer nonetheless desires to
proceed to acquire the Property subject to certain modifications of the
Agreement as set forth in this Addendum.
NOW THEREFORE, for the mutual considerations contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Incorporation. The above Recitals are incorporated herein as
if set forth in full below.
2. Reimbursement. Seller shall reimburse the Buyer the lesser
of: (A) Fifty (50%) percent of the actual costs incurred by Buyer and invoiced
to Buyer for work done on or before six (6) months following the closing on the
sale of the Property for replacing the roof and completing the repairs on
Exhibit "A"; and (B) $60,353.00.
3. Source of Payment. In order to assure Buyer that Seller will
promptly pay the sums required as set forth in paragraph 2. hereof, at closing,
a portion of the sale proceeds equal to $60,353.00, otherwise payable to the
Seller shall be paid to a joint escrow account, Sanford M. Aderson and Michael
K. Parrish, joint escrow agents, who shall be authorized to distribute the
escrowed funds in accordance with an escrow agreement which will provide inter
alia, for the payment of:
A. One-half (1/2) of all invoices submitted: (1) for
the replacement of the roof and the repair recommendations set forth on Exhibit
"A"; (2) on or before six (6) months following the closing; and (3) not to
exceed $60,353.00.
3
<PAGE> 3
B. The balance, if any, shall be paid to Steel City
Products, Inc., at the expiration of such six (6) month period.
4. Waiver of Contingencies. Buyer hereby waives all
contingencies set forth in 17.A.(3), 17.A.(4), and 17.A.(5) of the Agreement
and confirms and agrees that for the payments set forth in paragraph 2 hereof,
that (a) there are no "Major Defects" (as defined in the Agreement) for which
the Buyer shall be entitled compensation from the Seller or terminate the
Agreement; and (b) there is no condition which would render the Property
incompatible (as defined in the Agreement) for which the Buyer shall be
entitled to compensation from the Seller or terminate the Agreement.
5. In all other respects the Agreement of Sale and Purchase is
hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties have set their hands and seals the day
and year first above written.
ATTEST: STEEL CITY PRODUCTS, INC.
By: /s/ Karen Stempinski By: /s/ Robert M. Davies
------------------------- -----------------------
Assistant Secretary Chief Executive Officer
ATTEST: BEARING SERVICE COMPANY
OF PENNSYLVANIA
By: /s/ Franklin Blackstone By: /s/ William J. Burke
------------------------- -----------------------
Secretary President
4
<PAGE> 4
ADDENDUM TO AGREEMENT OF SALE
BY AND BETWEEN
STEEL CITY PRODUCTS, INC.
AND
BEARING SERVICE COMPANY
OF PENNSYLVANIA
DATED AS OF DECEMBER 17, 1997
MICHAEL K. PARRISH, ESQUIRE
GOEHRING, RUTTER & BOEHM
20465 ROUTE 19
CRANBERRY TWP., PA 16066
(412) 776-4440
<PAGE> 5
ADDENDUM TO AGREEMENT OF SALE
THIS ADDENDUM to the Agreement of Sale by and between STEEL CITY
PRODUCTS, INC. (Seller) and BEARING SERVICE COMPANY OF PENNSYLVANIA (Buyer)
dated the 17th day of December 1997, in connection with property located at 630
Alpha Drive, O'Hara Township, Allegheny County, PA 15238.
In consideration of the sum of One and no/100 ($1.00) Dollar in hand
paid by Buyer to Seller and for other good and valuable consideration and
intending to be legally bound hereby, the Buyer and Seller agree as follows:
1. The sales price of $2,850,000 set forth in the Agreement of
Sale shall be reduced to the amount of $2,656,384.35.
2. Buyer agrees to pay Hill Cleary & Associates' sales commission
in the amount of $97,637.65. In the event there is any sales commission due
Hill Cleary & Associates or any other realtor in connection with the sale of
property known as 630
1
<PAGE> 6
Alpha Drive, O'Hara Township, Allegheny County, PA 15238, Seller expressly
agrees to pay such commission and to hold Buyer harmless with respect to any
and all real estate commissions in excess of the $97,637.65 set forth in this
paragraph.
3. Buyer agrees to pay the total transfer taxes in the amount of
$66,409.61. To the extent that additional transfer taxes are assessed in this
transaction, the parties agree to share equally transfer taxes in excess of
$66,409.61.
4. Buyer agrees that Seller shall have the use of approximately
2,000 square feet of warehouse space to store inventory in its original
packaging and which inventory shall be neatly stacked in the warehouse area of
the premises until December 31, 1997. Seller expressly agrees to remove such
inventory on or before 5:00 P.M. on December 31, 1997. In the event that
Seller fails to remove such inventory by such time, Buyer shall give written
notice to remove the inventory within 20 days. At the expiration of the 20 day
notice period, Seller agrees that Buyer shall have the right to take possession
of such inventory and dispose of it in any manner Buyer sees fit.
2
<PAGE> 7
5. Buyer shall have no liability to Seller or any other party in
connection with the property of Seller remaining in the premises after closing,
and Seller expressly agrees that it shall bear the risk of loss and any other
liability of any kind which may arise out of the inventory or the removal
thereof.
6. Seller agrees to indemnify and hold Buyer harmless for any and
all claims, losses, causes of action, including attorney's fees, arising out of
the storage of Seller's property on the premises or after the notice required
in Paragraph 4, the removal of such property from the premises.
7. Buyer agrees that Seller shall have access during normal
business hours upon 24 hours advance notice to enter the premises and remove
any property of Seller; provided however, Seller expressly agrees that it shall
remove such property in an orderly manner and shall not interfere with any
business operations, property, or personnel of Buyer.
8. The parties further agree that Buyer shall deposit $60,353.00
with Goehring, Rutter & Boehm and Aderson, Frank & Steiner, P.C., escrow
agents, to secure the payment for the
3
<PAGE> 8
improvements set forth in the Addendum to the Agreement of Sale dated October
18, 1997.
IN WITNESS WHEREOF, the parties have executed this Addendum to
Agreement of Sale on the 18th day of December, 1997.
ATTEST: STEEL CITY PRODUCTS, INC.
By:/s/ Sandy Aderson By: /s/ Bernard H. Frank
----------------------- --------------------------
Chief Executive Officer
ATTEST: BEARING SERVICE COMPANY OF
PENNSYLVANIA
By:/s/ Franklin Blackstone By: /s/ William J. Burke
----------------------- --------------------------
Secretary President
4
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<S> <C>
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<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
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<INVENTORY> 2,487
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0
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<COMMON> 32
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<TOTAL-LIABILITY-AND-EQUITY> 14,588
<SALES> 14,038
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<INCOME-PRETAX> (145)
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