<PAGE> 1
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
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 No. 0-7770
MCCLAIN INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
STATE OF MICHIGAN 38-1867649
State of Incorporation I.R.S. Employer I.D. No.
6200 ELMRIDGE ROAD
STERLING HEIGHTS, MICHIGAN 48310
(810) 264-3611
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO 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, as amended, 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
----- -----
Indicate by check mark if 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.
[X]
As of December 29, 1995, the aggregate market value of the
Registrant's voting stock held by nonaffiliates of the Registrant was
$8,441,206 determined in accordance with the highest price at which the stock
was sold on such date as reported by the Nasdaq National Market.
As of December 29, 1995, there were 4,893,512 shares of the
Registrant's common stock issued and outstanding.
Exhibit Index is on Page 57
Page 1 of 347 Pages
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PART I
ITEM 1. BUSINESS
GENERAL
McClain Industries, Inc., a Michigan corporation ("McClain-Michigan"),
together with its subsidiaries (the "Company"), is one of the nation's leading
manufacturers of a diversified line of dump truck bodies and solid waste
handling equipment. Dump truck bodies are assemblies attached to truck frames
and used to carry and dump solid materials such as dirt or gravel. Solid waste
handling equipment is used for the temporary storage, transportation and
compaction of residential, commercial and industrial waste and recycling
materials. In addition, the Company operates a steel tube mill to manufacture
some of its steel tubing needs. The Company also provides coiled steel cutting
and warehousing services for its own manufacturing operations and, on a limited
basis, for sale to third-party customers.
BACKGROUND
McClain-Michigan was incorporated in 1968 and became a publicly-traded
company in 1973. It currently has: (i) five significant wholly-owned operating
subsidiaries: McClain of Ohio, Inc. ("McClain-Ohio"); McClain of Georgia, Inc.
("McClain-Georgia"); Shelby Steel Processing Co. ("Shelby Steel"); McClain Tube
Company (d/b/a Quality Tubing) ("Tube"); and McClain EPCO, Inc. ("EPCO"); (ii)
one wholly-owned lease financing subsidiary: McClain Group Leasing, Inc.
("Leasing"); and (iii) one wholly-owned holding company subsidiary: Galion
Holding Company ("Galion Holding"). Galion Holding is the sole shareholder of
two additional operating subsidiaries, McClain E-Z Pack, Inc. ("E-Z Pack") and
Galion Dump Bodies, Inc. ("Galion Dump Bodies"). McClain-Michigan, E-Z Pack
and Galion Dump Bodies collectively own all of the issued and outstanding stock
of McClain Group Sales, Inc. ("Sales"), which is the exclusive sales
representative of McClain-Michigan, McClain-Ohio, McClain-Georgia, E-Z Pack and
Galion Dump Bodies. All of these companies are Michigan corporations, except
for McClain-Georgia, which is a Georgia corporation, and EPCO, which is a New
York corporation.
The names of several of these companies were changed during the past
year in order to more closely identify them with McClain-Michigan. Leasing was
formerly known as Prime Leasing Corporation; McClain-Ohio was formerly known as
McClain Industries of Ohio, Inc.; E-Z Pack was formerly known as Galion Solid
Waste Equipment, Inc.; Sales was formerly known as M.E.G. Equipment Sales,
Inc.; and EPCO was formerly known as EPCO Manufacturing Corp. EPCO was
acquired during July 1995. See ITEM 1. BUSINESS, Acquisition of EPCO, below.
McClain-Michigan, McClain-Ohio, McClain-Georgia and EPCO are sometimes
collectively referred to as "McClain"; Galion Holding, E-Z Pack and Galion Dump
Bodies are sometimes collectively referred to as "Galion"; and, unless the
context otherwise requires, all references to the Company mean McClain-Michigan
and all of the entities owned or controlled by McClain-Michigan.
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The Company's executive offices are located at 6200 Elmridge Road,
Sterling Heights, Michigan 48310 and its telephone number is (810) 264-3611.
ACQUISITION OF EPCO
On July 17, 1995, McClain-Michigan purchased all of the issued and
outstanding common stock of EPCO in exchange for stock of McClain with a market
value of $1,000,000 and an agreement to issue additional McClain stock over the
next 3 years with a market value of up to $500,000 if sales of EPCO balers
exceed specified amounts during such years. The stock issued to the former
EPCO shareholders has not been registered under any federal or state securities
laws and, consequently, its transfer is restricted.
EPCO manufactures and sells high quality vertical downstroke balers
primarily for cardboard and plastics, compacting such waste for recycling.
During its fiscal year ended March 31, 1995, EPCO had operating income of
approximately $10,600 on net sales of approximately $2.5 million. Acquiring
EPCO permits the Company to offer its customers a more complete line of solid
waste handling equipment, satisfy customers which seek to purchase balers and
compactors as a unit, and remain competitive in the industry.
PRODUCTS
The Company manufactures and markets dump truck bodies and four major
solid waste handling equipment product lines: (1) containers; (2) compactors
and baling equipment; (3) garbage and recycling truck bodies; and (4) transfer
trailers.
Dump Truck Bodies and Hoists
Galion Dump Bodies manufactures steel dump truck bodies varying in
capacity from two to twenty-five cubic yards at its Winesburg, Ohio facility.
McClain-Michigan and McClain-Georgia, under license from Galion Dump Bodies,
also manufacture dump truck bodies at its Oklahoma City, Oklahoma and Macon,
Georgia facilities, respectively. Dump truck bodies are assemblies which are
attached to a truck's frame or chassis, to allow the truck to carry and dump
solid materials such as dirt, gravel or waste materials. Hoists are the
hydraulic lift mechanisms used to tilt the dump body. Trucks with a dump body
and hoist are commonly seen in use as "dump trucks". The products manufactured
by Galion Dump Bodies are sold under the registered trademark "Galion". The
trademark registration, if not renewed, will expire in the year 2001. Sales of
dump truck bodies accounted for approximately 21% of the Company's consolidated
sales for the fiscal year ended September 30, 1995.
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Containers
Detachable Roll-Off Containers and Roll-Off Hoists. McClain-Michigan,
McClain-Ohio and McClain-Georgia manufacture several types of detachable
roll-off containers and roll-off hoists at the Company's facilities in Sterling
Heights, Michigan, Macon, Georgia, Oklahoma City, Oklahoma, and Galion, Ohio.
Detachable roll-off containers vary in capacity from ten to forty-five cubic
yards and are transported with their contents to recycling centers,
incinerators or landfill sites. Roll-off hoists consist of frames mounted on
truck chassis which are hydraulically operated to load, transport and dump
roll-off containers. Roll-off hoists are advertised and sold under the trade
name "MAGNA-HOIST". Sales of detachable roll-off containers and roll-off
hoists accounted for approximately 18% of the Company's consolidated sales for
the fiscal year ended September 30, 1995.
Intermodal, Water-Tight and Sludge Containers. The Company
manufactures various types of intermodal, water-tight and sludge containers at
the Company's facilities in Sterling Heights, Michigan, Macon, Georgia,
Oklahoma City, Oklahoma, and Galion, Ohio. Intermodal containers vary in
capacity from nineteen cubic yards to thirty-five cubic yards and are designed
for highway, railroad and marine movement of waste products. Water-tight
containers vary in capacity from ten to forty cubic yards and are designed for
highway movement of wet waste. Sludge containers vary in capacity from ten to
seventy cubic yards and are designed for highway movement of slurry type waste
products. Sales of these containers accounted for approximately 7% of the
Company's consolidated sales for the fiscal year ended September 30, 1995.
Compactors and Baling Equipment
The Company manufactures compactors at its Sterling Heights, Michigan
facility. Compactors consist of a compaction unit and separate power source.
Compaction units force deposited refuse through an opening at one end of the
unit into a roll-off body coupled to the compaction unit. When the roll-off
body is filled, the compactor is detached and the roll-off body is removed for
dumping. The Company also manufactures unitized compaction systems consisting
of a compactor and roll-off container manufactured as a single unit.
Compactors are sold under the trade name "MAGNUM" and unitized compactor
systems are sold under the trade name "UNIMAG". Sales of compactors and
unitized compaction systems accounted for approximately 11% of the Company's
consolidated sales for the fiscal year ended September 30, 1995. EPCO
manufactures at its Buffalo, New York facility 24 models of balers which
compact plastic and paper products, primarily cardboard. Balers are either
vertical downstroke or closed door horizontal balers. Sales of balers for the
approximately 2-1/2 months since the date of acquisition accounted for
approximately 1% of the Company's consolidated sales for the fiscal year ended
September 30, 1995.
Garbage and Recycling Truck Bodies
E-Z Pack manufactures at its Galion, Ohio facility traditional garbage
truck bodies comprised of front, rear and side loading truck bodies and a
recycling truck body used
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in solid waste handling and disposal. The front loading truck bodies vary in
capacity from thirty-two cubic yards to forty-three cubic yards, the rear
loading truck bodies vary in capacity from eighteen cubic yards to thirty-one
cubic yards, and the side loading truck bodies vary in capacity from
twenty-nine cubic yards to thirty-nine cubic yards. The recycling truck bodies
vary in capacity from thirty cubic yards to forty cubic yards. The products
manufactured by E-Z Pack are sold under the registered trademark "E-Z Pack".
Within this line, E-Z Pack sells its front loading truck bodies under the
trademarks "Goliath", "Goliath II", and "Apollo". The side loading truck
bodies and the recycling truck bodies are principally identified by the E-Z
Pack name only. These trademarks will expire in the year 2001, unless renewed.
Sales of garbage and recycling truck bodies accounted for approximately 20% of
the Company's consolidated sales for the fiscal year ended September 30, 1995.
Transfer Trailers
McClain-Ohio manufactures at its Galion, Ohio facility, various types
of steel and aluminum transfer trailers, including open-top walking floor
trailers, closed-top walking floor trailers, ejection trailers and open-top
tipper trailers, varying in capacity from thirty cubic yards to 124 cubic
yards. Transfer trailers are used to transport compacted solid waste from
transfer stations to landfills or incinerators. Sales of transfer trailers
accounted for approximately 8% of the Company's consolidated sales for the
fiscal year ended September 30, 1995.
CUSTOMERS AND DISTRIBUTION
For the fiscal year ended September 30, 1995, the Company's
consolidated sales were divided approximately 43% to distributors, 54% to solid
waste handling companies and 3% to governmental agencies.
The Company traditionally has not depended on product sales to any one
customer and no single customer accounted for more than 10% of the Company's
net sales for the fiscal years ended September 30, 1995 and 1994. However, for
the year ended September 30, 1993, sales to WMX Technologies, Inc. constituted
approximately 11% of the Company's net sales. The Company has no contracts
with any of its customers and, accordingly, sells its products pursuant to
purchase orders placed from time to time in the ordinary course of business.
The Company delivers its products to its customers through the use of its own
trucks or common carriers.
The Company obtains its municipal as well as certain private contracts
through the process of competitive bidding. There can be no assurance that
municipalities or others will continue to solicit bids, or if they do, that the
Company will continue to be successful in having its bids accepted.
Additionally, inherent in the competitive bidding process is the risk that if a
bid is submitted and a contract is subsequently awarded, actual performance
costs may exceed the projected costs upon which the submitted bid or contract
price was based.
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Although historically foreign sales have not accounted for a
significant portion of the Company's revenues, the Company anticipates that a
greater portion of its future net sales will be derived from sales of its
products in foreign markets.
SALES AND MARKETING
Historically, the Company's products have been marketed by the
Company's executive officers and sales personnel who have worked closely with
customers to solicit orders and to render technical assistance and advice. The
Company's executive officers will continue to devote a significant amount of
time to developing and maintaining continuing relations with the Company's
customers. The Company operates Sales, a separate wholly-owned corporation, to
act as the Company's exclusive sales representative. All of the Company's
sales efforts are centralized through Sales rather than being handled by the
separate product divisions.
The Company also engages independent distributors and dealers in
various regions throughout the United States and certain foreign countries, for
marketing its products to customers. The Company's dealers are generally
responsible in their respective geographic markets for identifying customers
and soliciting customer orders. As of December 1, 1995, there were
approximately 143 authorized Company dealers located in numerous states and six
authorized Company dealers, licensees and commissioned district managers in
four foreign countries, each of which is independently owned. The Company is
dependent on such dealers for a significant portion of its revenues. These
dealers typically specialize in specific products and areas and, accordingly,
have specific knowledge of and contacts in particular markets. The Company
believes that its dealers have enhanced and will continue to enhance the scope
of the Company's marketing and sales efforts and have, to a certain extent,
also enabled the Company to avoid certain significant costs associated with
creating a more extensive direct sales network.
The Company advertises its products under trade names and under its
name in trade journals and brochures. Other marketing efforts include articles
in trade publications, attendance at trade shows and presentations by the
Company's personnel at industry trade conferences.
The Company, through Leasing, also provides lease financing on a
limited basis for purchases of the Company's products. At September 30, 1995,
Leasing held lease receivables the present value of which aggregates
approximately $3.6 million.
RAW MATERIALS
The Company is dependent on third-party suppliers and manufacturers
for the raw materials and a significant portion of the parts it uses in the
manufacture of its products. The major raw materials used by the Company are
steel in sheet, plate, structural and tubular form and aluminum in sheet and
extruded form. The Company purchases its steel, principally in coils, and its
sheet and extruded aluminum from domestic mills and warehouses. Coiled steel
is received by the Company at various manufacturing facilities
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where it is then cut, bent, sheared and formed for assembly by welding.
Electric and hydraulic components incorporated into the power units of
compactors, balers and hoists used with dump bodies manufactured by the Company
are brand name items purchased from various sources and assembled by the
Company or to their specifications by outside sources. The assembled products
are then painted to customers' specifications.
While the Company attempts to maintain alternative sources for the
Company's raw materials and believes that multiple sources are currently
available for all of the raw materials (other than aluminum extrusions) that it
uses, the Company's business is generally subject to periodic shortages of raw
materials which could have an adverse effect on the Company. The Company
currently purchases all of its extruded aluminum from one source. The Company
is unaware of other potential providers of extruded aluminum which meets the
Company's requirements and, therefore, the failure of the Company's extruded
aluminum supplier to continue to supply the Company could have a material
adverse effect on the Company. Although to date the Company has been able to
obtain sufficient quantities of extruded aluminum to satisfy its manufacturing
needs, a prolonged shortage of such raw material could adversely affect the
Company. In addition, the Company currently purchases all of its hydraulic
cylinders from only a few major suppliers. The failure by any of such
suppliers to continue to supply the Company with cylinders on commercially
reasonable terms, or at all, could also have a material adverse effect on the
Company.
The Company generally has no supply agreements with any of its
suppliers and, accordingly, generally purchases raw materials pursuant to
purchase orders placed from time to time in the ordinary course of business.
Failure or delay by suppliers in supplying necessary raw materials to the
Company could adversely affect the Company's ability to obtain and deliver its
products on a timely and competitive basis. In addition, the Company has
experienced price fluctuations for the raw materials that it purchases,
particularly with respect to steel and aluminum. Any significant price
fluctuations in the future could also have an adverse effect on the Company.
The Company uses a stringent forecasting and purchasing system to
monitor the quantity and cost of necessary raw materials. Such cost controls
allow the Company to minimize its operating costs by purchasing from the lowest
priced suppliers the appropriate amount of raw materials in light of the
Company's needs. The Company often orders raw materials in amounts in excess
of its anticipated short-term needs in order to take advantage of price
discounts available on large volume purchases of raw materials.
To reduce its cost of raw materials, the Company has been processing
coiled steel and manufacturing some of its own tubing, rather than purchasing
tubing and processed sheet steel from third parties. The Company believes that
it is the only manufacturer of dump truck bodies and solid waste handling
equipment to process coiled steel and to operate a steel tube mill.
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Steel Processing
Shelby Steel, a wholly-owned subsidiary of the Company, receives
coiled steel and either warehouses or cuts and processes the steel at its River
Rouge, Michigan facility to prescribed specifications. In addition to
processing coiled steel for use by the Company, Shelby Steel also offers steel
processing and warehousing services to third parties. Shelby Steel's ability
to warehouse customers' steel attracts customers such as steel brokers who do
not maintain facilities of their own to warehouse steel. Its steel processing
and warehousing sales are generally limited to customers in the Detroit
metropolitan area. Sales to third parties represented 78.6%, 86.7% and 87.7%
of Shelby Steel's business and 1.2%, 2.0% and 2.8% of the Company's
consolidated net sales for the fiscal years ended September 30, 1995, 1994 and
1993, respectively.
Tube Manufacturing
Tube, a wholly-owned subsidiary of the Company, began operating its
tube manufacturing line in the Company's Kalamazoo facility in mid-1994. The
facility receives coiled steel, slits the coil to proper width and forms it
into square and rectangular tubing. The tubing produced by this facility is
expected to eventually provide the Company with 90% of its steel tubing
requirements. Currently, it provides approximately 80% of such requirements.
COMPETITION
The Company faces intense competition in the solid waste handling
equipment and dump truck bodies industries. Certain of the Company's
competitors offer as wide a range of products, have greater market share and
financial, marketing, manufacturing and other resources than the Company. At
present, the Company's order backlogs are approximately two to four weeks. In
addition, the Company believes that several of its competitors have added or
are in the process of adding additional manufacturing capacity, which could
reduce order backlogs and price levels, and consequently adversely affect the
Company. Moreover, the absence of highly sophisticated technology results in a
number of small regional companies entering the industry periodically and
competing with the Company.
Although the Company believes that its products are superior to those
of most of its competitors because of the quality and amount of steel used in
its products, consumers generally find the products relatively interchangeable.
Consequently, price, product availability and delivery, design and
manufacturing quality and service are the principal means of competition. The
Company believes that it can continue to compete and further strengthen its
competitive position through proper pricing, marketing and cost-effective
distribution of the Company's products.
The steel processing industry is also highly competitive, with
quality, price and delivery the principal means of competition. The Company
believes that it will generally continue to maintain its competitive position
in the marketplace with respect to steel
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processing. Shelby Steel's ability to warehouse customers' steel attracts
customers such as steel brokers who do not maintain facilities of their own to
warehouse steel.
BACKLOG AND INVENTORY
The Company generally produces solid waste handling equipment and dump
truck bodies pursuant to customer purchase orders. The Company includes in its
backlog only firm product orders, which are subject to termination at will and
rescheduling, without penalty. The Company's backlog was approximately $8.6
million and $16.6 million at September 30, 1995 and 1994, respectively.
Substantially all of the Company's backlog is delivered within four weeks of
the Company's receipt of purchase orders. Due to numerous factors, including
termination of orders, rescheduling, possible change orders and delays, which
affect production and delivery of the Company's products, there can be no
assurance as to if or when cash receipts will be recognized from the Company's
backlog. In addition, year to year comparisons of backlog are not necessarily
indicative of future operating results. Although most of the Company's sales
are based on orders for goods to be manufactured, the Company nevertheless
carries certain amounts of finished goods inventory in order to meet customer
delivery dates. In addition, from time to time, the Company manufactures units
in excess of ordered units to "round out" production runs or to maintain base
stock levels. At September 30, 1995, 1994 and 1993, the Company had inventory
of $31.2 million, $23.3 million and $18.4 million, respectively.
EMPLOYEES
The Company had approximately 540 employees as of December 1, 1995.
Sixty-three of the Company's hourly employees are represented by the McClain
Hourly Employees' Union pursuant to a collective bargaining agreement which
expires September 1996. The 137 hourly employees of E-Z Pack are represented
by the International Association of Machinists and Aerospace Workers Union
pursuant to a collective bargaining agreement which expires June 12, 1997. The
54 hourly employees of McClain-Ohio are represented by the International
Association of Machinists and Aerospace Workers Union pursuant to a collective
bargaining agreement which expires in November, 1996. On February 23, 1995 the
National Labor Relations Board conducted an election in response to a petition
filed by the Shopmen's Local Union No. 616 of the International Association of
Bridge, Structural and Ornamental Iron Workers (AFL-CIO) (the "Union") to
represent the hourly employees at the McClain-Georgia facility in Macon,
Georgia. Fifty-one employees or former employees voted, of which 21 voted
against Union representation and 19 voted in favor of Union representation.
The ballots of 11 employees were challenged as ineligible. The Union filed
charges against the Company asserting that it committed various unfair labor
practices which affected the election results and that the challenged ballots
should be counted. It seeks an order that it be recognized as the exclusive
bargaining agent for the hourly employees and that certain former employees be
awarded backpay, lost benefits, and reinstatement. A trial regarding these
charges was held during October 1995. The Company does not believe that Union
certification, if it occurs, or an adverse final decision regarding the charges
filed by the Union, would have a material adverse effect on the Company. The
Company believes
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that relations with the hourly employees at McClain of Georgia are generally
satisfactory. There have been no work stoppages due to labor difficulties.
ENVIRONMENTAL
The Company's operations are subject to extensive federal, state and
local regulation under environmental laws and regulations concerning, among
other things, emissions into the air, discharges into the waters and the
generation, handling, storage, transportation, treatment and disposal of waste
and other materials. Inherent in manufacturing operations and in owning real
estate is the risk of environmental liabilities as a result of both current and
past operations, which cannot be predicted with certainty. The Company has
incurred and will continue to incur costs, on an ongoing basis, associated with
environmental regulatory compliance in its business.
During 1994, the Company engaged the services of an outside consulting
firm to perform environmental compliance assessments of all of the Company's
facilities (the "Audits"). The Audits identified a number of regulatory
compliance issues associated with hazardous waste management and reporting,
wastewater and stormwater requirements, underground storage tank registration
and reporting requirements and air permitting requirements. The anticipated
cost to remedy these compliance deficiencies was not deemed material by the
Company. Since the date of the Audits, the Company has begun to implement
procedures and take requisite actions to remedy the deficiencies identified in
the Audits so that its facilities will comply with all applicable and material
environmental laws and regulations.
One of the properties the Company acquired as part of its acquisition
(the "Galion Acquisition") on July 27, 1992 of all of the assets and
substantially all of the liabilities of the Peabody Galion Division of Peabody
International Corporation ("Peabody") needs environmental remediation as
reflected in a Phase II environmental study issued in September, 1993 by
Stearns & Wheler in connection with the Galion Acquisition. This Phase II
study indicates that there is no groundwater contamination on the property but
that certain parcels of the property are contaminated with volatile organic
compounds and excess levels of PCBs. The purchase agreement relating to the
Galion Acquisition provides that the Company is responsible only for the first
$300,000 of costs and expenses, if any, incurred for such remediation, and
Peabody is responsible for any costs or expenses in excess of such amount. The
actual costs of remediation have not yet been determined. The indemnity
provisions of the purchase agreement may not cover environmental liabilities
arising from contamination found off-site. Although there is some indication
that such contamination exists, the Phase II environmental study did not
evaluate off-site liability issues. If such off-site contamination exists and
is traceable to the property, Galion Holding could be responsible for some or
all of the remediation costs associated with such contamination.
On July 17, 1995, the Company acquired all of the outstanding stock of
EPCO Manufacturing Corporation ("EPCO") located in the State of New York. In
connection with that acquisition, the Company performed environmental site and
compliance assessments of both the real property then being used by EPCO for
operations and the property to
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which EPCO was moving. While the assessments did identify minor environmental
compliance issues, none of the issues was material. Subsurface contamination
concerns were identified only with respect to the property to which EPCO was
moving, a property with confirmed soil and groundwater contamination. However,
the owner of the new EPCO facility has agreed to indemnify EPCO for any
pre-existing soil or groundwater contamination.
State and local agencies have become increasingly active in the
environmental area. The increased regulation by multiple agencies can be
expected to increase the Company's future environmental costs. In particular,
properties under federal and state scrutiny frequently result in significant
clean-up costs and litigation expenses related to a party's clean-up
obligation. However, the Company believes that the ever-increasing waste
stream and the continuing initiatives of government authorities relating to
environmental and waste disposal problems, including restrictions on landfill
locations and operations and extensive regulation relating to the disposal of
waste, create significant opportunities for companies in the solid waste
handling equipment industry. In addition, the trend towards classifying more
materials as "semi-hazardous" or "hazardous" waste may be expected to continue
to make handling such materials more complex, thereby further facilitating the
market for solid waste handling products.
ITEM 2. PROPERTIES
In the aggregate, the Company owns or leases approximately 866,500
square feet of real property located in Michigan, Ohio, Georgia, Oklahoma and
New York. The Company owns three facilities in Michigan, three facilities in
Ohio, one facility in Georgia and one facility in Oklahoma. The properties
that the Company owns or leases consist of the following:
<TABLE>
<CAPTION>
OWNED SQUARE
LOCATION OR LEASED FOOTAGE
-------- --------- --------
<S> <C> <C>
Sterling Heights, Michigan Owned 37,000
Sterling Heights, Michigan Leased 18,000
Kalamazoo, Michigan Owned 55,000
River Rouge, Michigan Owned 50,000
Galion, Ohio Owned 365,000
Winesburg, Ohio Owned 67,500
Winesburg, Ohio Owned 16,000
Winesburg, Ohio Owned 15,200
Macon, Georgia Owned 114,500
Oklahoma City, Oklahoma Owned 100,000
Buffalo, New York Leased 28,300
</TABLE>
The Company's main office and manufacturing facilities are located in
a 37,000 square foot facility situated on 8 2/3 acres in Sterling Heights,
Michigan owned by McClain-Michigan. This facility is used to manufacture
roll-off containers, roll-off hoists and compactors. McClain-Michigan also
owns a 55,000 square foot facility located in
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Kalamazoo, Michigan which is home to the Company's tube mill. Shelby Steel
owns a 50,000 square foot steel processing facility on six acres of land in
River Rouge, Michigan, where all of its operations are conducted.
McClain-Michigan leases, under a verbal month-to-month lease, an 18,000 square
foot manufacturing facility also located in Sterling Heights, Michigan from the
mother of Messrs. Kenneth and Robert McClain. This facility is used by the
Company as a fabrication facility. The monthly rental for this facility is
$3,500, with the lessor responsible for the payment of real estate taxes,
assessments, insurance premiums and replacement in case of damage by fire, and
the Company responsible for maintenance of the building. The Company believes
that the terms and conditions of this lease are comparable to the terms and
conditions which would be available from an unrelated party with respect to
similar facilities, although other similarly situated unrelated parties would,
in all likelihood, require a long-term written lease.
E-Z Pack owns three buildings comprising approximately 365,000 square
feet situated on approximately 38 acres of land in Galion, Ohio. This
three-building facility is the sole location for its manufacturing operations.
This facility manufactures front, side and rear loading garbage truck bodies
and recycling trucks. Sales's executive offices are located in one of the
Galion, Ohio buildings under a lease arrangement and McClain-Ohio leases one of
the other buildings at this location. Galion Dump Bodies owns three
manufacturing facilities (67,500, 15,200 and 16,000 square feet) situated on 20
acres of land in Winesburg, Ohio where it manufactures dump bodies and hoists.
The Company's Georgia facility is an approximately 114,500 square foot
manufacturing facility on 13.2 acres in Macon, Georgia. McClain-Georgia
manufactures roll-off containers and fabricates and processes steel for its own
use in the manufacturing process at this facility.
The Company's Oklahoma facility consists of three buildings in
Oklahoma City, aggregating 100,000 square feet. This facility is used to
fabricate and process steel for its own use and to manufacture roll-off
containers.
EPCO leases an approximately 28,300 square foot facility outside
Buffalo, New York, where it manufacturers balers.
McClain-Michigan's Sterling Heights, Michigan facility and
McClain-Ohio's Ohio facility are currently operating at approximately 60% of
capacity. The Oklahoma facility is currently operating at 50% of capacity.
The Georgia facility is currently operating at 55% of capacity. The E-Z Pack
portion of the Galion, Ohio facility is currently operating at 70% of capacity.
The Winesburg, Ohio facility is currently operating at 75% of capacity. The
Kalamazoo, Michigan facility is currently operating at 50% of capacity. The
EPCO facility is currently operating at 50% capacity. The determination of the
productive capacity on each facility actually used by the Company is a function
of the mix of products being produced at such facility and the pricing of such
products. The production capacity figures set forth in this paragraph reflect
the mix of products presently produced by each facility and the present pricing
of such products. The Company enjoys expandable capacity at most of these
facilities depending on double-shifting and other performance enhancing
activities.
-12-
<PAGE> 13
The facilities owned and leased by the Company are well maintained and
in good operating condition. Its plants and equipment are subject to various
liens and encumbrances which collateralize certain obligations. See Notes 5
and 6 of Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time subject to various claims from
existing or former employees alleging gender, age or racial discrimination and
anti-union activity, none of which are expected to have a material adverse
affect on the Company. In addition, as a manufacturer of industrial products,
the Company is, from time to time, subjected to various product liability
claims. Such claims typically involve personal injury or wrongful death
associated with the use or misuse of the Company's products. While such claims
have not been material to the Company in any year and the Company believes that
it maintains adequate product liability insurance, there can be no assurance
that such insurance will continue to be available on terms acceptable to the
Company. Any product liability claim not fully covered by insurance, as well
as any adverse publicity from a product liability claim, could have a material
adverse effect on the Company. The Company is currently defending a few legal
proceedings involving product liability claims relating to McClain, Galion
Dump and E-Z Pack brand products. Galion Holding, pursuant to an
indemnification it provided Peabody Galion Division of Peabody International
Corporation ("Peabody")in connection with the Galion Acquisition, is currently
defending a number of legal proceedings involving product liability claims
arising out of products manufactured by Peabody prior to the date of the Galion
Acquisition. These claims are also covered by insurance. Although the Company
has already settled many of these cases and the Company believes that it can
continue to successfully resolve these product liability claims, there can be
no assurance that the Company can continue to do so. The Company is not
presently a party to any material legal proceedings except as described above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded and quoted on the Nasdaq National
Market ("Nasdaq/NMS") under the trading symbol "MCCL." The following table
sets forth, for the periods indicated, the high and low sales prices for the
Common Stock as reported
-13-
<PAGE> 14
by Nasdaq/NMS. These per share quotations represent inter-dealer prices on
the Nasdaq/NMS, and do not include retail mark-ups or commissions.
<TABLE>
<CAPTION>
SALES PRICE
OF
COMMON STOCK
------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1994
First Quarter . . . . . . . . . . . . . . $15.00 $9.50
Second Quarter . . . . . . . . . . . . . . 15.00 8.00
Third Quarter . . . . . . . . . . . . . . 13.00 8.25
Fourth Quarter . . . . . . . . . . . . . . 12.50 10.50
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter . . . . . . . . . . . . . . 12.25 9.00
Second Quarter . . . . . . . . . . . . . . 11.50 6.625
Third Quarter . . . . . . . . . . . . . . 8.75 7.125
Fourth Quarter . . . . . . . . . . . . . . 7.88 6.38
</TABLE>
Effective February 28, 1995, a four-for-three spilt of the Company's
Common Stock was declared.
On December 29, 1995, the last reported sales price for the Common
Stock as reported by Nasdaq/NMS was $4-7/16. As of such date there were
approximately 237 holders of record of the Common Stock. The Company believes
there are a substantial number of beneficial owners of Common Stock whose
shares are held in street name. The Company has never paid any cash dividends.
The payment of dividends by the Company is within the discretion of the Board
of Directors and will depend on the Company's earnings, its capital
requirements and financial condition, as well as other relevant factors. The
Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain earnings for use in the Company's
operations.
In December 1995, the Board of Directors authorized the Company to
repurchase from time to time on the open market up to 100,000 shares of the
Company's common stock.
-14-
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for each of the Company's last five fiscal
years ended September 30 are as follows:
<TABLE>
<CAPTION>
============================================================================================================
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $82,263,202 $79,166,990 $61,794,822 $31,895,313 $27,035,673
Net Income $2,462,755 $3,250,996 $2,110,838 $ 1,190,385 $ 665,414
Net Earnings Per
Common and Common
Equivalent Share(1)
$.53 $.71 $.51 $.30 $.17
<CAPTION>
As of September 30,
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working Capital $33,868,556 $21,997,601 $10,664,116 $12,577,620 $8,706,995
Total Assets $73,899,197 $58,189,747 $49,562,268 $36,014,382 $19,088,253
Long-Term Debt $31,170,287 $18,039,869 $7,022,215 $4,814,324 $3,700,857
Stockholders'
Investment $22,841,274 $19,359,709 $15,794,210 $11,707,722 $10,745,887
Weighted Average
Number of Common
Equivalent Shares
Outstanding(1),(2) 4,657,476 4,608,137 4,104,076 3,921,769 3,948,403
Current Ratio 3.37:1 2.49:1 1.55:1 2.20:1 3.05:1
Long Term Debt to
Equity 1.36:1 0.93:1 0.44:1 0.41:1 0.34:1
============================================================================================================
</TABLE>
1 Average number of shares outstanding includes, as appropriate, shares
that could have been purchased by the exercise of options during the
year.
2 Adjusted to reflect a 4-for-3 stock split effective February 28, 1995.
-15-
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
consolidated financial statements, including the notes thereto, appearing
elsewhere in this report.
The following table presents, as a percentage of net sales, certain
selected financial data for the Company for the years indicated:
<TABLE>
<CAPTION>
Year Ended
September 30,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales . . . . . . . . 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales . . . . . . 77.68 78.12 78.13 75.23 75.30
----- ----- ----- ----- -----
Gross Profit . . . . . . 22.32 21.88 21.87 24.77 24.70
Selling, General &
Administrative Expenses . 14.19 13.48 15.00 15.74 17.73
----- ----- ----- ----- -----
Operating Profit . . . . 8.13 8.40 6.87 9.03 6.97
Other Expense . . . . . . 3.59 2.19 2.18 3.01 3.31
---- ----- ----- ----- -----
Income Before Income
Taxes . . . . . . . . . . 4.54 6.21 4.69 6.02 3.66
Income Taxes . . . . . . 1.55 2.09 1.27 2.29 1.20
---- ----- ----- ----- -----
Net Income . . . . . . . 2.99% 4.12% 3.42% 3.73% 2.46%
==== ===== ===== ===== =====
</TABLE>
The Company manufactures dump truck bodies and a variety of solid
waste handling products including: (i) detachable roll-off waste containers
("roll-off containers") and hydraulically operated roll-off hoist tilt truck
frames used to load, transport and dump roll-off containers ("roll-off
hoists"); (ii) intermodal waste containers designed for interchangeable use on
trucks, trains and ships ("intermodals"); (iii) water-tight and sludge
detachable roll-off waste containers designed to handle wet waste and slurry
type waste, respectively; (iv) compactors, unitized compactor/roll-off
container systems ("unitized compaction systems"), and balers; (v) an
assortment of front, rear and side loading garbage truck bodies; (vi) recycling
truck bodies; and (vii) transfer trailers used to transport compacted solid
waste from transfer stations to landfills or incinerators.
-16-
<PAGE> 17
The following table presents the net sales of the Company by major
product line for the years indicated (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
---------------------------------------------
1995 1994
---------------------------------------------
AMOUNT % AMOUNT %
---------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
GARBAGE AND RECYCLING TRUCK
BODIES
$21,612 26.27% $18,027 22.77%
CONTAINERS 20,644 25.10% 19,515 24.65%
DUMP TRUCK BODIES 17,611 21.41% 18,047 22.80%
COMPACTORS, UNITIZED
COMPACTION SYSTEMS AND
BALERS 9,797 11.91% 9,357 11.82%
TRANSFER TRAILERS 6,809 8.28% 9,094 11.49%
REPLACEMENT PARTS 3,436 4.18% 3,258 4.12%
OTHER PRODUCT SALES 2,354 2.85% 1,869 2.35%
---------------------------------------------
TOTALS $82,263 100.0% $79,167 100.0%
=============================================
</TABLE>
RESULTS OF OPERATIONS
Comparison of year ended September 30, 1995 to year ended September 30, 1994
Net sales for the fiscal year ended September 30, 1995 reached $82.3
million reflecting a 3.91% increase over sales for Fiscal 1994 of $79.2
million. This increase in sales for Fiscal 1995 was attributable to container
sales, exclusive of intermodal and sludge containers, increasing by $2.8
million for the period and garbage and recycling truck bodies sales increasing
by $3.6 million for the period. Sales of other product lines remained static
or declined in comparison to Fiscal 1994; most notably trailer sales which
declined $2.3 million and intermodal and sludge containers sales which declined
$1.8 million. The decline in trailer sales is attributable to a temporary over
supply of trailers by end users and a restructuring of the Company's sales
force. Management expects the restructuring of the trailer sales force to have
a positive effect on sales commencing in the second quarter of Fiscal 1996.
The decline in intermodal and sludge containers sales is primarily due to an
over supply of intermodal and sludge containers in rental fleet markets.
Cost of sales as a percentage of net sales was 77.68% for Fiscal 1995
compared to 78.12% for Fiscal 1994. The gross profit as a percentage of net
sales was 22.32% for Fiscal 1995 compared to 21.88% for 1994. The gross profit
margins for Fiscal 1995 are
-17-
<PAGE> 18
lower than originally forecasted as a result of increased costs incurred for
raw materials, principally steel and aluminum which were not fully recoverable
due to intense pricing competition within the Solid Waste Industry, and
start-up expenses incurred in transferring production of one of the product
lines from one manufacturing facility to another facility. Steel prices
declined in the latter part of the fourth quarter of Fiscal 1995 and this
decline is expected to have a positive effect on gross profit margins in the
latter part of the first quarter of Fiscal 1996.
Selling, general and administrative expenses as a percentage of net
sales increased modestly to 14.19% for Fiscal 1995 compared to 13.48% for
Fiscal 1994. Interest expense as a percentage of net sales increased to 3.01%
of net sales for Fiscal 1995 compared to 1.67% of net sales in Fiscal 1994 as a
result of increased long-term debt. The increase in long-term debt resulted
from acquiring approximately $4 million of fixed assets and supporting higher
inventory. Machinery and equipment was acquired to replace existing equipment
to enhance productivity levels. Higher inventories of raw materials and
supplies were maintained in order to be more responsive to customer needs and
to reduce delivery time of finished goods. Net income as a percentage of net
sales was 2.99% for Fiscal 1995 compared to 4.12% for Fiscal 1994. The decline
in net income is attributable to increased interest expense and increased
prices of raw materials which were not recoverable through higher selling
prices.
Comparison of year ended September 30, 1994 to year ended September 30, 1993
Net sales increased 28.11% to $79.2 million for the fiscal year ended
September 30, 1994 ("Fiscal 1994") from $61.8 million for the fiscal year ended
September 30, 1993 ("Fiscal 1993"), primarily due to increased unit sales
attributable to the Company's increased selling efforts and the general
economic recovery. Intermodal, water-tight and sludge container sales
accounted for 10.30% of the sales increase for such period, dump truck body
sales accounted for 6.94%, and trailer sales accounted for 6.68% of the sales
increase for such period. For Fiscal 1994, sales of dump truck bodies amounted
to $18 million or 22.80% of net sales, sales of garbage and recycling truck
bodies amounted to $18 million or 22.77% of net sales and sales of the
Company's other solid waste handling equipment amounted to $38 million or
47.96% of net sales. Cost of sales as a percentage of net sales was 78.12% for
Fiscal 1994 compared to 78.13% for Fiscal 1993. The Company's historical gross
margins prior to the Galion Acquisition have approximated 25%. The inclusion
of sales and cost of sales of E-Z Pack has had the effect of reducing the
Company's consolidated gross margins by approximately 3%. During the fourth
quarter of Fiscal 1994, the Company increased the selling prices on all E-Z
Pack product lines and, as a result of this action and other factors, the
Company anticipates an increase in the gross margins commensurate with
historical gross margins for the Company as a whole. Selling, general and
administrative expenses as a percentage of net sales declined to 13.48% for
Fiscal 1994 compared to 15% for Fiscal 1993 primarily due to the absorption of
a higher percentage of such costs, which are generally fixed in nature, by the
higher sales volume. Interest expense increased 87% to $1.3 million in Fiscal
1994 from $707,000 in Fiscal 1993. The higher interest expense is attributable
primarily to higher prevailing interest rates, additional borrowings as a
result of increased inventories associated with increased sales activity and
the purchase of
-18-
<PAGE> 19
additional machinery and equipment. Net income was $3.3 million for Fiscal
1994 compared to $2.1 million for Fiscal 1993. As a result of the increased
sales volume and the Company's continuing cost-cutting efforts, the Company's
net income as a percentage of net sales increased to 4.12% for Fiscal 1994
compared to 3.42% for Fiscal 1993. Such cost-cutting efforts include
maintaining stringent cost controls over the purchase of raw materials and
improving labor and production efficiencies.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs and capital expenditures continued
to increase significantly during Fiscal 1995 primarily due to increased
inventories and purchases of machinery and equipment. Higher inventory levels
were maintained by the Company in order to be more customer responsive, and
machinery and equipment purchases were made to improve production efficiencies.
The Company had working capital of approximately $33.9 million at
September 30, 1995, compared to approximately $22.0 million at September 30,
1994. The ratio of the Company's current assets to its current liabilities was
3.37:1 at September 30, 1995, compared to 2.49 at September 30, 1994. The
Company's cash and short term investments totaled $1.2 million at September 30,
1995. Cash flows used in operating activities were $9.0 million for Fiscal
1995 due to increased inventories, an increase in accounts receivable and a
reduction of trade accounts payable. During this period, investing activities
used $4.8 million, primarily as a result of equipment purchases. The cash
flows used in operating and investing activities were funded by financing
activities which consisted of an additional $13.3 million in borrowings.
In June 1995, the Company entered into a new Revolving Credit Facility
with Standard Federal Bank, a federal savings bank ("Standard"). Under this
agreement the Company may borrow up to $21 million. At September 30, 1995,
approximately $20 million had been drawn down under the Revolving Facility.
Borrowings under the Revolving Facility are limited to 80% of eligible accounts
receivable and 50% of qualified inventory (the "Borrowing Limit"), and bear
interest at prime. All borrowings under the Revolving Facility are due in
March 1997.
In February 1995, the Company entered into a new loan agreement with
Standard to refinance two promissory notes in the aggregate amount of $1.4
million and provide additional working capital in the amount of $600,000. The
note has a five year term, a fifteen-year amortization schedule, bears interest
at the prime rate plus 1/4%, and is secured by a mortgage on certain of the
Company's properties.
Also in February 1995, the Company and Standard entered into a new
equipment purchase credit agreement in the amount of $2.2 million. The Company
can finance up to 85% of the cost of equipment purchased over a five year term,
with interest at prime, and secured by the related equipment. At September 30,
1995, approximately $1.5 million had been drawn on this financing.
-19-
<PAGE> 20
All borrowings with Standard are secured by substantially all of the
assets of the Company. In addition, the loans contain various covenants
including those requiring the Company to maintain certain current ratios,
levels of tangible net worth and debt ratios, and restricting the Company from
acquiring fixed assets in excess of $4.5 million/year.
In May 1995, the Company and Standard amended the revolving line of
credit used to finance its lease receivables, reducing the maximum borrowings
to $3.5 million. At September 30, 1995, approximately $2.9 million had been
drawn on this line.
In April 1995, the Company entered into a program with a financial
institution to finance its lease receivables in the amount of $3.0 million.
Under this facility, the Company may finance 100% of the Company's eligible
lease receivables over the term of the related lease at a fixed interest rate
determined at the time of the lease closing. The note is secured by the
related lease receivable. At September 30, 1995, approximately $480,000 had
been drawn on this facility.
Subsequent to September 30, 1995, the Company and Standard entered
into a demonstrator equipment line of credit in the amount of $1.5 million.
The Company can finance up to 85% of the cost of a demonstrator fleet on a
revolving basis, with interest at prime. All borrowings under this revolving
facility mature in March 1997.
The revolving credit agreements expire in March 1997 at which time the
Company expects to obtain renewals upon the same or similar terms.
The Company believes that the available credit under its debt
facilities, together with cash generated from the Company's operations, will be
adequate to meet the Company's working capital requirements for the next 12
months.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are filed herewith under
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in the Company's independent public
accountants during the past two fiscal years and the Company does not disagree
with such accountants on any matter of accounting principles, practices or
financial statement disclosure.
-20-
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
DATE
SERVICE
NAME AGE OFFICE BEGAN
---- --- ------ -----
<S> <C> <C> <C>
Kenneth D. McClain(1) 54 Chairman of the Board, Chief
Executive Officer and President 3/68
Robert W. McClain(1) 59 Senior Vice President, Assistant
Secretary and Director 3/68
Raymond Elliott 61 Director 8/90
Walter J. Kirchberger 60 Director 11/95
Carl Jaworski 52 Secretary 10/72
Edward James Zabinski 53 Treasurer 4/92
</TABLE>
(1) Kenneth D. McClain and Robert W. McClain are brothers.
KENNETH D. MCCLAIN is Chairman of the Board and President of the
Company. He has been a director and officer of the Company since its inception
in March 1968. He also serves as Vice President and a director of Shelby Steel
and President and a director of McClain-Georgia. Mr. McClain is also a
director and the Chairman of the Board of Galion Holding, E-Z Pack, Galion Dump
Bodies and Sales
ROBERT W. MCCLAIN is Senior Vice President and Assistant Secretary of
the Company. He has been a director and officer of the Company since its
inception in March 1968. He also serves as President of Shelby Steel and Vice
President of McClain-Georgia.
RAYMOND ELLIOTT has been a director of the Company since August 1990.
He has been President and a director of Elliott & Sons Insurance Agency, Inc.
and Michigan Benefit Plans Insurance Agency, Inc. since 1967. Mr. Elliott also
serves as a director of the Boys and Girls Club of Troy, a charitable
organization located in Troy, Michigan.
WALTER J. KIRCHBERGER was elected to fill a vacancy in the Board of
Directors resulting from the return of Peter Sugar to his former law firm which
serves as general counsel to the Company. Mr. Kirchberger is First Vice
President - Research of
-21-
<PAGE> 22
PaineWebber Incorporated, and has served in such capacity for more than 25
years. He also serves as a director of Simpson Industries, Inc.
CARL JAWORSKI is Secretary of the Company and has served in such
capacity since October 1972. He was also a director and the Treasurer of the
Company from October 1972 until April 1992. Mr. Jaworski also serves as
Treasurer, Secretary and a director of Shelby Steel and Treasurer and Secretary
of McClain-Georgia. Mr. Jaworski is the Secretary of E-Z Pack, the Treasurer
of Galion Dump Bodies and a Vice President and Secretary of Sales.
EDWARD JAMES ZABINSKI has been the Treasurer of the Company since
April 1992, and joined the Company in June 1991. Prior to such time, Mr.
Zabinski was a Certified Public Accountant with Rehmann Robson, the Company's
independent accountants since 1978. Mr. Zabinski worked with Rehmann Robson &
Co. for twenty years. Mr. Zabinski is also the Vice President and Treasurer of
Galion Holding and Sales and the Treasurer of E-Z Pack. He also serves as a
director of Sales.
The Company is required to identify each person who was an officer,
director or beneficial owner of more than 10% of the Company's registered
equity securities during the Company's most recent fiscal year and who failed
to file on a timely basis reports required by Section 16(a) of the Securities
Exchange Act of 1934. Based solely upon its review of copies of such reports
received by it during or with respect to the fiscal year ended September 30,
1995, the Company believes that all officers, directors and beneficial owners
of more than 10% of the Company's registered equity securities timely filed all
required reports, except that Kenneth McClain filed three late reports on Form
4 and Robert W. McClain filed two late reports on Form 4.
-22-
<PAGE> 23
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth all cash compensation paid to the Chief
Executive Officer of the Company and the only other executive officer whose
total annual salary and bonus from the Company exceeded $100,000 during the
fiscal year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
-----------------------------------------------------------------------
Name and Fiscal Salary Options/
Principal Position Year Amount($) SARs(#)
------------------ ---- ------ ----
<S> <C> <C> <C>
Kenneth D. McClain, 1995 $219,675 13,333
President/ CEO
1994 194,250 26,667
1993 194,250 0
Robert W. McClain, 1995 216,582 6,667
Senior Vice President
1994 191,250 22,667
1993 191,250 0
</TABLE>
OPTION/SAR GRANTS TABLE
-----------------------
<TABLE>
<CAPTION>
Potential Realizable
Shares % of Total Value at Assumed
Underlying Options/SARs Annual Rates of Stock
Options/SARs Granted to Exercise Price Appreciation
Granted Employees Price Expiration for Option Term
Name in 1995 in 1995 ($/Sh.) Date ----------------------
5% ($) 10% ($)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. McClain 13,333 26.31% $7.31 1/16/00 $26,927 $53,854
Robert W. McClain 6,667 13.16% $7.31 1/16/00 $13,465 $26,930
</TABLE>
-23-
<PAGE> 24
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
<TABLE>
<CAPTION>
No. of Unexercised Options/SARs Value of Unexercised
at In-The-Money Options/SARs at
Shares Fiscal Year-End Fiscal Year-End
Acquired Value ---------------------------------------------------------------------
on Received Not Not
Exercise Exercisable Exercisable(1) Exercisable Exercisable(2)
in 1995
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kenneth D. 0 8,889 17,778 $3,378 $6,756
McClain
Robert W. 0 7,556 15,111 $2,871 $574
McClain
</TABLE>
- -----------------------
(1) Stock options granted April 18, 1994 pursuant to the Company's 1989
Incentive Stock Plan (the "Incentive Plan"). Options must be
exercised by April 17, 1999. Exercise price is $6.56 per share.
(2) Value based on the average of the September 29, 1995 closing bid high
and low price which was $6.94 per share.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive compensation
for serving on the Board or on the Board's committees. Directors who are not
employees of the Company are entitled to a quarterly retainer fee of $3,250
($2,500 for quarters ending prior to October 1, 1995), a $1,000 fee for each
regular or special meeting of the Board and a $1,000 fee for each committee
meeting attended on a day other than a regular or special Board meeting date
(collectively, the "Fees"). A Director may elect to receive payment of the
Fees in shares of Common Stock pursuant to the Company's 1989 Retainer Stock
Plan for Non-Employee Directors (the "Retainer Plan"). To participate in the
Retainer Plan, an eligible director must elect prior to December 31 of each
year the percentage, if any, of Fees he desires to receive in the form of
shares of Common Stock. The Common Stock is issued quarterly during the
following calendar year. The number of shares of Common Stock to be issued to
an eligible director is determined by dividing the dollar amount of the
percentage of fees such director elects to receive in Common Stock by the "fair
market value" of Common Stock on the day prior to the date of issuance of the
Common Stock to such director. The term "fair market value" means the average
of the highest and lowest selling price for the Common Stock as quoted on
Nasdaq/NMS for the day prior to the date of issuance or for the first date
prior to the date of issuance for which shares of Common Stock are quoted, if
not quoted on the day prior to the date of issuance. Any fractional share of
Common Stock derived from such calculation is paid in cash.
The aggregate fair market value of the shares of Common Stock issued
to any eligible director in a given year cannot exceed 100% of such eligible
director's fees. Fees may not be increased more often than annually.
-24-
<PAGE> 25
During the fiscal year ended September 30, 1995, 1,565 shares of
Common Stock were issued under the Retainer Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of December 29, 1995, certain
information regarding the beneficial ownership of Common Stock, of: (i) each
person known to the Company to be the beneficial owner of more than five (5%)
percent of the Common Stock; (ii) each director of the Company; (iii) each
executive officer listed in the Summary Compensation Table; and (iv) all
executive officers and directors of the Company as a group, based upon
information available to the Company.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address Beneficial Outstanding
of Beneficial Owner Ownership(1) Shares(2)
------------------- -------------- ----------
<S> <C> <C>
Kenneth D. McClain 1,352,300(3) 27.63%
6200 Elmridge Road
Sterling Heights, MI 48310
Robert W. McClain 1,138,734(4) 23.27%
6200 Elmridge Road
Sterling Heights, MI 48310
June McClain 337,178 6.89%
68333 DeQuindre
Oakland, MI 48368
Lisa McClain Pfeil(5) 310,474 6.34%
67667 Sisson
Romeo, MI 48065
Raymond Elliott 7,983 .16%
290 Town Center
P.O. Box 890
Troy, Michigan 48084
All current executive officers and 2,664,156(6) 53.61%
directors as a group (5 persons)
</TABLE>
- -----------------------------
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares that such person has a right to acquire
within 60 days.
(2) Based on 4,893,512 shares of Common Stock issued and outstanding as of
December 29, 1995. In addition, for purposes of computing the
percentage of outstanding shares held by each person or group of
persons named above, any security that such person or persons has or
have the right to acquire within 60 days is also deemed to be
outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes 2,430 shares of Common Stock owned by Kenneth D. McClain's
wife. Mr. McClain disclaims beneficial ownership of these shares.
-25-
<PAGE> 26
(4) Includes 337,178 shares of Common Stock owned by Robert W. McClain's
wife. Mr. McClain disclaims beneficial ownership of these shares.
(5) Of the shares beneficially owned by Mrs. Pfeil, 305,098 are held of
record by an irrevocable trust for her benefit. Mrs. Pfeil is the
daughter of Kenneth D. McClain.
(6) Includes 76,442 shares which executive officers and directors have the
right to acquire pursuant to stock options exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 2, 1993, the Company consummated the purchase of three
facilities which it had been leasing from three different entities controlled
by certain officers and directors of the Company, including its main Sterling
Heights, Michigan facility, its Kalamazoo, Michigan facility and its Macon,
Georgia facility. In each instance, the Company paid the purchase price by
issuing shares of Common Stock and assuming existing mortgages on the
facilities. The purchase prices were determined by the Company's Board of
Directors on the basis of independent appraisals of the facilities. The stock
issued was valued at $5.40 per share, based on the market price for shares of
Common Stock as of March 29, 1993, the date that definitive purchase agreements
for the facilities were executed. These shares are restricted within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), meaning that it cannot be resold unless registered
under the Securities Act, or in a transaction which is exempt from such
registration. The seller of each facility owned the facility for more than two
years before the sale.
In November 1994, in connection with a contemplated public offering of
its Common Stock, the Company agreed to value the shares issued in exchange for
these facilities at a price based on the market value of shares of Common Stock
as of August 2, 1993, the date these transactions were consummated. This
revision gave effect to the fact that the shares had increased in value by
$504,000 from March 29, 1993. Messrs. Kenneth and Robert McClain have agreed
to pay this amount to the Company, with interest at Standard's prime rate, in
five equal principal installments with accrued interest, commencing September
30, 1995.
The Company leases one of its facilities from the mother of Messrs.
Kenneth and Robert McClain. See "Properties." The Company believes that the
terms and conditions of this lease are comparable to those available from an
unrelated party with respect to similar facilities. See also Note 12 of Notes
to Consolidated Financial Statements.
The Company had sales of approximately $239,000 in Fiscal 1995 to
McClain Leasing Corporation, an entity controlled by certain officers and
directors of the Company.
Elliott & Sons Insurance Agency, Inc. and Michigan Benefit Plans,
Inc., entities controlled by Raymond Elliott, a director of the Company,
provided insurance to the Company during Fiscal 1995. Sales from these
entities to the Company aggregated approximately $1.3 million during Fiscal
1995, for which these entities received fees and commissions in the approximate
amount of $129,000.
-26-
<PAGE> 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed herewith as part of this Form 10-K:
(1) A list of the financial statements
required to be filed as a part of
this Form 10-K is shown in the "Index
to the Consolidated Financial
Statements and Schedules" filed
herewith.
(2) A list of financial statement
schedules required to be filed as a
part of this Form 10-K is shown in
the "Index to the Consolidated
Financial Statements and Schedules"
filed herewith.
(3) A list of the exhibits required by
Item 601 of Regulation S-K to be
filed as a part of this Form 10-K is
shown on the "Index to Exhibits"
filed herewith.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K regarding events
occurring during the months included in the fourth quarter of the
Company's fiscal year.
-27-
<PAGE> 28
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.
Dated: January , 1996 McCLAIN INDUSTRIES, INC.
-----
By:/s/ Kenneth D. McClain
----------------------------------
Kenneth D. McClain, President
(Principal Executive Officer)
And By:/s/ Edward James Zabinski
----------------------------------
Edward James Zabinski, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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 and on the dates indicated.
Dated: January , 1996 /s/ Kenneth D. McClain
----- --------------------------------------
Kenneth D. McClain, Director
Dated: January , 1996 /s/ Robert W. McClain
----- --------------------------------------
Robert W. McClain, Director
Dated: January , 1996 /s/ Raymond Elliott
----- --------------------------------------
Raymond Elliott, Director
Dated: January , 1996 /s/ Walter J. Kirchberger
----- --------------------------------------
Walter J. Kirchberger, Director
-28-
<PAGE> 29
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
Form 10-K
For Corporations
ANNUAL REPORT
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 and 1993
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
(NAME OF REGISTRANT)
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
<PAGE> 30
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets - September 30, 1995 and September 30, 1994
Consolidated Statements of Income for each of the three years in the period
ended September 30, 1995
Consolidated Statements of Stockholders' Investment for each of the three years
in the period ended September 30, 1995
Consolidated Statements of Cash Flows for each of the three years in the period
ended September 30, 1995
Notes to Consolidated Financial Statements
SCHEDULES
The information required to be submitted in Schedule II is included in the
consolidated financial statements and notes thereto.
The following schedules are omitted as not required or not applicable:
I, III, IV and V.
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
McClain Industries, Inc. and Subsidiaries
Sterling Heights, Michigan
We have audited the accompanying consolidated balance sheets of McClain
Industries, Inc. and Subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of income, stockholders' investment, and cash
flows for each of the three years in the period ended September 30, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of McClain Industries, Inc. and
Subsidiaries as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1995 in conformity with generally accepted accounting principles.
REHMANN ROBSON
Farmington Hills, Michigan
January 8, 1996
<PAGE> 32
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 and 1994
ASSETS
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $1,173,370 $ 1,697,713
Accounts receivable, net of allowance for doubtful
accounts of $600,000 ($425,800 in 1994)
(Notes 5, 6 and 7) 14,284,478 10,908,932
Inventories (Notes 5, 6 and 8) 31,229,399 23,340,907
Net investment in sales-type leases, current portion 1,305,800 521,302
Prepaid expenses 176,075 296,944
----------- -----------
TOTAL CURRENT ASSETS 48,169,122 36,765,798
----------- -----------
PLANT AND EQUIPMENT at cost (Notes 5 and 6):
Land 1,895,367 1,792,471
Buildings 9,701,280 8,852,933
Storage areas 1,518,928 1,411,795
Machinery and equipment 16,448,110 13,871,140
Furniture and fixtures 1,644,569 1,375,349
Transportation equipment 1,407,063 1,299,909
Leasehold improvements 462,818 230,304
----------- -----------
Total 33,078,135 28,833,901
Less accumulated depreciation and amortization (11,894,922) (10,070,253)
----------- -----------
NET PLANT AND EQUIPMENT 21,183,213 18,763,648
----------- -----------
OTHER ASSETS
Net investment in sales-type leases, net of
current portion (Notes 4 and 6) 2,255,164 1,355,387
Goodwill, net of amortization 1,737,921 479,375
Other 553,777 385,507
Equipment under construction (Note 3) -0- 440,032
----------- -----------
TOTAL OTHER ASSETS 4,546,862 2,660,301
----------- -----------
TOTAL ASSETS $73,899,197 $58,189,747
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 33
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 9,190,309 $10,324,028
Current portion of long-term debt 2,179,449 1,791,213
Accrued expenses (Note 13) 2,331,809 2,003,884
Federal income taxes 598,999 649,072
----------- -----------
TOTAL CURRENT LIABILITIES 14,300,566 14,768,197
LONG-TERM DEBT, LESS CURRENT PORTION (NOTE 6) 31,170,287 18,039,869
PRODUCT LIABILITY (NOTE 14) 4,147,070 4,956,972
DEFERRED INCOME TAXES (NOTE 9) 1,440,000 1,065,000
----------- -----------
TOTAL LIABILITIES 51,057,923 38,830,038
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 14)
STOCKHOLDERS' INVESTMENT (NOTES 3 AND 15)
Common stock, no par value, authorized
10,000,000 shares, issued and outstanding
4,587,744 shares in 1995 (4,447,160 shares in 1994) 5,572,846 4,554,036
Retained earnings 17,772,428 15,309,673
Less amount due from officers (504,000) (504,000)
----------- -----------
TOTAL STOCKHOLDERS' INVESTMENT 22,841,274 19,359,709
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' INVESTMENT $73,899,197 $58,189,747
=========== ===========
</TABLE>
<PAGE> 34
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
------------ ------------ -------------
<S> <C> <C> <C>
NET SALES $82,263,202 $79,166,990 $61,794,822
COST OF SALES 63,901,196 61,843,845 48,281,844
----------- ----------- -----------
GROSS PROFIT 18,362,006 17,323,145 13,512,978
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 11,673,686 10,674,043 9,271,167
----------- ----------- ------------
OPERATING PROFIT 6,688,320 6,649,102 4,241,811
------------ ----------- ------------
OTHER EXPENSE
Interest 2,478,350 1,321,533 706,672
Loss on sale of plant and equipment 22,067 24,672 14,925
Other, net 451,148 388,201 625,376
------------ ----------- ------------
TOTAL OTHER EXPENSE 2,951,565 1,734,406 1,346,973
------------ ----------- ------------
INCOME BEFORE INCOME TAXES 3,736,755 4,914,696 2,894,838
INCOME TAXES (NOTE 9) 1,274,000 1,663,700 784,000
------------ ----------- -------------
NET INCOME $ 2,462,755 $ 3,250,996 $ 2,110,838
=========== =========== ============
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARES $ .53 $ .71 $ .51
====== ====== ======
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (NOTE 1) 4,657,476 4,608,137 4,104,076
========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 35
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Common Stock Amount
------------------------ Retained Due From
Shares Amount Earnings Officers Totals
---------- ------------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1992 3,831,171 $1,759,883 $9,947,839 $ -0- $11,707,722
PROCEEDS FROM COMMON
STOCK ISSUED (NOTE 15) 6,667 15,750 -0- 15,750
COMMON STOCK ISSUED IN
LIEU OF CASH
(NOTES 3 AND 15) 483,129 2,463,900 -0- (504,000) 1,959,900
NET INCOME -0- 2,110,838 2,110,838
---------- ---------- ---------- ------------ -----------
BALANCE AT SEPTEMBER 30, 1993 4,320,967 4,239,533 12,058,677 (504,000) 15,794,210
PROCEEDS FROM COMMON
STOCK ISSUED (NOTE 15) 124,000 296,450 -0- 296,450
COMMON STOCK ISSUED IN
LIEU OF CASH (NOTE 15) 2,193 18,053 -0- 18,053
NET INCOME -0- 3,250,996 3,250,996
---------- ---------- ---------- ------------ -----------
BALANCE AT SEPTEMBER 30, 1994 4,447,160 4,554,036 15,309,673 (504,000) 19,359,709
PROCEEDS FROM COMMON
STOCK ISSUED (NOTE 15) 3,416 8,389 8,389
COMMON STOCK ISSUED IN
LIEU OF CASH
(NOTE 15) 1,565 11,510 11,510
REDEMPTION OF FRACTIONAL
SHARES (98) (1,089) (1,089)
COMMON STOCK ISSUED IN
CONNECTION WITH EPCO
ACQUISITION (NOTES 2 AND 3) 135,701 1,000,000 1,000,000
NET INCOME 2,462,755 2,462,755
---------- ---------- ---------- ------------ -----------
BALANCE AT SEPTEMBER 30, 1995 4,587,744 $5,572,846 $17,772,428 $(504,000) $22,841,274
========= ========== =========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 36
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,462,755 $ 3,250,996 $ 2,110,838
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,179,992 1,936,191 1,617,387
Deferred income taxes 375,000 709,700 115,000
Provision for doubtful accounts, net 174,200 231,067 111,408
Loss on sale of plant and equipment 22,067 24,672 14,925
Common stock issued for services 11,510 18,053 15,888
Net changes in operating assets and liabilities
which provided (used) cash, net of effects in
1995 of the EPCO acquisition:
Accounts receivable (3,036,791) (1,171,894) (3,474,990)
Inventories (7,721,234) (4,895,119) (4,602,083)
Net investment in sales-type leases (1,684,275) (345,126) (294,234)
Prepaid expenses 120,869 90,476 30,319
Other assets (316,587) (324,580) (1,799,289)
Accounts payable (1,909,327) 2,202,094 3,630,600
Accrued expenses 327,925 (754,454) (227,068)
Federal income taxes (50,073) (29,881) (149,216)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (9,043,969) 942,195 (2,900,515)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to plant and equipment (3,995,109) (3,079,553) (2,740,832)
Payments on liabilities assumed upon the
Galion acquisition (809,902) (1,092,532) (1,398,496)
Proceeds from sale of plant and equipment 30,112 33,869 74,781
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (4,774,899) (4,138,216) (4,064,547)
----------- ----------- -----------
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements.
<PAGE> 37
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONCLUDED)
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings $22,927,180 $6,354,350 $1,453,387
Repayments of long-term borrowings (9,639,955) (2,223,270) (882,303)
Net short-term borrowings -0- -0- 5,516,994
Sale of common stock under stock option plan 8,389 296,450 15,750
Redemption of fractional shares (1,089) -0- -0-
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 13,294,525 4,427,530 6,103,828
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (524,343) 1,231,509 (861,234)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,697,713 466,204 1,327,438
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,173,370 $ 1,697,713 $ 466,204
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 38
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Concentration of Credit Risk
McClain Industries, Inc. and its wholly-owned subsidiaries (the
"Company") manufacture and sell a diversified line of dump truck
bodies (assemblies attached to truck frames which are used to
carry and dump solid materials such as dirt or gravel) and solid
waste handling equipment (including containers, compactors,
bailers, garbage and recycling truck bodies and transfer trailers)
used for the temporary storage, transportation and compaction of
residential, commercial and industrial waste and recycling
materials. The Company sells its dump truck bodies primarily to
truck equipment dealers and its solid waste handling equipment
primarily to distributors, solid waste handling companies,
government agencies, shopping centers and other large retail
outlets throughout the United States. In addition, the Company
provides coiled steel cutting and warehousing services for its own
manufacturing operations in order to reduce its processed steel
expense (one of its major cost components), and, on a limited
basis, for sale to third-party customers.
The Company grants credit to its customers in the normal course of
business. No collateral is required. The Company maintains
reserves for potential credit losses and such losses have
historically been insignificant and generally within management's
expectations.
Principles of Consolidation
The consolidated financial statements include the accounts of
McClain Industries, Inc., and its wholly-owned subsidiaries
(Galion Holding Company, Shelby Steel Processing Co., McClain of
Georgia, Inc., McClain of Ohio, Inc., McClain EPCO, Inc., McClain
Group Leasing, Inc., McClain Tube Company, and McClain Group
Sales, Inc., a corporation owned jointly by McClain Industries,
Inc. and the two operating subsidiaries of Galion Holding
Company). All significant intercompany accounts and transactions
have been eliminated.
In July 1995, the Company acquired and began operating an
additional wholly-owned subsidiary, McClain EPCO, Inc., a business
incorporated in the State of New York (Note 2).
The names of several of the subsidiaries were changed during the
year ended September 30, 1995 in order to more closely identify
them with McClain Industries, Inc.
(Continued)
<PAGE> 39
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Inventories
Inventories are stated at the lower of cost or market. The LIFO
(last-in, first-out) method is utilized for certain inventories,
while the FIFO (first-in, first-out) method is utilized for the
remaining inventories.
Plant and Equipment
Plant and equipment are recorded in the accounts at cost which
does not purport to represent replacement cost or realizable
value. Depreciation is provided at annual rates sufficient to
allocate the cost of the assets over their estimated useful lives.
The principal estimated useful lives are summarized as follows:
Buildings 20-30 years
Storage areas 5-10 years
Machinery and equipment 4-30 years
Furniture and fixtures 5-10 years
Transportation equipment 3-10 years
Leaseholds 5-20 years
Depreciation and amortization are computed primarily using the
straight-line method for book purposes and accelerated methods for
federal income tax purposes.
The cost of properties retired or otherwise disposed of and the
accumulated depreciation and amortization thereon are eliminated
from the accounts at the time of retirement, and the resulting
gain or loss is taken into income. Maintenance and repairs are
charged against income as incurred, and renewals and betterments
are capitalized.
Income Taxes
Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible
amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized. Income tax expense is the tax payable or refundable
for the year plus or minus the change during the year in deferred
tax assets and liabilities. Deferred income taxes arise from
temporary basis differences principally related to inventory,
product liability, and plant and equipment.
(Continued)
<PAGE> 40
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits in banks.
The Company maintains certain bank accounts which hold balances in
excess of the FDIC insured limit of $100,000.
Sales-Type Leases
The Company, through McClain Group Leasing, Inc., offers lease
financing to certain purchasers of the Company's products. These
leases meet the criteria for classification as capitalized leases
and are accounted for as sales-type leases. Accordingly, an
investment is reflected on the accompanying balance sheets in an
amount equal to the gross minimum lease payments receivable less
unearned finance income. Unearned finance income is amortized in
such a manner as to produce a constant periodic rate of return on
the net investment in the lease.
Goodwill
Goodwill representing the purchase price in excess of the fair
values of net assets acquired is amortized by direct charges to
its carrying value. The amortization period is estimated based
upon management's judgements and generally ranges from 15 to 40
years. Accumulated amortization at September 30, 1995 and 1994
was $116,155 and $90,800, respectively.
Common Stock Issued for Services
Common stock is issued from time to time in lieu of cash for
services provided to the Company and is recorded as compensation
expense at generally the fair value on the date of issuance.
Earnings Per Common and Common Equivalent Shares
Effective February 28, 1995, a four-for-three split of the
Company's common stock was declared and was subsequently effected
through distribution of one additional share for every three
shares issued and outstanding. All applicable share and per share
data have been restated to give retroactive effect to the stock
split.
(Continued)
<PAGE> 41
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - (CONCLUDED)
Earnings per common and common equivalent shares were calculated
using the weighted average number of common shares and common
stock equivalents outstanding during the year. The number of
common shares was increased by the number of shares issuable on
the exercise of stock options when the market price of the common
stock exceeds the option price granted. This increase in the
number of common shares was reduced by the number of common shares
that are assumed to have been purchased with the proceeds from the
exercise of the stock options; those purchases were assumed to
have been made at the average price of the common stock during the
year.
New Accounting Pronouncement
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation",
which requires a change in the way compensation cost arising from
stock options granted is measured. The Company intends to adopt
the disclosure aspects of this pronouncement.
Reclassifications
Certain amounts reported in 1994 and 1993 have been reclassified
to conform to the 1995 presentation.
NOTE 2: BUSINESS ACQUISITION
On July 17, 1995, the Company acquired all of the issued and
outstanding common stock of EPCO Manufacturing Corporation, Inc.
("EPCO") in a business combination accounted for as a purchase.
EPCO is a manufacturer of vertical downstroke and closed door
horizontal baling equipment used for processing of cardboard,
paper, plastic and non-ferrous metals in the recycling industry.
Concurrent with the acquisition, EPCO's name was changed to
McClain EPCO, Inc., an enterprise which operates as a wholly-owned
subsidiary of McClain Industries, Inc.
The purchase price of EPCO was $1,000,000 which was paid at
closing by the issuance of 135,701 shares of unregistered common
stock valued at the market price of approximately $7.37,
determined for a period immediately preceding the acquisition
date. The purchase price was significantly in excess of the fair
values of the net assets acquired and such excess was
substantially allocated to goodwill. Additional consideration not
to exceed $500,000 is payable in additional shares of the
Company's common stock contingent upon EPCO sales exceeding
specified amounts during the three-year period ending on September
30, 1998.
(Continued)
<PAGE> 42
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2: BUSINESS ACQUISITION (CONCLUDED)
EPCO sales (unaudited) for its most recent fiscal year preceding
the acquisition were approximately $2.5 million. Results of
operations of EPCO included in the Company's financial statements
since the date of acquisition are not significant and,
accordingly, proforma results of operations as if the transaction
had occurred at the beginning of the previous fiscal year are not
presented.
NOTE 3: SUPPLEMENTAL CASH FLOWS INFORMATION
Non-cash Investing and Financing Activities
Non-cash investing and financing transactions during the year
ended September 30, 1995 consisted of the EPCO acquisition and
placing into service certain equipment valued at approximately
$426,000, which had previously been included in other assets.
The Company issued common stock valued at $1,000,000 in connection
with the EPCO acquisition, which is summarized as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $ 876,000
Goodwill assigned 1,203,000
Liabilities assumed (1,079,000)
----------
Total consideration exchanged $1,000,000
==========
</TABLE>
Non-cash financing and investing transactions during the year
ended September 30, 1994 consisted of placing into service a tube
mill valued at $1,735,000, which had previously been included in
other assets, and settling $7,623,414 of short-term notes payable
for which a like amount of long-term debt was incurred as a result
of debt refinancing (Note 5).
(Continued)
<PAGE> 43
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: SUPPLEMENTAL CASH FLOWS INFORMATION (CONCLUDED)
On August 2, 1993, the Company acquired certain real estate and
assumed certain liabilities in exchange for common stock of the
Company (refer to Note 12).
<TABLE>
<S> <C>
Fair value of assets acquired $ 3,723,500
Mortgages assumed (1,779,500)
-----------
Net assets acquired 1,944,000
Less value of common stock issued 2,448,000
-----------
Amount due from officers $ 504,000
===========
</TABLE>
Other Cash Flows Information
Cash paid for interest amounted to $2,482,481 for 1995, $1,321,533
for 1994, and $706,672 for 1993. Cash paid for federal income
taxes amounted to $945,314 for 1995, $835,000 for 1994, and
$827,928 for 1993.
NOTE 4: NET INVESTMENT IN SALES-TYPE LEASES
The net investment in sales-type leases is comprised of the
following amounts at September 30:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
------------ -------------
<S> <C> <C>
Gross minimum lease payments collectible
in monthly installments $4,727,944 $2,320,850
Less advance lease payments and deposits
received 178,780 104,027
---------- ----------
Subtotal 4,549,164 2,216,823
Less unearned finance income 988,200 340,134
---------- ----------
Total net investment in sales-type leases 3,560,964 1,876,689
Current portion 1,305,800 521,302
---------- ----------
Noncurrent portion $2,255,164 $1,355,387
========== ==========
</TABLE>
(Continued)
<PAGE> 44
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: NET INVESTMENT IN SALES-TYPE LEASES (CONCLUDED)
Lease receivables are collectible in the following minimum annual
amounts for the years succeeding September 30, 1995:
<TABLE>
<CAPTION>
Year Amount
---- -----------
<S> <C>
1996 $1,567,842
1997 1,380,470
1998 871,627
1999 434,931
2000 294,294
----------
Gross minimum amount collectible $4,549,164
==========
</TABLE>
NOTE 5: LINES OF CREDIT
In June 1995, the Company and a subsidiary entered into a new line
of credit agreement with their bank. The Company and the
subsidiary have two lines of credit borrowing arrangements with
the bank totaling $21,000,000 at September 30, 1995. Borrowings
under the lines of credit are limited to 80% of eligible accounts
receivable and 50% of qualified inventory and are subject to
interest no greater than the bank's prime rate. The lines of
credit are secured by substantially all the assets of the Company
and contain various covenants requiring the Company to maintain
certain current ratios, levels of tangible net worth and debt
ratios. The agreement also prohibits the Company from incurring
additional indebtedness other than subordinated indebtedness and
limits plant and equipment acquisitions to $4.5 million per fiscal
year. The Company had an $11 million line of credit at September
30, 1994 and had an $8 million line of credit at September 30,
1993. Borrowings outstanding under the various lines of credit at
September 30, 1995 and 1994 were $20,093,093 and $9,179,067,
respectively.
In October 1995, the Company and the bank entered into an
additional $1,500,000 line of credit agreement in order to
finance, on a revolving basis, up to 85% of the cost of
demonstrator units. Interest on such borrowings will be charged
at the prime rate.
The credit agreements expire in March 1997 at which time the
Company expects to obtain renewals upon the same or similar terms.
(Continued)
<PAGE> 45
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: LINES OF CREDIT (CONCLUDED)
Certain information relative to these borrowings is summarized as
follows:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
------------- ------------ -------------
<S> <C> <C> <C>
Average aggregate borrowings outstanding
during the year $15,069,445 $9,027,614 $4,778,179
Maximum amount of borrowings outstanding
during the year $20,093,093 $10,058,476 $7,825,500
Average interest rates on borrowings
outstanding at the end of the year 9.00% 8.00% 6.25%
Average interest rates on borrowings
outstanding during the year, based on
monthly averages 8.93% 6.85% 6.1%
</TABLE>
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: LONG-TERM DEBT
Long-term debt as of September 30, 1995 and 1994 consisted of the
following obligations:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
--------------- --------------
<S> <C> <C>
Promissory notes to a bank, collateralized by certain
assets as disclosed in Note 5. The notes are payable
in monthly installments of $95,340 plus interest at
rates ranging from prime to prime plus 1/2% as
published in the Wall Street Journal (effective rate
of 8.75% at September 30, 1995), and mature at various
dates through July 2002. $6,337,964 $ 5,281,229
</TABLE>
(Continued)
<PAGE> 46
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: LONG-TERM DEBT (CONCLUDED)
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
--------------- --------------
<S> <C> <C>
Promissory notes to banks, collateralized by a
commercial mortgage on certain real estate, payable in
monthly installments of $27,578 plus interest ranging
from the bank prime rate to prime plus 1/2% (effective
rate of 8.75% at September 30, 1995), maturing at
various dates through January 2000. $ 3,527,462 $ 3,166,862
Revolving credit facility with a bank, which is
limited to the lessor of $3,500,000 in 1995 and
$5,000,000 for 1994 or 80% of eligible lease
receivables. Payable in monthly installments,
including interest at prime as published in the Wall
Street Journal (effective rate of 8.75% at
September 30, 1995), due March 1997. The credit
facility is collateralized by lease receivables (Note 4). 2,908,785 2,203,924
Promissory notes to a bank. Payable in monthly
installments of $8,186 plus interest. The notes are
collateralized by the related equipment. 482,432 -0-
Lines of credit borrowings (Note 5) 20,093,093 9,179,067
------------ ------------
Total debt 33,349,736 19,831,082
Less current portion 2,179,449 1,791,213
------------ ------------
Long-term portion $31,170,287 $18,039,869
=========== ===========
</TABLE>
Scheduled aggregate principal maturities of long-term debt for
years succeeding September 30, 1995 are presented below:
<TABLE>
<CAPTION>
Year Ending
September 30, Amount
------------- ------------
<S> <C>
1996 $ 2,179,449
1997 24,477,333
1998 1,523,896
1999 2,564,287
2000 2,018,711
Thereafter 586,060
------------
Total $33,349,736
===========
</TABLE>
<PAGE> 47
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7: ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The following is a summary of changes in the allowance for
doubtful accounts for each of the three years in the period ended
September 30, 1995:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
----------- ---------- ----------
<S> <C> <C> <C>
Balance beginning of year $ 425,800 $ 194,733 $ 83,325
Add provision charged
against income 205,000 276,610 111,408
Less uncollectible accounts
written off, net of recoveries (30,800) (45,543) -0-
--------- ---------- ---------
Balance end of year $ 600,000 $ 425,800 $ 194,733
========= ========= =========
</TABLE>
NOTE 8: INVENTORIES
The major components of inventories at September 30, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
-------------- -------------
<S> <C> <C>
Materials and supplies $17,400,070 $8,362,693
Work-in-process 6,255,749 7,115,786
Finished goods 7,573,580 7,862,428
----------- -----------
$31,229,399 $23,340,907
=========== ===========
</TABLE>
NOTE 9: INCOME TAXES
The provision for income taxes for each of the three years in the
period ended September 30, 1995 consists of the following
components:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
------------- ------------ ------------
<S> <C> <C> <C>
Current federal provision $ 899,000 $ 954,000 $ 669,000
Deferred provision 375,000 709,700 115,000
----------- ----------- ---------
Total income taxes $1,274,000 $1,663,700 $ 784,000
========== ========== =========
</TABLE>
(Continued)
<PAGE> 48
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: INCOME TAXES (CONTINUED)
The effective income tax rate on consolidated pre-tax income
differs from the federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
----------------- ----------------- ----------------
Amount % Amount % Amount %
----------- ---- ----------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Provision computed at
statutory rate $1,270,000 34 $1,671,000 34 $ 984,000 34
Nondeductible expenses 26,000 1 14,000 - 17,000 1
Alternative minimum tax
provision (credit) (293,000) (6) (217,000) (8)
Other (22,000) (1) 271,700 6 -0- -
---------- --- ---------- --- --------- ---
$1,274,000 34 $1,663,700 34 $ 784,000 27
========== === ========== === ========= ===
</TABLE>
The components of the deferred income tax provision are as
follows:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
----------- ------------ ------------
<S> <C> <C> <C>
Temporary differences resulting
primarily from differences in
depreciation, inventory, product
liability, bad debts and other
liabilities $ 403,000 $ 399,000 $ 530,000
Alternative minimum tax -0- 293,000 (215,000)
Other, net (28,000) 17,700 (200,000)
--------- ---------- ---------
$ 375,000 $ 709,700 $ 115,000
========= ========== =========
</TABLE>
During the year ended September 30, 1994, the Company utilized its
remaining available alternative minimum tax (AMT) credits to
reduce its current tax liability.
In 1993, the Company utilized approximately $360,000 of its
available alternative minimum tax (AMT) credits to reduce its
current tax liability; such credits arose because of tax
preference items related to the Galion acquisition in 1992.
Additional AMT credits of $330,000 were used to offset existing
deferred taxes.
(Continued)
<PAGE> 49
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: INCOME TAXES (CONCLUDED)
The balance of the net deferred income tax liability as of
September 30, 1995 and 1994 consists of temporary basis
differences related to the following assets and liabilities:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
------------ ------------
<S> <C> <C>
Taxable differences:
Property and equipment $2,138,000 $2,110,000
Inventory 1,478,000 1,397,000
Other -0- 16,000
---------- ----------
Gross deferred tax liabilities 3,616,000 3,523,000
---------- ----------
Deductible differences:
Product liability 1,410,000 1,685,000
Accounts receivable 405,000 296,000
Accrued expenses 351,000 477,000
Other 10,000 -0-
---------- ----------
Gross deferred tax assets 2,176,000 2,458,000
---------- ----------
Net deferred income tax liability $1,440,000 $1,065,000
========== ==========
</TABLE>
The components which comprise net deferred taxes are not expected
to reverse within the next year; as such, the entire related net
liability is classified as noncurrent.
NOTE 10: EMPLOYEE PENSION AND PROFIT SHARING PLANS
The Company and certain subsidiaries have qualified pension and
profit sharing plans covering substantially all union employees.
Contributions to the plans were calculated at an hourly rate as
defined in the various union contracts. The cost of these plans
was $255,503 in 1995, $236,449 in 1994, and $186,764 in 1993.
The Company has an employee stock bonus plan for full time,
salaried and non-union employees. Company contributions are
discretionary each year and are generally limited to 15% of
participants' compensation. No contributions were made for the
years ended September 30, 1995, 1994 and 1993.
<PAGE> 50
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Year Ended September 30
-------------------------------------------------
1 9 9 5 1 9 9 4 1 9 9 3
------------ ------------ ------------
<S> <C> <C> <C>
Charged to costs and expenses:
Depreciation $2,099,192 $1,855,311 $1,528,258
Amortization of goodwill and
organizational costs 96,635 79,980 89,129
Maintenance and repairs 1,153,509 728,850 774,058
Taxes, other than payroll and
income taxes 396,276 388,348 632,128
</TABLE>
NOTE 12: RELATED PARTY TRANSACTIONS
Leases
The Company leases an operating facility from the mother of the
President of McClain Industries, Inc. on a month-to-month basis
with annual rentals totaling $42,000 in 1995, 1994 and 1993.
Waste Stream Programs
In connection with its acquisition of EPCO in July 1995, the
Company entered into a consulting and commission agreement with
Waste Stream Associates ("Waste Stream"), a partnership consisting
of certain stockholders of the Company, to compensate Waste Stream
in an amount equal to 50% of the pre-tax profit derived by EPCO
from Waste Stream Programs, as defined. Such compensation was not
significant for the period ended September 30, 1995.
(Continued)
<PAGE> 51
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: RELATED PARTY TRANSACTIONS - (CONCLUDED)
Note Receivable
The Company's office and operating facility, the Georgia facility
and the Kalamazoo facility were leased from related party
partnerships comprised of officers, directors and employees of
McClain Industries, Inc. On August 2, 1993, the Company acquired
these facilities in exchange for 360,000 shares of common stock.
In November 1994, in connection with an aborted securities
offering, the Company agreed to value these shares at a price
based on the market value of such shares as of August 2, 1993, the
date the transactions were consummated. This revision gives
effect to the fact that the shares increased in value by $504,000
from March 29, 1993, the date the definitive agreements for the
transactions were executed by the parties, to August 2, 1993. The
Company's principal shareholders have agreed to reimburse that
amount to the Company. A letter agreement has been executed
calling for equal annual principal payments to be received by the
Company over a five-year period beginning on September 30, 1995,
plus interest at the Company's cost of funds, which approximates
the prime rate.
Rentals on the above office and operating facilities prior to
their acquisition by the Company amounted to $215,674 during the
year ended September 30, 1993.
Other
Elliott & Sons Insurance Agency, Inc. and Michigan Defined Plans,
Inc., entities controlled by Raymond Elliott, a director of the
Company, provided insurance at a cost of approximately $1,300,000,
$1,400,000, and $1,000,000 to the Company during the years ended
September 30, 1995, 1994 and 1993, respectively. These entities
received fees and commissions in connection with these
transactions of approximately $129,000, $118,000 and $124,000,
respectively.
Product Sales
The Company had product sales of approximately $239,000, $232,000
and $314,000 during the years ended September 30, 1995, 1994 and
1993, respectively, to a business controlled by an executive
officer of McClain Industries, Inc.
<PAGE> 52
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: ACCRUED EXPENSES
Accrued expenses included on the accompanying balance sheets
consist of the following amounts at September 30:
<TABLE>
<CAPTION>
1 9 9 5 1 9 9 4
------------ ------------
<S> <C> <C>
Compensation $ 442,158 $ 411,958
Vacation & holiday pay 513,988 460,225
Taxes 374,558 181,721
Insurance 321,713 329,312
Other 679,392 620,668
---------- ----------
Total $2,331,809 $2,003,884
========== ==========
</TABLE>
NOTE 14: COMMITMENTS AND CONTINGENCIES
Product Liability
As a manufacturer of industrial products, the Company is
occasionally subjected to various product liability claims. Such
claims typically involve personal injury or wrongful death
associated with the use or misuse of the Company's products. The
Company is currently defending certain legal proceedings involving
allegations of product liability relating to products manufactured
and sold by the Company. Historically, such claims have not
resulted in material losses to the Company in any one year, and
the Company maintains product liability insurance in amounts
believed by management to be adequate.
Galion Holding Company (GHC), pursuant to an indemnification it
provided to the seller in connection with GHC's July 1992
acquisition of the Galion operations, is currently defending a
number of legal proceedings involving product liability claims
arising out of products manufactured and sold prior to the
acquisition. These claims are covered by insurance and many of
these cases have been settled.
A liability to provide for these product claims was established at
the acquisition date. Since many of the cases have been settled
and insurance coverage exists, management believes that the
ongoing costs to defend these claims will not exceed the amount
accrued on the accompanying balance sheet at September 30, 1995.
(Continued)
<PAGE> 53
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14: COMMITMENTS AND CONTINGENCIES (CONTINUED)
Environmental Matters
The Company's operations are subject to extensive federal, state
and local regulation under environmental laws and regulations
concerning, among other things, emissions into the air, discharges
into the waters and the generation, handling, storage,
transportation, treatment and disposal of waste and other
materials. Inherent in manufacturing operations and in owning
real estate is the risk of environmental liabilities as a result
of both current and past operations, which cannot be predicted
with certainty. The Company has incurred and will continue to
incur costs, on an ongoing basis, associated with environmental
regulatory compliance in its business.
The Company engaged the services of an outside consulting firm to
perform environmental compliance assessments of all of the
Company's facilities (the "Audits"). The Audits identified a
number of regulatory compliance issues associated with hazardous
waste management and reporting, wastewater and stormwater
requirements, underground storage tank registration and reporting
requirements and air permitting requirements. Since the date of
the Audits, the Company has begun to implement procedures and take
requisite actions to remedy the deficiencies identified in the
Audits so that its facilities will comply with all applicable and
material environmental laws and regulations. The Company
estimates that the total costs of bringing its facilities into
compliance will not have a material effect on the Company's
consolidated financial statements.
Legal Matters Other Than Product Liability
The Company is also involved in routine litigation incidental to
its business. Management believes that the resolution of these
matters will not materially affect the consolidated financial
statements.
Employment Agreement
In connection with the EPCO acquisition on July 17, 1995, the
Company entered into a three-year employment agreement with the
president of EPCO, which provides for a base salary of $100,000
annually. As an inducement for the Company to enter into the
employment agreement, the officer agreed to not compete with the
Company's business for a period of three years after employment is
terminated, or five years from the date of the agreement,
whichever is longer.
(Continued)
<PAGE> 54
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14: COMMITMENTS AND CONTINGENCIES (CONCLUDED)
Operating Lease
In connection with the EPCO acquisition in July 1995, the Company
assumed a contractual commitment to lease for a five-year period
ending on April 1, 2000 the New York facilities used in its baler
manufacturing operation. The Company is responsible for
insurance, utilities, maintenance including a percentage of common
area charges and a portion of the property taxes. Minimum rental
payments required pursuant to this noncancellable lease agreement
for the years succeeding September 30, 1995 amount to
approximately $285,000.
The Company has an option to extend the term of the lease for an
additional five-year period at a minimum fixed aggregate rental of
approximately $347,000.
Common Stock Repurchase
In December 1995, the Board of Directors authorized the Company to
repurchase from time to time on the open market up to 100,000
shares of the Company's common stock.
NOTE 15: INCENTIVE STOCK OPTION PLANS
The Company maintains the 1989 Retainer Stock Plan for
Non-employee Directors and the McClain 1989 Incentive Stock Plan.
Retainer Stock Plan
The Retainer Stock Plan as adopted calls for reserving 100,000
shares of the Company's no par common stock and allows
non-employee directors the option to receive payment of all or a
portion of their directors fees in the form of shares of common
stock at the fair market value of such shares on the date of
issuance. For the years ended September 30, 1995, 1994 and 1993
the Company issued 1,565, 1,645 and 2,347 shares, respectively, of
its common stock to such directors in exchange for services
rendered.
(Continued)
<PAGE> 55
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15: INCENTIVE STOCK OPTION PLANS (CONTINUED)
Incentive Stock Plan
The Incentive Stock Plan as adopted calls for reserving 1,000,000
shares of the Company's no par common stock for the granting of
stock awards to officers and key management personnel. The awards
consist of incentive stock option (ISO) or non-qualified options,
stock appreciation rights (SARs) and restricted share rights, and
may be granted at the following prices at the date of grant:
incentive stock options must be equal to or greater than the fair
market value of common stock; stock appreciation rights and
restricted share rights may be issued at a price which may not be
less than 50% of the price of the common stock.
In connection with the EPCO acquisition on July 17, 1995, the
Board of Directors granted to two EPCO employees options to
purchase 20,000 shares of the Company's common stock at an
exercise price of $7.37 per share, which was the fair market value
of the shares on the date of grant. The employees may exercise
one-third of the options at any time after July 1996, one-third of
the options at any time after July 1997 and one-third of the
options at any time after July 1998, but no options may be
exercised after July 2000.
On January 16, 1995, the Board of Directors granted to the
Company's President and other key employees options to purchase
30,667 shares of the Company's common stock at an exercise price
of $7.31 per share, which was the fair market value for the shares
on the date of grant. The employees may exercise one-third of the
options at any time after January 1996, one-third of the options
at any time after January 1997, and one-third of the options at
any time after January 1998, but no options may be exercised after
January 2000.
On September 12, 1994, the Board of Directors granted to key
employees options to purchase 13,333 shares of the Company's
common stock at an exercise price of $8.81 per share, which was
the fair market value for the shares on the date of the grant.
The employees may exercise one-third of the options at any time
after September 1995, one-third of the options at any time after
September 1996, and one-third of the options at any time after
September 1997, but no options may be exercised after September
1999.
On April 4, 1994, the Board of Directors granted to the Company's
President and other key employees options to purchase 52,667
shares of the Company's common stock at an exercise price of $6.56
per share, which was the fair market value for the shares on the
date of the grant. The employees may exercise one-third of the
options at any time after April 1995, one-third of the options at
any time after April 1996, and one-third of the options at any
time after April 1997, but no options may be exercised after April
1999.
(Continued)
<PAGE> 56
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15: INCENTIVE STOCK OPTION PLANS (CONCLUDED)
On December 21, 1992, the Board of Directors granted to key
employees options to purchase 72,584 shares of the Company's
common stock at an exercise price of $3.18 per share, which was
the fair market value for the shares on the date of grant. The
employees may exercise these options at any time after December
1993, but not later than December 1997.
The following table presents a summary of stock option activity
for each of the years in the three year period ended September 30,
1995:
<TABLE>
<CAPTION>
Shares Under Option
-----------------------------------------
1 9 9 5 1 9 9 4 1 9 9 3
--------- --------- ---------
<S> <C> <C> <C>
Outstanding, beginning of year 325,999 370,666 376,000
Granted during the year 50,667 73,333 73,333
Canceled during the year -0- -0- (72,000)
Exercised during the year (3,415) (124,000) (6,667)
--------- -------- ---------
Outstanding, end of year (at exercise
prices ranging from $2.36 to $8.81 per
share) 373,251 325,999 370,666
======== ======== ========
Eligible, end of year for exercise
currently (at prices ranging from $2.36
to $8.81 per share) 252,166 208,888 165,333
======== ======== ========
</TABLE>
NOTE 16: MAJOR CUSTOMER
For the years ended September 30, 1995 and 1994, there were no
significant sales to any one customer. In 1993, 11% of net sales
were made to one customer.
NOTE 17: FOURTH QUARTER ADJUSTMENTS
During the quarter ended September 30, 1995, the Company recorded
various adjustments of approximately $1,100,000 principally
related to the valuation of inventories and carrying values of
certain liabilities. The aggregate effect of such adjustments was
to decrease net income for the fourth quarter by approximately
$720,000 ($.15 per share).
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation of McClain Industries, Inc. (7)
3.2 Bylaws of McClain Industries, Inc. (1)
10.1 McClain Industries, Inc. 1989 Incentive Stock Plan (2)
10.2 McClain Industries, Inc. 1989 Retainer Stock Plan for Non-Employee Directors (2)
10.3 Land Contract dated November 12, 1991 between Robert and Helen J. Warzyniak and Violet and
Walter H. Urban, as Seller, and the Company, as Purchaser (3)
10.4 Agreement of Purchase and Sale dated July 20, 1992 by and between Peabody International
Corporation, as Seller, and Galion Holding Company, as Buyer (4)
10.5 Loan documents dated May 29, 1992, by and between Prime Leasing Corporation and Standard
Federal Bank (5)
10.6 Manufacture and License Agreement dated as of November 2, 1992, between Galion Dump Bodies,
as Licensor, and the Company, as Licensee (6)
10.7 Loan documents dated as of March 1, 1993, between the Company and Galion Dump Bodies and E-Z Pack (6)
10.8 Guaranty Fee Agreement dated as of March 2, 1993, between Galion Holding and the Company (6)
10.9 Loan documents dated June 29, 1993, between Standard Federal Bank and Galion Holding, E-Z Pack
and Galion Dump Bodies (6)
10.10 Term Note dated January 18, 1994 between Trust Company Bank of Middle Georgia, N.A. and the Company (7)
10.11 Loan Agreement, dated September 15, 1994, between Standard Federal Bank and the Company,
McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (7)
</TABLE>
-57-
<PAGE> 58
<TABLE>
<S> <C> <C>
10.12 Loan Agreement, dated September 15, 1994, between Standard Federal Bank and Galion Holding,
E-Z Pack and Galion Dump Bodies (7)
10.13 Third Amendment Agreement (Promissory Note), dated September 15, 1994, between Standard Federal
Bank, the Company, McClain-Georgia and Shelby Steel (7)
10.14 Third Amendment Agreement (Promissory Note), dated September 15, 1994, between Standard Federal Bank,
the Company, McClain-Georgia and Shelby Steel (7)
10.15 Promissory Note (Term Loan), dated September 15, 1994, between Standard Federal Bank, Galion Holding,
E-Z Pack and Galion Dump Bodies (7)
10.16 Promissory Note (Line of Credit), dated September 15, 1994, between Standard Federal Bank, Galion
Holding, E-Z Pack and Galion Dump Bodies (7)
10.17 Promissory Note (Term Loan), dated September 15, 1994, between Standard Federal Bank, the Company,
McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (7)
10.18 Promissory Note (Line of Credit), dated September 15, 1994, between Standard Federal Bank, the
Company, McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (7)
10.19 Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties III (7)
10.20 Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties (7)
10.21 Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties of Georgia (7)
10.22 Letter Agreement, dated November 17, 1994, among the Company, Kenneth D. McClain and Robert W.
McClain (7)
10.23 Promissory Note (Term Loan) dated February 6, 1995, between Standard Federal Bank, the Company,
McClain-George, Shelby Steel, Quality Tube and McClain-Ohio (8)
10.24 Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement Dated
February 6, 1995, between Standard Federal Bank and the Company (8)
</TABLE>
-58-
<PAGE> 59
<TABLE>
<S> <C> <C>
10.25 Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and Financing Statement Dated
February 6, 1995, between Standard Federal Bank and the Company (8)
10.26 Guaranty Dated February 6, 1995, between Standard Federal Bank and the Company (8)
10.27 Promissory Note (Line of Credit with term provisions) (First Line of Credit) dated February 6, 1996,
between Standard Federal Bank, the Company, McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (8)
10.28 Promissory Note (Line of Credit with Term Provisions) (Second Line of Credit) dated February 6, 1995,
between Standard Federal Bank, the Company, McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (8)
10.29 Loan Agreement Between Standard Federal Bank and the Company, McClain-Georgia, Shelby Steel, Quality
Tube and McClain-Ohio dated February 6, 1995 (8)
10.30 Loan Agreement between Standard Federal Bank and Galion Holding, Galion Solid Waste and Galion Dump Bodies
dated February 6, 1995 (8)
10.31 Promissory Note (Line of Credit with Term Provisions) (First Line of Credit) dated February 6, 1995
between Standard Federal Bank, Galion Holding Company, Galion Solid Waste and Galion Dump Bodies (8)
10.32 Promissory Note (Line of Credit with Term Provisions) (Second Line of Credit) dated February 6, 1995,
between Standard Federal Bank, Galion Holding Company, Galion Solid Waste and Galion Dump Bodies (8)
10.33 Second Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals (Secures Future
Advances) dated February 6, 1995, between Standard Federal Bank and Galion Solid Waste (8)
10.34 Second Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals (Secures Future
Advances) dated February 6, 1995, between Standard Federal Bank and Galion Dump Bodies (8)
</TABLE>
-59-
<PAGE> 60
<TABLE>
<S> <C> <C>
10.35 Amended and Restated Promissory Note (Line of Credit) dated February 16, 1995, between Standard
Federal Bank, the Company, McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (8)
10.36 First Amendment to Loan Agreement Between Standard Federal Bank, the Company, McClain-Georgia,
Shelby Steel, Quality Tube and McClain-Ohio Dated February 16, 1995 (8)
10.37 Amended and Restated Promissory Note (Line of Credit) dated February 16, 1995, between Standard
Federal Bank, Galion Holding Company, Galion Solid Waste and Galion Dump Bodies (8)
10.38 First Amendment to Loan Agreement between Standard Federal Bank, Galion Holding Company, Galion
Solid Waste and Galion Dump Bodies dated February 16, 1995. (8)
10.39 Amended and Restated Promissory Note (Line of Credit) dated May 5, 1995, between Standard Federal Bank,
Galion Holding Company, Galion Solid Waste and Galion Dump Bodies (8)
10.40 Second Amendment to Loan Agreement between Standard Federal Bank, Galion Holding Company, Galion Solid
Waste and Galion Dump Bodies dated May 5, 1995 (8)
10.41 Second Amendment to Loan Agreement between Standard Federal Bank, the Company, McClain-Georgia, Shelby
Steel, Quality Tube, McClain-Ohio and EPCO dated June 22, 1995 (8)
10.42 Second Amended and Restated Promissory Note (Line of Credit) dated June 22, 1995, between Standard Federal
Bank, McClain-Georgia, Shelby Steel, Quality Tube, McClain-Ohio and EPCO (8)
10.43 Fifth Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals (Secures
Future Advances) between Standard Federal Bank and Galion Dump Bodies dated June 22, 1995. (8)
10.44 Third Amendment to Loan Agreement between Standard Federal Bank, Galion Holding Company, Galion Solid
Waste, Galion Dump Bodies and M.E.G. Equipment and Sales of Florida dated June 22, 1995. (8)
10.45 Third Amended and Restated Promissory Note (Line of Credit) dated June 22, 1995, between Standard Federal
Bank, Galion Holding Company, Galion Solid Waste, Galion Dump Bodies and M.E.G. Equipment Sales of Florida (8)
</TABLE>
-60-
<PAGE> 61
<TABLE>
<S> <C> <C>
10.46 Security Agreement dated June 22, 1995, between Standard Federal Bank and M.E.G. Equipment Sales
of Florida (8)
10.47 Fifth Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals (Secures
Future Advances) dated June 22, 1995, between Standard Federal Bank and Galion Solid Waste (8)
10.48 Certification of Resolution of Corporation Authority to Borrow and Pledge Collateral dated June 22, 1995,
between Standard Federal Bank and M.E.G. Equipment Sales of Florida (8)
10.49 Certification of Resolution of Corporation Authority to Borrow and Pledge Collateral dated July 18, 1995,
between Standard Federal Bank and EPCO Manufacturing (8)
10.50 Promissory Note (Line of Credit with Term Provisions) (Second Line of Credit) dated July 18, 1995, between
Standard Federal Bank, the Company, McClain-Georgia, Shelby Steel, Quality Tube, McClain-Ohio and
EPCO (8)
10.51 Promissory Note (Line of Credit with Term Provisions) (First Line of Credit) dated July 18, 1995, between
Standard Federal Bank, the Company, McClain-Georgia, Shelby Steel, Quality Tube, McClain-Ohio and EPCO (8)
10.52 Promissory Note (Term Loan) dated July 18, 1995, between Standard Federal Bank, the Company,
McClain-Georgia, Shelby Steel, Quality Tube, McClain-Ohio and EPCO (8)
10.53 Security Agreement dated July 18, 1995, between Standard Federal Bank and EPCO (8)
10.54 Amendment Agreement Promissory Note (Line of Credit) dated September 25, 1995, between Standard Federal
Bank, Galion Holding Company, Galion Solid Waste, Galion Dump Bodies and M.E.G. Equipment Sales of Florida (8)
10.55 Second Amendment Agreement Promissory Note (Line of Credit with Term Provisions) (First Line of Credit) dated
September 25, 1995, between Standard Federal Bank, Galion Holding Company, Galion Solid Waste, Galion Dump
Bodies (8)
10.56 Third Amendment Agreement Promissory Note (Line of Credit with Term Provisions) (Second Line of Credit) dated
September 25, 1995, between Standard Federal Bank, Galion Holding Company, Galion Solid Waste, Galion Dump
Bodies (8)
</TABLE>
-61-
<PAGE> 62
<TABLE>
<S> <C> <C>
10.57 Amendment Agreement Promissory Note (Term Loan) dated September 25, 1995, between Standard Federal Bank,
Galion Holding Company, Galion Solid Waste, Galion Dump Bodies and M.E.G. Equipment Sales of Florida (8)
10.58 First Amended and Restated Loan Agreement Between Standard Federal Bank, Galion Holding Company, McClain E-Z
Pack, Galion Dump Bodies and McClain Group Sales of Florida dated October 2, 1995 (8)
21 List of Subsidiaries (6)
</TABLE>
- ----------------------------------
(1) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/89
(2) Incorporated by reference to the Company's Registration Statement
(33-29613)
(3) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/91
(4) Incorporated by reference to the Company's Form 8-K dated 7/27/92
(5) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/92
(6) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/93
(7) Incorporated by reference to the Company's Registration Statement on
Form S-2 (33-84562)
(8) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/95
-62-
<PAGE> 1
EXHIBIT 10.23
Note No. 0250017724
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Term Loan)
$2,000,000.00 Troy , Michigan
Due Date: January 1, 2000 Dated: February 6, 1995
FOR VALUE RECEIVED, the undersigned, jointly and severally (collectively,
"Borrower"), promise to pay to the order of Standard Federal Bank, a federal
savings bank ("Standard Federal"), at its office set forth below, or at such
other place as Standard Federal may designate in writing, the principal sum of
Two Million and 00/100 Dollars ($2,000,000.00), plus interest on all amounts
from time to time outstanding hereunder, as hereinafter provided, all in lawful
money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to One-Quarter of One percent (0.25%) in excess of the Wall Street
Journal Prime Rate. As used herein the phrase "Wall Street Journal Prime Rate"
shall mean the "Prime Rate" published by the Wall Street Journal as the base
rate on corporate loans posted by at least 75% of the nation's 30 largest banks
as the same may be changed from time to time. If more than one Prime Rate is
published, the highest rate published shall be deemed the Wall Street Journal
Prime Rate. If the publishing of the Wall Street Journal Prime Rate is
discontinued during the term hereof, then the Effective Interest Rate shall be
based upon the index which is published by The Wall Street Journal in
replacement thereof based on similar base rates on corporate loans or, if no
such replacement index is published, the index which, in Standard Federal's
sole determination, most nearly corresponds to the Wall Street Journal Prime
Rate. If, in such event, Standard Federal selects an index which, in the
Borrower's opinion, does not correspond to the Wall Street Journal Prime Rate,
Borrower's sole remedy shall be to prepay this Note in full without penalty or
premium. Until such prepayment has been received by Standard Federal, the
index selected by Standard Federal shall apply for all purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest Rate
shall be determined by reference to the "Wall Street Journal Prime Rate" and
not by reference to the actual rate of interest charged by any particular bank
to any particular borrower or borrowers and shall automatically increase or
decrease when and to the extent that the Wall Street Journal Prime Rate shall
have been increased or decreased.
<PAGE> 2
Principal and interest shall be paid in consecutive monthly payments of
principal in the amount of $11,111.11 each, plus interest accrued to the due
date of each payment, commencing on March 1, 1995, and continuing on the same
day of each consecutive month thereafter and a final payment on the Due Date in
an amount equal to the then unpaid principal and accrued interest.
All payments required to be paid hereunder shall first be applied to costs
and expenses required to be paid hereunder, then to accrued interest hereunder
and the balance shall be applied against the principal. This Note may be
prepaid, in full or in part, at any time, without the payment of any prepayment
fee or penalty. All partial prepayments shall be applied against the last
accruing installment or amount due under this Note; and no prepayments shall
affect the obligation of the undersigned to continue the regular installments
hereinbefore mentioned, until the entire unpaid principal and accrued interest
has been paid in full. Borrower understands that the installment payments of
principal provided for herein are not sufficient to fully amortize the
outstanding principal balance of this Note by the Due Date and that the final
payment due on the Due Date will be a balloon payment of all then outstanding
principal and accrued interest.
Nothing herein contained, nor any transaction relating thereto, or hereto,
shall be construed or so operate as to require the Borrower to pay, or charge,
interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest, or other charges, charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by applicable law, then
any and all such excess shall be and the same is hereby waived by Standard
Federal, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Standard
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized, validly
existing and in good standing and is duly authorized to make and perform this
Note, which constitutes its valid and binding legal obligation enforceable in
accordance with its terms. All financial data furnished to Standard Federal in
connection with this Note fairly present the financial condition of the
Borrower and its subsidiaries, if any, as of the dates thereof
-2-
<PAGE> 3
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of this
Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default
-3-
<PAGE> 4
hereunder, Standard Federal may hold and apply at any time its own indebtedness
or liability to Borrower in payment of any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement of even date herewith.
This Note is secured by a Security Agreement, dated September 15, 1994, and by
two Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and
Financing Statements of even date herewith. Reference is hereby made to such
documents for additional terms relating to the transaction giving rise to this
Note, the security given for this Note and additional terms and conditions
under which this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
-4-
<PAGE> 5
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
--------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY,
a Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY TUBE,
a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
MCCLAIN INDUSTRIES OF OHIO, INC.,
a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.24
COMMERCIAL MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
This is a Future Advance Mortgage
THIS MORTGAGE is made this 6th day of February, 1995, by MCCLAIN
INDUSTRIES, INC., a Michigan corporation ("Borrower"), whose address is 6200
Elmridge, Sterling Heights, Michigan 48310 to Standard Federal Bank, a federal
savings bank ("Standard Federal"), whose address is 2600 West Big Beaver Road,
Troy, Michigan 48084.
RECITALS:
A. Borrower is justly indebted to Standard Federal in the principal amount
of Two Million and 00/100 Dollars ($2,000,000.00), together with interest
thereon in accordance with a mortgage note from Borrower to Standard Federal of
even date herewith (the "Note").
B. The Note is identified as being secured hereby by a statement thereon.
THEREFORE, in order to secure payment of the principal and interest of such
indebtedness according to the terms of the Note, and all other amounts payable
by Borrower thereunder, and any and all extensions and renewals thereof,
however evidenced, and the performance of the covenants and conditions hereof,
and THE REPAYMENT OF ANY FUTURE ADVANCES, WITH INTEREST THEREON, made to
Borrower by Standard Federal pursuant to the provisions hereof, Borrower does
hereby MORTGAGE and WARRANT to Standard Federal, its successors and assigns
forever, certain real property owned by Borrower and situated in the State of
Michigan, as more particularly described in Exhibit "A" attached hereto (the
"premises"), together with (1) all the estate, title, interest and rights of
Borrower in and to the premises and all buildings and improvements of every
kind and description now or hereafter placed upon the premises or any part
thereof, (2) all heretofore or hereafter vacated alleys and streets abutting
the premises, (3) all furniture, fixtures, equipment and appliances, regardless
of their character as personal property, including, but not limited to, all
lighting, heating, cooling, ventilating, air conditioning, plumbing,
sprinkling, communicating and electrical systems, and machinery, appliances,
fixtures and equipment pertaining thereto, awnings, stoves, refrigerators,
dishwashers, disposals, incinerators, carpeting and drapes, and all other
furniture, fixtures, equipment and appliances of every type, nature and
description, owned by Borrower and now or at any time hereafter related to,
affixed to, attached to, placed upon or used in any way in connection with the
use, occupancy or operation of the premises (except leased equipment and trade
fixtures which, in either case, are readily removable without damaging or
reducing the value or utility of the premises or the improvements thereto), all
of which
<PAGE> 2
furniture, fixtures, equipment and appliances shall be deemed to be a part of
the premises and covered by the lien hereof, and (4) all of the rents, profits,
and leases thereof and the tenements, hereditaments, easements, privileges and
appurtenances thereto. (Any reference herein to the "Project" shall be deemed
to apply to the above described premises and to such buildings, fixtures,
furniture, equipment and appliances, and to the rents, profits and leases
thereof, and to such tenements, hereditaments, easements, privileges and
appurtenances, unless the context shall require otherwise.)
To have and to hold the Project, with all of the tenements, hereditaments,
easements, appurtenances and other rights and privileges thereunto belonging or
in any manner now or hereafter appertaining thereto, for the use and benefit of
Standard Federal upon the conditions hereinafter set forth.
Borrower does hereby covenant, promise and agree to and with Standard
Federal, which covenants, promises and agreements shall, to the extent
permitted by law, be deemed to run with the land, as follows:
1. Covenant to Pay Indebtedness. Borrower shall pay the principal and
interest of Borrower's indebtedness to Standard Federal according to the terms
of the Note and shall pay the indebtedness to Standard Federal according to the
terms of any future advances secured by this Mortgage and shall pay all other
amounts provided herein.
2. Covenant of Title. At the time of the execution and delivery of this
Mortgage, Borrower is well and truly seized of the Project in fee simple, free
of all easements, liens and encumbrances whatever (other than those easements
of record as of the date hereof and the rights of the public in any part of the
Project used or taken for road purposes), and will forever warrant and defend
the same against any and all other claims whatever, and the lien created hereby
is and will be kept as a first lien upon the Project and every part thereof,
subject only to the foregoing exceptions.
3. Taxes and Assessments. Until the debt secured hereby is fully
satisfied, Borrower will pay all taxes, assessments and all other charges and
encumbrances levied on the Project before any penalty for nonpayment attaches
thereto, and will deliver to Standard Federal, upon request, official receipts
showing such payment. Borrower also shall pay when due all taxes, assessments
and other charges and encumbrances that may be levied upon or on account of
this Mortgage or the indebtedness secured hereby or upon the interest or estate
in the Project created or represented by this Mortgage, whether levied against
Standard Federal or otherwise. In the event payment by Borrower of any tax
referred to in the foregoing sentence would result in the payment of interest
-2-
<PAGE> 3
in excess of the rate permitted by law, then Borrower shall have no obligation
to pay the portion of such tax which would result in the payment of such
excess; provided, however, in such event, at any time after the enactment of a
law providing for such tax, Standard Federal, at its option, may declare the
entire principal balance of the indebtedness secured hereby, together with all
interest thereon, to be due and payable immediately, without notice.
4. Insurance. Until the debt secured hereby is fully satisfied, Borrower
will keep the Project continuously insured against loss by fire, windstorm and
other hazards, casualties and contingencies, including vandalism and malicious
mischief, in such amounts and for such periods as may be required by Standard
Federal. Borrower shall pay promptly when due all premiums for such insurance
and deliver to Standard Federal, without request, receipts showing such
payment. All insurance shall be carried in companies approved by Standard
Federal and the policies and renewals thereof shall be held by, and pledged to,
Standard Federal (unless Standard Federal shall direct or permit otherwise) as
additional security hereunder, and shall have attached thereto a mortgagee
clause acceptable to Standard Federal, making all loss or losses under such
policies payable to Standard Federal, its successors and assigns, as its or
their interest may appear. In the event of loss or damage to the Project,
Borrower shall give immediate notice in writing by mail to Standard Federal,
who may make proof of loss if not made promptly by Borrower.
In the event the amount of the loss is $200,000.00 or less, the insurance
proceeds shall be released to the Borrower, upon request by the Borrower.
Borrower shall be obligated to use such proceeds to restore or repair the
Project unless Standard Federal otherwise specifies in writing.
In the event the amount of the loss is greater than $200,000.00, each
insurance company concerned is hereby authorized and directed upon request by
Standard Federal, to make payment for such loss, to the extent of the
indebtedness hereby secured, directly to Standard Federal instead of to
Borrower and Standard Federal jointly. Provided there has occurred no Event of
Default hereunder nor any event which with notice or the passage of time or
both would become an Event of Default hereunder and further provided that
Standard Federal shall reasonably determine that sufficient funds are available
from insurance proceeds and any funds to be provided by Borrower to repair or
restore the Project within a reasonable time and that such repair or
restoration is economically feasible, Standard Federal agrees, upon request by
the Borrower, to apply the insurance proceeds to repair or restore the Project,
after reimbursement of all costs and expenses of Standard Federal in collecting
such proceeds, subject to the following terms and conditions:
-3-
<PAGE> 4
(a) Standard Federal shall retain all insurance proceeds in a
non-interest bearing escrow account to be disbursed to pay the costs of
repair or restoration in accordance with procedures reasonably established
by Standard Federal.
(b) All plans and specifications for repair or restoration shall be
approved by Standard Federal prior to the commencement of any repair or
restoration.
(c) All repair or restoration shall be done by or under the direction
of Borrower, shall be in accordance with the approved plans and
specifications, shall be in a workmanlike manner free from all defects,
shall be in compliance with all statutes, ordinances, rules and regulations
applicable thereto and shall be completed free of all construction liens
except those being contested in good faith by appropriate proceedings and
with respect to which Borrower shall have provided Standard Federal
satisfactory security.
(d) Standard Federal shall have the right, at Borrower's expense, to
inspect all repairs and restoration and, if Standard Federal reasonably
determines that any work or materials are not in conformity with the
approved plans and specifications or other requirements of sub-paragraph
(c) above, to stop the work and order replacement or correction thereof by
Borrower.
(e) Standard Federal shall not be obligated to make disbursements
more frequently than monthly and the remaining undisbursed proceeds shall
always be sufficient to meet the total estimated remaining costs to
complete the repair or restoration plus 10% of such costs.
(f) All insurance proceeds in excess of the amounts necessary to
repair or restore the Project may be applied, at Standard Federal's option,
to the outstanding principal balance under the Note (without penalty for
prepayment), to fulfill any other covenant herein or any other obligation
of Borrower to Standard Federal, or released to Borrower.
In the event all of the conditions to the use of the insurance proceeds to
repair or restore the Project which are outlined above are not satisfied,
Standard Federal, at its option, may apply the insurance proceeds or any part
thereof, first, toward reimbursement of all costs and expenses of Standard
Federal in collecting such proceeds, and then, to the outstanding principal
balance under the Note (without any penalty for prepayment), to fulfill any
other covenant herein or any other obligation of Borrower to Standard Federal,
or to the restoration or repair of the Project.
Application by Standard Federal of any insurance proceeds to the
outstanding principal balance under the Note shall not excuse
-4-
<PAGE> 5
Borrower from making the regularly scheduled payments due thereunder, nor shall
such application extend or reduce the amount of such payments. In the event of
foreclosure of this Mortgage or other transfer of title to the Project in
extinguishment of the indebtedness secured hereby, all right, title and
interest of Borrower in and to any insurance policies then in force shall pass
to the purchaser or grantee and Borrower hereby appoints Standard Federal its
attorney-in-fact, in Borrower's name, to assign and transfer all such policies
and proceeds to such purchaser or grantee.
5. Standard Federal's Right to Make Expenditures. Should an Event of
Default occur hereunder as a result of Borrower's failure to pay any taxes or
assessments or procure and maintain insurance or make necessary repairs to the
Project, Standard Federal may pay such taxes and assessments, effect such
insurance and make such repairs, and the monies so paid by it shall be a
further lien on the Project, payable forthwith, with interest at the default
rate set forth in the Note. Standard Federal may make advances pursuant to
this paragraph or to paragraph 7 without curing the Event of Default and
without waiving Standard Federal's right of foreclosure or any other right or
remedy of Standard Federal under this Mortgage. The exercise of the right to
make advances pursuant to this paragraph shall be optional with Standard
Federal and not obligatory and Standard Federal shall not be liable in any case
for failure to exercise such right or for failure to continue exercising such
right once having exercised it. Borrower's failure to pay taxes and/or
assessments assessed against the Project, or any installment thereof, or any
insurance premium upon policies covering the Project or any part thereof, shall
constitute waste (although the meaning of the term "waste" shall not
necessarily be limited to such nonpayment), as provided by Act No. 236 of the
Public Acts of Michigan of 1961, as amended, and shall entitle Standard Federal
to all remedies provided for therein. Borrower further agrees to and does
hereby consent to the appointment of a receiver under such statute, should
Standard Federal elect to seek such relief thereunder.
6. Escrow for Taxes and Insurance. Standard Federal, in its sole
discretion, shall be entitled to require Borrower to pay to Standard Federal
monthly such amounts as Standard Federal from time to time estimates as
necessary to create and maintain a reserve fund from which to pay before the
same become due all taxes, assessments and other charges and encumbrances
levied on the Project and premiums for insurance as are herein covenanted to be
paid by Borrower and when such taxes, assessments and other charges and
encumbrances and insurance premiums become due and payable, Standard Federal
shall pay the same to the extent funds are available from the reserve fund;
provided, however, that Standard Federal shall have no liability for any
failure to so pay taxes, assessments and other charges and encumbrances or
insurance premiums for any reason whatsoever. In the event that sufficient
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<PAGE> 6
funds have not been deposited as aforesaid to cover the amount of such taxes,
assessments and other charges and encumbrances and insurance premiums when the
same become due and payable, Borrower shall forthwith upon request by Standard
Federal pay such balance to Standard Federal. Standard Federal shall not be
required to pay Borrower any interest or earnings whatever on the funds held by
Standard Federal for the payment of such taxes, assessments and other charges
and encumbrances or for the payment of insurance premiums, or on any other
funds deposited with Standard Federal in connection with this Mortgage. Upon
the occurrence of an Event of Default under this Mortgage, any of such monies
then remaining on deposit with Standard Federal may be applied against the
indebtedness hereby secured immediately upon or at any time after the
occurrence of an Event of Default, and without notice to Borrower. Further,
Standard Federal may make payments from any of such monies on deposit with
Standard Federal for taxes, assessments, other charges or encumbrances or
insurance premiums on or with respect to the Project notwithstanding that
subsequent owners of the Project may benefit thereby.
7. Waste and Inspection and Repair. Borrower will abstain from and will
not suffer the commission of waste on the Project and will keep the buildings,
improvements, fixtures, equipment and appliances now or hereafter thereon in
good repair and will make replacements thereto as and when the same become
necessary. Borrower will comply promptly with all laws, ordinances,
regulations and orders of all public authorities having jurisdiction over the
Project relating to the use, occupancy and maintenance thereof, and shall upon
request promptly submit to Standard Federal evidence of such compliance.
Nothing herein shall be deemed to prohibit Borrower from contesting the
enforceability or applicability of any law, ordinance, regulation or order;
provided, however, that Standard Federal, in its sole discretion, may require
that Borrower comply with any such law, ordinance, regulation or order during
the pendency of any such contest and all appeals therefrom. In the event the
Project or any part thereof, in the sole judgment of Standard Federal, requires
inspection, repair, care or attention of any kind or nature not theretofore
provided by Borrower within 30 days after notice thereof from Standard Federal
to Borrower, or within such longer time as may be necessary if the repair, care
or attention is of a kind which cannot be completed in 30 days, provided that
Borrower undertakes the repair, care or attention within 30 days after notice
thereof from Standard Federal and thereafter diligently pursues the completion
of same within a reasonable time, Standard Federal may (without being obligated
to do so) enter or cause entry to be made upon the Project and inspect, repair,
and/or maintain the same as Standard Federal may deem necessary or advisable,
and may (without being obligated to do so) make such expenditures and outlays
of money as Standard Federal may deem appropriate for the preservation of the
Project. All expenditures and outlays of money made by Standard Federal
pursuant hereto shall be secured hereby, shall be payable forthwith, and
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<PAGE> 7
shall bear interest at the default rate provided in the Note. Standard Federal
shall have the right at any time, and from time to time, to enter the Project
for the purpose of inspecting the same. Borrower will not permit the Project
or any portion thereof to be used for any unlawful purpose. No building or
other improvement on any part of the Project shall be removed, demolished or
materially altered without the prior written consent of Standard Federal,
except that Borrower shall have the right, without such consent, to remove and
dispose of, free from the lien of this Mortgage, such personalty and equipment
as from time to time may become worn out or obsolete, provided that (a)
simultaneously with or prior to such removal, any such equipment shall be
replaced with other new equipment of like kind and quality, free from any
security interest, lien or encumbrances, and by such removal and replacement,
Borrower shall be deemed to have subjected the replacement equipment to the
lien of this Mortgage; and (b) any net cash proceeds received from such
disposition shall be promptly paid over to Standard Federal to be applied to
the outstanding principal balance under the Note, without any charge for
prepayment.
8. Events of Default. The occurrences listed below shall be deemed Events
of Default hereunder and shall entitle Standard Federal, at its option and
without notice except where required by law and as otherwise provided herein,
to exercise any one or any combination of remedies described in paragraph 9 or
otherwise available to Standard Federal:
(a) If any indebtedness of the Borrower to Standard Federal is not paid
within 10 days after the date due, regardless of whether such indebtedness
has arisen pursuant to the terms of the Note, or any loan agreement,
promissory note, mortgage, security agreement, guaranty, instrument or
other agreement or otherwise.
(b) If any warranty or representation made by or for the Borrower
and/or any endorser or guarantor of the Note ("Guarantor") in connection
with the loan(s) evidenced thereby, or if any financial data or any other
information now or hereafter furnished to Standard Federal by or on behalf
of the Borrower and/or any Guarantor shall prove to be false, inaccurate or
misleading in any material respect, and such default is not cured within 15
days after written notice to the Borrower of such default.
(c) If the Borrower and/or any Guarantor shall fail to perform any
obligation or covenant hereunder, or shall fail to comply with any of the
provisions of the Note or of any loan agreement or other agreement with
Standard Federal to which it may be a party, and such failure is not cured
within 15 days after written notice to the Borrower of such failure.
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<PAGE> 8
(d) If any other Event of Default shall occur under the Note.
(e) If foreclosure or other proceedings to enforce any second
mortgage or any junior security interest, lien or encumbrance of any kind
upon the Project or any portion thereof are instituted and are not
dismissed, or insured against or bonded over in a manner reasonably
acceptable to Standard Federal within ninety (90) days.
(f) If Borrower fails to substantially comply with all of the
material terms, covenants and provisions of any and all leases or other
agreements, documents or restrictions that now encumber, affect or pertain
to the Project or any portion thereof.
9. Remedies. Immediately upon the occurrence of an Event of Default
defined in paragraph 8, Standard Federal shall have the option, in addition to
and not in lieu of or substitution for, all other rights and remedies provided
by law, to do any or all of the following:
(a) Without notice except as expressly required by law, to declare
the principal sum secured by this Mortgage, with all interest thereon and
all other sums secured hereby, to be immediately due and payable, and if
the same is not paid on demand, at Standard Federal's option, to bring suit
therefor; to demand payment of and if the same is not paid on demand, to
bring suit for any delinquent installment payment under the Note or
otherwise; to take any and all steps and institute any and all other
proceedings that Standard Federal deems necessary to enforce the
indebtedness and obligations secured hereby and to protect the lien of this
Mortgage.
(b) Upon the occurrence of any Event of Default arising out of the
existence of any lien upon the Project, Standard Federal shall have the
right (without being obligated to do so or to continue to do so), without
notice to Borrower, to advance on and for the account of Borrower such sums
as Standard Federal in its sole discretion deems necessary to cure such
Event of Default or to induce the holder of any such lien to forbear from
exercising its rights thereunder. The repayment of all such advances, with
interest thereon at the default rate set forth in the Note from the date of
each such advance, shall be secured hereby and shall be immediately due and
payable without demand.
(c) Immediately commence foreclosure proceedings against the Project
pursuant to applicable law. The commencement by Standard Federal of
foreclosure proceedings by advertisement or in equity shall be deemed an
exercise by Standard Federal of its option set forth in paragraph 9(a) to
accelerate the
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<PAGE> 9
due date of all sums secured hereby. Borrower hereby grants power to
Standard Federal upon the occurrence of an Event of Default hereunder, to
grant, bargain, sell, release and convey the Project at public auction or
vendue, and upon such sale to execute and deliver to the purchaser(s)
instruments of conveyance pursuant to the terms hereof and to the
applicable laws. Borrower acknowledges that the foregoing sentence confers
a power of sale upon Standard Federal, and that upon the occurrence of an
Event of Default this Mortgage may be foreclosed by advertisement as
described below and in the applicable Michigan statutes. Borrower
understands that upon the occurrence of an Event of Default, Standard
Federal is hereby authorized and empowered to sell the Project, or cause
the same to be sold and to convey the same to the purchaser in any lawful
manner, including but not limited to that provided by Chapter 32 of the
Revised Judicature Act of Michigan, entitled "Foreclosure of Mortgages by
Advertisement", which permits Standard Federal to sell the Project without
affording Borrower a hearing, or giving him actual personal notice. The
only notice required under such Chapter 32 is to publish notice in a local
newspaper and to post a copy of the notice on the Project.
WAIVER: By conferring this power of sale upon Standard Federal, Borrower,
for itself, its successors and assigns, after an opportunity for
consultation with its legal counsel, hereby voluntarily, knowingly and
intelligently waives all rights under the Constitution and Laws of the
United States and under the Constitution and Laws of the State of Michigan,
both to a hearing on the right to exercise and the exercise of the power of
sale, and to notice except as required by the Michigan statute which
provides for foreclosure of mortgages by advertisement. However, Borrower
reserves the right to timely contest the exercise of the power of sale by
instituting suit against Standard Federal in the circuit court of the
county in which the Project is located or any other court of competent
jurisdiction.
(d) Procure mortgage foreclosure or title reports. Borrower
covenants to pay forthwith to Standard Federal all sums paid for such
purposes with interest at the default rate provided for in the Note, and
such sums and the interest thereon shall constitute a further lien upon the
Project.
(e) Procure appraisals, environmental audits and such other
investigations or analyses of the Project as Standard Federal may determine
to be required by regulatory or accounting rules, procedures or practices
or to otherwise be prudent or necessary. Borrower shall grant Standard
Federal free and unrestricted access to the Project for such purposes.
Borrower covenants to pay forthwith to Standard Federal all sums paid for
such purposes with interest at the default rate
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<PAGE> 10
provided for in the Note, and such sums and the interest thereon shall
constitute a further lien upon the Project.
(f) To enter into peaceful possession of the Project and/or to
receive the rent, income and profits therefrom, and to apply the same in
accordance with paragraph 18 hereof.
In connection with Standard Federal's right to possession of the Project
upon the occurrence of an Event of Default, as specified in the foregoing
paragraph, Borrower acknowledges that it has been advised that there is a
significant body of case law in Michigan which purportedly provides that in the
absence of a showing of waste of a character sufficient to endanger the value
of the Project, or other special factors, a mortgagor is entitled to remain in
possession of the Project, and to enjoy the income, rents and profits
therefrom, during the pendency of foreclosure proceedings and until the
expiration of the redemption period, even if the mortgage documents expressly
provide to the contrary. Borrower further acknowledges that it has been
advised that Standard Federal recognizes the value of the security covered
hereby is inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Project, and that Standard Federal
would not make the loan secured hereby unless it could be assured that it would
have the right to take possession of the Project in order to manage or to
control management thereof, and to enjoy the income, rents and profits
therefrom, immediately upon the occurrence of an Event of Default hereunder,
notwithstanding that foreclosure proceedings may not have been instituted, or
are pending, or the redemption period may not have expired. Accordingly,
Borrower hereby knowingly, intelligently and voluntarily waives all right to
possession of the Project from and after the occurrence of an Event of Default
hereunder, upon demand for possession by Standard Federal, and Borrower agrees
not to assert any objection or defense to Standard Federal's request or
petition to a court for possession. The rights hereby conferred upon Standard
Federal have been agreed upon prior to the occurrence of an Event of Default
hereunder and the exercise by Standard Federal of any such rights shall not be
deemed to put Standard Federal in the status of a "mortgagee in possession".
Borrower acknowledges that this provision is material to this transaction and
that Standard Federal would not make the loan secured hereby but for this
paragraph.
In the event of any sale of the Project by foreclosure, through suit in
equity, by publication or otherwise, the proceeds of any such sale shall be
applied in the following order of priority: (1) to all expenses incurred for
the collection of Borrower's indebtedness and the foreclosure of the Mortgage,
including reasonable attorneys' fees as are permitted by law; (2) to all sums
expended or incurred by Standard Federal directly or indirectly in carrying out
the covenants and agreements of Borrower under this Mortgage, together with
interest thereon; (3) to all
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<PAGE> 11
interest accrued under the Note; (4) to the principal balance of the Note and
the principal balance of any other indebtedness due from Borrower to Standard
Federal; and (5) the surplus, if any, shall be paid to Borrower, unless a
court of competent jurisdiction decrees otherwise.
10. Sale in Parcels. Upon any foreclosure sale of the Project, the same
may be sold either as a whole or in parcels, as Standard Federal may elect, and
if in parcels, the same may be divided as Standard Federal may elect, and at
the election of Standard Federal, may be offered first in parcels and then as a
whole, that offer producing the highest price for the entire Project to
prevail. Any law, statutory or otherwise, to the contrary notwithstanding,
Borrower hereby waives the right to require any such sale to be made in parcels
or the right to select such parcels.
11. Costs of Legal Proceedings. The Borrower shall pay Standard Federal
a reasonable attorney's fee in addition to all other legal costs in case
Standard Federal shall become a party, either as plaintiff or defendant, to any
legal proceedings in relation to the Project or the lien created hereby, which
sums shall be secured hereby and shall be payable forthwith at the default rate
set forth in the Note.
12. Eminent Domain. In the event the entire Project is taken under the
power of eminent domain, the entire award or payment in lieu of condemnation,
to the full extent of the amount secured hereby, shall be paid to Standard
Federal. Standard Federal shall apply such award or payment, first, toward
reimbursement of all of Standard Federal's costs and expenses incurred in
connection with collecting such award or payment, and then, at Standard
Federal's option, to the outstanding principal balance under the Note (without
any penalty for prepayment), to fulfill any other covenant herein or to any
other obligation of Borrower to Standard Federal.
In the event of a partial taking of the Project under the power of eminent
domain, the entire award or payment in lieu of condemnation, to the full extent
of the amount secured hereby, shall be paid over to Standard Federal. Provided
there has occurred no Event of Default hereunder, nor any event which with
notice or the passage of time or both would become an Event of Default
hereunder, and Standard Federal shall reasonably determine that sufficient
funds are available from the award or payment and any funds to be provided by
Borrower to repair or restore the remaining portion of the Project within a
reasonable time and that such repair or restoration is economically feasible,
Standard Federal agrees, upon request by the Borrower, to apply the award or
payment to repair or restore the remaining portion of the Project, after
reimbursement of all costs and expenses of Standard Federal in collecting the
award or payment, subject to the following terms and conditions:
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<PAGE> 12
(a) Standard Federal shall retain the award or payment in a
non-interest bearing escrow account to be disbursed to pay the costs of
repair or restoration in accordance with procedures reasonably established
by Standard Federal.
(b) All plans and specifications for repair or restoration shall be
approved by Standard Federal prior to the commencement of any repair or
restoration.
(c) All repair or restoration shall be done by or under the direction
of Borrower, shall be in accordance with the approved plans and
specifications, shall be in a workmanlike manner free from all defects,
shall be in compliance with all statutes, ordinances, rules and regulations
applicable thereto and shall be completed free of all construction liens
except those being contested in good faith by appropriate proceedings and
with respect to which Borrower shall have provided Standard Federal
satisfactory security.
(d) Standard Federal shall have the right, at Borrower's expense, to
inspect all repairs and restoration and, if Standard Federal reasonably
determines that any work or materials are not in conformity with the
approved plans and specifications or other requirements of sub-paragraph
(c) above, to stop the work and order replacement or correction thereof by
Borrower.
(e) Standard Federal shall not be obligated to make disbursements
more frequently than monthly and the remaining undisbursed proceeds shall
always be sufficient to meet the total estimated remaining costs to
complete the repair or restoration plus 10% of such costs.
(f) All proceeds of the award or payment in excess of the amounts
necessary to repair or restore the Project may be applied, at Standard
Federal's option, to the outstanding principal balance under the Note
(without penalty for prepayment), to fulfill any other covenant herein or
any other obligation of Borrower to Standard Federal, or released to
Borrower.
In the event all of the conditions to the use of the award or payment to
repair or restore the Project which are outlined above are not satisfied,
Standard Federal, at its option, may apply the award or payment or any part
thereof, first, toward reimbursement of all costs and expenses of Standard
Federal in collecting such award or payment, and then, to the outstanding
principal balance under the Note (without any penalty for prepayment), to
fulfill any other covenant herein or any other obligation of Borrower to
Standard Federal, or to the restoration or repair of the Project.
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<PAGE> 13
Application by Standard Federal of any condemnation award or payment or
portion thereof to the outstanding principal balance under the Note shall not
excuse Borrower from making the regularly scheduled payments due thereunder,
nor shall such application extend or reduce the amount of such payments.
Standard Federal is hereby empowered in the name of Borrower to receive, and
give acquittance for, any such award or payment, whether it is joint or
several; provided, however, that Standard Federal shall not be held responsible
for failure to collect any such award or payment, regardless of the cause of
such failure.
13. Books and Records. The Borrower covenants and agrees to furnish to
Standard Federal promptly certificates of occupancy and such other books,
records, documents, information and statements pertaining to the Borrower, the
Project and its operations and any guarantor(s) as Standard Federal may
request. All books, records and other information provided by Borrower
hereunder shall be in a form that is acceptable to Standard Federal and all
costs of providing the same shall be borne entirely by Borrower.
14. Secondary Financing. Borrower will not, without the prior written
consent of Standard Federal, mortgage or pledge the Project or any part thereof
as security for any other loan or obligation of Borrower. If any such mortgage
or pledge is entered into without the prior written consent of Standard
Federal, the entire indebtedness secured hereby, may, at the option of Standard
Federal, be declared immediately due and payable without notice. Further,
Borrower also shall pay any and all other obligations, liabilities or debts
which may become liens, security interests, or encumbrances upon or charges
against the Project for any repairs or improvements that are now or may
hereafter be made thereon, and shall not, without Standard Federal's prior
written consent, permit any lien, security interest, encumbrance or charge of
any kind to accrue and remain outstanding against the Project or any part
thereof, or any improvements thereon, irrespective of whether such lien,
security interest, encumbrance or charge is junior to the lien of this
Mortgage. Notwithstanding the foregoing, if any personal property by way of
additions, replacements or substitutions is hereafter purchased and installed,
affixed or placed by Borrower on the Project under a security agreement, the
lien or title of which is superior to the lien created by this Mortgage, all
the right, title and interest of Borrower in and to any and all such personal
property, together with the benefit of any deposits or payments made thereon by
Borrower, shall nevertheless be and are hereby assigned to Standard Federal and
are covered by the lien of this Mortgage.
15. Payment Upon Acceleration Subject to Any Prepayment Penalty. Upon
the occurrence of an Event of Default by Borrower hereunder and following the
acceleration of maturity as provided in paragraph 9 hereof, a tender of payment
of the amount necessary to satisfy the entire indebtedness secured hereby, made
at any time
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<PAGE> 14
prior to the foreclosure sale by Borrower, or by anyone in behalf of the
Borrower, shall constitute an evasion of the payment terms of the Note and
shall be deemed to be a voluntary prepayment thereunder, and any such payment,
to the extent permitted by law, will therefore include the premium required
under the prepayment privilege, if any, contained in the Note.
16. Security Agreement and Financing Statements. Borrower shall
execute, acknowledge and deliver any and all such further conveyances,
documents, mortgages and assurances as Standard Federal may reasonably require
for accomplishing the purposes hereof, including financing statements required
by Standard Federal to protect its interest under the provisions of the
Michigan Uniform Commercial Code, as amended, forthwith upon the written
request of Standard Federal. Upon any failure of Borrower to do so, Standard
Federal may execute, record, file, re-record and refile any and all such
documents for and in the name of Borrower, and Borrower hereby irrevocably
appoints Standard Federal as agent and attorney-in-fact of Borrower for the
foregoing purposes. This instrument is intended by the parties to be, and
shall be construed as, a security agreement, as that term is defined and used
in Article Nine of the Michigan Uniform Commercial Code, as amended, and shall
grant to Standard Federal a security interest in that portion of the Project
with respect to which a security interest can be granted under Article Nine of
the Michigan Uniform Commercial Code, as amended, which security interest shall
include a security interest in all personalty owned by Borrower, whether now
owned or subsequently acquired, which is or in the future may be physically
located on or affixed to the Project described in Exhibit "A" hereto,
regardless of whether such personalty consists of fixtures under Michigan law,
a security interest in the proceeds and products of the proceeds of all
insurance policies now or hereafter covering all or any part of such
collateral. For purposes of Article Nine of the Michigan Uniform Commercial
Code, (a) Borrower herein is the "debtor", (b) Standard Federal herein is the
"secured party", (c) information concerning the security interest created
hereby may be obtained from Standard Federal at its address set forth on page 1
hereof, and (d) Borrower's mailing address is that set forth on page 1 hereof.
17. Assignment of Contracts and Agreements. Borrower hereby assigns to
Standard Federal, as further security for the indebtedness secured hereby,
Borrower's interest in all agreements, contracts (including contracts for the
lease or sale of the Project or any portion thereof), licenses and permits
affecting the Project. Such assignment shall not be construed as a consent by
Standard Federal to any agreement, contract, license, or permit so assigned, or
to impose upon Standard Federal any obligations with respect thereto. Borrower
shall not cancel or amend any of the agreements, contracts, licenses and
permits hereby assigned (nor permit any of the same to terminate if they are
necessary or desirable for the operation of the Project), except in the
ordinary
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<PAGE> 15
course of business, without first obtaining, on each occasion, the written
approval of Standard Federal. This paragraph shall not be applicable to any
agreement, contract, license or permit that terminates if it is assigned
without the consent of any party thereto (other than Borrower) or issuer
thereof, unless such consent has been obtained or this assignment is ratified
by such party or issuer; nor shall this paragraph be construed as a present
assignment of any agreement, contract, license or permit that Borrower is
required by law to hold in order to operate the Project for the purposes
intended.
18. Assignment of Leases and Rents. As additional security for the
payment of the indebtedness evidenced by the Note, including interest thereon,
and the performance of all of Borrower's obligations hereunder or secured
hereby, and under any other document executed simultaneously or in connection
herewith, Borrower does hereby sell, assign, transfer and set over unto
Standard Federal, pursuant to Act 210 of the Public Acts of Michigan of 1953,
as amended, all the rents, profits and income under all leases or occupancy
agreements or arrangements, however evidenced or denominated, upon or affecting
the Project (including any extensions, amendments or renewals thereof), whether
such rents, profits and income are due or are to become due, including all such
leases in existence or coming into existence during the period this Mortgage is
in effect. This assignment shall run with the land until this Mortgage is
discharged in full and be good and valid as against Borrower and those claiming
by, under or through Borrower, from the date of recording of this Mortgage.
This assignment shall continue to be operative during the foreclosure or any
other proceedings taken to enforce this Mortgage. In the event of a
foreclosure sale which results in a deficiency, this assignment shall stand as
security during the redemption period for the payment of such deficiency. This
assignment is given as collateral security only and does not and shall not be
construed as obligating Standard Federal to perform any of the covenants or
undertakings required to be performed by Borrower in any leases.
Borrower covenants and agrees not to cancel, accept a surrender of, modify
or alter (orally or in writing), reduce the rental under or consent to the
assignment or subletting of the lessee's interest in, any lease affecting the
Project, except in the ordinary course of business and on commercially
reasonable terms, or to make any other assignment, pledge or other disposition
of such leases, or any of them, or of the rents, issues and profits derived
from the use of the mortgaged premises. Any of the above acts, if done without
the written consent of Standard Federal, shall be null and void.
Borrower warrants and represents that all leases or copies of leases which
have been delivered to Standard Federal are in full force and effect and there
are no defaults existing thereunder, and that Borrower has not: (a) executed
any prior assignments
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<PAGE> 16
presently subsisting of any leases or rentals pertaining to the Project, (b)
performed any acts or executed any other instruments which might prevent or
limit Standard Federal's operating under any of the terms and conditions of
this Mortgage, (c) executed or granted any modification whatever of any lease
pertaining to the Project which has not been disclosed to Standard Federal, or
(d) subordinated any lease to the lien of this Mortgage, except on terms
acceptable to Standard Federal.
Until the occurrence of an Event of Default hereunder, Borrower may
receive, collect and enjoy the rents and income from the Project. Upon the
occurrence of an Event of Default under this Mortgage, Standard Federal shall
be entitled to, at its option, to enter upon the Project, or any part thereof,
by its officers, agents, or employees, and: (a) collect the rents and income
from the Project as long as an Event of Default exists and during the pendency
of any foreclosure proceedings and, if there is a deficiency, during any
redemption period, (b) rent or lease the Project or any portion thereof upon
such terms and for such time as it may deem best, (c) operate or maintain the
Project, (d) maintain proceedings to recover rents or possession of the Project
from any tenant or trespasser, and apply the net proceeds of such rent and
income, after payment of all proper charges and expenses, to the following
purposes: (1) payment of all of the costs and expenses incurred by Standard
Federal in exercising its rights under this paragraph; (2) payment of interest
and principal due under the Note; (3) payment of all other sums secured hereby;
(4) payment of expenses of preserving the Project, including taxes and
insurance premiums. Notwithstanding the foregoing, Standard Federal, in its
sole discretion, may change the priorities set forth above for the application
of the net proceeds of such rent and income. The Borrower hereby authorizes
Standard Federal in general to perform all acts necessary for the operation and
maintenance of the Project in the same manner and to the same extent that the
Borrower might reasonably so act. Standard Federal shall only be accountable
for money actually received by it pursuant to the assignment contained in this
paragraph. Such entry and taking possession of the Project, or any part
thereof, by Standard Federal, may be made by actual entry and possession, or by
written notice served personally upon or sent by certified mail to the last
address of the Borrower appearing on the records of Standard Federal, as
Standard Federal may elect, and no further authorization or notice shall be
required. BORROWER HEREBY WAIVES ANY RIGHT TO NOTICE, OTHER THAN THE NOTICE
PROVIDED ABOVE AND WAIVES ANY RIGHT TO ANY HEARING JUDICIAL OR OTHERWISE PRIOR
TO STANDARD FEDERAL EXERCISING ITS RIGHTS UNDER THE ASSIGNMENT CONTAINED IN
THIS PARAGRAPH.
Standard Federal and its duly authorized agents shall be entitled to enter
the Project for the purpose of delivering any and all such notices and other
communications to the tenants and occupiers thereof or to take such other steps
as shall be necessary or desirable in Standard Federal's discretion to exercise
its
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<PAGE> 17
rights hereunder, and Standard Federal and its agents shall have absolutely no
liability to Borrower arising therefrom, except for gross negligence or willful
misconduct. Standard Federal shall not, however, be obligated to give any
tenant or occupier of the Project any notice by personal delivery and Standard
Federal may, in its sole discretion, deliver all such notices and
communications by ordinary first-class U.S. mail, postage prepaid, or
otherwise.
The Borrower irrevocably consents that any lessee or lessees under any
leases covering the Project, upon demand and notice from Standard Federal of
Borrower's default under the Note or this Mortgage, shall pay all rents, issues
and profits under such leases to Standard Federal without any obligation upon
any such lessee or lessees for the determination of the actual existence of any
default.
In the event that Borrower obstructs Standard Federal in its efforts to
collect the rents and income from the Project, or after requested by Standard
Federal, unreasonably refuses, fails or neglects to assist Standard Federal in
collecting such rent and income, Standard Federal shall be entitled to the
appointment of a receiver of the Project and of the income, rents and profits
therefrom, with such powers as the court making such appointment may confer.
The Borrower covenants and agrees to perform and discharge each and every
obligation, covenant, and agreement required to be performed by the landlord
under all leases covering the Project, and should the Borrower fail so to do,
then Standard Federal, but without obligation to do so, and without releasing
the Borrower from any obligation hereof, may make or do the same in such manner
and to such extent as Standard Federal may deem necessary to protect the
security hereof. Nothing herein contained shall be construed to bind Standard
Federal to perform any of the terms and provisions contained in the leases, or
otherwise to impose any obligation upon Standard Federal. Any default by the
Borrower in the performance of any of the obligations contained in this
paragraph, which is not cured within 30 days after notice thereof from Standard
Federal to Borrower, or, if the default is of a kind which cannot be cured
within 30 days, if Borrower fails to undertake the cure of such default within
30 days after notice thereof from Standard Federal to Borrower and thereafter
diligently pursue such cure and complete it within a reasonable time, shall
constitute and be deemed to be a default under the terms of this Mortgage
entitling Standard Federal to exercise the rights and remedies provided by this
Mortgage.
Standard Federal shall at no time have any obligation whatever to attempt
to collect rent from any tenant or occupier of the Project notwithstanding that
such tenants and occupiers may not be paying rent to either Borrower or to
Standard Federal. Further, Standard Federal shall at no time have any
obligation whatever to
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<PAGE> 18
enforce any other obligations owed by tenants or occupiers of the Project to
Borrower. No action taken by Standard Federal under this Mortgage shall put
Standard Federal in the position of a "mortgagee in possession."
Borrower shall at no time collect advance rent under any lease upon,
affecting or pertaining to the Project or any part thereof in excess of one
month (other than as a security deposit) and Standard Federal shall not be
bound in any respect by any rent prepayment made or received in violation of
the terms hereof.
Standard Federal shall have the right to assign the Borrower's right, title
and interest in all leases covering the Project to any subsequent holder of
this Mortgage or the Note, and to assign the same to any person acquiring title
to the Project through foreclosure or otherwise.
19. Environmental Representations and Indemnity. The Borrower
represents and warrants to Standard Federal:
(a) Except as may otherwise be disclosed in a Subsurface Investigation
at 6200 Elmridge Drive, Sterling Heights, Michigan, Clayton Project No.
58644.00, dated November 4, 1994, prepared by Clayton Environmental
Consultants, neither the Borrower nor, to the best of Borrower's knowledge
after due inquiry, any prior owner of the Project or any other person has
caused or permitted any waste, oil, pesticides, or any substance or material of
any kind which is currently known or suspected to be toxic or hazardous,
including but not limited to any substance defined as a "Hazardous Waste" in
Title 40, Part 261 of the Code of Federal Regulations, (hereinafter referred to
as "Hazardous Material") to be discharged, dispersed, released, stored,
treated, generated, disposed of, or allowed to escape on, under or at the
Project, nor has the Project, or any part thereof ever been used by the
Borrower or, to the best of Borrower's knowledge after due inquiry, any prior
owner of the Project or any other person, as a dump, storage or disposal site
for any Hazardous Material.
(b) To the best of Borrower's knowledge, no asbestos or
asbestos-containing materials have been installed, used, incorporated into, or
disposed of on the Project.
(c) To the best of Borrower's knowledge, no polychlorinated biphenyls
("PCBs") are located on or in the Project, in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils, or any
other device or form.
(d) To the best of Borrower's knowledge, no underground storage tanks
are located on the Project or were located on the Project and subsequently
removed or filled.
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<PAGE> 19
(e) The Borrower (1) has not received any notice of any release or
threatened release of any Hazardous Materials in, under or upon the Project or
of any violation of any environmental or ecological protection laws or
regulations with respect to the Project, and (2) does not know of any basis for
any such notice or violation with respect to the Project.
Borrower hereby indemnifies Standard Federal and agrees to hold Standard
Federal harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, Standard Federal for, with
respect to, or as a direct or indirect result of (a) the presence on or under,
or the escape, seepage, leakage, spillage, discharge, emission or release from,
the Project of any Hazardous Material, including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims, asserted or
arising under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., 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 Material, the costs of any required or necessary
clean-up or detoxification of the Project, the costs of the preparation of any
clean-up or closure plans and reasonable attorney's fees and costs, or (b) the
presence of any asbestos on the Project (including, without limitation, the
cost of removal) regardless of whether or not caused by, or within the control
of, Borrower.
20. Due on Sale. Standard Federal in making the loan secured by this
Mortgage is relying upon the integrity of Borrower and its undertaking to
maintain the Project. If Borrower should (a) sell, transfer, convey or assign
the Project, or any right, title or interest therein, whether legal or
equitable, whether voluntarily or involuntarily, by outright sale, deed,
installment sale contract, land contract, contract for deed, leasehold interest
(other than leases to tenants) with a term greater than three years, lease
option contract or any other method of conveyance of real property interests;
or (b) cause, permit or suffer any change in the current ownership or
management of the Borrower; or (c) cause, permit or suffer any change in the
current management and control of the Project or in the degree of control
Borrower exercises or is empowered to exercise over the decisions affecting the
ownership and operation of the Project as of the date hereof, then, and in any
such event, Standard Federal shall have the right at its sole option thereafter
to declare all sums secured hereby and then unpaid to be due and payable
forthwith although the period limited for the payment thereof shall not then
have expired, anything contained to the contrary hereinbefore notwithstanding,
and thereupon to exercise all of its rights and remedies under this Mortgage.
If the ownership of the Project, or any part thereof, becomes vested in a
person other than the Borrower (with or without
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<PAGE> 20
Standard Federal's consent), Standard Federal may deal with such successor or
successors in interest with reference to this Mortgage, and the indebtedness
hereby secured, in the same manner as with the Borrower, without in any manner
vitiating, releasing or discharging the Borrower's liability hereunder or upon
the indebtedness hereby secured. No sale of the Project and no forbearance or
extensions by Standard Federal of the time for payment of the indebtedness
hereby secured or the performance of the covenants and agreements herein
provided shall in any way operate to release, discharge, modify, change or
affect the lien of this Mortgage or the liability of Borrower on the Note or
for the performance hereof, either in whole or in part, and the Borrower shall
at all times continue primarily liable on the indebtedness secured hereby until
this Mortgage is fully discharged or Borrower is formally released by an
instrument in writing duly executed by Standard Federal.
21. Binding Effect. Until this Mortgage is discharged in full, all of
the covenants and conditions hereof shall run with the land and shall be
binding upon the successors and assigns of Borrower, and shall inure to the
benefit of the successors and assigns of Standard Federal. Any reference
herein to "Borrower" or "Standard Federal" shall include their respective
successors and assigns.
22. Notices. All notices, demands and requests required or permitted to
be given to Borrower hereunder or by law shall be deemed delivered when
deposited in the United States mail, with full postage prepaid thereon,
addressed to Borrower at the last address of Borrower on the records of
Standard Federal.
23. No Waiver. No waiver by Standard Federal of any right or remedy
granted hereunder shall affect or extend to any other right or remedy of
Standard Federal hereunder, nor affect the subsequent exercise of the same
right or remedy by Standard Federal for any further or subsequent Event of
Default by Borrower hereunder, and all such rights and remedies of Standard
Federal hereunder are cumulative. Time is of the essence.
24. Severability. If any provision(s) hereof are in conflict with any
statute or rule of law of the State of Michigan or are otherwise unenforceable
for any reason whatever, then such provision(s) shall be deemed null and void
to the extent of such conflict or unenforceability, but shall be deemed
separable from and shall not invalidate any other provisions of this Mortgage.
25. Pronouns. If more than one person joins in the execution hereof, or
is of the feminine sex, or a corporation, the pronoun and relative words herein
used shall be read as if in plural, feminine or neuter, respectively.
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<PAGE> 21
26. Future Advances. Upon request of Borrower, Standard Federal at
Standard Federal's option prior to release of this Mortgage, may make future
advances to Borrower. Such future advances, with interest thereon, shall be
secured by this Mortgage when evidenced by promissory notes stating that said
notes are secured hereby.
IN WITNESS WHEREOF, this Mortgage was executed and delivered by the
undersigned on the day and year first above written.
WITNESSES: BORROWER:
MCCLAIN INDUSTRIES, INC.,
a Michigan corporation
By:
- ---------------------------- ---------------------------------
E. James Zabinski
Its: Treasurer
- ---------------------------- --------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF )
The foregoing instrument was acknowledged before me this 6th day of
February, 1995, by E. James Zabinski, Treasurer of McClain Industries, Inc.,
a Michigan corporation, on behalf of the corporation.
-----------------------------------
Notary Public,
---------------------
County, Michigan
My commission expires:
--------------
DRAFTED BY: WHEN RECORDED RETURN TO:
Daniel C. Watson, Esq. Standard Federal Bank
Standard Federal Bank, a Att: Commercial Loan Department
federal savings bank 2600 West Big Beaver Road
2600 West Big Beaver Road Troy, Michigan 48084
Troy, Michigan 48084
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<PAGE> 22
"EXHIBIT A"
Land in the City of Sterling Heights, County of Macomb and State of
Michigan, described as:
Lots 22 through 26, SUPERVISOR'S PLAT NO. 2, according to the Plat
thereof as recorded in Liber 16 of Plats, Page 34, Macomb County Records
Tax Parcel No.: 10-16-151-010 - Lot 22
10-16-151-011 - Lot 23
10-16-151-012 - Lot 24
10-16-151-013 - Lot 25
10-16-151-014 - Lot 26
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<PAGE> 1
EXHIBIT 10.25
COMMERCIAL MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
This is a Future Advance Mortgage
THIS MORTGAGE is made this 6th day of February, 1995, by MCCLAIN
INDUSTRIES, INC., a Michigan corporation ("Borrower"), whose address is
6200 Elmridge, Sterling Heights, Michigan 48310 to Standard Federal Bank, a
federal savings bank ("Standard Federal"), whose address is 2600 West Big
Beaver Road, Troy, Michigan 48084.
RECITALS:
A. Borrower is justly indebted to Standard Federal in the principal
amount of Two Million and 00/100 Dollars ($2,000,000.00), together with
interest thereon in accordance with a mortgage note from Borrower to Standard
Federal of even date herewith (the "Note").
B. The Note is identified as being secured hereby by a statement thereon.
THEREFORE, in order to secure payment of the principal and interest of such
indebtedness according to the terms of the Note, and all other amounts payable
by Borrower thereunder, and any and all extensions and renewals thereof,
however evidenced, and the performance of the covenants and conditions hereof,
and THE REPAYMENT OF ANY FUTURE ADVANCES, WITH INTEREST THEREON, made to
Borrower by Standard Federal pursuant to the provisions hereof, Borrower does
hereby MORTGAGE and WARRANT to Standard Federal, its successors and assigns
forever, certain real property owned by Borrower and situated in the State of
Michigan, as more particularly described in Exhibit "A" attached hereto (the
"premises"), together with (1) all the estate, title, interest and rights of
Borrower in and to the premises and all buildings and improvements of every
kind and description now or hereafter placed upon the premises or any part
thereof, (2) all heretofore or hereafter vacated alleys and streets abutting
the premises, (3) all furniture, fixtures, equipment and appliances, regardless
of their character as personal property, including, but not limited to, all
lighting, heating, cooling, ventilating, air conditioning, plumbing,
sprinkling, communicating and electrical systems, and machinery, appliances,
fixtures and equipment pertaining thereto, awnings, stoves, refrigerators,
dishwashers, disposals, incinerators, carpeting and drapes, and all other
furniture, fixtures, equipment and appliances of every type, nature and
description, owned by Borrower and now or at any time hereafter related to,
affixed to, attached to, placed upon or used in any way in connection with the
use, occupancy or operation of the premises (except leased equipment and trade
fixtures which, in either case, are readily removable without damaging or
reducing the value or utility of the premises or the improvements thereto), all
of which
<PAGE> 2
furniture, fixtures, equipment and appliances shall be deemed to be a part of
the premises and covered by the lien hereof, and (4) all of the rents, profits,
and leases thereof and the tenements, hereditaments, easements, privileges and
appurtenances thereto. (Any reference herein to the "Project" shall be deemed
to apply to the above described premises and to such buildings, fixtures,
furniture, equipment and appliances, and to the rents, profits and leases
thereof, and to such tenements, hereditaments, easements, privileges and
appurtenances, unless the context shall require otherwise.)
To have and to hold the Project, with all of the tenements, hereditaments,
easements, appurtenances and other rights and privileges thereunto belonging or
in any manner now or hereafter appertaining thereto, for the use and benefit of
Standard Federal upon the conditions hereinafter set forth.
Borrower does hereby covenant, promise and agree to and with Standard
Federal, which covenants, promises and agreements shall, to the extent
permitted by law, be deemed to run with the land, as follows:
1. Covenant to Pay Indebtedness. Borrower shall pay the principal and
interest of Borrower's indebtedness to Standard Federal according to the terms
of the Note and shall pay the indebtedness to Standard Federal according to the
terms of any future advances secured by this Mortgage and shall pay all other
amounts provided herein.
2. Covenant of Title. At the time of the execution and delivery of this
Mortgage, Borrower is well and truly seized of the Project in fee simple, free
of all easements, liens and encumbrances whatever (other than those easements
of record as of the date hereof and the rights of the public in any part of the
Project used or taken for road purposes), and will forever warrant and defend
the same against any and all other claims whatever, and the lien created hereby
is and will be kept as a first lien upon the Project and every part thereof,
subject only to the foregoing exceptions.
3. Taxes and Assessments. Until the debt secured hereby is fully
satisfied, Borrower will pay all taxes, assessments and all other charges and
encumbrances levied on the Project before any penalty for nonpayment attaches
thereto, and will deliver to Standard Federal, upon request, official receipts
showing such payment. Borrower also shall pay when due all taxes, assessments
and other charges and encumbrances that may be levied upon or on account of
this Mortgage or the indebtedness secured hereby or upon the interest or estate
in the Project created or represented by this Mortgage, whether levied against
Standard Federal or otherwise. In the event payment by Borrower of any tax
referred to in the foregoing sentence would result in the payment of interest
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<PAGE> 3
in excess of the rate permitted by law, then Borrower shall have no obligation
to pay the portion of such tax which would result in the payment of such
excess; provided, however, in such event, at any time after the enactment of a
law providing for such tax, Standard Federal, at its option, may declare the
entire principal balance of the indebtedness secured hereby, together with all
interest thereon, to be due and payable immediately, without notice.
4. Insurance. Until the debt secured hereby is fully satisfied, Borrower
will keep the Project continuously insured against loss by fire, windstorm and
other hazards, casualties and contingencies, including vandalism and malicious
mischief, in such amounts and for such periods as may be required by Standard
Federal. Borrower shall pay promptly when due all premiums for such insurance
and deliver to Standard Federal, without request, receipts showing such
payment. All insurance shall be carried in companies approved by Standard
Federal and the policies and renewals thereof shall be held by, and pledged to,
Standard Federal (unless Standard Federal shall direct or permit otherwise) as
additional security hereunder, and shall have attached thereto a mortgagee
clause acceptable to Standard Federal, making all loss or losses under such
policies payable to Standard Federal, its successors and assigns, as its or
their interest may appear. In the event of loss or damage to the Project,
Borrower shall give immediate notice in writing by mail to Standard Federal,
who may make proof of loss if not made promptly by Borrower.
In the event the amount of the loss is $200,000.00 or less, the insurance
proceeds shall be released to the Borrower, upon request by the Borrower.
Borrower shall be obligated to use such proceeds to restore or repair the
Project unless Standard Federal otherwise specifies in writing.
In the event the amount of the loss is greater than $200,000.00, each
insurance company concerned is hereby authorized and directed upon request by
Standard Federal, to make payment for such loss, to the extent of the
indebtedness hereby secured, directly to Standard Federal instead of to
Borrower and Standard Federal jointly. Provided there has occurred no Event of
Default hereunder nor any event which with notice or the passage of time or
both would become an Event of Default hereunder and further provided that
Standard Federal shall reasonably determine that sufficient funds are available
from insurance proceeds and any funds to be provided by Borrower to repair or
restore the Project within a reasonable time and that such repair or
restoration is economically feasible, Standard Federal agrees, upon request by
the Borrower, to apply the insurance proceeds to repair or restore the Project,
after reimbursement of all costs and expenses of Standard Federal in collecting
such proceeds, subject to the following terms and conditions:
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<PAGE> 4
(a) Standard Federal shall retain all insurance proceeds in a
non-interest bearing escrow account to be disbursed to pay the costs of
repair or restoration in accordance with procedures reasonably established
by Standard Federal.
(b) All plans and specifications for repair or restoration shall be
approved by Standard Federal prior to the commencement of any repair or
restoration.
(c) All repair or restoration shall be done by or under the direction
of Borrower, shall be in accordance with the approved plans and
specifications, shall be in a workmanlike manner free from all defects,
shall be in compliance with all statutes, ordinances, rules and regulations
applicable thereto and shall be completed free of all construction liens
except those being contested in good faith by appropriate proceedings and
with respect to which Borrower shall have provided Standard Federal
satisfactory security.
(d) Standard Federal shall have the right, at Borrower's expense, to
inspect all repairs and restoration and, if Standard Federal reasonably
determines that any work or materials are not in conformity with the
approved plans and specifications or other requirements of sub-paragraph
(c) above, to stop the work and order replacement or correction thereof by
Borrower.
(e) Standard Federal shall not be obligated to make disbursements more
frequently than monthly and the remaining undisbursed proceeds shall always
be sufficient to meet the total estimated remaining costs to complete the
repair or restoration plus 10% of such costs.
(f) All insurance proceeds in excess of the amounts necessary to
repair or restore the Project may be applied, at Standard Federal's option,
to the outstanding principal balance under the Note (without penalty for
prepayment), to fulfill any other covenant herein or any other obligation
of Borrower to Standard Federal, or released to Borrower.
In the event all of the conditions to the use of the insurance proceeds to
repair or restore the Project which are outlined above are not satisfied,
Standard Federal, at its option, may apply the insurance proceeds or any part
thereof, first, toward reimbursement of all costs and expenses of Standard
Federal in collecting such proceeds, and then, to the outstanding principal
balance under the Note (without any penalty for prepayment), to fulfill any
other covenant herein or any other obligation of Borrower to Standard Federal,
or to the restoration or repair of the Project.
Application by Standard Federal of any insurance proceeds to the
outstanding principal balance under the Note shall not excuse
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<PAGE> 5
Borrower from making the regularly scheduled payments due thereunder, nor shall
such application extend or reduce the amount of such payments. In the event of
foreclosure of this Mortgage or other transfer of title to the Project in
extinguishment of the indebtedness secured hereby, all right, title and
interest of Borrower in and to any insurance policies then in force shall pass
to the purchaser or grantee and Borrower hereby appoints Standard Federal its
attorney-in-fact, in Borrower's name, to assign and transfer all such policies
and proceeds to such purchaser or grantee.
5. Standard Federal's Right to Make Expenditures. Should an Event of
Default occur hereunder as a result of Borrower's failure to pay any taxes or
assessments or procure and maintain insurance or make necessary repairs to the
Project, Standard Federal may pay such taxes and assessments, effect such
insurance and make such repairs, and the monies so paid by it shall be a
further lien on the Project, payable forthwith, with interest at the default
rate set forth in the Note. Standard Federal may make advances pursuant to
this paragraph or to paragraph 7 without curing the Event of Default and
without waiving Standard Federal's right of foreclosure or any other right or
remedy of Standard Federal under this Mortgage. The exercise of the right to
make advances pursuant to this paragraph shall be optional with Standard
Federal and not obligatory and Standard Federal shall not be liable in any case
for failure to exercise such right or for failure to continue exercising such
right once having exercised it. Borrower's failure to pay taxes and/or
assessments assessed against the Project, or any installment thereof, or any
insurance premium upon policies covering the Project or any part thereof, shall
constitute waste (although the meaning of the term "waste" shall not
necessarily be limited to such nonpayment), as provided by Act No. 236 of the
Public Acts of Michigan of 1961, as amended, and shall entitle Standard Federal
to all remedies provided for therein. Borrower further agrees to and does
hereby consent to the appointment of a receiver under such statute, should
Standard Federal elect to seek such relief thereunder.
6. Escrow for Taxes and Insurance. Standard Federal, in its sole
discretion, shall be entitled to require Borrower to pay to Standard Federal
monthly such amounts as Standard Federal from time to time estimates as
necessary to create and maintain a reserve fund from which to pay before the
same become due all taxes, assessments and other charges and encumbrances
levied on the Project and premiums for insurance as are herein covenanted to be
paid by Borrower and when such taxes, assessments and other charges and
encumbrances and insurance premiums become due and payable, Standard Federal
shall pay the same to the extent funds are available from the reserve fund;
provided, however, that Standard Federal shall have no liability for any
failure to so pay taxes, assessments and other charges and encumbrances or
insurance premiums for any reason whatsoever. In the event that sufficient
-5-
<PAGE> 6
funds have not been deposited as aforesaid to cover the amount of such taxes,
assessments and other charges and encumbrances and insurance premiums when the
same become due and payable, Borrower shall forthwith upon request by Standard
Federal pay such balance to Standard Federal. Standard Federal shall not be
required to pay Borrower any interest or earnings whatever on the funds held by
Standard Federal for the payment of such taxes, assessments and other charges
and encumbrances or for the payment of insurance premiums, or on any other
funds deposited with Standard Federal in connection with this Mortgage. Upon
the occurrence of an Event of Default under this Mortgage, any of such monies
then remaining on deposit with Standard Federal may be applied against the
indebtedness hereby secured immediately upon or at any time after the
occurrence of an Event of Default, and without notice to Borrower. Further,
Standard Federal may make payments from any of such monies on deposit with
Standard Federal for taxes, assessments, other charges or encumbrances or
insurance premiums on or with respect to the Project notwithstanding that
subsequent owners of the Project may benefit thereby.
7. Waste and Inspection and Repair. Borrower will abstain from and will
not suffer the commission of waste on the Project and will keep the buildings,
improvements, fixtures, equipment and appliances now or hereafter thereon in
good repair and will make replacements thereto as and when the same become
necessary. Borrower will comply promptly with all laws, ordinances,
regulations and orders of all public authorities having jurisdiction over the
Project relating to the use, occupancy and maintenance thereof, and shall upon
request promptly submit to Standard Federal evidence of such compliance.
Nothing herein shall be deemed to prohibit Borrower from contesting the
enforceability or applicability of any law, ordinance, regulation or order;
provided, however, that Standard Federal, in its sole discretion, may require
that Borrower comply with any such law, ordinance, regulation or order during
the pendency of any such contest and all appeals therefrom. In the event the
Project or any part thereof, in the sole judgment of Standard Federal, requires
inspection, repair, care or attention of any kind or nature not theretofore
provided by Borrower within 30 days after notice thereof from Standard Federal
to Borrower, or within such longer time as may be necessary if the repair, care
or attention is of a kind which cannot be completed in 30 days, provided that
Borrower undertakes the repair, care or attention within 30 days after notice
thereof from Standard Federal and thereafter diligently pursues the completion
of same within a reasonable time, Standard Federal may (without being obligated
to do so) enter or cause entry to be made upon the Project and inspect, repair,
and/or maintain the same as Standard Federal may deem necessary or advisable,
and may (without being obligated to do so) make such expenditures and outlays
of money as Standard Federal may deem appropriate for the preservation of the
Project. All expenditures and outlays of money made by Standard Federal
pursuant hereto shall be secured hereby, shall be payable forthwith, and
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<PAGE> 7
shall bear interest at the default rate provided in the Note. Standard Federal
shall have the right at any time, and from time to time, to enter the Project
for the purpose of inspecting the same. Borrower will not permit the Project
or any portion thereof to be used for any unlawful purpose. No building or
other improvement on any part of the Project shall be removed, demolished or
materially altered without the prior written consent of Standard Federal,
except that Borrower shall have the right, without such consent, to remove and
dispose of, free from the lien of this Mortgage, such personalty and equipment
as from time to time may become worn out or obsolete, provided that (a)
simultaneously with or prior to such removal, any such equipment shall be
replaced with other new equipment of like kind and quality, free from any
security interest, lien or encumbrances, and by such removal and replacement,
Borrower shall be deemed to have subjected the replacement equipment to the
lien of this Mortgage; and (b) any net cash proceeds received from such
disposition shall be promptly paid over to Standard Federal to be applied to
the outstanding principal balance under the Note, without any charge for
prepayment.
8. Events of Default. The occurrences listed below shall be deemed
Events of Default hereunder and shall entitle Standard Federal, at its option
and without notice except where required by law and as otherwise provided
herein, to exercise any one or any combination of remedies described in
paragraph 9 or otherwise available to Standard Federal:
(a) If any indebtedness of the Borrower to Standard Federal is not
paid within 10 days after the date due, regardless of whether such
indebtedness has arisen pursuant to the terms of the Note, or any loan
agreement, promissory note, mortgage, security agreement, guaranty,
instrument or other agreement or otherwise.
(b) If any warranty or representation made by or for the Borrower
and/or any endorser or guarantor of the Note ("Guarantor") in connection
with the loan(s) evidenced thereby, or if any financial data or any other
information now or hereafter furnished to Standard Federal by or on behalf
of the Borrower and/or any Guarantor shall prove to be false, inaccurate or
misleading in any material respect, and such default is not cured within 15
days after written notice to the Borrower of such default.
(c) If the Borrower and/or any Guarantor shall fail to perform any
obligation or covenant hereunder, or shall fail to comply with any of the
provisions of the Note or of any loan agreement or other agreement with
Standard Federal to which it may be a party, and such failure is not cured
within 15 days after written notice to the Borrower of such failure.
-7-
<PAGE> 8
(d) If any other Event of Default shall occur under the Note.
(e) If foreclosure or other proceedings to enforce any second mortgage
or any junior security interest, lien or encumbrance of any kind upon the
Project or any portion thereof are instituted and are not dismissed, or
insured against or bonded over in a manner reasonably acceptable to
Standard Federal within ninety (90) days.
(f) If Borrower fails to substantially comply with all of the material
terms, covenants and provisions of any and all leases or other agreements,
documents or restrictions that now encumber, affect or pertain to the
Project or any portion thereof.
9. Remedies. Immediately upon the occurrence of an Event of Default
defined in paragraph 8, Standard Federal shall have the option, in addition to
and not in lieu of or substitution for, all other rights and remedies provided
by law, to do any or all of the following:
(a) Without notice except as expressly required by law, to declare the
principal sum secured by this Mortgage, with all interest thereon and all
other sums secured hereby, to be immediately due and payable, and if the
same is not paid on demand, at Standard Federal's option, to bring suit
therefor; to demand payment of and if the same is not paid on demand, to
bring suit for any delinquent installment payment under the Note or
otherwise; to take any and all steps and institute any and all other
proceedings that Standard Federal deems necessary to enforce the
indebtedness and obligations secured hereby and to protect the lien of this
Mortgage.
(b) Upon the occurrence of any Event of Default arising out of the
existence of any lien upon the Project, Standard Federal shall have the
right (without being obligated to do so or to continue to do so), without
notice to Borrower, to advance on and for the account of Borrower such sums
as Standard Federal in its sole discretion deems necessary to cure such
Event of Default or to induce the holder of any such lien to forbear from
exercising its rights thereunder. The repayment of all such advances, with
interest thereon at the default rate set forth in the Note from the date of
each such advance, shall be secured hereby and shall be immediately due and
payable without demand.
(c) Immediately commence foreclosure proceedings against the Project
pursuant to applicable law. The commencement by Standard Federal of
foreclosure proceedings by advertisement or in equity shall be deemed an
exercise by Standard Federal of its option set forth in paragraph 9(a) to
accelerate the
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<PAGE> 9
due date of all sums secured hereby. Borrower hereby grants power to
Standard Federal upon the occurrence of an Event of Default hereunder, to
grant, bargain, sell, release and convey the Project at public auction or
vendue, and upon such sale to execute and deliver to the purchaser(s)
instruments of conveyance pursuant to the terms hereof and to the
applicable laws. Borrower acknowledges that the foregoing sentence confers
a power of sale upon Standard Federal, and that upon the occurrence of an
Event of Default this Mortgage may be foreclosed by advertisement as
described below and in the applicable Michigan statutes. Borrower
understands that upon the occurrence of an Event of Default, Standard
Federal is hereby authorized and empowered to sell the Project, or cause
the same to be sold and to convey the same to the purchaser in any lawful
manner, including but not limited to that provided by Chapter 32 of the
Revised Judicature Act of Michigan, entitled "Foreclosure of Mortgages by
Advertisement", which permits Standard Federal to sell the Project without
affording Borrower a hearing, or giving him actual personal notice. The
only notice required under such Chapter 32 is to publish notice in a local
newspaper and to post a copy of the notice on the Project.
WAIVER: By conferring this power of sale upon Standard Federal, Borrower,
for itself, its successors and assigns, after an opportunity for
consultation with its legal counsel, hereby voluntarily, knowingly and
intelligently waives all rights under the Constitution and Laws of the
United States and under the Constitution and Laws of the State of Michigan,
both to a hearing on the right to exercise and the exercise of the power of
sale, and to notice except as required by the Michigan statute which
provides for foreclosure of mortgages by advertisement. However, Borrower
reserves the right to timely contest the exercise of the power of sale by
instituting suit against Standard Federal in the circuit court of the
county in which the Project is located or any other court of competent
jurisdiction.
(d) Procure mortgage foreclosure or title reports. Borrower covenants
to pay forthwith to Standard Federal all sums paid for such purposes with
interest at the default rate provided for in the Note, and such sums and
the interest thereon shall constitute a further lien upon the Project.
(e) Procure appraisals, environmental audits and such other
investigations or analyses of the Project as Standard Federal may determine
to be required by regulatory or accounting rules, procedures or practices
or to otherwise be prudent or necessary. Borrower shall grant Standard
Federal free and unrestricted access to the Project for such purposes.
Borrower covenants to pay forthwith to Standard Federal all sums paid for
such purposes with interest at the default rate
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<PAGE> 10
provided for in the Note, and such sums and the interest thereon shall
constitute a further lien upon the Project.
(f) To enter into peaceful possession of the Project and/or to receive
the rent, income and profits therefrom, and to apply the same in accordance
with paragraph 18 hereof.
In connection with Standard Federal's right to possession of the Project
upon the occurrence of an Event of Default, as specified in the foregoing
paragraph, Borrower acknowledges that it has been advised that there is a
significant body of case law in Michigan which purportedly provides that in the
absence of a showing of waste of a character sufficient to endanger the value
of the Project, or other special factors, a mortgagor is entitled to remain in
possession of the Project, and to enjoy the income, rents and profits
therefrom, during the pendency of foreclosure proceedings and until the
expiration of the redemption period, even if the mortgage documents expressly
provide to the contrary. Borrower further acknowledges that it has been
advised that Standard Federal recognizes the value of the security covered
hereby is inextricably intertwined with the effectiveness of the management,
maintenance and general operation of the Project, and that Standard Federal
would not make the loan secured hereby unless it could be assured that it would
have the right to take possession of the Project in order to manage or to
control management thereof, and to enjoy the income, rents and profits
therefrom, immediately upon the occurrence of an Event of Default hereunder,
notwithstanding that foreclosure proceedings may not have been instituted, or
are pending, or the redemption period may not have expired. Accordingly,
Borrower hereby knowingly, intelligently and voluntarily waives all right to
possession of the Project from and after the occurrence of an Event of Default
hereunder, upon demand for possession by Standard Federal, and Borrower agrees
not to assert any objection or defense to Standard Federal's request or
petition to a court for possession. The rights hereby conferred upon Standard
Federal have been agreed upon prior to the occurrence of an Event of Default
hereunder and the exercise by Standard Federal of any such rights shall not be
deemed to put Standard Federal in the status of a "mortgagee in possession".
Borrower acknowledges that this provision is material to this transaction and
that Standard Federal would not make the loan secured hereby but for this
paragraph.
In the event of any sale of the Project by foreclosure, through suit in
equity, by publication or otherwise, the proceeds of any such sale shall be
applied in the following order of priority: (1) to all expenses incurred for
the collection of Borrower's indebtedness and the foreclosure of the Mortgage,
including reasonable attorneys' fees as are permitted by law; (2) to all sums
expended or incurred by Standard Federal directly or indirectly in carrying out
the covenants and agreements of Borrower under this Mortgage, together with
interest thereon; (3) to all
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<PAGE> 11
interest accrued under the Note; (4) to the principal balance of the Note and
the principal balance of any other indebtedness due from Borrower to Standard
Federal; and (5) the surplus, if any, shall be paid to Borrower, unless a
court of competent jurisdiction decrees otherwise.
10. Sale in Parcels. Upon any foreclosure sale of the Project, the same
may be sold either as a whole or in parcels, as Standard Federal may elect, and
if in parcels, the same may be divided as Standard Federal may elect, and at
the election of Standard Federal, may be offered first in parcels and then as a
whole, that offer producing the highest price for the entire Project to
prevail. Any law, statutory or otherwise, to the contrary notwithstanding,
Borrower hereby waives the right to require any such sale to be made in parcels
or the right to select such parcels.
11. Costs of Legal Proceedings. The Borrower shall pay Standard Federal a
reasonable attorney's fee in addition to all other legal costs in case Standard
Federal shall become a party, either as plaintiff or defendant, to any legal
proceedings in relation to the Project or the lien created hereby, which sums
shall be secured hereby and shall be payable forthwith at the default rate set
forth in the Note.
12. Eminent Domain. In the event the entire Project is taken under the
power of eminent domain, the entire award or payment in lieu of condemnation,
to the full extent of the amount secured hereby, shall be paid to Standard
Federal. Standard Federal shall apply such award or payment, first, toward
reimbursement of all of Standard Federal's costs and expenses incurred in
connection with collecting such award or payment, and then, at Standard
Federal's option, to the outstanding principal balance under the Note (without
any penalty for prepayment), to fulfill any other covenant herein or to any
other obligation of Borrower to Standard Federal.
In the event of a partial taking of the Project under the power of eminent
domain, the entire award or payment in lieu of condemnation, to the full extent
of the amount secured hereby, shall be paid over to Standard Federal. Provided
there has occurred no Event of Default hereunder, nor any event which with
notice or the passage of time or both would become an Event of Default
hereunder, and Standard Federal shall reasonably determine that sufficient
funds are available from the award or payment and any funds to be provided by
Borrower to repair or restore the remaining portion of the Project within a
reasonable time and that such repair or restoration is economically feasible,
Standard Federal agrees, upon request by the Borrower, to apply the award or
payment to repair or restore the remaining portion of the Project, after
reimbursement of all costs and expenses of Standard Federal in collecting the
award or payment, subject to the following terms and conditions:
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<PAGE> 12
(a) Standard Federal shall retain the award or payment in a
non-interest bearing escrow account to be disbursed to pay the costs of
repair or restoration in accordance with procedures reasonably established
by Standard Federal.
(b) All plans and specifications for repair or restoration shall be
approved by Standard Federal prior to the commencement of any repair or
restoration.
(c) All repair or restoration shall be done by or under the direction
of Borrower, shall be in accordance with the approved plans and
specifications, shall be in a workmanlike manner free from all defects,
shall be in compliance with all statutes, ordinances, rules and regulations
applicable thereto and shall be completed free of all construction liens
except those being contested in good faith by appropriate proceedings and
with respect to which Borrower shall have provided Standard Federal
satisfactory security.
(d) Standard Federal shall have the right, at Borrower's expense, to
inspect all repairs and restoration and, if Standard Federal reasonably
determines that any work or materials are not in conformity with the
approved plans and specifications or other requirements of sub-paragraph
(c) above, to stop the work and order replacement or correction thereof by
Borrower.
(e) Standard Federal shall not be obligated to make disbursements more
frequently than monthly and the remaining undisbursed proceeds shall always
be sufficient to meet the total estimated remaining costs to complete the
repair or restoration plus 10% of such costs.
(f) All proceeds of the award or payment in excess of the amounts
necessary to repair or restore the Project may be applied, at Standard
Federal's option, to the outstanding principal balance under the Note
(without penalty for prepayment), to fulfill any other covenant herein or
any other obligation of Borrower to Standard Federal, or released to
Borrower.
In the event all of the conditions to the use of the award or payment to
repair or restore the Project which are outlined above are not satisfied,
Standard Federal, at its option, may apply the award or payment or any part
thereof, first, toward reimbursement of all costs and expenses of Standard
Federal in collecting such award or payment, and then, to the outstanding
principal balance under the Note (without any penalty for prepayment), to
fulfill any other covenant herein or any other obligation of Borrower to
Standard Federal, or to the restoration or repair of the Project.
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<PAGE> 13
Application by Standard Federal of any condemnation award or payment or
portion thereof to the outstanding principal balance under the Note shall not
excuse Borrower from making the regularly scheduled payments due thereunder,
nor shall such application extend or reduce the amount of such payments.
Standard Federal is hereby empowered in the name of Borrower to receive, and
give acquittance for, any such award or payment, whether it is joint or
several; provided, however, that Standard Federal shall not be held responsible
for failure to collect any such award or payment, regardless of the cause of
such failure.
13. Books and Records. The Borrower covenants and agrees to furnish to
Standard Federal promptly certificates of occupancy and such other books,
records, documents, information and statements pertaining to the Borrower, the
Project and its operations and any guarantor(s) as Standard Federal may
request. All books, records and other information provided by Borrower
hereunder shall be in a form that is acceptable to Standard Federal and all
costs of providing the same shall be borne entirely by Borrower.
14. Secondary Financing. Borrower will not, without the prior written
consent of Standard Federal, mortgage or pledge the Project or any part thereof
as security for any other loan or obligation of Borrower. If any such mortgage
or pledge is entered into without the prior written consent of Standard
Federal, the entire indebtedness secured hereby, may, at the option of Standard
Federal, be declared immediately due and payable without notice. Further,
Borrower also shall pay any and all other obligations, liabilities or debts
which may become liens, security interests, or encumbrances upon or charges
against the Project for any repairs or improvements that are now or may
hereafter be made thereon, and shall not, without Standard Federal's prior
written consent, permit any lien, security interest, encumbrance or charge of
any kind to accrue and remain outstanding against the Project or any part
thereof, or any improvements thereon, irrespective of whether such lien,
security interest, encumbrance or charge is junior to the lien of this
Mortgage. Notwithstanding the foregoing, if any personal property by way of
additions, replacements or substitutions is hereafter purchased and installed,
affixed or placed by Borrower on the Project under a security agreement, the
lien or title of which is superior to the lien created by this Mortgage, all
the right, title and interest of Borrower in and to any and all such personal
property, together with the benefit of any deposits or payments made thereon by
Borrower, shall nevertheless be and are hereby assigned to Standard Federal and
are covered by the lien of this Mortgage.
15. Payment Upon Acceleration Subject to Any Prepayment Penalty. Upon the
occurrence of an Event of Default by Borrower hereunder and following the
acceleration of maturity as provided in paragraph 9 hereof, a tender of payment
of the amount necessary to satisfy the entire indebtedness secured hereby, made
at any time
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<PAGE> 14
prior to the foreclosure sale by Borrower, or by anyone in behalf of the
Borrower, shall constitute an evasion of the payment terms of the Note and
shall be deemed to be a voluntary prepayment thereunder, and any such payment,
to the extent permitted by law, will therefore include the premium required
under the prepayment privilege, if any, contained in the Note.
16. Security Agreement and Financing Statements. Borrower shall execute,
acknowledge and deliver any and all such further conveyances, documents,
mortgages and assurances as Standard Federal may reasonably require for
accomplishing the purposes hereof, including financing statements required by
Standard Federal to protect its interest under the provisions of the Michigan
Uniform Commercial Code, as amended, forthwith upon the written request of
Standard Federal. Upon any failure of Borrower to do so, Standard Federal may
execute, record, file, re-record and refile any and all such documents for and
in the name of Borrower, and Borrower hereby irrevocably appoints Standard
Federal as agent and attorney-in-fact of Borrower for the foregoing purposes.
This instrument is intended by the parties to be, and shall be construed as, a
security agreement, as that term is defined and used in Article Nine of the
Michigan Uniform Commercial Code, as amended, and shall grant to Standard
Federal a security interest in that portion of the Project with respect to
which a security interest can be granted under Article Nine of the Michigan
Uniform Commercial Code, as amended, which security interest shall include a
security interest in all personalty owned by Borrower, whether now owned or
subsequently acquired, which is or in the future may be physically located on
or affixed to the Project described in Exhibit "A" hereto, regardless of
whether such personalty consists of fixtures under Michigan law, a security
interest in the proceeds and products of the proceeds of all insurance policies
now or hereafter covering all or any part of such collateral. For purposes of
Article Nine of the Michigan Uniform Commercial Code, (a) Borrower herein is
the "debtor", (b) Standard Federal herein is the "secured party", (c)
information concerning the security interest created hereby may be obtained
from Standard Federal at its address set forth on page 1 hereof, and (d)
Borrower's mailing address is that set forth on page 1 hereof.
17. Assignment of Contracts and Agreements. Borrower hereby assigns to
Standard Federal, as further security for the indebtedness secured hereby,
Borrower's interest in all agreements, contracts (including contracts for the
lease or sale of the Project or any portion thereof), licenses and permits
affecting the Project. Such assignment shall not be construed as a consent by
Standard Federal to any agreement, contract, license, or permit so assigned, or
to impose upon Standard Federal any obligations with respect thereto. Borrower
shall not cancel or amend any of the agreements, contracts, licenses and
permits hereby assigned (nor permit any of the same to terminate if they are
necessary or desirable for the operation of the Project), except in the
ordinary
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<PAGE> 15
course of business, without first obtaining, on each occasion, the written
approval of Standard Federal. This paragraph shall not be applicable to any
agreement, contract, license or permit that terminates if it is assigned
without the consent of any party thereto (other than Borrower) or issuer
thereof, unless such consent has been obtained or this assignment is ratified
by such party or issuer; nor shall this paragraph be construed as a present
assignment of any agreement, contract, license or permit that Borrower is
required by law to hold in order to operate the Project for the purposes
intended.
18. Assignment of Leases and Rents. As additional security for the
payment of the indebtedness evidenced by the Note, including interest thereon,
and the performance of all of Borrower's obligations hereunder or secured
hereby, and under any other document executed simultaneously or in connection
herewith, Borrower does hereby sell, assign, transfer and set over unto
Standard Federal, pursuant to Act 210 of the Public Acts of Michigan of 1953,
as amended, all the rents, profits and income under all leases or occupancy
agreements or arrangements, however evidenced or denominated, upon or affecting
the Project (including any extensions, amendments or renewals thereof), whether
such rents, profits and income are due or are to become due, including all such
leases in existence or coming into existence during the period this Mortgage is
in effect. This assignment shall run with the land until this Mortgage is
discharged in full and be good and valid as against Borrower and those claiming
by, under or through Borrower, from the date of recording of this Mortgage.
This assignment shall continue to be operative during the foreclosure or any
other proceedings taken to enforce this Mortgage. In the event of a
foreclosure sale which results in a deficiency, this assignment shall stand as
security during the redemption period for the payment of such deficiency. This
assignment is given as collateral security only and does not and shall not be
construed as obligating Standard Federal to perform any of the covenants or
undertakings required to be performed by Borrower in any leases.
Borrower covenants and agrees not to cancel, accept a surrender of, modify
or alter (orally or in writing), reduce the rental under or consent to the
assignment or subletting of the lessee's interest in, any lease affecting the
Project, except in the ordinary course of business and on commercially
reasonable terms, or to make any other assignment, pledge or other disposition
of such leases, or any of them, or of the rents, issues and profits derived
from the use of the mortgaged premises. Any of the above acts, if done without
the written consent of Standard Federal, shall be null and void.
Borrower warrants and represents that all leases or copies of leases which
have been delivered to Standard Federal are in full force and effect and there
are no defaults existing thereunder, and that Borrower has not: (a) executed
any prior assignments
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<PAGE> 16
presently subsisting of any leases or rentals pertaining to the Project, (b)
performed any acts or executed any other instruments which might prevent or
limit Standard Federal's operating under any of the terms and conditions of
this Mortgage, (c) executed or granted any modification whatever of any lease
pertaining to the Project which has not been disclosed to Standard Federal, or
(d) subordinated any lease to the lien of this Mortgage, except on terms
acceptable to Standard Federal.
Until the occurrence of an Event of Default hereunder, Borrower may
receive, collect and enjoy the rents and income from the Project. Upon the
occurrence of an Event of Default under this Mortgage, Standard Federal shall
be entitled to, at its option, to enter upon the Project, or any part thereof,
by its officers, agents, or employees, and: (a) collect the rents and income
from the Project as long as an Event of Default exists and during the pendency
of any foreclosure proceedings and, if there is a deficiency, during any
redemption period, (b) rent or lease the Project or any portion thereof upon
such terms and for such time as it may deem best, (c) operate or maintain the
Project, (d) maintain proceedings to recover rents or possession of the Project
from any tenant or trespasser, and apply the net proceeds of such rent and
income, after payment of all proper charges and expenses, to the following
purposes: (1) payment of all of the costs and expenses incurred by Standard
Federal in exercising its rights under this paragraph; (2) payment of interest
and principal due under the Note; (3) payment of all other sums secured hereby;
(4) payment of expenses of preserving the Project, including taxes and
insurance premiums. Notwithstanding the foregoing, Standard Federal, in its
sole discretion, may change the priorities set forth above for the application
of the net proceeds of such rent and income. The Borrower hereby authorizes
Standard Federal in general to perform all acts necessary for the operation and
maintenance of the Project in the same manner and to the same extent that the
Borrower might reasonably so act. Standard Federal shall only be accountable
for money actually received by it pursuant to the assignment contained in this
paragraph. Such entry and taking possession of the Project, or any part
thereof, by Standard Federal, may be made by actual entry and possession, or by
written notice served personally upon or sent by certified mail to the last
address of the Borrower appearing on the records of Standard Federal, as
Standard Federal may elect, and no further authorization or notice shall be
required. BORROWER HEREBY WAIVES ANY RIGHT TO NOTICE, OTHER THAN THE NOTICE
PROVIDED ABOVE AND WAIVES ANY RIGHT TO ANY HEARING JUDICIAL OR OTHERWISE PRIOR
TO STANDARD FEDERAL EXERCISING ITS RIGHTS UNDER THE ASSIGNMENT CONTAINED IN
THIS PARAGRAPH.
Standard Federal and its duly authorized agents shall be entitled to enter
the Project for the purpose of delivering any and all such notices and other
communications to the tenants and occupiers thereof or to take such other steps
as shall be necessary or desirable in Standard Federal's discretion to exercise
its
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<PAGE> 17
rights hereunder, and Standard Federal and its agents shall have absolutely no
liability to Borrower arising therefrom, except for gross negligence or willful
misconduct. Standard Federal shall not, however, be obligated to give any
tenant or occupier of the Project any notice by personal delivery and Standard
Federal may, in its sole discretion, deliver all such notices and
communications by ordinary first-class U.S. mail, postage prepaid, or
otherwise.
The Borrower irrevocably consents that any lessee or lessees under any
leases covering the Project, upon demand and notice from Standard Federal of
Borrower's default under the Note or this Mortgage, shall pay all rents, issues
and profits under such leases to Standard Federal without any obligation upon
any such lessee or lessees for the determination of the actual existence of any
default.
In the event that Borrower obstructs Standard Federal in its efforts to
collect the rents and income from the Project, or after requested by Standard
Federal, unreasonably refuses, fails or neglects to assist Standard Federal in
collecting such rent and income, Standard Federal shall be entitled to the
appointment of a receiver of the Project and of the income, rents and profits
therefrom, with such powers as the court making such appointment may confer.
The Borrower covenants and agrees to perform and discharge each and every
obligation, covenant, and agreement required to be performed by the landlord
under all leases covering the Project, and should the Borrower fail so to do,
then Standard Federal, but without obligation to do so, and without releasing
the Borrower from any obligation hereof, may make or do the same in such manner
and to such extent as Standard Federal may deem necessary to protect the
security hereof. Nothing herein contained shall be construed to bind Standard
Federal to perform any of the terms and provisions contained in the leases, or
otherwise to impose any obligation upon Standard Federal. Any default by the
Borrower in the performance of any of the obligations contained in this
paragraph, which is not cured within 30 days after notice thereof from Standard
Federal to Borrower, or, if the default is of a kind which cannot be cured
within 30 days, if Borrower fails to undertake the cure of such default within
30 days after notice thereof from Standard Federal to Borrower and thereafter
diligently pursue such cure and complete it within a reasonable time, shall
constitute and be deemed to be a default under the terms of this Mortgage
entitling Standard Federal to exercise the rights and remedies provided by this
Mortgage.
Standard Federal shall at no time have any obligation whatever to attempt
to collect rent from any tenant or occupier of the Project notwithstanding that
such tenants and occupiers may not be paying rent to either Borrower or to
Standard Federal. Further, Standard Federal shall at no time have any
obligation whatever to
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<PAGE> 18
enforce any other obligations owed by tenants or occupiers of the Project to
Borrower. No action taken by Standard Federal under this Mortgage shall put
Standard Federal in the position of a "mortgagee in possession."
Borrower shall at no time collect advance rent under any lease upon,
affecting or pertaining to the Project or any part thereof in excess of one
month (other than as a security deposit) and Standard Federal shall not be
bound in any respect by any rent prepayment made or received in violation of
the terms hereof.
Standard Federal shall have the right to assign the Borrower's right, title
and interest in all leases covering the Project to any subsequent holder of
this Mortgage or the Note, and to assign the same to any person acquiring title
to the Project through foreclosure or otherwise.
19. Environmental Representations and Indemnity. The Borrower represents
and warrants to Standard Federal:
(a) Except as may otherwise be disclosed in a Subsurface Investigation at
5669 East Cork Street, Comstock Park, Michigan, Clayton Project No. 58643.00,
dated November 4, 1994, prepared by Clayton Environmental Consultants, neither
the Borrower nor, to the best of Borrower's knowledge after due inquiry, any
prior owner of the Project or any other person has caused or permitted any
waste, oil, pesticides, or any substance or material of any kind which is
currently known or suspected to be toxic or hazardous, including but not
limited to any substance defined as a "Hazardous Waste" in Title 40, Part 261
of the Code of Federal Regulations, (hereinafter referred to as "Hazardous
Material") to be discharged, dispersed, released, stored, treated, generated,
disposed of, or allowed to escape on, under or at the Project, nor has the
Project, or any part thereof ever been used by the Borrower or, to the best of
Borrower's knowledge after due inquiry, any prior owner of the Project or any
other person, as a dump, storage or disposal site for any Hazardous Material.
(b) To the best of Borrower's knowledge, no asbestos or
asbestos-containing materials have been installed, used, incorporated into, or
disposed of on the Project.
(c) To the best of Borrower's knowledge, no polychlorinated biphenyls
("PCBs") are located on or in the Project, in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils, or any
other device or form.
(d) To the best of Borrower's knowledge, no underground storage tanks are
located on the Project or were located on the Project and subsequently removed
or filled.
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<PAGE> 19
(e) The Borrower (1) has not received any notice of any release or
threatened release of any Hazardous Materials in, under or upon the Project or
of any violation of any environmental or ecological protection laws or
regulations with respect to the Project, and (2) does not know of any basis for
any such notice or violation with respect to the Project.
Borrower hereby indemnifies Standard Federal and agrees to hold Standard
Federal harmless from and against any and all losses, liabilities, damages,
injuries, costs, expenses and claims of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, Standard Federal for, with
respect to, or as a direct or indirect result of (a) the presence on or under,
or the escape, seepage, leakage, spillage, discharge, emission or release from,
the Project of any Hazardous Material, including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims, asserted or
arising under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., 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 Material, the costs of any required or necessary
clean-up or detoxification of the Project, the costs of the preparation of any
clean-up or closure plans and reasonable attorney's fees and costs, or (b) the
presence of any asbestos on the Project (including, without limitation, the
cost of removal) regardless of whether or not caused by, or within the control
of, Borrower.
20. Due on Sale. Standard Federal in making the loan secured by this
Mortgage is relying upon the integrity of Borrower and its undertaking to
maintain the Project. If Borrower should (a) sell, transfer, convey or assign
the Project, or any right, title or interest therein, whether legal or
equitable, whether voluntarily or involuntarily, by outright sale, deed,
installment sale contract, land contract, contract for deed, leasehold interest
(other than leases to tenants) with a term greater than three years, lease
option contract or any other method of conveyance of real property interests;
or (b) cause, permit or suffer any change in the current ownership or
management of the Borrower; or (c) cause, permit or suffer any change in the
current management and control of the Project or in the degree of control
Borrower exercises or is empowered to exercise over the decisions affecting the
ownership and operation of the Project as of the date hereof, then, and in any
such event, Standard Federal shall have the right at its sole option thereafter
to declare all sums secured hereby and then unpaid to be due and payable
forthwith although the period limited for the payment thereof shall not then
have expired, anything contained to the contrary hereinbefore notwithstanding,
and thereupon to exercise all of its rights and remedies under this Mortgage.
If the ownership of the Project, or any part thereof, becomes vested in a
person other than the Borrower (with or without
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<PAGE> 20
Standard Federal's consent), Standard Federal may deal with such successor or
successors in interest with reference to this Mortgage, and the indebtedness
hereby secured, in the same manner as with the Borrower, without in any manner
vitiating, releasing or discharging the Borrower's liability hereunder or upon
the indebtedness hereby secured. No sale of the Project and no forbearance or
extensions by Standard Federal of the time for payment of the indebtedness
hereby secured or the performance of the covenants and agreements herein
provided shall in any way operate to release, discharge, modify, change or
affect the lien of this Mortgage or the liability of Borrower on the Note or
for the performance hereof, either in whole or in part, and the Borrower shall
at all times continue primarily liable on the indebtedness secured hereby until
this Mortgage is fully discharged or Borrower is formally released by an
instrument in writing duly executed by Standard Federal.
21. Binding Effect. Until this Mortgage is discharged in full, all of the
covenants and conditions hereof shall run with the land and shall be binding
upon the successors and assigns of Borrower, and shall inure to the benefit of
the successors and assigns of Standard Federal. Any reference herein to
"Borrower" or "Standard Federal" shall include their respective successors and
assigns.
22. Notices. All notices, demands and requests required or permitted to
be given to Borrower hereunder or by law shall be deemed delivered when
deposited in the United States mail, with full postage prepaid thereon,
addressed to Borrower at the last address of Borrower on the records of
Standard Federal.
23. No Waiver. No waiver by Standard Federal of any right or remedy
granted hereunder shall affect or extend to any other right or remedy of
Standard Federal hereunder, nor affect the subsequent exercise of the same
right or remedy by Standard Federal for any further or subsequent Event of
Default by Borrower hereunder, and all such rights and remedies of Standard
Federal hereunder are cumulative. Time is of the essence.
24. Severability. If any provision(s) hereof are in conflict with any
statute or rule of law of the State of Michigan or are otherwise unenforceable
for any reason whatever, then such provision(s) shall be deemed null and void
to the extent of such conflict or unenforceability, but shall be deemed
separable from and shall not invalidate any other provisions of this Mortgage.
25. Pronouns. If more than one person joins in the execution hereof, or
is of the feminine sex, or a corporation, the pronoun and relative words herein
used shall be read as if in plural, feminine or neuter, respectively.
-20-
<PAGE> 21
26. Future Advances. Upon request of Borrower, Standard Federal at
Standard Federal's option prior to release of this Mortgage, may make future
advances to Borrower. Such future advances, with interest thereon, shall be
secured by this Mortgage when evidenced by promissory notes stating that said
notes are secured hereby.
IN WITNESS WHEREOF, this Mortgage was executed and delivered by the
undersigned on the day and year first above written.
WITNESSES: BORROWER:
MCCLAIN INDUSTRIES, INC.,
a Michigan corporation
By:
- ------------------------------ ---------------------------------
E. James Zabinski
Its: Treasurer
- ------------------------------ --------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF )
The foregoing instrument was acknowledged before me this 6th day of
February , 19 , by E. James Zabinski, Treasurer of McClain
Industries, Inc., a Michigan corporation, on behalf of the corporation.
-----------------------------------
Notary Public,
---------------------
County, Michigan
My commission expires:
-------------
DRAFTED BY: WHEN RECORDED RETURN TO:
Daniel C. Watson, Esq. Standard Federal Bank
Standard Federal Bank, a Att: Commercial Loan Department
federal savings bank 2600 West Big Beaver Road
2600 West Big Beaver Road Troy, Michigan 48084
Troy, Michigan 48084
-21-
<PAGE> 22
"EXHIBIT A"
Land in the Township of Comstock, County of Kalamazoo and State of
Michigan, described as:
A parcel of land in the East half of the Southwest quarter of the
Southeast quarter of Section 30, Town 2 South, Range 10 West,
described as follows: commencing at the Southeast corner of the
Southwest quarter of the Southeast quarter of Section 30, Town 2
South, Range 10 West; thence West along the South line of said Section
297.91 feet for the place of beginning of the land hereinafter
described; thence continuing West along said South line 231.91 feet to
a point 132 feet East of the West line of the East half of the
Southwest quarter of the southeast quarter of said Section; thence
North parallel to said West line 802.04 feet to a point 522 feet to a
point 522 feet South of the North line of the Southwest quarter of the
Southwest quarter of said Section; thence East parallel to said North
line 231.95 feet; thence South 802.18 feet to the place of beginning.
Tax Parcel No.: 3907-30-455-060
-22-
<PAGE> 1
EXHIBIT 10.26
GUARANTY
THIS GUARANTY, is made this 6th day of February , 1995, by
McClain Industries, Inc., whose address is 6200 Elmridge, Sterling Heights,
Michigan 48310 ("Guarantor") to and with Standard Federal Bank, a federal
savings bank ("Standard Federal").
WITNESSETH:
WHEREAS, Galion Holding Company, a Michigan corporation, Galion Solid
Waste Equipment, Inc., a Michigan corporation and Galion Dump Bodies, Inc., a
Michigan corporation ("Borrower"), may from time to time request loans,
advances or other financial accommodations from Standard Federal and Standard
Federal may, in its discretion, honor such requests in whole or part and
thereby Borrower may from time to time be indebted to Standard Federal; and
WHEREAS, Standard Federal is unwilling to make loans, advances or extend
other financial accommodations to or otherwise do business with Borrower unless
Guarantor unconditionally guarantees payment of all present and future
indebtedness and obligations of Borrower to Standard Federal; and
WHEREAS, Guarantor will directly benefit from Standard Federal's making of
loans advances or extending other financial accommodations to or otherwise
doing business with Borrower.
NOW, THEREFORE, in order to induce Standard Federal to make loans,
advances or extend other financial accommodations to and otherwise do business
with Borrower and for other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, Guarantor hereby covenants and
agrees with Standard Federal as follows:
SECTION 1. GUARANTY.
1.1 Guarantor hereby irrevocably and unconditionally guarantees to Standard
Federal and its successors and assigns: (a) the full and prompt payment and
performance when due of the Indebtedness, as hereinafter defined; and (b) the
payment, compliance with and performance of all other obligations, covenants,
representations and warranties of every kind, nature and description in
accordance with all instruments and documents executed by the Borrower in favor
of Standard Federal, whether now owing or existing or heretofore or hereafter
created or arising, regardless of whether such obligations, covenants,
representations or warranties are held to be unenforceable, void or of no
effect against the Borrower and including without limitation, those under any
loan agreement and/or promissory note executed and delivered by Borrower to
Standard Federal, and any extensions, modifications or renewals thereof. The
term "Indebtedness" shall mean all principal, interest, attorneys' fees,
commitment fees, liabilities for costs and expenses and all other indebtedness,
obligations and liabilities
<PAGE> 2
under and in accordance with the terms of all instruments and documents
executed by Borrower in favor of Standard Federal, whether direct or indirect,
absolute or contingent and whether now owing or existing or heretofore or
hereafter created or arising, and regardless of whether such indebtedness,
obligations or liabilities are held to be unenforceable, void or of no effect
against the Borrower, and all costs, expenses and fees, including reasonable
attorneys' fees, arising in connection with the collection or enforcement of
any or all amounts, indebtedness, obligations and liabilities of Borrower to
Standard Federal, as described above, regardless of whether the Borrower is
held to be liable for such amounts. Guarantor acknowledges and agrees that any
indebtedness of the Borrower to Standard Federal as evidenced by any promissory
note may be extended or renewed upon maturity at the sole discretion of
Standard Federal and that the Indebtedness as defined herein, the payment of
which is hereby guaranteed, shall include, without limitation, all indebtedness
and other obligations as extended or renewed and as may be evidenced by any
renewal promissory note.
1.2 This is an irrevocable, unconditional and absolute guaranty of payment,
and not of collection, and the undersigned agrees that its liability on this
Guaranty shall be immediate and Standard Federal may have immediate recourse
against the undersigned for full and immediate payment of the Indebtedness at
any time after the Indebtedness or any part thereof, has not been paid when due
(whether by acceleration or otherwise) or the Borrower has defaulted or
otherwise failed to perform when due any of its obligations, covenants,
representations or warranties to Standard Federal.
SECTION 2. LIABILITY OF GUARANTOR.
2.1 The liability of Guarantor on this Guaranty shall not be contingent upon
the exercise or enforcement by Standard Federal of whatever remedies it may
have against the Borrower or others, or the enforcement of any lien or
realization upon any security or collateral Standard Federal may at any time
possess. Any one or more successive and/or concurrent actions may be brought
hereon against Guarantor either in the same action, if any, brought against
Borrower or in separate actions, as often as Standard Federal, in it sole
discretion, may deem advisable. No election to proceed in one form of action
or proceeding, or against any party, or on any obligation, shall constitute a
waiver of Standard Federal's right to proceed in any other form of action or
proceeding or against other parties unless Standard Federal has expressly
waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Standard Federal
against Borrower under any document or instrument evidencing or securing the
Indebtedness shall serve to diminish the liability of Guarantor, except to the
extent Standard Federal realizes payment by such action or proceeding,
-2-
<PAGE> 3
notwithstanding the effect of any such action or proceeding upon Guarantor's
right of subrogation against Borrower. Receipt by Standard Federal of payment
or payments with knowledge of the breach of any provision with respect to any
of the Indebtedness shall not, as to the Guarantor, be deemed a waiver of such
breach. All rights, powers and remedies of Standard Federal hereunder and
under any other agreement now or at any time hereafter in force between
Standard Federal and the Guarantor shall be cumulative and not alternative and
shall be in addition to all rights, powers and remedies given to Standard
Federal by law.
2.2 Guarantor agrees that its liability hereunder is absolute and
unconditional and that Standard Federal shall not be obligated (although it may
do so at its sole option) before being entitled to direct recourse against
Guarantor to take any steps, whatsoever to preserve, protect, accept, perfect
Standard Federal's interest in, foreclose upon or realize on collateral
security, if any, for the payment of the Indebtedness or any other guaranty of
the Indebtedness or in any other respect exercise any diligence whatever in
collecting or attempting to collect the Indebtedness by any means.
2.3 The liability of the Guarantor shall in no way be affected or impaired by:
(a) any amendment, alteration, extension, renewal, waiver, indulgence or other
modification of the Indebtedness; (b) any settlement or compromise in
connection with the Indebtedness; (c) any subordination of payments under the
Indebtedness to any other debt or claim; (d) any substitution, exchange,
release or other disposition of all or any part of the Indebtedness; (e) any
failure, delay, neglect, act or omission by Standard Federal to act in
connection with the Indebtedness; (f) any advances for the purpose of
performing any covenant of agreement of the Borrower, or curing any breach; (g)
the filing by or against Borrower of bankruptcy, insolvency, reorganization or
other debtor's relief afforded Borrower pursuant to the present or future
provisions of the Bankruptcy Code or any other state or federal statute or by
the decision of any court; or (h) any other matter whether similar or
dissimilar to the foregoing. The obligations of Guarantor are unconditional,
notwithstanding any defect in the genuineness, validity, regularity or
enforceability of the Indebtedness or any other circumstances whether or not
referred to herein, which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.
2.4 The Guarantor hereby waives each and every defense which, under principles
of guaranty or suretyship law or otherwise, would otherwise operate to impair
or diminish the liability of Guarantor hereunder, including, without
limitation: (a) notice of acceptance of this Guaranty and of creations of
Indebtedness of Borrower to Standard Federal; (b) any subrogation to the
rights of Standard Federal against Borrower until the Indebtedness has been
paid in full; (c) presentment and demand for payment of any Indebtedness
-3-
<PAGE> 4
of Borrower; (d) protest, notice or protest, and notice of dishonor or default
to the Guarantor or to any other party with respect to any of the Indebtedness;
(e) all other notices to which the Guarantor might otherwise be entitled; (f)
any demand for payment under this Guaranty; (g) any defense arising by reason
of any disability or other defense of Borrower by reason of the cessation from
any cause whatsoever of the liability of the Borrower; (h) any rights to
extension, composition or otherwise under the Bankruptcy Code or any amendments
thereof, or under any state or other federal statute; and (i) any right or
claim or claim of right to cause a marshalling of Borrower's assets. No notice
to or demand on the Guarantor shall be deemed to be a waiver of the obligation
of the Guarantor or of the right of Standard Federal to take further action
without notice or demand as provided herein; nor in any event shall any
modification or waiver of the provisions of this Guaranty be effective unless
in writing nor shall any such waiver be applicable except in the specific
instance for which given.
SECTION 3. WARRANTIES AND REPRESENTATIONS.
3.1 Guarantor represents, warrants and covenants to Standard Federal that, as
of the date of this Guaranty: the fair salable value of Guarantor's assets
exceeds its liabilities, including the liability undertaken pursuant to this
Guaranty; Guarantor is meeting its current liabilities as they mature; any
financial statements of Guarantor furnished Standard Federal are true and
correct and include in the footnotes thereto all contingent liabilities of
Guarantor: since the date of said financial statements there has been no
material adverse change in the financial condition of Guarantor; there are not
now pending any material court or administrative proceedings or undischarged
judgments against Guarantor and no federal or state tax liens have been filed
or threatened against Guarantor, nor is Guarantor in default or claimed default
under any agreement for borrowed money.
3.2 Guarantor agrees to immediately give Standard Federal written notice of
any material adverse change in its financial condition, including but not
limited to litigation commenced, tax liens filed, default claimed under its
indebtedness for borrowed money or bankruptcy proceedings commenced by or
against Guarantor. Guarantor agrees to deliver, timely to Standard Federal,
annual financial statements for the preceding fiscal year; and at such
reasonable times as Standard Federal requests to furnish its current financial
statements to Standard Federal and permit Standard Federal or its
representatives to inspect at Guarantor's offices, its financial records and
properties and make extracts therefrom in order to evaluate the financial
condition of Guarantor. Guarantor is fully aware of the financial condition of
the Borrower. Guarantor delivers this Guaranty based solely upon its own
independent investigation and in no part upon any representation or statement
of Standard Federal with respect
-4-
<PAGE> 5
thereto. Guarantor is in a position to and hereby assumes full responsibility
for obtaining any additional information concerning Borrower's financial
condition as Guarantor may deem material to its obligations hereunder; and
Guarantor is not relying upon nor expecting Standard Federal to furnish it any
information in Standard Federal's possession concerning Borrower's financial
condition.
SECTION 4. MISCELLANEOUS.
4.1 This Guaranty shall inure to the benefit of Standard Federal and its
successors and assigns, including each and every holder or owner of any of the
indebtedness guaranteed hereby. In the event that there shall be more than
one such holder or owner, this Guaranty shall be deemed a separate contract
with each such holder and owner. In the event that any person other than
Standard Federal shall become a holder or owner of any of the Indebtedness,
each reference to Standard Federal hereunder shall be construed as if it
referred to each such holder or owner.
4.2 This Guaranty shall be binding upon Guarantor and its successors and
assigns. Guarantor agrees that recourse may be had against its earnings and
separate property for all of Guarantor's obligations under this Guaranty.
4.3 The liability of each Guarantor executing this Guaranty shall be joint and
several and the term "Guarantor" shall mean each and all such Guarantors.
4.4 This Guaranty and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the laws of the
State of Michigan.
4.5 THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO STANDARD FEDERAL BY
GUARANTOR, JOINTLY AND SEVERALLY, WITHOUT ANY DURESS OR COERCION, AND AFTER
GUARANTOR, JOINTLY AND SEVERALLY, HAS EITHER CONSULTED WITH COUNSEL OR BEEN
GIVEN AN OPPORTUNITY TO DO SO, AND GUARANTOR, JOINTLY AND SEVERALLY, HAS
CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS
GUARANTY.
IN WITNESS WHEREOF, this Guaranty was executed and delivered by the
undersigned on the day and year first above written.
WITNESSES: GUARANTOR:
McClain Industries, Inc., a
Michigan corporation
By:
- -------------------------------- ---------------------------
E. James Zabinski
Its: Treasurer
---------------------
-5-
<PAGE> 6
STANDARD FEDERAL BANK, a federal
savings bank
2600 W. Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.27
Note No. 0250017740
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit with Term Provisions) [X] New
(First Line of Credit) [ ] Renewal
$950,000.00 Sterling Heights , Michigan
Due Date: February 1, 2002 Dated: February 6, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Nine Hundred
Fifty Thousand and 00/100 Dollars ($950,000.00) or such lesser amount as may
from time to time be outstanding by reason of having been advanced hereunder in
accordance with the provisions of a Loan Agreement of even date herewith (the
"Loan Agreement"), plus interest as hereinafter provided on all amounts from
time to time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower or borrowers and shall automatically increase
or decrease when and to the extent that the Wall Street Journal Prime Rate
shall have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the Borrower
to Standard Federal arising as a result of advances or other credit which may
be made under this Note from time to time to and until August 1, 1995 (the
"Term Date"). Any and all indebtedness may be repaid by the Borrower in whole
or in part from time to time prior to the Term Date. Standard Federal shall,
from time to time prior to the Term Date, make advances to Borrower hereunder
upon request therefor by Borrower, made in accordance with the requirements of
the Loan Agreement, provided that upon giving effect to such advance no Event
of Default (as hereinafter defined) and no event which with notice and/or the
passage of time would become an Event of Default shall exist at the time the
advance is to be made and that all representations and warranties of Borrower
theretofore made are true and correct and that Standard Federal shall not have
previously or concurrently declared all amounts owing hereunder to be
immediately due and payable and that the amount requested shall not cause the
total amount outstanding hereunder to exceed the First Credit Limit as defined
in the Loan Agreement. The principal amount of indebtedness owing pursuant to
this Note shall change from time to time, decreasing in an amount equal to any
and all payments of principal made by the Borrower prior to the Due Date and
increasing by an amount equal to any and all advances made by Standard Federal
to the Borrower pursuant to the terms hereof, and the books and records of
Standard Federal shall be conclusive evidence of the amount of principal and
interest owing hereunder at any time. All payments made hereunder shall be
applied first against costs and expenses required to be paid hereunder, then
against accrued interest to the extent thereof and the balance shall be applied
against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month beginning
on March 1, 1995 through and including the Term Date. From and after the Term
Date, Standard Federal shall make no further advances hereunder and the
outstanding principal balance hereunder as of the Term Date, with interest,
shall be repaid in consecutive monthly payments of principal, each in the
amount determined by dividing the outstanding principal balance hereunder as of
the Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on September 1, 1995 and continuing on the same day of each
consecutive month thereafter and a final payment on the Due Date in an amount
equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard Federal shall reasonably determine that the Effective
Interest Rate (together with all other charges or payments related hereto that
may be deemed interest) stipulated under this Note is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note, with accrued
interest at the highest rate permitted to be charged by stipulation in writing
between Standard Federal and Borrower, at the option of Standard Federal, shall
immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement of even date
herewith and is secured by a Security Agreement, dated September 15,
1994. Reference is hereby made to such documents for additional terms relating
to the transaction giving rise to this Note, the security given for this Note
and additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------
58-1738825
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
----------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
----------------------
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.28
Note No. 0250017675
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit with Term Provisions) [X] New
(Second Line of Credit) [ ] Renewal
$950,000.00 Sterling Heights , Michigan
Due Date: August 1, 2002 Dated: February 6, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Nine Hundred
Fifty Thousand and 00/100 Dollars ($950,000.00) or such lesser amount as may
from time to time be outstanding by reason of having been advanced hereunder in
accordance with the provisions of a Loan Agreement of even date herewith (the
"Loan Agreement"), plus interest as hereinafter provided on all amounts from
time to time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower or borrowers and shall automatically increase
or decrease when and to the extent that the Wall Street Journal Prime Rate
shall have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the Borrower
to Standard Federal arising as a result of advances or other credit which may
be made under this Note from time to time after August 1, 1995 to and until
February 1, 1996 (the "Term Date"). Any and all indebtedness may be repaid by
the Borrower in whole or in part from time to time prior to the Term Date.
Standard Federal shall, from time to time prior to the Term Date, make advances
to Borrower hereunder upon request therefor by Borrower, made in accordance
with the requirements of the Loan Agreement, provided that upon giving effect
to such advance no Event of Default (as hereinafter defined) and no event which
with notice and/or the passage of time would become an Event of Default shall
exist at the time the advance is to be made and that all representations and
warranties of Borrower theretofore made are true and correct and that Standard
Federal shall not have previously or concurrently declared all amounts owing
hereunder to be immediately due and payable and that the amount requested shall
not cause the total amount outstanding hereunder to exceed the Second Credit
Limit as defined in the Loan Agreement. The principal amount of indebtedness
owing pursuant to this Note shall change from time to time, decreasing in an
amount equal to any and all payments of principal made by the Borrower prior to
the Due Date and increasing by an amount equal to any and all advances made by
Standard Federal to the Borrower pursuant to the terms hereof, and the books
and records of Standard Federal shall be conclusive evidence of the amount of
principal and interest owing hereunder at any time. All payments made
hereunder shall be applied first against costs and expenses required to be paid
hereunder, then against accrued interest to the extent thereof and the balance
shall be applied against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month beginning
on September 1, 1995 through and including the Term Date. From and after the
Term Date, Standard Federal shall make no further advances hereunder and the
outstanding principal balance hereunder as of the Term Date, with interest,
shall be repaid in consecutive monthly payments of principal, each in the
amount determined by dividing the outstanding principal balance hereunder as of
the Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on March 1, 1996 and continuing on the same day of each
consecutive month thereafter and a final payment on the Due Date in an amount
equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard Federal shall reasonably determine that the Effective
Interest Rate (together with all other charges or payments related hereto that
may be deemed interest) stipulated under this Note is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note, with accrued
interest at the highest rate permitted to be charged by stipulation in writing
between Standard Federal and Borrower, at the option of Standard Federal, shall
immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement of even date
herewith and is secured by a Security Agreement, dated September 15,
1994. Reference is hereby made to such documents for additional terms relating
to the transaction giving rise to this Note, the security given for this Note
and additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
------------------
58-1738825
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.29
LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
MCCLAIN INDUSTRIES, INC., MCCLAIN OF GEORGIA, INC.,
SHELBY STEEL PROCESSING COMPANY,
MCCLAIN TUBE COMPANY D/B/A QUALITY TUBE AND
MCCLAIN INDUSTRIES OF OHIO, INC.
THIS AGREEMENT made and delivered this 6th day of February , 1995, by and
between McClain Industries, Inc., a Michigan corporation, McClain of Georgia,
Inc., a Georgia corporation, Shelby Steel Processing Company, a Michigan
corporation, McClain Tube Company d/b/a Quality Tube, a Michigan corporation,
and McClain Industries of Ohio, Inc., a Michigan corporation (collectively,
"Borrower"), whose address/principal office is 6200 Elmridge, Sterling Heights,
Michigan 48310, and Standard Federal Bank, a federal savings bank ("Standard
Federal"), whose address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS:
A. Borrower has requested a term loan in the principal amount of
$2,000,000.00 and an equipment purchase credit facility in the total principal
amount of $950,000.00.
B. Standard Federal is willing to supply such financing subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual promises herein contained, the
Borrower and Standard Federal hereby agree as follows:
SECTION 1. TERM LOAN
1.1 Standard Federal hereby extends to the Borrower a term loan (the
"Term Loan") in the principal amount of Two Million and 00/100 Dollars
($2,000,000.00).
1A.2 The Term Loan herein extended shall be subject to the terms and
conditions of a Promissory Note (Term Loan) of even date herewith and all
renewals and amendments thereof (the "Term Note"). The Term Loan shall be
payable and shall bear interest as set forth in the Term Note. This Loan
Agreement and the Term Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all provisions of
both documents.
<PAGE> 2
SECTION 1A. EQUIPMENT PURCHASE LINES OF CREDIT
1A.1 First Line of Credit
1A.1(a) Standard Federal hereby extends to the Borrower a revolving line of
credit (the "First Line of Credit") which shall not exceed at any one time
outstanding the principal amount of Nine Hundred Fifty Thousand and 00/100
Dollars ($950,000.00) (the "First Credit Limit").
1A.1(b) The First Line of Credit herein extended shall be subject to the
terms and conditions of a Promissory Note (Line of Credit with Term Provisions)
(First Line of Credit), in the principal amount of Nine Hundred Fifty Thousand
and 00/100 Dollars ($950,000.00), of even date herewith and all renewals and
amendments thereof (the "First Line of Credit Note"). This Loan Agreement and
the First Line of Credit Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all provisions of
both documents.
1A.1(c) If at any time the amount outstanding under the First Line of Credit
shall exceed the First Credit Limit, Borrower shall, on demand, forthwith pay
to Standard Federal such sums as are necessary to reduce the amount outstanding
to an amount not greater than the First Credit Limit.
1A.1(d) Each advance under the First Line of Credit shall be used solely for
the purchase of equipment. Each advance shall be in an amount not in excess of
Eighty Five percent (85.0%) of the cost to the Borrower of the equipment to be
purchased with such advance. Standard Federal shall make advances under the
First Line of Credit only upon receipt by it in a form satisfactory to it of a
true and authentic copy of the dealer invoice for the equipment purchased or to
be purchased with the advance.
1A.1(e) Standard Federal shall, from time to time to and until August 1,
1995 (the "First Term Date"), make advances to Borrower under the First Line of
Credit upon request therefor by Borrower, subject to the other conditions
contained in the First Line of Credit Note.
1A.1(f) Accrued interest shall be payable under the First Line of Credit
Note on the 1st day of each month beginning on March 1, 1995 through and
including the First Term Date. From and after the First Term Date, Standard
Federal shall make no further advances under the First Line of Credit and the
outstanding principal balance thereunder as of the First Term Date, with
interest, shall be repaid in consecutive monthly payments of principal, each in
the amount determined by dividing the outstanding principal balance under the
First Line of Credit Note as of the First Term Date by 78, plus interest
accrued to the due date of each such payment, commencing on September 1, 1995
and continuing on the same day of
2
<PAGE> 3
each consecutive month thereafter and a final payment on February 1, 2002 in an
amount equal to the then unpaid principal and accrued interest under the First
Line of Credit Note.
1A.2 Second Line of Credit
1A.2(a) Standard Federal hereby extends to the Borrower an additional
revolving line of credit (the "Second Line of Credit") (the First Line of
Credit and the Second Line of Credit are sometimes herein collectively referred
to as the "Line of Credit") which shall not exceed at any one time outstanding
the principal amount of Nine Hundred Fifty Thousand and 00/100 Dollars
($950,000.00), less the principal outstanding under the First Line of Credit as
of the First Term Date (the "Second Credit Limit").
1A.2(b) The Second Line of Credit herein extended shall be subject to the
terms and conditions of a Promissory Note (Line of Credit with Term Provisions)
(Second Line of Credit), in the principal amount of Nine Hundred Fifty Thousand
and 00/100 Dollars ($950,000.00), of even date herewith and all renewals and
amendments thereof (the "Second Line of Credit Note") (the First Line of Credit
Note and the Second Line of Credit Note are sometimes herein collectively
referred to as the "Line of Credit Notes"). This Loan Agreement and the Second
Line of Credit Note are of equal materiality and shall each be construed in
such manner as to give full force and effect to all provisions of both
documents.
1A.2(c) If at any time the amount outstanding under the Second Line of
Credit shall exceed the Second Credit Limit, Borrower shall, on demand,
forthwith pay to Standard Federal such sums as are necessary to reduce the
amount outstanding to an amount not greater than the Second Credit Limit.
1A.2(d) Each advance under the Second Line of Credit shall be used solely
for the purchase of equipment. Each advance shall be in an amount not in
excess of Eighty Five percent (85.0%) of the cost to the Borrower of the
equipment to be purchased with such advance. Standard Federal shall make
advances under the Second Line of Credit only upon receipt by it in a form
satisfactory to it of a true and authentic copy of the dealer invoice for the
equipment purchased or to be purchased with the advance.
1A.2(e) Standard Federal shall, from time to time after the First Term Date
and to and until February 1, 1996 (the "Second Term Date"), make advances to
Borrower under the Second Line of Credit upon request therefor by Borrower,
subject to the other conditions contained in the Second Line of Credit Note.
1A.2(f) Accrued interest shall be payable under the Second Line of Credit
Note on the 1st day of each month beginning on September 1, 1995 through and
including the Second Term Date. From and after
3
<PAGE> 4
the Second Term Date, Standard Federal shall make no further advances under the
Second Line of Credit and the outstanding principal balance thereunder as of
the Second Term Date, with interest, shall be repaid in consecutive monthly
payments of principal, each in the amount determined by dividing the
outstanding principal balance under the Second Line of Credit Note as of the
Second Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on March 1, 1996 and continuing on the same day of each
consecutive month thereafter and a final payment on August 1, 2002 in an amount
equal to the then unpaid principal and accrued interest under the Second Line
of Credit Note.
SECTION 1B. CONDITIONS TO MAKING LOANS
1B.1 The following are conditions precedent to the obligation of Standard
to make the Term Loan and the Line of Credit hereunder:
1B.1(a) The Borrower shall have delivered or shall have had delivered to
Standard Federal, in form and substance satisfactory to Standard Federal and
its counsel, each of the following:
a. A duly executed copy of this Loan Agreement;
b. A duly executed copy of the Line of Credit Notes, the Term Note and
such other loan documents as Standard Federal shall require to
evidence and document the Line of Credit and the Term Loan;
c. Such credit applications, financial statements, authorizations, and
such information concerning the Borrower and its business,
operations, and condition (financial and otherwise) as Standard
Federal may reasonably request;
d. Certified copies of resolutions of the Boards of Directors of the
Borrower approving the execution and delivery of the loan documents
required hereunder;
e. A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign the loan documents required
hereunder;
f. Copies of each of the Articles of Incorporation of the Borrower,
certified by the Secretary of State of Michigan as of a recent date;
g. Copies of each of the Articles of Incorporation and Bylaws of the
Borrower, certified by the Secretary or an Assistant Secretary of
the Borrower as of the date of this Agreement as being accurate and
complete;
h. Certificate of good standing of the Borrower from the Secretary of
State of Michigan as of a recent date;
i. Certificates of authority and good standing of the Borrower for each
state in which the Borrower is qualified to do business;
4
<PAGE> 5
j. A certificate of compliance of the chief financial officer or
treasurer of the Borrower in form satisfactory to Standard Federal
dated as of the date of this Agreement;
k. Such certificates, binders or other evidence of all insurance
required of the Borrower under this Loan Agreement as Standard
Federal may reasonably require; and
l. Acknowledgement copies of all UCC-1 financing statements filed with
respect to the Collateral accompanied by a search report showing
such financing statements as duly filed and evidencing that the
security interest of Standard Federal in the Collateral is prior to
all other security interests of record.
1B.1(b) All acts and conditions (including, without limitation, the
obtaining of any necessary regulatory approvals and the making of any required
filings, recordings, or registrations) required to be done and performed and to
have happened precedent to the execution, delivery, and performance of the loan
documents required hereunder and to constitute the same legal, valid, and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
1B.1(c) All documentation, including, without limitation, documentation for
corporate and legal proceedings in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to Standard Federal and its counsel and all fees and charges, including
recording and filing fees, shall have been paid as required hereunder.
1B.2 As conditions precedent to Standard Federal's obligation to make the
Term Loan and to fund any request for an advance under the Line of Credit, at
and as of the date of the funding thereof;
a. The representations and warranties of the Borrower contained in the
Loan Documents shall be accurate and complete in all respects as if
made on and as of such date;
b. The Borrower shall have paid all fees and expenses, including any
recording fees and charges, required hereunder;
c. There shall not have occurred an Event of Default or any event which
with the passage of time of the giving of notice or both would
constitute an Event of Default; and
d. Following the making of such loan or advance, the aggregate
principal amount outstanding will not exceed the limitations
described in Sections 1 and 1A.
5
<PAGE> 6
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to Standard Federal that as of
the date of acceptance of this Agreement, as of the time any advance is to be
made hereunder and, unless expressly provided otherwise herein or agreed to by
a writing signed by Standard Federal, at all times any amounts are outstanding
hereunder:
2.1 The Borrower and each of its subsidiaries, if any, are corporations
duly organized, validly existing and in good standing under the laws of the
state of their incorporation; the Borrower and each of its subsidiaries (if
any) have the legal power and authority to own their properties and assets and
to carry out their business as now being conducted and each is qualified to do
business in the state of its incorporation and in every jurisdiction where the
nature of its business or the property owned or operated by it makes such
qualification necessary and is otherwise in compliance with all applicable
laws, statutes, regulations, rules and requirements of any federal, state,
judicial, regulatory or administrative body having jurisdiction of the Borrower
or any of its assets; the Borrower has the legal power and authority to execute
and perform this Agreement, to borrow money in accordance with its terms, to
execute and deliver the Line of Credit Notes and the Term Note and other
documents contemplated hereby, to grant to Standard Federal mortgages and
security interests in the Collateral, as hereby contemplated, and to do any and
all other things required of it hereunder; and this Agreement, the Line of
Credit Notes, the Term Note and all other documents contemplated hereby, when
executed by the Borrower's duly authorized officers will constitute its valid
and binding legal obligations enforceable in accordance with their terms.
2.2 The execution, delivery and performance of this Agreement, the
borrowings hereunder and the execution and delivery of the Line of Credit Notes
and the Term Note and other documents contemplated hereby (a) have been duly
authorized by all requisite corporate action, (b) do not require governmental
approval or the approval of any person not a party to this Agreement, (c) will
not result (with or without notice and/or the passage of time) in any conflict
with or breach or violation of or default under, any provision of law, the
Articles of Incorporation or Bylaws of the Borrower or any indenture, agreement
or other instrument to which the Borrower is a party, or by which it or any of
its properties or assets are bound, and (d) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than in favor of Standard
Federal and as contemplated hereby.
2.3 There is not pending or, to the best of the knowledge of the
Borrower, threatened, any litigation, proceeding or governmental investigation
which could materially and adversely
6
<PAGE> 7
affect the business of the Borrower or its subsidiaries, if any, or its ability
to perform its covenants hereunder.
2.4 Borrower has good and marketable title to its properties given as
security as herein described, and, except for liens in favor of Standard
Federal, liens for taxes not delinquent or being contested in good faith and
liens created in connection with worker's compensation, unemployment insurance
and social security, or to secure the performance of bids, tenders or contracts
(other than for the repayment of borrowed money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like nature made
in the ordinary course of business, none of the Borrower's or any of its
subsidiaries' (if any) assets are subject to any mortgage, pledge, lien,
security interest, or other encumbrance of any kind or character except as have
been disclosed to Standard Federal in writing. The Borrower owns all material
patents, trademarks, service marks, trade names, copyrights, licenses and other
rights, free from any material restrictions, that are necessary for the
operation of its business as presently conducted.
2.5 All financial data which has been or shall hereafter be furnished to
Standard Federal for the purposes of, or in connection with, this Agreement,
including particularly, but without limitation, the audited consolidated
financial statements of McClain Industries, Inc. as of September 30, 1993,
prepared by Rehmann Robson & Co., and the Form 10-Q's filed with the Securities
and Exchange Commission by McClain Industries, Inc. pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 for the quarterly periods ended
December 31, 1993, March 31, 1994 and June 30, 1994, and the transactions
contemplated hereby has been and/or shall be prepared in accordance with
generally accepted accounting principles consistently applied, and does or will
fairly present the financial condition of the Borrower as of the dates, and the
results of its operations for the periods, for which the same is furnished to
Standard Federal.
2.6 There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower or its
subsidiaries (if any) since the date of the latest financial statements
provided to Standard Federal and there are no material debts, liabilities or
obligations (absolute or contingent) of the Borrower except as reflected in
such financial statements (or in the notes thereto).
2.7 The Borrower is not in default in the repayment of any indebtedness
for money borrowed by it nor has there occurred any event which, with or
without notice or the passage of time or both, would constitute a default by
the Borrower under any agreement or instrument pertaining to any indebtedness
for money borrowed by it.
7
<PAGE> 8
2.8 Borrower has filed all reports and tax returns required by
governmental authority to be filed by it prior to the date hereof and Borrower
has received no notice that such reports or returns have been rejected,
declared insufficient, or otherwise challenged by such governmental authority.
2.9 The principal officers of the Borrower ("Principal Officers") are as
follows:
McClain Industries, Inc.:
Chairman of the Board Kenneth D. McClain
----------------------------
Vice President Robert W. McClain
----------------------------
Treasurer E. James Zabinski
----------------------------
Secretary Carl L. Jaworski
----------------------------
McClain of Georgia, Inc.:
President Kenneth D. McClain
----------------------------
Vice President Robert W. McClain
----------------------------
Secretary Carl L. Jaworski
----------------------------
Shelby Steel Processing Company:
President Robert W. McClain
----------------------------
Vice President Kenneth D. McClain
----------------------------
Secretary Carl L. Jaworski
----------------------------
McClain Tube Company d/b/a Quality Tube:
President Kenneth D. McClain
----------------------------
Treasurer E. James Zabinski
----------------------------
Secretary Carl L. Jaworski
----------------------------
McClain Industries of Ohio, Inc.:
President Kenneth D. McClain
----------------------------
Vice President Robert W. McClain
----------------------------
Treasurer E. James Zabinski
----------------------------
Secretary Margaret Bruce
----------------------------
8
<PAGE> 9
2.10 McClain of Georgia, Inc., a Georgia corporation, Shelby Steel
Processing Company, a Michigan corporation, McClain Tube Company d/b/a Quality
Tube, a Michigan corporation, McClain Industries of Ohio, Inc., a Michigan
corporation, and Southfield Quality Leasing Company, a Michigan corporation,
are each wholly-owned subsidiaries of McClain Industries, Inc., a Michigan
corporation, and have no subsidiaries. Prime Leasing Corporation, a Michigan
corporation, and Galion Holding Company, a Michigan corporation, are also
wholly-owned subsidiaries of McClain Industries, Inc. McClain Industries, Inc.
also holds one-third of the outstanding capital stock of M.E.G. Equipment
Sales, Inc., Michigan corporation, of which M.E.G. Equipment Sales of Florida,
Inc., a Florida corporation, is a wholly-owned subsidiary. McClain Industries,
Inc., as of the date of this Loan Agreement, owns no other subsidiaries.
2.11 None of the proceeds of the Line of Credit or the Term Loan will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U or G of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221 and 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation U or G. Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stocks. Neither Borrower nor any person acting on behalf of Borrower
has taken or will take any action which might cause the Line of Credit Notes
and the Term Note or any of the other documents executed in conjunction
therewith, including this Agreement, to violate Regulations U or G or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Borrower and its subsidiaries, if any, own no
"margin stock" except for that described in the financial statements provided
to Standard Federal and, as of the date hereof, the aggregate value of all
"margin stock" owned by Borrower and its subsidiaries, if any, does not exceed
25% of all of the value of all of Borrower's and its subsidiaries', if any,
assets.
2.12 Except as disclosed in the environmental reports listed in attached
Schedule 2.12, copies of which the Borrower has furnished to Standard Federal,
neither the Borrower nor, to the best of Borrower's knowledge after due
inquiry, any other person or entity, has caused or permitted any waste, oil,
pesticides, or any substance or material of any kind which is currently known
or suspected to be toxic or hazardous, including but not limited to any
substance defined as a "Hazardous Waste" in Title 40, Part 261 of the Code of
Federal Regulations, (hereinafter referred to as "Hazardous Material") to be
discharged, dispersed, released, disposed of, or allowed to escape on, under or
at any property
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owned, occupied or operated by any Borrower in violation of any Hazardous
Materials Laws (as hereinafter defined), nor has any property owned, occupied
or operated by any Borrower, or any part thereof, ever been used by the
Borrower or, to the best of Borrower's knowledge after due inquiry, any prior
owner or any other person, as a dump, storage or disposal site for any
Hazardous Material, nor has there occurred any other violation of the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9601 et seq., 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
Material ("Hazardous Materials Laws") with respect to any property owned,
occupied or operated by any Borrower. No asbestos or asbestos-containing
materials have been installed, used, incorporated into, or disposed of on any
property owned, occupied or operated by any Borrower. No polychlorinated
biphenyls ("PCBs") are located on or in any property owned, occupied or
operated by any Borrower, in the form of electrical transformers, fluorescent
light fixtures with ballasts, cooling oils, or any other device or form. All
underground storage tanks located on any property owned, occupied or operated
by any Borrower have been installed and are being operated in full compliance
with all applicable Hazardous Materials Laws. The Borrower: (a) has not
received any notice of any release, threatened release, escape, seepage,
leakage, spillage, discharge or emission of any Hazardous Materials in, under
or upon any property owned, occupied or operated by any Borrower or of any
violation of any Hazardous Materials Law, and (2) does not know of any basis
for any such notice or violation.
2.13 No "reportable event," as defined in the Employee Retirement Income
Security Act of 1974 and any amendments thereto ("ERISA"), has occurred and is
continuing with respect to any employee pension and/or profit sharing benefit
plan maintained by or on behalf of the Borrower for the benefit of any of its
employees. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any such employee pension and/or profit
sharing plan or to appoint a trustee to administer such plan. The Borrower
has maintained and funded and caused each of its subsidiaries, if any, to
maintain and fund all employee pension and/or profit sharing plans in
accordance with their terms and with all applicable provisions of ERISA.
Neither the Borrower nor any duly appointed administrator of any employee
pension and/or profit sharing plan: (a) has incurred any liability to PBGC with
respect to any such plan other than for premiums not yet due or payable, (b)
has instituted or intends to institute proceedings to terminate any such plan
under Section 4042 or 4041A of Erisa, or (c) has withdrawn from any
Multi-Employer Pension Plan (as that term is defined in Section 3(37) of
ERISA).
2.14 There is no material fact that the Borrower has not disclosed to
Standard Federal which could have a material adverse
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<PAGE> 11
effect on the properties, business, prospects or condition (financial or
otherwise) of the Borrower or any of its subsidiaries. For purposes of this
Section 2.14, a "material adverse effect" means any circumstance or event which
(a) could have any adverse effect whatsoever upon the validity, performance or
enforceability of any material provision of the Loan Documents, (b) is or might
be material and adverse to the financial condition or business operations of
the Borrower or any subsidiary, (c) could impair the ability of the Borrower to
fulfill its obligations under the Loan Documents, or (d) causes an Event of
Default or any event which, with notice or lapse of time or both, could become
an Event of Default. Neither the financial statements referred to in Section
2.5 hereof, nor any certificate or statement delivered herewith or heretofore
by Borrower in connection with the negotiations of this Loan Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary to keep the statements contained herein or therein, under the
circumstances in which they were made, from being misleading.
2.15 Each request for an advance under the Line of Credit shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Event of Default
exists and that all representations and warranties contained in this Section 2
or in any mortgage, guaranty, security agreement or other document given to
secure or relating to the Line of Credit Notes or this Agreement are true and
correct at and as of the time the advance is to be made.
SECTION 3. AFFIRMATIVE COVENANTS OF BORROWER
3.1 Prior to Standard Federal's disbursement of any advances under the
Line of Credit, or closing of the Term Loan, the Borrower shall; (a) furnish to
Standard Federal, if Standard Federal so requires, certified copies of its
Articles of Incorporation, Bylaws and Certificate of Good Standing, which
Articles of Incorporation and Good Standing Certificate are to be certified by
the appropriate official of the Borrower's state of incorporation; (b) furnish
to Standard Federal if Standard Federal so requires a statement of the Borrower
and the chief financial officer of Borrower certifying that they are unaware of
the occurrence of an Event of Default or of any event which with notice and/or
the passage of time could become an Event of Default; and (c) furnish Standard
Federal such other instruments, documents, opinions or certificates as Standard
Federal or its counsel shall reasonably require. All actions, proceedings,
instruments and documents required or requested hereunder shall be satisfactory
to and approved by Standard Federal and/or its counsel prior to the
disbursement of advances under the Line of Credit or closing of the Term Loan.
3.2 From the date hereof until all amounts owing under the Term Loan and
the Line of Credit are paid in full and all
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obligations under the Line of Credit Notes and the Term Note, this Agreement
and all other documents executed in connection with the Line of Credit and the
Term Loan are fully paid, performed and satisfied and so long as Standard
Federal has any commitment to make advances hereunder, the Borrower covenants
and agrees it will:
3.2(a) Furnish to Standard Federal as soon as available and, in any event,
within 90 days after the close of each fiscal year of the Borrower, or, in the
event the Borrower obtains an extension of the filing date from the Securities
Exchange Commission, by such extended date, detailed financial statements of
the Borrower as of the close of such fiscal year, containing a consolidated
balance sheet of the Borrower and its subsidiaries, if any, and statements of
income and cash flows of the Borrower and its subsidiaries, if any, for such
fiscal year prepared in accordance with generally accepted accounting
principles and in a manner consistent with prior such statements containing an
analysis of sources and uses of funds and such other comments and financial
details as are usually included in similar reports. Such statements shall be
accompanied by an opinion thereon (which shall not be qualified by reason of
any limitation imposed by Borrower) of independent certified public accountants
selected by Borrower and acceptable to Standard Federal as to the fairness of
the statements included in the report and to the effect that the examination of
such accounts in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly,
includes such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances.
3.2(b) Furnish to Standard Federal as soon as available and, in any event,
within 45 days after the close of each quarter of each fiscal year, or, in the
event the Borrower obtains an extension of the filing date from the Securities
Exchange Commission, by such extended date, detailed financial statements of
the Borrower as of the close of such fiscal period containing a consolidated
balance sheet of the Borrower and its subsidiaries, if any, and statements of
income and cash flows of the Borrower and its subsidiaries, if any, for such
fiscal period and for the portion of the fiscal year ending with such period in
reasonable detail and form acceptable to Standard Federal and certified by the
chief financial officer of the Borrower as being true and correct and as having
been prepared in accordance with generally accepted accounting principles
consistently applied, subject to year-end adjustments, if any.
3.2(c) Furnish to Standard Federal, promptly after sending, filing or
publishing the same, copies of all proxy statements, financial statements and
reports that the Borrower sends to its public shareholders and copies of all
regular, periodic and special reports and all registration statements and
amendments thereto that the Borrower files with the Securities and Exchange
Commission or any other governmental authority and any Exchange, and copies of
all press releases issued by Borrower.
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3.2(d) Promptly inform Standard Federal of the occurrence of any Event of
Default or of any event (including without limitation any pending or threatened
litigation or other proceedings before any governmental body or agency) which
could have a materially adverse effect upon the Borrower's business,
properties, financial condition or ability to comply with its obligations
hereunder or under the Line of Credit Notes or the Term Note.
3.2(e) Furnish such other information as Standard Federal may reasonably
request and permit Standard Federal and its agents, attorneys and employees to
inspect all of the books, records and properties of the Borrower at any
reasonable time.
3.2(f) Maintain adequate insurance with responsible companies in such
amounts and against such risks and hazards as are normally insured against by
similar businesses, and provide Standard Federal evidence of such insurance
upon request; policies of casualty insurance shall contain a customary
mortgagee clause requiring payment of proceeds to Borrower and to Standard
Federal as their interests may appear and all other insurance shall contain a
customary loss payable clause requiring payment of proceeds to Borrower and to
Standard Federal as their interests may appear and all insurance policies shall
provide that no cancellation, reduction in amount, change in coverage or
expiration thereof shall be effective until at least 30 days prior written
notice has been given by the insurer to Standard Federal; and pay when due all
taxes, assessments, fees and similar charges of every kind and nature lawfully
assessed upon the Borrower and/or its property, except to the extent being
contested in good faith; and in the event the Borrower fails to maintain such
insurance or to pay promptly any taxes or charges when due, then and in such
event Standard Federal, in its sole discretion, may, but shall not be required
to, pay the same and any amounts expended by Standard Federal for such purpose
shall become a part of the Line of Credit and shall bear interest at the rate
applicable to the outstanding principal balance owing under the Line of Credit
Notes.
3.2(g) Preserve and keep in full force and effect its own and its material,
operating subsidiaries' (if any) corporate existence in good standing and
maintain voting control in its present controlling shareholder(s); keep current
all filings of assumed name certificates for each name under which and each
county in which the Borrower does business and promptly inform Standard Federal
of any assumed names under which it does business which were not used by the
Borrower on the date of this Agreement; continue to conduct and operate its
business substantially as presently conducted and operated in accordance with
all applicable laws and regulations; maintain and protect all franchises and
trade names and preserve all the remainder of its property used or useful in
the conduct of its business and keep the same in good repair and condition; pay
its indebtedness and obligations when due under normal terms and maintain
proper books of record and account, and;
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otherwise remain in compliance with all applicable laws, statutes, regulations,
rules and requirements of any federal, state, judicial, regulatory or
administrative body having jurisdiction of the Borrower or any of its assets,
except to the extent noncompliance is immaterial and would not have a material
adverse effect on Borrower.
3.2(h) Maintain on a consolidated statement basis "Tangible Net Worth" of
not less than the amounts specified below as of the end of each fiscal quarter
during the fiscal years ending on the dates specified below:
<TABLE>
<CAPTION>
Minimum
"Tangible
Fiscal Year-End Net Worth"
--------------- ----------
<S> <C>
09/30/94 $16,500,000
09/30/95 $18,000,000
09/30/96 $19,000,000
</TABLE>
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of the Borrower.
3.2(k) Maintain on a consolidated statement basis the ratio of "Current
Assets" to "Current Liabilities" of not less than the ratios specified below as
of the end of each fiscal quarter during the fiscal years ending on the dates
specified below:
<TABLE>
<CAPTION>
Fiscal Year-End Minimum Current Ratio
--------------- ---------------------
<S> <C>
09/30/94 2.25 to 1.00
09/30/95 2.30 to 1.00
09/30/96 2.35 to 1.00
</TABLE>
"Current Assets" shall include all assets considered current in accordance
with generally accepted accounting principles as in effect as of the date of
this Agreement, consistently applied, less all amounts due Borrower from any of
its directors, officers, employees, its shareholders, or any company controlled
by any of its shareholders. "Current Liabilities" shall include all
liabilities considered current in accordance with generally accepted accounting
principles as in effect as of the date of this Agreement, consistently applied,
except that portion of the Line of Credit payable within a twelve-month period.
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<PAGE> 15
3.2(l) On a consolidated statement basis maintain the ratio of
"Liabilities" to "Tangible Net Worth" of not more than the ratios specified
below as of the end of each fiscal quarter during the fiscal years ending on
the dates specified below:
<TABLE>
<CAPTION>
Fiscal Year-End Maximum Liabilities-to-Worth Ratio
--------------- ----------------------------------
<S> <C>
09/30/94 2.75 to 1.00
09/30/95 2.65 to 1.00
09/30/96 2.55 to 1.00
</TABLE>
"Liabilities" shall mean all liabilities of the Borrower and its
consolidated subsidiaries, if any, as defined in accordance with generally
accepted accounting principles as in effect as of the date of this Agreement,
consistently applied.
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of the Borrower.
3.2(m) On a consolidated statement basis, maintain an Interest Coverage
Ratio of not less than 2.00 to 1.00 for each fiscal year. The "Interest
Coverage Ratio" shall be defined as the ratio of the Borrower's net income,
plus interest charges, income and other taxes and amortization and depreciation
for the fiscal year to all interest expense of the Borrower for such fiscal
year, as determined in accordance with generally accepted accounting
principles.
3.2(n) On a consolidated statement basis, maintain a Fixed Charge Coverage
Ratio of not less than 1.75 to 1.00 for each fiscal year. The "Fixed Charge
Coverage Ratio" for each fiscal year shall be defined as the ratio of the
Borrower's net income, plus amortization and depreciation for the fiscal year,
to current maturities of long term debt, as determined in accordance with
generally accepted accounting principles.
3.2(o) At all times meet and cause each of its subsidiaries, if any, to
meet the minimum funding requirements of ERISA with respect to all employee
pension and/or profit sharing plans subject to ERISA and, with respect to any
such employee benefit plan, promptly notify Standard Federal in writing of any
reportable event, as defined in ERISA, or any proposed termination (voluntary
or otherwise) which could give rise to material termination liability within
the meaning of ERISA Section 4062.
3.3 The Borrower will not make any change in its accounting policies or
financial reporting practices and procedures, except
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changes in accounting policies which are required or permitted by generally
accepted accounting principles and changes in financial reporting practices and
procedures which are required or permitted by generally accepted accounting
principles.
3.4 The Borrower shall use the monies loaned hereunder only for the
purpose(s) set forth in the preamble hereto.
3.5 The Borrower shall allow Standard Federal's participant in the Line
of Credit and Term Loan and staff or independent accountants or auditors
selected by Standard Federal's participant to conduct a full audit of the
Borrower's financial statements and its books and records twice during the
first year of the term of the Line of Credit and Term Loan and once in each of
the second and third years of the term of the Line of Credit and Term Loan.
Standard Federal's participant shall schedule such audits during normal
business hours of the Borrower and shall provide Borrower not less than two (2)
business days notice of the commencement of each audit. The Borrower shall
make adequate facilities available on its premises at Borrower's expense to
enable Standard Federal's participant to conduct the audits herein described
and shall make available all of its books, records and other documents and
information as may be reasonably requested to facilitate the audits. The
Borrower agrees to pay to Standard Federal's participant an audit fee of
$3,000.00 plus travel expenses for each audit so conducted by the participant.
SECTION 4. NEGATIVE COVENANTS
4.1 From the date hereof until all amounts owing under the Line of
Credit are paid in full and all obligations under the Line of Credit Notes and
the Term Note, this Agreement and all other documents executed in connection
with the Line of Credit and the Term Loan are fully paid, performed and
satisfied and so long as Standard Federal has any commitment to make advances
hereunder, the Borrower covenants and agrees that it will not do and will not
permit any subsidiary, if any, to do any of the following without the prior
written approval of Standard Federal:
4.1(a) Create, incur, assume or permit to exist (a) any mortgage, pledge,
security interest, lien or charge of any kind upon any of its property or
assets whether now owned or hereafter acquired other than in favor of Standard
Federal, except as required or permitted by Standard Federal, or (b) any
indebtedness or liability for borrowed money, except indebtedness to Standard
Federal or indebtedness subordinated to the prior payment in full of the
Borrower's indebtedness to Standard Federal which is approved in writing by
Standard Federal, except as otherwise required or permitted in writing by
Standard Federal.
4.1(b) Make loans, advances or extensions of credit to any Entity (which in
this Agreement means any individual, partnership,
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<PAGE> 17
corporation or other legal entity), other than a parent or subsidiary of the
Borrower, in excess of $100,000.00 in principal amount, except for sales on
open account and in ordinary course of business; or guarantee or in any way
become responsible for obligations of any other Entity except by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business; or subordinate any indebtedness due it from an Entity to indebtedness
of any other creditor of such Entity.
4.1(c) Sell, lease or transfer, during any fiscal year, except inventory in
the ordinary course of business, any substantial portion of its assets; or
consolidate with or merge into any other Entity, or permit another to merge
into it; or acquire by lease or purchase all or substantially all the business
or assets of any Entity; or enter into any lease-back arrangement with any
Entity.
4.1(d) Acquire or expend for, by lease, purchase or otherwise, during any
fiscal year, fixed assets in excess of $4,500,000, excluding expenditures
during 1994 relating to the tube mill of McClain Tube Company d/b/a Quality
Tube.
SECTION 5. SECURITY
5.1 In order to secure: (1) the full and timely performance of the
Borrower's covenants set forth herein and in the Line of Credit Notes and the
Term Note, (2) the repayment of any and all indebtedness of the Borrower to
Standard Federal arising pursuant to the Line of Credit Notes, the Term Note
(including any renewals or substitutions thereof), this Agreement and any
mortgage, guaranty, security agreement or other document given to secure or
relating to the Line of Credit Notes, the Term Note or this Agreement, and (3)
all other indebtedness and liabilities of the Borrower to Standard Federal
arising under this Agreement, the Line of Credit Notes or the Term Note,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising:
5.1(a) The Borrower hereby grants unto Standard Federal a security interest
in the following property and the proceeds thereof: (i) any and all securities
or other property received by the Borrower with respect to, on account of or in
exchange for any item of Collateral; (ii) all stock and/or liquidating
dividends (whether the same be in the form of cash or other property) paid
upon, on account of or with respect to any item of Collateral; and (iii) all
bank deposits, instruments, negotiable documents, chattel paper and any and all
other property of the Borrower of any kind whatsoever which shall at any time
be in the possession or under the control of Standard Federal; and
5.1(b) The Borrower has granted to Standard Federal a security interest of
first priority in all personal property of the Borrower as provided in a
certain Security Agreement dated September 15,
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<PAGE> 18
1994 from the Borrower to Standard Federal, the provisions of which are hereby
incorporated herein by reference (herein, together with the property described
in Sections 5.1(a) (i), (ii) and (iii) above, referred to as the "Collateral"
or "item(s) of Collateral").
5.2 The Borrower shall execute and deliver to Standard Federal any and
all documents (including financing statements) as Standard Federal may require
to insure the perfection and priority of its liens and security interests in
the Collateral and furnish, if Standard Federal so requires, proof of hazard
insurance policies, in accordance with Section 3.2(g) above, relating to the
Collateral.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the events enumerated in Sections 6.1 to
6.11 below shall constitute an Event of Default for purposes of this Agreement:
6.1 FAILURE TO PAY MONIES DUE. If any indebtedness of the Borrower to
Standard Federal on the Line of Credit or the Term Loan is not paid when due,
regardless of whether such indebtedness has arisen pursuant to the terms of the
Line of Credit Notes, the Term Note, this Agreement or any mortgage, security
agreement, guaranty, instrument or other agreement executed in conjunction
herewith.
6.2 MISREPRESENTATION. If any warranty or representation made by or for
the Borrower and/or any endorser or guarantor of the Line of Credit Notes or
the Term Note in connection with the loan(s) evidenced thereby, or if any
financial data or any other information now or hereafter furnished to Standard
Federal by or on behalf of the Borrower and/or any endorser or guarantor of the
Line of Credit Notes or the Term Note shall prove to be false, inaccurate or
misleading in any material respect.
6.3 NONCOMPLIANCE WITH AFFIRMATIVE COVENANTS AND OTHER AGREEMENTS. If
the Borrower shall fail to perform any of its obligations and covenants under
Section 3 of this Agreement, or shall fail to comply with any of the other
provisions of this Agreement, other than under Section 4 hereof, or the Line of
Credit Notes, the Term Note, or any other agreement with Standard Federal to
which it may be a party, other than the payment of principal and interest.
6.4 NONCOMPLIANCE WITH NEGATIVE COVENANTS. If the Borrower shall fail
to perform any of its obligations and covenants described in Section 4 of this
Agreement.
6.5 BUSINESS SUSPENSION. If the Borrower and/or any endorser or
guarantor of the Line of Credit Notes or the Term Note shall voluntarily
suspend transaction of its business.
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<PAGE> 19
6.6 BANKRUPTCY, ETC. If the Borrower and/or any endorser or guarantor
of the Line of Credit Notes or the Term Note: (a) makes a general assignment
for the benefit of creditors; (b) shall file a voluntary petition in bankruptcy
or for a reorganization to effect a plan or other arrangement with creditors;
or shall file an answer to a creditor's petition or other petition against
Borrower and/or any endorser or guarantor of the Line of Credit Notes or the
Term Note for relief in bankruptcy or for a reorganization which answer admits
the material allegations thereof; or if any order for relief shall be entered
by any court of bankruptcy jurisdiction with respect to the Borrower and/or any
endorser or guarantor of the Line of Credit Notes or the Term Note, or if
bankruptcy, reorganization or liquidation proceedings are instituted against
Borrower and/or any endorser or guarantor of the Line of Credit Notes or the
Term Note and remain undismissed for 60 days; (c) has entered against it any
order by any court approving a plan for the reorganization of the Borrower or
any endorser or guarantor of the Line of Credit Notes or the Term Note or any
other plan or arrangement with creditors of the Borrower or any endorser or
guarantor of the Line of Credit Notes or the Term Note; (d) shall apply for or
permit the appointment of a receiver, trustee or custodian for any substantial
portion of the Borrower's and/or any endorser's or guarantor's properties or
assets; or (e) becomes unable to meet its debts as they mature or becomes
insolvent.
6.7 JUDGMENTS AND WRITS. If there shall be entered against the Borrower
and/or any endorser or guarantor of the Line of Credit Notes or the Term Note
one or more judgments or decrees which are not insured against or satisfied or
appealed from and bonded within the time or times limited by applicable rules
of procedure for appeal as of right or if a writ of attachment or garnishment
against the Borrower and/or any endorser or guarantor of the Line of Credit
Notes or the Term Note shall be issued and levied in an action claiming
$100,000.00 or more and not released, bonded or appealed from within 30 days
after the levy thereof.
6.8 MERGER. If the Borrower shall merge or consolidate with another
entity.
6.9 CHANGE OF CONTROL OR MANAGEMENT. If the Borrower or a controlling
portion of its voting stock or a substantial portion of its assets comes under
the practical, beneficial or effective control of any person or persons other
than those having such control as of the date of execution of the Line of
Credit Notes and the Term Note, whether by reason of merger, consolidation,
sale or purchase of stock or assets or otherwise, if any such change of
control, in the sole and absolute discretion of Standard Federal, adversely
impacts upon the ability of the Borrower to carry on its business as
theretofore conducted.
6.10 OTHER DEFAULTS. If the Borrower and/or any endorser or guarantor of
the Line of Credit Notes or the Term Note shall
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<PAGE> 20
default in the due payment of any material indebtedness to whomsoever owed, or
shall default in the observance or performance of any material term, covenant
or condition in any mortgage, security agreement, guaranty, instrument, lease
or agreement to which the Borrower and/or any endorser or guarantor of the Line
of Credit Notes or the Term Note is a party.
6.11 REPORTABLE EVENT. If there shall occur any "reportable event", as
defined in the Employee Retirement Income Security Act of 1974 and any
amendments thereto, which is determined to constitute grounds for termination
by the Pension Benefit Guaranty Corporation of any employee pension benefit
plan maintained by or on behalf of the Borrower for the benefit of any of its
employees or for the appointment by the appropriate United States District
Court of a trustee to administer such plan and such reportable event is not
corrected and such determination is not revoked within 30 days after notice
thereof has been given to the plan administrator or the Borrower; or the
institution of proceedings by the Pension Benefit Guaranty Corporation to
terminate any such employee benefit pension plan or to appoint a trustee to
administer such plan; or the appointment of a trustee by the appropriate United
States District Court to administer any such employee benefit pension plan.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT
7.1 Upon the occurrence of any Event of Default described in Sections
6.2, 6.3 or 6.10 hereof which is not cured or waived in writing by Standard
Federal within 15 days after written notice to the Borrower of such default; or
upon the occurrence of any Event of Default described in Section 6.1 which
continues unremedied for 10 days, or upon the occurrence of any Event of
Default described in Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.11, Standard
Federal's commitment to lend hereunder, if any, shall terminate and Standard
Federal may, without notice, declare the entire unpaid and outstanding
principal balance of the Line of Credit and the Term Loan and all accrued
interest to be due and payable in full forthwith, without presentment, demand
or notice of any kind, all of which are hereby expressly waived by Borrower,
and thereupon Standard Federal shall have and may exercise any one or more of
the rights and remedies provided herein or in the Line of Credit Notes or the
Term Note or in any mortgage, guaranty, security agreement or other document
relating hereto or granted secured parties under the Michigan Uniform
Commercial Code, including the right to take possession of and dispose of the
Collateral, or otherwise provided by applicable law, and to offset against the
Line of Credit and the Term Loan any amount owing by Standard Federal to the
Borrower.
SECTION 8. MISCELLANEOUS.
8.1 No default shall be waived by Standard Federal except in writing and
a waiver of any default shall not be a waiver of any
20
<PAGE> 21
other default or of the same default on a future occasion. No single or
partial exercise of any right, power or privilege hereunder, or any delay in
the exercise hereof, shall preclude other or further exercise of the rights of
the parties to this Agreement.
8.2 No forbearance on the part of Standard Federal in enforcing any of
its rights under this Agreement, nor any renewal, extension or rearrangement of
any payment or covenant to be made or performed by the Borrower hereunder shall
constitute a waiver of any of the terms of this Agreement or of any such right.
8.3 This Agreement shall be construed in accordance with the law of the
State of Michigan.
8.4 All covenants, agreements, representations and warranties made in
connection with this Agreement and any document contemplated hereby shall
survive the borrowing hereunder and shall be deemed to have been relied upon by
Standard Federal. All statements contained in any certificate or other
document delivered to Standard Federal at any time by or on behalf of the
Borrower pursuant hereto shall constitute representations and warranties by the
Borrower.
8.5 The Borrower agrees that it will pay all costs and expenses incurred
by Standard Federal in enforcing Standard Federal's rights under this Agreement
and the documents contemplated hereby, including without limitation any and all
reasonable fees and disbursements of legal counsel to Standard Federal.
8.6 This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and assigns; provided, however, that the Borrower shall not assign
or transfer its rights or obligations hereunder without the prior written
consent of Standard Federal.
8.7 If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable as applied in any particular
case in any or all jurisdictions, or in all cases because it conflicts with any
other provision or provisions hereof or any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any
extent whatever. The invalidity of any one or more phrases, sentences, clauses
or sections contained in this Agreement, shall not affect the remaining
portions of this Agreement, or any part thereof.
21
<PAGE> 22
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Line of Credit Loan Agreement to be executed as of the day and year first
written above.
BORROWER:
MCCLAIN INDUSTRIES, INC.,
a Michigan corporation
By:
- -------------------------------- -------------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
----------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC.,
a Georgia corporation
By:
- --------------------------------- --------------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
-----------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY,
a Michigan corporation
By:
- --------------------------------- --------------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
-----------------------------------
Taxpayer Identification Number
22
<PAGE> 23
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- --------------------------------- --------------------------------
E. James Zabinski
Its: Treasurer
-------------------------
-----------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC.,
a Michigan corporation
By:
- ----------------------------- --------------------------------
E. James Zabinski
Its: Treasurer
--------------------------
-----------------------------------
Taxpayer Identification Number
STANDARD FEDERAL BANK, a
federal savings bank
By:
--------------------------------
Its:
----------------------------
23
<PAGE> 24
Schedule 2.12
1. Final Report Phase I Environmental Assessment Peabody-Galion
Corporation, Winesburg, Holmes County, Ohio, prepared by Stearns &
Wheler, Environmental Engineers and Scientists, dated February,
1993, Project No. 2471.
2. Final Report Phase II Site Investigation, Galion Site, Winesburg,
Ohio, prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated September, 1993, Project No. 2471.
3. Phase II Site Investigation Peabody-Galion Site, Galion, Ohio,
prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated January, 1993, Project No. 2429.
4. Subsurface Investigation at 5669 East Cork Street, Comstock Park,
Michigan, Clayton Project No. 58643.00, dated November 4, 1994,
prepared by Clayton Environmental Consultants.
5. Subsurface Investigation at 6200 Elmridge Drive, Sterling Heights,
Michigan, Clayton Project No. 58644.00, dated November 4, 1994,
prepared by Clayton Environmental Consultants.
24
<PAGE> 1
EXHIBIT 10.30
LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
GALION HOLDING COMPANY,
GALION SOLID WASTE EQUIPMENT, INC.
AND GALION DUMP BODIES, INC.
THIS AGREEMENT made and delivered this 6th day of February, 1995, by and
between Galion Holding Company, a Michigan corporation, Galion Solid Waste
Equipment, Inc., a Michigan corporation, and Galion Dump Bodies, Inc., a
Michigan corporation (collectively, "Borrower"), whose address/principal office
is 6200 Elmridge, Sterling Heights, Michigan 48310, and Standard Federal Bank,
a federal savings bank ("Standard Federal"), whose address is 2600 West Big
Beaver Road, Troy, Michigan 48084.
RECITALS:
A. Borrower has requested an equipment purchase credit facility in the
total principal amount of $800,000.00.
B. Standard Federal is willing to supply such financing subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual promises herein contained, the
Borrower and Standard Federal hereby agree as follows:
SECTION 1. EQUIPMENT PURCHASE LINES OF CREDIT
1.1 First Line of Credit
1.1(a) Standard Federal hereby extends to the Borrower a revolving line of
credit (the "First Line of Credit") which shall not exceed at any one time
outstanding the principal amount of Eight Hundred Thousand and 00/100 Dollars
($800,000.00) (the "First Credit Limit").
1.1(b) The First Line of Credit herein extended shall be subject to the
terms and conditions of a Promissory Note (Line of Credit with Term Provisions)
(First Line of Credit), in the principal amount of Eight Hundred Thousand and
00/100 Dollars ($800,000.00), of even date herewith and all renewals and
amendments thereof (the "First Line of Credit Note"). This Loan Agreement and
the First Line of Credit Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all provisions of
both documents.
<PAGE> 2
1.1(c) If at any time the amount outstanding under the First Line of Credit
shall exceed the First Credit Limit, Borrower shall, on demand, forthwith pay
to Standard Federal such sums as are necessary to reduce the amount outstanding
to an amount not greater than the First Credit Limit.
1.1(d) Each advance under the First Line of Credit shall be used solely for
the purchase of equipment. Each advance shall be in an amount not in excess of
Eighty Five percent (85.0%) of the cost to the Borrower of the equipment to be
purchased with such advance. Standard Federal shall make advances under the
First Line of Credit only upon receipt by it in a form satisfactory to it of a
true and authentic copy of the dealer invoice for the equipment purchased or to
be purchased with the advance.
1.1(e) Standard Federal shall, from time to time to and until August 1,
1995 (the "First Term Date"), make advances to Borrower under the First Line of
Credit upon request therefor by Borrower, subject to the other conditions
contained in the First Line of Credit Note.
1.1(f) Accrued interest shall be payable under the First Line of Credit
Note on the 1st day of each month beginning on March 1, 1995 through and
including the First Term Date. From and after the First Term Date, Standard
Federal shall make no further advances under the First Line of Credit and the
outstanding principal balance thereunder as of the First Term Date, with
interest, shall be repaid in consecutive monthly payments of principal, each in
the amount determined by dividing the outstanding principal balance under the
First Line of Credit Note as of the First Term Date by 78, plus interest
accrued to the due date of each such payment, commencing on September 1, 1995
and continuing on the same day of each consecutive month thereafter and a final
payment on February 1, 2002 in an amount equal to the then unpaid principal and
accrued interest under the First Line of Credit Note.
1.2 Second Line of Credit
1.2(a) Standard Federal hereby extends to the Borrower an additional revolving
line of credit (the "Second Line of Credit") (the First Line of Credit and the
Second Line of Credit are sometimes herein collectively referred to as the
"Line of Credit") which shall not exceed at any one time outstanding the
principal amount of Eight Hundred Thousand and 00/100 Dollars ($800,000.00),
less the principal outstanding under the First Line of Credit as of the First
Term Date (the "Second Credit Limit").
1.2(b) The Second Line of Credit herein extended shall be subject to the
terms and conditions of a Promissory Note (Line of Credit with Term Provisions)
(Second Line of Credit), in the principal amount of Eight Hundred Thousand and
00/100 Dollars ($950,000.00), of even date herewith and all renewals and
2
<PAGE> 3
amendments thereof (the "Second Line of Credit Note") (the First Line of Credit
Note and the Second Line of Credit Note are sometimes herein collectively
referred to as the "Line of Credit Notes"). This Loan Agreement and the Second
Line of Credit Note are of equal materiality and shall each be construed in
such manner as to give full force and effect to all provisions of both
documents.
1.2(c) If at any time the amount outstanding under the Second Line of
Credit shall exceed the Second Credit Limit, Borrower shall, on demand,
forthwith pay to Standard Federal such sums as are necessary to reduce the
amount outstanding to an amount not greater than the Second Credit Limit.
1.2(d) Each advance under the Second Line of Credit shall be used solely
for the purchase of equipment. Each advance shall be in an amount not in
excess of Eighty Five percent (85.0%) of the cost to the Borrower of the
equipment to be purchased with such advance. Standard Federal shall make
advances under the Second Line of Credit only upon receipt by it in a form
satisfactory to it of a true and authentic copy of the dealer invoice for the
equipment purchased or to be purchased with the advance.
1.2(e) Standard Federal shall, from time to time after the First Term Date
and to and until February 1, 1996 (the "Second Term Date"), make advances to
Borrower under the Second Line of Credit upon request therefor by Borrower,
subject to the other conditions contained in the Second Line of Credit Note.
1.2(f) Accrued interest shall be payable under the Second Line of Credit
Note on the 1st day of each month beginning on September 1, 1995 through and
including the Second Term Date. From and after the Second Term Date, Standard
Federal shall make no further advances under the Second Line of Credit and the
outstanding principal balance thereunder as of the Second Term Date, with
interest, shall be repaid in consecutive monthly payments of principal, each in
the amount determined by dividing the outstanding principal balance under the
Second Line of Credit Note as of the Second Term Date by 78, plus interest
accrued to the due date of each such payment, commencing on March 1, 1996 and
continuing on the same day of each consecutive month thereafter and a final
payment on August 1, 2002 in an amount equal to the then unpaid principal and
accrued interest under the Second Line of Credit Note.
SECTION 1A. CONDITIONS TO MAKING LOAN
1A.1 The following are conditions precedent to the obligation of Standard
to make the Line of Credit hereunder:
3
<PAGE> 4
1A.1(a) The Borrower shall have delivered or shall have had delivered to
Standard Federal, in form and substance satisfactory to Standard Federal and
its counsel, each of the following:
a. A duly executed copy of this Loan Agreement;
b. A duly executed copy of the Line of Credit Notes and such other loan
documents as Standard Federal shall require to evidence and document
the Line of Credit;
c. Such credit applications, financial statements, authorizations, and
such information concerning the Borrower and its business,
operations, and condition (financial and otherwise) as Standard
Federal may reasonably request;
d. Certified copies of resolutions of the Boards of Directors of the
Borrower approving the execution and delivery of the loan documents
required hereunder;
e. A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign the loan documents required
hereunder;
f. Copies of each of the Articles of Incorporation of the Borrower,
certified by the Secretary of State of Michigan as of a recent date;
g. Copies of each of the Articles of Incorporation and Bylaws of the
Borrower, certified by the Secretary or an Assistant Secretary of
the Borrower as of the date of this Agreement as being accurate and
complete;
h. Certificate of good standing of the Borrower from the Secretary of
State of Michigan as of a recent date;
i. Certificates of authority and good standing of the Borrower for each
state in which the Borrower is qualified to do business;
j. A certificate of compliance of the chief financial officer or
treasurer of the Borrower in form satisfactory to Standard Federal
dated as of the date of this Agreement;
k. Such certificates, binders or other evidence of all insurance
required of the Borrower under this Loan Agreement as Standard
Federal may reasonably require; and
l. Acknowledgement copies of all UCC-1 financing statements filed with
respect to the Collateral accompanied by a search report showing
such financing statements as duly filed and evidencing that the
security interest of Standard Federal in the Collateral is prior to
all other security interests of record.
1A.1(b) All acts and conditions (including, without limitation, the
obtaining of any necessary regulatory approvals and the making of any required
filings, recordings, or registrations) required to be done and performed and to
have happened precedent to the execution, delivery, and performance of the loan
documents required hereunder and to constitute the same legal, valid, and
binding
4
<PAGE> 5
obligations, enforceable in accordance with their respective terms, shall have
been done and performed and shall have happened in due and strict compliance
with all applicable laws.
1A.1(c) All documentation, including, without limitation, documentation for
corporate and legal proceedings in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to Standard Federal and its counsel and all fees and charges, including
recording and filing fees, shall have been paid as required hereunder.
1A.2 As conditions precedent to Standard Federal's obligation to fund any
request for an advance under the Line of Credit, at and as of the date of the
funding thereof;
a. The representations and warranties of the Borrower contained in the
Loan Documents shall be accurate and complete in all respects as if
made on and as of such date;
b. The Borrower shall have paid all fees and expenses, including any
recording fees and charges, required hereunder;
c. There shall not have occurred an Event of Default or any event which
with the passage of time of the giving of notice or both would
constitute an Event of Default; and
d. Following the making of such loan or advance, the aggregate
principal amount outstanding will not exceed the limitations
described in Sections 1 and 1A.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to Standard Federal that as of
the date of acceptance of this Agreement, as of the time any advance is to be
made hereunder and, unless expressly provided otherwise herein or agreed to by
a writing signed by Standard Federal, at all times any amounts are outstanding
hereunder:
2.1 The Borrower and each of its subsidiaries, if any, are corporations
duly organized, validly existing and in good standing under the laws of the
state of their incorporation; the Borrower and each of its subsidiaries (if
any) have the legal power and authority to own their properties and assets and
to carry out their business as now being conducted and each is qualified to do
business in the State of Ohio, the State of Michigan and in every jurisdiction
where the nature of its business or the property owned or operated by it makes
such qualification necessary and is otherwise in compliance with all applicable
laws, statutes, regulations, rules and requirements of any federal, state,
judicial, regulatory or administrative body having jurisdiction of the Borrower
or any of its assets; the Borrower has the legal power and authority to execute
and perform this Agreement, to borrow money in accordance with its terms, to
execute and deliver the Line
5
<PAGE> 6
of Credit Notes and other documents contemplated hereby, to grant to Standard
Federal mortgages and security interests in the Collateral, as hereby
contemplated, and to do any and all other things required of it hereunder; and
this Agreement, the Line of Credit Notes and all other documents contemplated
hereby, when executed by the Borrower's duly authorized officers will
constitute its valid and binding legal obligations enforceable in accordance
with their terms.
2.2 The execution, delivery and performance of this Agreement, the
borrowings hereunder and the execution and delivery of the Line of Credit Notes
and other documents contemplated hereby (a) have been duly authorized by all
requisite corporate action, (b) do not require governmental approval or the
approval of any person not a party to this Agreement, (c) will not result (with
or without notice and/or the passage of time) in any conflict with or breach or
violation of or default under, any provision of law, the Articles of
Incorporation or Bylaws of the Borrower or any indenture, agreement or other
instrument to which the Borrower is a party, or by which it or any of its
properties or assets are bound, and (d) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than in favor of Standard
Federal and as contemplated hereby.
2.3 There is not pending or, to the best of the knowledge of the
Borrower, threatened, any litigation, proceeding or governmental investigation
which could materially and adversely affect the business of the Borrower or its
subsidiaries, if any, or its ability to perform its covenants hereunder.
2.4 Borrower has good and marketable title to its properties given as
security as herein described, and, except for liens in favor of Standard
Federal, liens for taxes not delinquent or being contested in good faith and
liens created in connection with worker's compensation, unemployment insurance
and social security, or to secure the performance of bids, tenders or contracts
(other than for the repayment of borrowed money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like nature made
in the ordinary course of business, none of the Borrower's or any of its
subsidiaries' (if any) assets are subject to any mortgage, pledge, lien,
security interest, or other encumbrance of any kind or character except as have
been disclosed to Standard Federal in writing. The Borrower owns all material
patents, trademarks, service marks, trade names, copyrights, licenses and other
rights, free from any material restrictions, that are necessary for the
operation of its business as presently conducted.
2.5 All financial data which has been or shall hereafter be furnished to
Standard Federal for the purposes of, or in connection with, this Agreement,
including particularly, but without
6
<PAGE> 7
limitation, the audited consolidated financial statements of McClain
Industries, Inc. as of September 30, 1993, prepared by Rehmann Robson & Co.,
and the Form 10-Q's filed with the Securities and Exchange Commission by
McClain industries, Inc. pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly periods ended December 31, 1993, March
31, 1994 and June 30, 1994, and the transactions contemplated hereby has been
and/or shall be prepared in accordance with generally accepted accounting
principles consistently applied, and does or will fairly present the financial
condition of the Borrower as of the dates, and the results of its operations
for the periods, for which the same is furnished to Standard Federal.
2.6 There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower or its
subsidiaries (if any) since the date of the latest financial statements
provided to Standard Federal and there are no material debts, liabilities or
obligations (absolute or contingent) of the Borrower except as reflected in
such financial statements (or in the notes thereto).
2.7 The Borrower is not in default in the repayment of any indebtedness
for money borrowed by it nor has there occurred any event which, with or
without notice or the passage of time or both, would constitute a default by
the Borrower under any agreement or instrument pertaining to any indebtedness
for money borrowed by it.
2.8 Borrower has filed all reports and tax returns required by
governmental authority to be filed by it prior to the date hereof and Borrower
has received no notice that such reports or returns have been rejected,
declared insufficient, or otherwise challenged by such governmental authority.
2.9 The principal officers of the Borrower ("Principal Officers") are as
follows:
Galion Holding Company:
Chairman of the Board Kenneth D. McClain
------------------
Vice President E. James Zabinski
------------------
Treasurer E. James Zabinski
------------------
Secretary Carl L. Jaworski
------------------
Galion Solid Waste Equipment, Inc.:
Chairman of the Board Kenneth D. McClain
------------------
Vice President E. James Zabinski
------------------
7
<PAGE> 8
Treasurer E. James Zabinski
------------------
Secretary Carl L. Jaworski
------------------
Galion Dump Bodies, Inc.:
Chairman of the Board Kenneth D. McClain
------------------
Vice President E. James Zabinski
------------------
Treasurer Carl L. Jaworski
------------------
Secretary Carl L. Jaworski
------------------
2.10 Galion Solid Waste Equipment, Inc., a Michigan corporation, and
Galion Dump Bodies, Inc., a Michigan corporation, are each wholly-owned
subsidiaries of Galion Holding Company, a Michigan corporation, which is a
wholly-owned subsidiary of McClain Industries, Inc., a Michigan corporation.
Galion Solid Waste Equipment, Inc. and Galion Dump Bodies, Inc. also each hold
one-third of the outstanding capital stock of M.E.G. Equipment Sales, Inc.,
Michigan corporation, of which M.E.G. Equipment Sales of Florida, Inc., a
Florida corporation, is a wholly-owned subsidiary. Galion Holding Company, as
of the date of this Loan Agreement, owns no other subsidiaries.
2.11 None of the proceeds of the Line of Credit will be used for the
purpose of purchasing or carrying any "margin stock" as defined in Regulation U
or G of the Board of Governors of the Federal Reserve System (12 C.F.R. Part
221 and 207), or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U or G. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stocks.
Neither Borrower nor any person acting on behalf of Borrower has taken or will
take any action which might cause the Line of Credit Notes or any of the other
documents executed in conjunction therewith, including this Agreement, to
violate Regulations U or G or any other regulations of the Board of Governors
of the Federal Reserve System or to violate Section 7 of the Securities
Exchange Act of 1934 or any rule or regulation thereunder, in each case as now
in effect or as the same may hereinafter be in effect. Borrower and its
subsidiaries, if any, own no "margin stock"except for that described in the
financial statements provided to Standard Federal and, as of the date hereof,
the aggregate value of all "margin stock" owned by Borrower and its
subsidiaries, if any, does not exceed 25% of all of the value of all of
Borrower's and its subsidiaries', if any, assets.
8
<PAGE> 9
2.12 Except as disclosed in the environmental reports listed in attached
Schedule 2.12, copies of which the Borrower has furnished to Standard Federal,
neither the Borrower nor, to the best of Borrower's knowledge after due
inquiry, any other person or entity, has caused or permitted any waste, oil,
pesticides, or any substance or material of any kind which is currently known
or suspected to be toxic or hazardous, including but not limited to any
substance defined as a "Hazardous Waste" in Title 40, Part 261 of the Code of
Federal Regulations, (hereinafter referred to as "Hazardous Material") to be
discharged, dispersed, released, disposed of, or allowed to escape on, under or
at any property owned, occupied or operated by any Borrower in violation of any
Hazardous Materials Laws (as hereinafter defined), nor has any property owned,
occupied or operated by any Borrower, or any part thereof, ever been used by
the Borrower or, to the best of Borrower's knowledge after due inquiry, any
prior owner or any other person, as a dump, storage or disposal site for any
Hazardous Material, nor has there occurred any other violation of the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9601 et seq., 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
Material ("Hazardous Materials Laws") with respect to any property owned,
occupied or operated by any Borrower. No asbestos or asbestos-containing
materials have been installed, used, incorporated into, or disposed of on any
property owned, occupied or operated by any Borrower. No polychlorinated
biphenyls ("PCBs") are located on or in any property owned, occupied or
operated by any Borrower, in the form of electrical transformers, fluorescent
light fixtures with ballasts, cooling oils, or any other device or form. All
underground storage tanks located on any property owned, occupied or operated
by any Borrower have been installed and are being operated in full compliance
with all applicable Hazardous Materials Laws. The Borrower: (a) has not
received any notice of any release, threatened release, escape, seepage,
leakage, spillage, discharge or emission of any Hazardous Materials in, under
or upon any property owned, occupied or operated by any Borrower or of any
violation of any Hazardous Materials Law, and (2) does not know of any basis
for any such notice or violation.
2.13 No "reportable event," as defined in the Employee Retirement Income
Security Act of 1974 and any amendments thereto ("ERISA"), has occurred and is
continuing with respect to any employee pension and/or profit sharing benefit
plan maintained byor on behalf of the Borrower for the benefit of any of its
employees. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any such employee pension and/or profit
sharing plan or to appoint a trustee to administer such plan. The Borrower
has maintained and funded and caused each of its subsidiaries, if any, to
maintain and fund all employee pension and/or profit sharing plans in
accordance with their terms
9
<PAGE> 10
and with all applicable provisions of ERISA. Neither the Borrower nor any duly
appointed administrator of any employee pension and/or profit sharing plan: (a)
has incurred any liability to PBGC with respect to any such plan other than for
premiums not yet due or payable, (b) has instituted or intends to institute
proceedings to terminate any such plan under Section 4042 or 4041A of Erisa, or
(c) has withdrawn from any Multi-Employer Pension Plan (as that term is defined
in Section 3(37) of ERISA).
2.14 There is no material fact that the Borrower has not disclosed to
Standard Federal which could have a material adverse effect on the properties,
business, prospects or condition (financial or otherwise) of the Borrower or
any of its subsidiaries. For purposes of this Section 2.14, a "material
adverse effect" means any circumstance or event which (a) could have any
adverse effect whatsoever upon the validity, performance or enforceability of
any material provision of the Loan Documents, (b) is or might be material and
adverse to the financial condition or business operations of the Borrower or
any subsidiary, (c) could impair the ability of the Borrower to fulfill its
obligations under the Loan Documents, or (d) causes an Event of Default or any
event which, with notice or lapse of time or both, could become an Event
of Default. Neither the financial statements referred to in Section 2.5
hereof, nor any certificate or statement delivered herewith or heretofore by
Borrower in connection with the negotiations of this Loan Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary to keep the statements contained herein or therein, under the
circumstances in which they were made, from being misleading.
2.15 Each request for an advance under the Line of Credit shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Event of Default
exists and that all representations and warranties contained in this Section 2
or in any mortgage, guaranty, security agreement or other document given to
secure or relating to the Line of Credit Notes or this Agreement are true and
correct at and as of the time the advance is to be made.
SECTION 3. AFFIRMATIVE COVENANTS OF BORROWER
3.1 Prior to Standard Federal's disbursement of any advances under the
Line of Credit, the Borrower shall; (a) furnish to Standard Federal, if
Standard Federal so requires, certified copies of its Articles of
Incorporation, Bylaws and Certificate of Good Standing, which Articles of
Incorporation and Good Standing Certificate are to be certified by the
appropriate official of the Borrower's state of incorporation; (b) furnish to
Standard Federal if Standard Federal so requires a statement of the Borrower
and the chief financial officer of Borrower certifying that they are unaware of
the occurrence of an Event
10
<PAGE> 11
of Default or of any event which with notice and/or the passage of time
could become an Event of Default; and (c) furnish Standard Federal such other
instruments, documents, opinions or certificates as Standard Federal or its
counsel shall reasonably require. All actions, proceedings, instruments and
documents required or requested hereunder shall be satisfactory to and approved
by Standard Federal and/or its counsel prior to the disbursement of advances
under the Line of Credit.
3.2 From the date hereof until all amounts owing under the Line of
Credit are paid in full and all obligations under the Line of Credit Notes,
this Agreement and all other documents executed in connection with the Line of
Credit are fully paid, performed and satisfied and so long as Standard Federal
has any commitment to make advances hereunder, the Borrower covenants and
agrees it will:
3.2(a) Furnish to Standard Federal as soon as available and, in any event,
within 90 days after the close of each fiscal year of the parent corporation of
the Borrower, McClain Industries, Inc. ("McClain"), or, in the event McClain
obtains an extension of the filing date from the Securities Exchange
Commission, by such extended date, detailed financial statements of McClain as
of the close of such fiscal year, containing a consolidated balance sheet of
McClain and its subsidiaries and statements of income and cash flows of McClain
and its subsidiaries for such fiscal year prepared in accordance with generally
accepted accounting principles and in a manner consistent with prior such
statements containing an analysis of sources and uses of funds and such other
comments and financial details as are usually included in similar reports.
Such statements shall be accompanied by an opinion thereon (which shall not be
qualified by reason of any limitation imposed by Borrower or McClain) of
independent certified public accountants selected by McClain and acceptable to
Standard Federal as to the fairness of the statements included in the report
and to the effect that the examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances.
3.2(b) Furnish to Standard Federal, as soon as available and in any event
within 45 days after the close of each quarter of each fiscal year of McClain,
or, in the event McClain obtains an extension of the filing date from the
Securities Exchange Commission, by such extended date, detailed financial
statements of McClain as of the close of such fiscal period containing a
consolidated balance sheet of McClain and its subsidiaries and statements of
income and cash flows of the McClain and its subsidiaries for such fiscal
period and for the portion of the fiscal year ending with such period in
reasonable detail and form acceptable to Standard Federal and certified by the
chief financial officer of McClain as being true and correct and as having been
prepared in accordance with generally accepted accounting
11
<PAGE> 12
principles consistently applied, subject to year-end adjustments, if any.
3.2(c) Furnish to Standard Federal in a form acceptable to Standard Federal
within a reasonable time not to exceed 20 days after the end of each calendar
month during the term hereof a statement of accounts receivable of Borrower
certified as correct by Borrower or a Principal Officer showing the agings
thereof and the payment, write-off or other disposition of former accounts
receivable the disposition of which has not previously been reported to
Standard Federal, and such other information and data as Standard Federal may
reasonably require. Borrower will further specifically disclose any facts
known to Borrower which facts would tend to render doubtful the collectibility
of any account receivable disclosed in such statements, or which would indicate
that the existence or amount of such account is disputed by the debtor thereon
or which would preclude any account from being included in the computation of
Eligible Accounts Receivable herein defined.
3.2(d) Furnish to Standard Federal in a form acceptable to Standard Federal
within a reasonable time not to exceed 20 days after the end of each calendar
month during the term hereof a statement of inventory of the Borrower certified
as correct by Borrower or a Principal Officer showing the method of reporting
and all additions to and dispositions of inventory since the previous inventory
report and such other information and data as Standard Federal may reasonably
require.
3.2(e) Furnish to Standard Federal, promptly after McClain sends, files or
publishes the same, copies of all proxy statements, financial statements and
reports that McClain sends to its public shareholders and copies of all
regular, periodic and special reports and all registration statements and
amendments thereto that McClain files with the Securities and Exchange
Commission or any other governmental authority and any Exchange, and copies of
all press releases issued by McClain.
3.2(f) Promptly inform Standard Federal of the occurrence of any Event
of Default or of any event (including without limitation any pending or
threatened litigation or other proceedings before any governmental body or
agency) which could have a materially adverse effect upon the Borrower's
business, properties, financial condition or ability to comply with its
obligations hereunder or under the Line of Credit Notes.
3.2(g) Furnish such other information as Standard Federal may reasonably
request and permit Standard Federal and its agents, attorneys and employees to
inspect all of the books, records and properties of the Borrower at any
reasonable time.
12
<PAGE> 13
3.2(h) Maintain adequate insurance with responsible companies in such
amounts and against such risks and hazards as are normally insured against by
similar businesses, and provide Standard Federal evidence of such insurance
upon request; policies of casualty insurance shall contain a customary
mortgagee clause requiring payment of proceeds to Borrower and to Standard
Federal as their interests may appear and all other insurance shall contain a
customary loss payable clause requiring payment of proceeds to Borrower and to
Standard Federal as their interests may appear and all insurance policies shall
provide that no cancellation, reduction in amount, change in coverage or
expiration thereof shall be effective until at least 30 days prior written
notice has been given by the insurer to Standard Federal; and pay when due all
taxes, assessments, fees and similar charges of every kind and nature lawfully
assessed upon the Borrower and/or its property, except to the extent being
contested in good faith; and in the event the Borrower fails to maintain such
insurance or to pay promptly any taxes or charges when due, then and in such
event Standard Federal, in its sole discretion, may, but shall not be required
to, pay the same and any amounts expended by Standard Federal for such purpose
shall become a part of the Line of Credit and shall bear interest at the rate
applicable to the outstanding principal balance owing under the Line of Credit
Notes.
3.2(i) Preserve and keep in full force and effect its own and its material,
operating subsidiaries' (if any) corporate existence in good standing and
maintain voting control in its present controlling shareholder(s); keep current
all filings of assumed name certificates for each name under which and each
county in which the Borrower does business and promptly inform Standard Federal
of any assumed names under which it does business which were not used by the
Borrower on the date of this Agreement; continue to conduct and operate its
business substantially as presently conducted and operated in accordance with
all applicable laws and regulations; maintain and protect all franchises and
trade names and preserve all the remainder of its property used or useful in
the conduct of its business and keep the same in good repair and condition; pay
its indebtedness and obligations when due under normal terms and maintain proper
books of record and account, and; otherwise remain in compliance with all
applicable laws, statutes, regulations, rules and requirements of any federal,
state, judicial, regulatory or administrative body having jurisdiction of the
Borrower or any of its assets, except to the extent noncompliance is immaterial
and would not have a material adverse effect on Borrower.
3.2(j) Cause McClain to maintain on a consolidated statement basis
"Tangible Net Worth" of not less than the amounts specified below as of the end
of each fiscal quarter during the fiscal years ending on the dates specified
below:
13
<PAGE> 14
<TABLE>
<CAPTION>
Minimum
"Tangible
Fiscal Year-End Net Worth"
--------------- ----------
<S> <C>
09/30/94 $16,500,000
09/30/95 $18,000,000
09/30/96 $19,000,000
</TABLE>
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of the Borrower.
3.2(k) Cause McClain to maintain on a consolidated statement basis the
ratio of "Current Assets" to "Current Liabilities" of not less than the ratios
specified below as of the end of each fiscal quarter during the fiscal years
ending on the dates specified below:
<TABLE>
<CAPTION>
Fiscal Year-End Minimum Current Ratio
--------------- ---------------------
<S> <C>
09/30/94 2.25 to 1.00
09/30/95 2.30 to 1.00
09/30/96 2.35 to 1.00
</TABLE>
"Current Assets" shall include all assets considered current in accordance
with generally accepted accounting principles as in effect as of the date of
this Agreement, consistently applied, less all amounts due Borrower from any of
its directors, officers, employees, its shareholders, or any company controlled
by any of its shareholders. "Current Liabilities" shall include all
liabilities considered current in accordance with generally accepted accounting
principles as in effect as of the date of this Agreement, consistently applied,
except that portion of McClain's $5,000,000.00 line of credit with Standard
Federal which is payable within a twelve-month period.
3.2(l) Cause McClain, on a consolidated statement basis, to maintain the
ratio of "Liabilities" to "Tangible Net Worth" of not more than the ratios
specified below as of the end of each fiscal quarter during the fiscal years
ending on the dates specified below:
14
<PAGE> 15
<TABLE>
<CAPTION>
Fiscal Year-End Maximum Liabilities-to-Worth Ratio
--------------- ----------------------------------
<S> <C>
09/30/94 2.75 to 1.00
09/30/95 2.65 to 1.00
09/30/96 2.55 to 1.00
</TABLE>
"Liabilities" shall mean all liabilities of McClain and its consolidated
subsidiaries as defined in accordance with generally accepted accounting
principles as in effect as of the date of this Agreement, consistently applied.
"Tangible Net Worth" shall mean total assets less trademarks, franchises,
copyrights, licenses, goodwill, similar intangible assets and all liabilities
(excluding debt subordinated to Standard Federal upon terms and conditions
acceptable to Standard Federal) of McClain.
3.2(m) Cause McClain, on a consolidated statement basis, to maintain an
Interest Coverage Ratio of not less than 2.00 to 1.00 for each fiscal year.
The "Interest Coverage Ratio" shall be defined as the ratio of McClain's net
income, plus interest charges, income and other taxes and amortization and
depreciation for the fiscal year to all interest expense of the Borrower for
such fiscal year, as determined in accordance with generally accepted
accounting principles.
3.2(n) Cause McClain, on a consolidated statement basis, to maintain a
Fixed Charge Coverage Ratio of not less than 1.75 to 1.00 for each fiscal year.
The "Fixed Charge Coverage Ratio" for each fiscal year shall be defined as the
ratio of McClain's net income, plus amortization and depreciation for the
fiscal year, to current maturities of long term debt, as determined in
accordance with generally accepted accounting principles.
3.2(o) At all times meet and cause each of its subsidiaries, if any, to
meet the minimum funding requirements of ERISA with respect to all employee
pension and/or profit sharing plans subject to ERISA and, with respect to any
such employee benefit plan, promptly notify Standard Federal in writing of any
reportable event, as defined in ERISA, or any proposed termination (voluntary
or otherwise) which could give rise to material termination liability within
the meaning of ERISA Section 4062.
3.3 The Borrower will not make any change in its accounting policies or
financial reporting practices and procedures, except changes in accounting
policies which are required or permitted by generally accepted accounting
principles and changes in financial reporting practices and procedures which
are required or permitted by generally accepted accounting principles.
15
<PAGE> 16
3.4 The Borrower shall use the monies loaned hereunder only for the
purpose(s) set forth in the preamble hereto.
3.5 The Borrower shall allow Standard Federal's participant in the Line
of Credit and staff or independent accountants or auditors selected by Standard
Federal's participant to conduct a full audit of the Borrower's financial
statements and its books and records twice during the first year of the term of
the Line of Credit and once in each of the second and third years of the term
of the Line of Credit an Loan. Standard Federal's participant shall schedule
such audits during normal business hours of the Borrower and shall provide
Borrower not less than two (2) business days notice of the commencement of each
audit. The Borrower shall make adequate facilities available on its premises
at Borrower's expense to enable Standard Federal's participant to conduct the
audits herein described and shall make available all of its books, records and
other documents and information as may be reasonably requested to facilitate
the audits. The Borrower agrees to pay to Standard Federal's participant an
audit fee of $3,000.00 plus travel expenses for each audit so conducted by the
participant.
SECTION 4. NEGATIVE COVENANTS
4.1 From the date hereof until all amounts owing under the Line of
Credit are paid in full and all obligations under the Line of Credit Notes,
this Agreement and all other documents executed in connection with the Line of
Credit are fully paid, performed and satisfied and so long as Standard Federal
has any commitment to make advances hereunder, the Borrower covenants and
agrees that it will not do and will not permit any subsidiary, if any, to do
any of the following without the prior written approval of Standard Federal:
4.1(a) Create, incur, assume or permit to exist (a) any mortgage, pledge,
security interest, lien or charge of any kind upon any of its property or
assets whether now owned or hereafter acquired other than in favor of Standard
Federal, except as required or permitted by Standard Federal, or (b) any
indebtedness or liability for borrowed money, except indebtedness to Standard
Federal or indebtedness subordinated to the prior payment in full of the
Borrower's indebtedness to Standard Federal which is approved in writing by
Standard Federal, except as otherwise required or permitted in writing by
Standard Federal.
4.1(b) Make loans, advances or extensions of credit to any Entity (which in
this Agreement means any individual, partnership, corporation or other legal
entity), other than a parent or subsidiary of the Borrower, in excess of
$100,000.00 in principal amount, except for sales on open account and in
ordinary course of business; or guarantee or in any way become responsible for
obligations of any other Entity except by endorsement of negotiable instruments
for deposit or collection in the ordinary course of
16
<PAGE> 17
business; or subordinate any indebtedness due it from an Entity to indebtedness
of any other creditor of such Entity.
4.1(c) Sell, lease or transfer, during any fiscal year, except inventory in
the ordinary course of business, any substantial portion of its assets; or
consolidate with or merge into any other Entity, or permit another to merge
into it; or acquire by lease or purchase all or substantially all the business
or assets of any Entity; or enter into any lease-back arrangement with any
Entity.
4.1(d) Allow McClain to acquire or expend for, by lease, purchase or
otherwise, during any fiscal year, fixed assets in excess of $4,500,000,
excluding expenditures during 1994 relating to the tube mill of McClain Tube
Company d/b/a Quality Tube.
SECTION 5. SECURITY
5.1 In order to secure: (1) the full and timely performance of the
Borrower's covenants set forth herein and in the Line of Credit Notes, (2) the
repayment of any and all indebtedness of the Borrower to Standard Federal
arising pursuant to the Line of Credit Notes (including any renewals or
substitutions thereof), this Agreement and any mortgage, guaranty, security
agreement or other document given to secure or relating to the Line of Credit
Notes or this Agreement, and (3) all other indebtedness and liabilities of the
Borrower to Standard Federal arising under this Agreement, the Line of Credit
Notes, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising:
5.1(a) The Borrower hereby grants unto Standard Federal a security interest
in the following property and the proceeds thereof: (i) any and all securities
or other property received by the Borrower with respect to, on account of or in
exchange for any item of Collateral; (ii) all stock and/or liquidating
dividends (whether the same be in the form of cash or other property) paid
upon, on account of or with respect to any item of Collateral; and (iii) all
bank deposits, instruments, negotiable documents, chattel paper and any and all
other property of the Borrower of any kind whatsoever which shall at any time
be in the possession or under the control of Standard Federal; and
5.1(b) The Borrower shall execute and deliver amendment agreements whereby
the mortgages, dated June 29, 1993 ("Mortgages"), from Galion Solid Waste
Equipment, Inc. and Galion Dump Bodies, Inc., as mortgagors, to Standard
Federal, as mortgagee, are amended to secure the Line of Credit, thereby
granting Standard Federal mortgages of first priority in the real property and
the fixtures and improvements thereon described in the Mortgages, the
provisions of which are hereby incorporated herein by reference.
17
<PAGE> 18
5.1(c) The Borrower has granted to Standard Federal a security interest of
first priority in all personal property of the Borrower as provided in a
certain Security Agreement dated September 15, 1994 from the Borrower to
Standard Federal, the provisions of which are hereby incorporated herein by
reference (herein, together with the property described in Sections 5.1(a) (i),
(ii) and (iii) above, referred to as the "Collateral" or "item(s) of
Collateral").
5.2 The Borrower shall execute and deliver to Standard Federal any and
all documents (including financing statements) as Standard Federal may require
to insure the perfection and priority of its liens and security interests in
the Collateral and furnish, if Standard Federal so requires, proof of hazard
insurance policies, in accordance with Section 3.2(g) above, relating to the
Collateral. Borrower shall also furnish a standard ALTA mortgage title
insurance policy without exceptions (provided that the policy may contain
exceptions approved in writing by Standard Federal) insuring Standard Federal
mortgage interest in the properties described in the mortgages provided for in
Section 5.1(b).
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the events enumerated in Sections 6.1 to
6.11 below shall constitute an Event of Default for purposes of this Agreement:
6.1 FAILURE TO PAY MONIES DUE. If any indebtedness of the Borrower to
Standard Federal on the Line of Credit is not paid when due, regardless of
whether such indebtedness has arisen pursuant to the terms of the Line of
Credit Notes, this Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith.
6.2 MISREPRESENTATION. If any warranty or representation made by or for
the Borrower and/or any endorser or guarantor of the Line of Credit Notes in
connection with the loan(s) evidenced thereby, or if any financial data or any
other information now or hereafter furnished to Standard Federal by or on
behalf of the Borrower and/or any endorser or guarantor of the Line of Credit
Notes shall prove to be false, inaccurate or misleading in any material
respect.
6.3 NONCOMPLIANCE WITH AFFIRMATIVE COVENANTS AND OTHER AGREEMENTS. If
the Borrower shall fail to perform any of its obligations and covenants under
Section 3 of this Agreement, or shall fail to comply with any of the other
provisions of this Agreement, other than under Section 4 hereof, or the Line of
Credit Notes, or any other agreement with Standard Federal to which it may be a
party, other than the payment of principal and interest.
18
<PAGE> 19
6.4 NONCOMPLIANCE WITH NEGATIVE COVENANTS. If the Borrower shall fail
to perform any of its obligations and covenants described in Section 4 of this
Agreement.
6.5 BUSINESS SUSPENSION. If the Borrower and/or any endorser or
guarantor of the Line of Credit Notes shall voluntarily suspend transaction of
its business.
6.6 BANKRUPTCY, ETC. If the Borrower and/or any endorser or guarantor
of the Line of Credit Notes: (a) makes a general assignment for the benefit of
creditors; (b) shall file a voluntary petition in bankruptcy or for a
reorganization to effect a plan or other arrangement with creditors; or shall
file an answer to a creditor's petition or other petition against Borrower
and/or any endorser or guarantor of the Line of Credit Notes for relief in
bankruptcy or for a reorganization which answer admits the material allegations
thereof; or if any order for relief shall be entered by any court of
bankruptcy jurisdiction with respect to the Borrower and/or any endorser or
guarantor of the Line of Credit Notes, or if bankruptcy, reorganization or
liquidation proceedings are instituted against Borrower and/or any endorser or
guarantor of the Line of Credit Notes and remain undismissed for 60 days; (c)
has entered against it any order by any court approving a plan for the
reorganization of the Borrower or any endorser or guarantor of the Line of
Credit Notes or any other plan or arrangement with creditors of the Borrower or
any endorser or guarantor of the Line of Credit Notes; (d) shall apply for or
permit the appointment of a receiver, trustee or custodian for any substantial
portion of the Borrower's and/or any endorser's or guarantor's properties or
assets; or (e) becomes unable to meet its debts as they mature or becomes
insolvent.
6.7 JUDGMENTS AND WRITS. If there shall be entered against the Borrower
and/or any endorser or guarantor of the Line of Credit Notes one or more
judgments or decrees which are not insured against or satisfied or appealed
from and bonded within the time or times limited by applicable rules of
procedure for appeal as of right or if a writ of attachment or garnishment
against the Borrower and/or any endorser or guarantor of the Line of Credit
Notes shall be issued and levied in an action claiming $100,000.00 or more and
not released, bonded or appealed from within 30 days after the levy thereof.
6.8 MERGER. If the Borrower shall merge or consolidate with another
entity.
6.9 CHANGE OF CONTROL OR MANAGEMENT. If the Borrower or a controlling
portion of its voting stock or a substantial portion of its assets comes under
the practical, beneficial or effective control of any person or persons other
than those having such control as of the date of execution of the Line of
Credit Notes, whether by reason of merger, consolidation, sale or purchase of
stock or
19
<PAGE> 20
assets or otherwise, if any such change of control, in the sole and absolute
discretion of Standard Federal, adversely impacts upon the ability of the
Borrower to carry on its business as theretofore conducted.
6.10 OTHER DEFAULTS. If the Borrower and/or any endorser or guarantor of
the Line of Credit Notes shall default in the due payment of any material
indebtedness to whomsoever owed, or shall default in the observance or
performance of any material term, covenant or condition in any mortgage,
security agreement, guaranty, instrument, lease or agreement to which the
Borrower and/or any endorser or guarantor of the Line of Credit Notes is a
party.
6.11 REPORTABLE EVENT. If there shall occur any "reportable event", as
defined in the Employee Retirement Income Security Act of 1974 and any
amendments thereto, which is determined to constitute grounds for termination
by the Pension Benefit Guaranty Corporation of any employee pension benefit
plan maintained by or on behalf of the Borrower for the benefit of any of its
employees or for the appointment by the appropriate United States District
Court of a trustee to administer such plan and such reportable event is not
corrected and such determination is not revoked within 30 days after notice
thereof has been given to the plan administrator or the Borrower; or the
institution of proceedings by the Pension Benefit Guaranty Corporation to
terminate any such employee benefit pension plan or to appoint a trustee to
administer such plan; or the appointment of a trustee by the appropriate United
States District Court to administer any such employee benefit pension plan.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT
7.1 Upon the occurrence of any Event of Default described in Sections
6.2, 6.3 or 6.10 hereof which is not cured or waived in writing by Standard
Federal within 15 days after written notice to the Borrower of such default; or
upon the occurrence of any Event of Default described in Section 6.1 which
continues unremedied for 10 days, or upon the occurrence of any Event of
Default described in Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.11, Standard
Federal's commitment to lend hereunder, if any, shall terminate and Standard
Federal may, without notice, declare the entire unpaid and outstanding
principal balance of the Line of Credit and all accrued interest to be due and
payable in full forthwith, without presentment, demand or notice of any kind,
all of which are hereby expressly waived by Borrower, and thereupon Standard
Federal shall have and may exercise any one or more of the rights and remedies
provided herein or in the Line of Credit Notes or in any mortgage, guaranty,
security agreement or other document relating hereto or granted secured parties
under the Michigan Uniform Commercial Code, including the right to take
possession of and dispose of the Collateral, or otherwise provided by
applicable law, and to offset
20
<PAGE> 21
against the Line of Credit any amount owing by Standard Federal to the
Borrower.
SECTION 8. MISCELLANEOUS.
8.1 No default shall be waived by Standard Federal except in writing and
a waiver of any default shall not be a waiver of any other default or of the
same default on a future occasion. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise hereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
8.2 No forbearance on the part of Standard Federal in enforcing any of
its rights under this Agreement, nor any renewal, extension or rearrangement of
any payment or covenant to be made or performed by the Borrower hereunder shall
constitute a waiver of any of the terms of this Agreement or of any such right.
8.3 This Agreement shall be construed in accordance with the law of the
State of Michigan.
8.4 All covenants, agreements, representations and warranties made in
connection with this Agreement and any document contemplated hereby shall
survive the borrowing hereunder and shall be deemed to have been relied upon by
Standard Federal. All statements contained in any certificate or other
document delivered to Standard Federal at any time by or on behalf of the
Borrower pursuant hereto shall constitute representations and warranties by the
Borrower.
8.5 The Borrower agrees that it will pay all costs and expenses incurred
by Standard Federal in enforcing Standard Federal's rights under this Agreement
and the documents contemplated hereby, including without limitation any and all
reasonable fees and disbursements of legal counsel to Standard Federal.
8.6 This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective heirs, personal representatives,
successors and assigns; provided, however, that the Borrower shall not assign
or transfer its rights or obligations hereunder without the prior written
consent of Standard Federal.
8.7 If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be inoperative or
21
<PAGE> 22
unenforceable as applied in any particular case in any or all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatever. The invalidity of any
one or more phrases, sentences, clauses or sections contained in this
Agreement, shall not affect the remaining portions of this Agreement, or any
part thereof.
SECTION 9. ADDITIONAL PROVISION
9.1 In addition to the terms, covenants and conditions set forth above,
Borrower agrees to cause McClain Industries, Inc., a Michigan corporation, to
execute and deliver to Standard Federal an unlimited and continuing guaranty of
payment of the obligations of Borrower under the Line of Credit in form and
substance acceptable to Standard Federal.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Line of Credit Loan Agreement to be executed as of the day and year first
written above.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
---------------------------------
GALION SOLID WASTE EQUIPMENT, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
22
<PAGE> 23
GALION DUMP BODIES, INC., a Michigan corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
23
<PAGE> 24
Schedule 2.12
1. Final Report Phase I Environmental Assessment Peabody-Galion
Corporation, Winesburg, Holmes County, Ohio, prepared by Stearns &
Wheler, Environmental Engineers and Scientists, dated February,
1993, Project No. 2471.
2. Final Report Phase II Site Investigation, Galion Site, Winesburg,
Ohio, prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated September, 1993, Project No. 2471.
3. Phase II Site Investigation Peabody-Galion Site, Galion, Ohio,
prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated January, 1993, Project No. 2429.
24
<PAGE> 1
EXHIBIT 10.31
Note No. 0250017732
STANDARD FEDERAL BANK
PROMISSORY NOTE
---------------
(Line of Credit with Term Provisions) [X] New
(First Line of Credit) [ ] Renewal
$800,000.00 Sterling Heights , Michigan
Due Date: February 1, 2002 Dated: February 6, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Eight Hundred
Thousand and 00/100 Dollars ($800,000.00) or such lesser amount as may from
time to time be outstanding by reason of having been advanced hereunder in
accordance with the provisions of a Loan Agreement of even date herewith (the
"Loan Agreement"), plus interest as hereinafter provided on all amounts from
time to time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest Rate
shall be determined by reference to the "Wall Street Journal Prime Rate" and not
by reference to the actual rate of interest charged by any particular bank to
any particular borrower or borrowers and shall automatically increase or
decrease when and to the extent that the Wall Street Journal Prime Rate shall
have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the Borrower
to Standard Federal arising as a result of advances or other credit which may
be made under this Note from time to time to and until August 1, 1995 (the
"Term Date"). Any and all indebtedness may be repaid by the Borrower in whole
or in part from time to time prior to the Term Date. Standard Federal shall,
from time to time prior to the Term Date, make advances to Borrower hereunder
upon request therefor by Borrower, made in accordance with the requirements of
the Loan Agreement, provided that upon giving effect to such advance no Event
of Default (as hereinafter defined) and no event which with notice and/or the
passage of time would become an Event of Default shall exist at the time the
advance is to be made and that all representations and warranties of Borrower
theretofore made are true and correct and that Standard Federal shall not have
previously or concurrently declared all amounts owing hereunder to be
immediately due and payable and that the amount requested shall not cause the
total amount outstanding hereunder to exceed the First Credit Limit as defined
in the Loan Agreement. The principal amount of indebtedness owing pursuant to
this Note shall change from time to time, decreasing in an amount equal to any
and all payments of principal made by the Borrower prior to the Due Date and
increasing by an amount equal to any and all advances made by Standard Federal
to the Borrower pursuant to the terms hereof, and the books and records of
Standard Federal shall be conclusive evidence of the amount of principal and
interest owing hereunder at any time. All payments made hereunder shall be
applied first against costs and expenses required to be paid hereunder, then
against accrued interest to the extent thereof and the balance shall be applied
against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month beginning
on March 1, 1995 through and including the Term Date. From and after the Term
Date, Standard Federal shall make no further advances hereunder and the
outstanding principal balance hereunder as of the Term Date, with interest,
shall be repaid in consecutive monthly payments of principal, each in the
amount determined by dividing the outstanding principal balance hereunder as of
the Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on September 1, 1995 and continuing on the same day of each
consecutive month thereafter and a final payment on the Due Date in an amount
equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or hereto,
shall be construed or so operate as to require the Borrower to pay, or charge,
interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest, or other charges, charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by applicable law, then
any and all such excess shall be and the same is hereby waived by Standard
Federal, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Standard
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized, validly
existing and in good standing and is duly authorized to make and perform this
Note, which constitutes its valid and binding legal obligation enforceable in
accordance with its terms. All financial data furnished to Standard Federal in
connection with this Note fairly present the financial condition of the
Borrower and its subsidiaries, if any, as of the dates thereof and there has
been no material adverse change in the condition (financial or otherwise) of
the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of this
Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note,diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement of even date herewith,
is secured by a Security Agreement dated September 15, 1994 and two Open-End
Commercial Mortgages and Assignments of Lease and Rentals, dated June 29, 1993,
as amended of even date herewith, and is supported by a Guaranty executed by
McClain Industries, Inc., a Michigan corporation, of even date herewith.
Reference is hereby made to such documents for additional terms relating to the
transaction giving rise to this Note, the security given for this Note and
additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN
ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY RELATED INSTRUMENT
OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF EITHER OF
THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT STANDARD FEDERAL'S ABILITY TO
PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT OR AGREEMENT. NEITHER THE
BORROWER NOR STANDARD FEDERAL SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors,and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
-5-
<PAGE> 6
The undersigned has executed this Note in Galion, Ohio, as of the date and
year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY
AGREEMENT WITH THE BORROWER, OR ANY OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree that
they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
-6-
<PAGE> 7
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.32
Note No. 0250017683
STANDARD FEDERAL BANK
PROMISSORY NOTE
---------------
(Line of Credit with Term Provisions) [X] New
(Second Line of Credit) [ ] Renewal
$800,000.00 Sterling Heights , Michigan
Due Date: February 1, 2002 Dated: February 6, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Eight Hundred
Thousand and 00/100 Dollars ($800,000.00) or such lesser amount as may from
time to time be outstanding by reason of having been advanced hereunder in
accordance with the provisions of a Loan Agreement of even date herewith (the
"Loan Agreement"), plus interest as hereinafter provided on all amounts from
time to time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest Rate
shall be determined by reference to the "Wall Street Journal Prime Rate" and
not by reference to the actual rate of interest charged by any particular bank
to any particular borrower or borrowers and shall automatically increase or
decrease when and to the extent that the Wall Street Journal Prime Rate shall
have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the Borrower
to Standard Federal arising as a result of advances or other credit which may
be made under this Note from time to time after August 1, 1995 to and until
February 1, 1996 (the "Term Date"). Any and all indebtedness may be repaid by
the Borrower in whole or in part from time to time prior to the Term Date.
Standard Federal shall, from time to time prior to the Term Date, make advances
to Borrower hereunder upon request therefor by Borrower, made in accordance
with the requirements of the Loan Agreement, provided that upon giving effect
to such advance no Event of Default (as hereinafter defined) and no event which
with notice and/or the passage of time would become an Event of Default shall
exist at the time the advance is to be made and that all representations and
warranties of Borrower theretofore made are true and correct and that Standard
Federal shall not have previously or concurrently declared all amounts owing
hereunder to be immediately due and payable and that the amount requested shall
not cause the total amount outstanding hereunder to exceed the First Credit
Limit as defined in the Loan Agreement. The principal amount of indebtedness
owing pursuant to this Note shall change from time to time, decreasing in an
amount equal to any and all payments of principal made by the Borrower prior to
the Due Date and increasing by an amount equal to any and all advances made by
Standard Federal to the Borrower pursuant to the terms hereof, and the books
and records of Standard Federal shall be conclusive evidence of the amount of
principal and interest owing hereunder at any time. All payments made
hereunder shall be applied first against costs and expenses required to be paid
hereunder, then against accrued interest to the extent thereof and the balance
shall be applied against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month beginning
on September 1, 1995 through and including the Term Date. From and after the
Term Date, Standard Federal shall make no further advances hereunder and the
outstanding principal balance hereunder as of the Term Date, with interest,
shall be repaid in consecutive monthly payments of principal, each in the
amount determined by dividing the outstanding principal balance hereunder as of
the Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on March 1, 1996 and continuing on the same day of each
consecutive month thereafter and a final payment on the Due Date in an amount
equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or hereto,
shall be construed or so operate as to require the Borrower to pay, or charge,
interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest, or other charges, charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by applicable law, then
any and all such excess shall be and the same is hereby waived by Standard
Federal, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Standard
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized, validly
existing and in good standing and is duly authorized to make and perform this
Note, which constitutes its valid and binding legal obligation enforceable in
accordance with its terms. All financial data furnished to Standard Federal in
connection with this Note fairly present the financial condition of the
Borrower and its subsidiaries, if any, as of the dates thereof and there has
been no material adverse change in the condition (financial or otherwise) of
the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of this
Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement of even date herewith,
is secured by a Security Agreement dated September 15, 1994 and two Open-End
Commercial Mortgages and Assignments of Lease and Rentals, dated June 29, 1993,
as amended of even date herewith, and is supported by a Guaranty executed by
McClain Industries, Inc., a Michigan corporation, of even date herewith.
Reference is hereby made to such documents for additional terms relating to the
transaction giving rise to this Note, the security given for this Note and
additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN
ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY RELATED INSTRUMENT
OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR ANY COURSE OF
CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF EITHER OF
THEM. THIS WAIVER SHALL NOT IN ANY WAY AFFECT STANDARD FEDERAL'S ABILITY TO
PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION
CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT OR AGREEMENT. NEITHER THE
BORROWER NOR STANDARD FEDERAL SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
-5-
<PAGE> 6
The undersigned has executed this Note in Galion, Ohio, as of the date and
year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY
AGREEMENT WITH THE BORROWER, OR ANY OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree that
they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
-6-
<PAGE> 7
GALION DUMP BODIES, INC., a Michigan corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.33
SECOND AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE
AND ASSIGNMENT OF LEASE AND RENTALS
(Secures Future Advances)
Maximum Indebtedness not to Exceed $8,800,000.00
THIS AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE AND ASSIGNMENT OF LEASES
AND RENTALS, is made and entered into this 6th day of February, 1995, by
and between Standard Federal Bank, a federal savings bank, of 2600
West Big Beaver Road, Troy, Michigan 48084 ("Mortgagee"), and Galion Solid
Waste Equipment, Inc., a Michigan corporation of 6200 Elmridge, Sterling
Heights, Michigan 48318 ("Mortgagor").
WITNESSETH:
WHEREAS, on June 29, 1993, in order to secure a promissory note dated June
29, 1993 by Mortgagor in favor of Mortgagee, Mortgagor granted to Mortgagee an
Open-End Commercial Mortgage and Assignment of Lease and Rentals (the
"Mortgage") on certain real property located in the City of Galion, County of
Crawford and State of Ohio, which real property is more particularly described
in the attached Exhibit A; and which Mortgage was recorded on July 13, 1993, in
Book 469, Page 631, Crawford County Recorder, and
WHEREAS, the Mortgage was amended by an Amendment to Open-end Commercial
Mortgage and Assignment of Lease and Rentals, dated September 15, 1994, and
recorded on October 4, 1994, in Book 487, Page 428, Crawford County Recorder
(the "Amendment to Mortgage, and
WHEREAS, the parties hereto desire to amend the Mortgage in the manner
hereinafter set forth.
NOW, THEREFORE, in consideration of One and No/100 Dollar ($1.00) and the
mutual covenants herein contained, the parties hereto hereby agree as follows:
1. The Mortgage is hereby amended to secure, in addition to the
indebtedness described in the Mortgage and the Amendment to Mortgage, two
Promissory Notes (Line of Credit) from the Mortgagor to Mortgagee, of even date
herewith, under which total principal in the amount of $800,000.00 may be
outstanding (collectively, the "Notes"), such Notes identified as being secured
by the Mortgage by statements thereon, including the payment of principal and
interest of such indebtedness according to the terms of the Notes, and all
other amounts payable by Mortgagor thereunder, and any and all extensions and
renewals thereof, however evidenced. The Notes have been executed pursuant to
a Loan Agreement of even date herewith by and between the Mortgagor and the
Mortgagee (the "Loan Agreement"). The indebtedness secured by the Mortgage
shall hereafter be deemed to include the indebtedness and obligations evidenced
by the Notes and the Loan Agreement, as well as the indebtedness described in
the Mortgage and the Amendment to Mortgage, such that the total indebtedness
secured by the Mortgage has been increased to
<PAGE> 2
$8,800,000.00.
2. In all other respects, the Mortgage is hereby ratified and confirmed
and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
WITNESSES:
Galion Solid Waste Equipment, Inc.,
a Michigan corporation
By:
- ------------------------- ---------------------------------
E. James Zabinski
Its: Treasurer
- ------------------------- -----------------------------
Standard Federal Bank, a federal
savings bank
By:
- ------------------------ ---------------------------------
David J. Bartlett
Its: Vice President
- ------------------------ ----------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 6th day of
February , 1995, by E. James Zabinski, who is the Treasurer of Galion
Solid Waste Equipment, Inc., a Michigan corporation, on behalf of the
corporation.
_______________________________
Notary Public
______________ County, Michigan
My Commission Expires:_________
STATE OF MICHIGAN )
-2-
<PAGE> 3
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this
6th day of February , 1995, by David J. Bartlett, a Vice President of
Standard Federal Bank, a federal savings bank, on behalf of the Bank.
_______________________________
Notary Public
______________ County, Michigan
My Commission Expires:_________
DRAFTED BY: AFTER RECORDING RETURN TO:
Daniel C. Watson Commercial Loan Department
Standard Federal Bank Standard Federal Bank
2600 West Big Beaver Road 2600 West Big Beaver Road
Troy, Michigan 48084 Troy, Michigan 48084
-3-
<PAGE> 1
EXHIBIT 10.34
SECOND AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE
AND ASSIGNMENT OF LEASE AND RENTALS
(Secures Future Advances)
Maximum Indebtedness not to Exceed $8,800,000.00
THIS AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE AND ASSIGNMENT OF LEASES
AND RENTALS, is made and entered into this 6th day of February, 1995, by
and between Standard Federal Bank, a federal savings bank, of 2600 West Big
Beaver Road, Troy, Michigan 48084 ("Mortgagee"), and Galion Dump Bodies, Inc.,
a Michigan corporation, of 6200 Elmridge, Sterling Heights, Michigan 48318
("Mortgagor").
WITNESSETH:
WHEREAS, on June 29, 1993, in order to secure a promissory note dated June
29, 1993 by Mortgagor in favor of Mortgagee, Mortgagor granted to Mortgagee an
Open-End Commercial Mortgage and Assignment of Lease and Rentals (the
"Mortgage") on certain real property located in the City of Winesburg, County
of Holmes and State of Ohio, which real property is more particularly described
in the attached Exhibit A; and which Mortgage was recorded on July 13, 1993, in
Volume 202, Page 527, Holmes County Recorder, and
WHEREAS, the Mortgage was amended by an Amendment to Open-end Commercial
Mortgage and Assignment of Lease and Rentals, dated September 15, 1994, and
recorded on September 30, 1994, in Volume 214, Page 9, Holmes County Recorder
(the "Amendment to Mortgage, and
WHEREAS, the parties hereto desire to further amend the Mortgage in the
manner hereinafter set forth.
NOW, THEREFORE, in consideration of One and No/100 Dollar ($1.00) and the
mutual covenants herein contained, the parties hereto hereby agree as follows:
1. The Mortgage is hereby amended to secure, in addition to the
indebtedness described in the Mortgage and the Amendment to Mortgage, two
Promissory Notes (Line of Credit) from the Mortgagor to Mortgagee, of even date
herewith, under which total principal in the amount of $800,000.00 may be
outstanding (collectively, the "Notes"), such Notes identified as being secured
by the Mortgage by statements thereon, including the payment of principal and
interest of such indebtedness according to the terms of the Notes, and all
other amounts payable by Mortgagor thereunder, and any and all extensions and
renewals thereof, however evidenced. The Notes have been executed pursuant to
a Loan Agreement of even date herewith by and between the Mortgagor and the
Mortgagee (the "Loan Agreement"). The indebtedness secured by the Mortgage
shall hereafter be deemed to include the indebtedness and obligations evidenced
by the Notes and the Loan Agreement, as well as the indebtedness described in
the Mortgage and the Amendment to Mortgage, such that the total
<PAGE> 2
indebtedness secured by the Mortgage has been increased to $8,800,000.00.
2. In all other respects, the Mortgage is hereby ratified and confirmed
and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
WITNESSES:
Galion Dump Bodies, Inc.,
a Michigan corporation
By:
- --------------------------- ---------------------------------------
Carl Jaworski
Its: Treasurer
- --------------------------- -------------------------------
Standard Federal Bank, a federal
savings bank
By:
- --------------------------- ---------------------------------------
Its:
- --------------------------- -------------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 6th day of
February , 1995, by Carl Jaworski, who is the Treasurer of Galion Dump
Bodies, Inc., a Michigan corporation, on behalf of the corporation.
_______________________________
Notary Public
______________ County, Michigan
My Commission Expires:_________
-2-
<PAGE> 3
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this
6th day of February , 1995, by David J. Bartlett , a Vice President
of Standard Federal Bank, a federal savings bank, on behalf of the Bank.
_______________________________
Notary Public
______________ County, Michigan
My Commission Expires:_________
DRAFTED BY: AFTER RECORDING RETURN TO:
Daniel C. Watson Commercial Loan Department
Standard Federal Bank Standard Federal Bank
2600 West Big Beaver Road 2600 West Big Beaver Road
Troy, Michigan 48084 Troy, Michigan 48084
-3-
<PAGE> 1
EXHIBIT 10.35
Note No. 0250006199
STANDARD FEDERAL BANK
AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit)
$9,500,000.00 Sterling Heights , Michigan
Due Date: March 31, 1997 Dated: February 16, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Nine Million
Five Hundred Thousand and 00/100 Dollars ($9,500,000.00) or such lesser amount
as may from time to time be outstanding by reason of having been advanced
hereunder, plus interest as hereinafter provided on all amounts from time to
time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest charged
by any particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall Street
Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on March 1, 1995.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a Loan Agreement of even date herewith by and between Standard
Federal and the Borrower (the "Loan Agreement"). Any and all indebtedness may
be repaid by the Borrower in whole or in part from time to time prior to the
Due Date. Standard Federal shall, from time to time prior to the Due Date,
make advances to Borrower hereunder upon request therefor by Borrower, provided
that, upon giving effect to such advance: (a) no Event of Default (as
hereinafter defined) and no event which with notice and/or the passage of time
would become an Event of Default shall exist at the time the advance is to be
made; (b) all representations and warranties of Borrower theretofore made are
true and correct; (c) Standard Federal shall not have previously or
concurrently declared all amounts owing hereunder to be immediately due and
payable; (d) the amount requested shall not cause the total amount outstanding
hereunder to exceed the Credit Limit, as defined in the Loan Agreement; and (e)
all other requirements for the making of advances provided for in the Loan
Agreement have been satisfied. The principal amount of indebtedness owing
pursuant to this Note shall change from time to time, decreasing in an amount
equal to any and all payments of principal made by the Borrower and increasing
by an amount equal to any and all advances made by Standard Federal to the
Borrower pursuant to the terms hereof, and the books and records of Standard
Federal shall be conclusive evidence of the amount of principal and interest
owing hereunder at any time. All payments made hereunder shall be applied
first against costs and expenses required to be paid hereunder, then against
accrued interest to the extent thereof and the balance shall be applied against
the outstanding principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against
-2-
<PAGE> 3
and in reduction of the principal due under this Note. If Standard Federal
shall reasonably determine that the Effective Interest Rate (together with all
other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of
-3-
<PAGE> 4
Standard Federal for collection of the Note and all other liabilities of
Borrower to Standard Federal and enforcement of rights hereunder, including
reasonable attorney fees and legal expenses including participation in
Bankruptcy proceedings. During any period(s) this Note is in default, or after
the Due Date, or after acceleration of maturity, the outstanding principal
amount hereof shall bear interest at a rate equal to two percent (2.0%) per
annum greater than the interest rate otherwise charged hereunder. If any
required payment is not made within ten (10) days after the date it is due,
then, at the option of Standard Federal, a late charge of not more than four
cents ($.04) for each dollar of the payment so overdue may be charged. In
addition to any other security interests granted to Standard Federal, Borrower
hereby grants Standard Federal a security interest in all of Borrower's bank
deposits, instruments, negotiable documents, and chattel paper which at any
time are in the possession or control of Standard Federal. After the
occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement, dated September
15, 1994, as amended by a First Amendment to Loan Agreement of even date
herewith, and is secured by a Security Agreement, dated September 15, 1994.
Reference is hereby made to such documents for additional terms relating to the
transaction giving rise to this Note, the security given for this Note and
-4-
<PAGE> 5
additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
38-1867649
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
58-1738825
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
---------------------
38-2205216
Taxpayer Identification Number
-5-
<PAGE> 6
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.36
FIRST AMENDMENT TO LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
MCCLAIN INDUSTRIES, INC., MCCLAIN OF GEORGIA, INC.,
SHELBY STEEL PROCESSING COMPANY,
MCCLAIN TUBE COMPANY d/b/a QUALITY TUBE AND
MCCLAIN INDUSTRIES OF OHIO, INC.
THIS AMENDMENT AGREEMENT made and delivered this 16th day of
February, 1995, by and between McClain Industries, Inc., a Michigan
corporation, McClain of Georgia, Inc., a Georgia corporation, Shelby Steel
Processing Company, a Michigan corporation, McClain Tube Company d/b/a Quality
Tube, a Michigan corporation, and McClain Industries of Ohio, Inc., a Michigan
corporation (collectively, "Borrower"), whose address/principal office is 6200
Elmridge, Sterling Heights, Michigan 48310, and Standard Federal Bank, a
federal savings bank ("Standard Federal"), whose address is 2600 West Big
Beaver Road, Troy, Michigan 48084.
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement (the "Loan Agreement"), pursuant to which the
Borrower opened a revolving line of credit facility with Standard Federal, Loan
No. 0250006199, with a credit limit of up to $5,000,000.00 (the "Line of
Credit"), as evidenced by a Promissory Note (Line of Credit), dated September
15, 1994, in the principal amount of $5,000,000.00 (the "Note"), secured by a
Security Agreement dated September 15, 1994 (the "Security Agreement").
B. The Borrower has requested an increase in the credit limit of
the Line of Credit, as herein provided, and Standard Federal is willing to
supply such financing subject to the terms and conditions set forth in this
Amendment Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided
and in consideration of the premises and the mutual promises herein contained,
the Borrower and Standard Federal hereby agree as follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Amendment Agreement and the Loan Agreement (as
hereby amended) are valid and enforceable according to their terms and do not
conflict with or
<PAGE> 2
violate Borrower's corporate charter or by-laws or any agreement or covenants
to which Borrower is a party.
2. The Security Agreement is valid and enforceable in accordance
with its terms. Standard Federal's security interest in the collateral
described in the Security Agreement is valid and perfected and Borrower is
aware of no claims or interests in such collateral prior or paramount to
Standard Federal's.
3. Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and replaced by the following new Section 1.1:
1.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Line of Credit") which shall not exceed
at any one time outstanding the Credit Limit as hereafter defined.
The term "Credit Limit" shall mean the lesser of: (a) Nine Million
Five Hundred Thousand and 00/100 Dollars ($9,500,000.00), or (b) an
amount equal to the sum of: (i) an amount equal to 80% of Eligible
Accounts Receivable, plus (ii) an amount equal to the lesser of: (1)
Six Million and 00/100 Dollars ($6,000,000.00), or (2) an amount equal
to 40% of Qualified Inventory. As used herein, the term "Eligible
Accounts Receivable" shall mean accounts receivable of the Borrower
less than 90 days old, not doubtful as to collectibility or disputed
as to existence or amount or subject to offset, contra-indebtedness or
return and not intra-company or owing from any affiliated or related
company or other entity, exclusive of any account receivable arising
under a government contract, the assignment of which is subject to the
Assignment of Claims Act of 1940, as amended, or any other similar
federal or state statute or regulation governing the assignment of
contracts with a governmental agency. The term "Qualified Inventory"
shall mean the inventory of Borrower in which Standard Federal holds a
perfected first security interest exclusive of any returned or damaged
items and work-in-process.
4. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall execute and deliver to Standard Federal an Amended and
Restated Promissory Note (Line of Credit) in the stated principal amount of
$9,500,000.00 (the "Amended Note") to evidence the Line of Credit as hereby
amended and to replace the Note. The "Line of Credit Note" referred to in the
Loan Agreement shall hereafter be deemed to refer to the Amended Note.
5. Except as herein amended, the Loan Agreement and Security
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Amendment Agreement to be executed as of the day and year first written above.
2
<PAGE> 3
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- ----------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- ----------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- ------------------------ -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- ----------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
3
<PAGE> 4
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- ---------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
4
<PAGE> 1
EXHIBIT 10.37
Note No. 0250012691
STANDARD FEDERAL BANK
AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit)
$7,500,000.00 Sterling Heights, Michigan
Due Date: March 31, 1997 Dated: February 16, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Seven Million
Five Hundred Thousand and 00/100 Dollars ($7,500,000.00) or such lesser amount
as may from time to time be outstanding by reason of having been advanced
hereunder, plus interest as hereinafter provided on all amounts from time to
time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to One-Half of One percent (0.50%) in excess of the Wall Street Journal
Prime Rate. As used herein the phrase "Wall Street Journal Prime Rate"
shall mean the "Prime Rate" published by the Wall Street Journal as the base
rate on corporate loans posted by at least 75% of the nation's 30 largest banks
as the same may be changed from time to time. If more than one Prime Rate is
published, the highest rate published shall be deemed the Wall Street Journal
Prime Rate. If the publishing of the Wall Street Journal Prime Rate is
discontinued during the term hereof, then the Effective Interest Rate shall be
based upon the index which is published by The Wall Street Journal in
replacement thereof based on similar base rates on corporate loans or, if no
such replacement index is published, the index which, in Standard Federal's
sole determination, most nearly corresponds to the Wall Street Journal Prime
Rate. If, in such event, Standard Federal selects an index which, in the
Borrower's opinion, does not correspond to the Wall Street Journal Prime Rate,
Borrower's sole remedy shall be to prepay this Note in full without penalty or
premium. Until such prepayment has been received by Standard Federal, the
index selected by Standard Federal shall apply for all purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest charged
by any particular bank to any particular borrower or borrowers and
shall automatically increase or decrease when and to the extent that the Wall
Street Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on March 1, 1995.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a Loan Agreement of even date herewith by and between Standard
Federal and the Borrower (the "Loan Agreement"). Any and all indebtedness may
be repaid by the Borrower in whole or in part from time to time prior to the
Due Date. Standard Federal shall, from time to time prior to the Due Date,
make advances to Borrower hereunder upon request therefor by Borrower, provided
that, upon giving effect to such advance: (a) no Event of Default (as
hereinafter defined) and no event which with notice and/or the passage of time
would become an Event of Default shall exist at the time the advance is to be
made; (b) all representations and warranties of Borrower theretofore made are
true and correct; (c) Standard Federal shall not have previously or
concurrently declared all amounts owing hereunder to be immediately due and
payable; (d) the amount requested shall not cause the total amount outstanding
hereunder to exceed the Credit Limit, as defined in the Loan Agreement; and (e)
all other requirements for the making of advances provided for in the Loan
Agreement have been satisfied. The principal amount of indebtedness owing
pursuant to this Note shall change from time to time, decreasing in an amount
equal to any and all payments of principal made by the Borrower and increasing
by an amount equal to any and all advances made by Standard Federal to the
Borrower pursuant to the terms hereof, and the books and records of Standard
Federal shall be conclusive evidence of the amount of principal and interest
owing hereunder at any time. All payments made hereunder shall be applied
first against costs and expenses required to be paid hereunder, then against
accrued interest to the extent thereof and the balance shall be applied against
the outstanding principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against
-2-
<PAGE> 3
and in reduction of the principal due under this Note. If Standard Federal
shall reasonably determine that the Effective Interest Rate (together with all
other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of
-3-
<PAGE> 4
Standard Federal for collection of the Note and all other liabilities of
Borrower to Standard Federal and enforcement of rights hereunder, including
reasonable attorney fees and legal expenses including participation in
Bankruptcy proceedings. During any period(s) this Note is in default, or after
the Due Date, or after acceleration of maturity, the outstanding principal
amount hereof shall bear interest at a rate equal to two percent (2.0%) per
annum greater than the interest rate otherwise charged hereunder. If any
required payment is not made within ten (10) days after the date it is due,
then, at the option of Standard Federal, a late charge of not more than four
cents ($.04) for each dollar of the payment so overdue may be charged. In
addition to any other security interests granted to Standard Federal, Borrower
hereby grants Standard Federal a security interest in all of Borrower's bank
deposits, instruments, negotiable documents, and chattel paper which at any
time are in the possession or control of Standard Federal. After the
occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement dated September 15,
1994, as amended by a First Amendment to Loan Agreement of even date herewith,
is secured by a Security Agreement, dated September 15, 1994, and two Open-End
Commercial Mortgages and Assignments of Lease and Rentals, dated June 29, 1993,
as amended September 15, 1994 and as further amended of even
-4-
<PAGE> 5
date herewith, and is supported by a Guaranty executed by McClain Industries,
Inc., a Michigan corporation, of even date herewith. Reference is hereby made
to such documents for additional terms relating to the transaction
giving rise to this Note, the security given for this Note and additional terms
and conditions under which this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION
OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT
OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
The undersigned has executed this Note in Galion, Ohio, as of the date
and year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY
AGREEMENT WITH THE BORROWER, OR ANY OTHER CAUSE.
-5-
<PAGE> 6
Each of the undersigned Borrowers acknowledge, represent and agree
that they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
-6-
<PAGE> 7
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.38
FIRST AMENDMENT TO LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
GALION HOLDING COMPANY,
GALION SOLID WASTE EQUIPMENT, INC.
AND GALION DUMP BODIES, INC.
THIS AMENDMENT AGREEMENT made and delivered this 16th day of February,
1995, by and between Galion Holding Company, a Michigan corporation, Galion
Solid Waste Equipment, Inc., a Michigan corporation, and Galion Dump Bodies,
Inc., a Michigan corporation (collectively, "Borrower"), whose
address/principal office is 6200 Elmridge, Sterling Heights, Michigan 48310,
and Standard Federal Bank, a federal savings bank ("Standard Federal"), whose
address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement (the "Loan Agreement"), pursuant to which the
Borrower opened a revolving line of credit facility with Standard Federal, Loan
No. 0250012691, with a credit limit of up to $6,000,000.00 (the "Line of
Credit"), as evidenced by a Promissory Note (Line of Credit), dated September
15, 1994, in the principal amount of $6,000,000.00 (the "Note"), secured by a
Security Agreement, dated September 15, 1994 (the "Security Agreement"), and
two Open-End Commercial Mortgages and Assignments of Lease and Rentals, dated
June 29, 1993, as amended September 15, 1994 (the "Mortgages").
B. The Borrower has requested an increase in the credit limit of
the Line of Credit, as herein provided, and Standard Federal is willing to
supply such financing subject to the terms and conditions set forth in this
Amendment Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual promises herein contained, the
Borrower and Standard Federal hereby agree as follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Amendment Agreement and the Loan Agreement (as
hereby amended) are valid and enforceable according to their terms and do not
conflict with or
-8-
<PAGE> 2
violate Borrower's corporate charter or by-laws or any agreement or covenants
to which Borrower is a party.
2. The Security Agreement is valid and enforceable in accordance
with its terms. Standard Federal's security interest in the collateral
described in the Security Agreement is valid and perfected and Borrower is
aware of no claims or interests in such collateral prior or paramount to
Standard Federal's.
3. The Mortgages are valid and enforceable in accordance with
their terms. Standard Federal holds valid first mortgage interests in the real
property described in the Mortgages which are valid and perfected and Borrower
is aware of no claims or interests in such property prior or paramount to
Standard Federal's.
4. Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and replaced by the following new Section 1.1:
1.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Line of Credit") which shall not exceed
at any one time outstanding the Credit Limit as hereafter defined.
The term "Credit Limit" shall mean the lesser of: (a) Seven Million
Five Hundred Thousand and 00/100 Dollars ($7,500,000.00), or (b) an
amount equal to the sum of: (i) an amount equal to 80% of Eligible
Accounts Receivable, plus (ii) an amount equal to the lesser of: (1)
Five Million and 00/100 Dollars ($5,000,000.00), or (2) an amount
equal to 40% of Qualified Inventory. As used herein, the term
"Eligible Accounts Receivable" shall mean accounts receivable of the
Borrower less than 90 days old, not doubtful as to collectibility or
disputed as to existence or amount or subject to offset,
contra-indebtedness or return and not intra-company or owing from any
affiliated or related company or other entity, exclusive of any
account receivable arising under a government contract, the assignment
of which is subject to the Assignment of Claims Act of 1940, as
amended, or any other similar federal or state statute or regulation
governing the assignment of contracts with a governmental agency. The
term "Qualified Inventory" shall mean the inventory of Borrower in
which Standard Federal holds a perfected first security interest
exclusive of any returned or damaged items and work-in-process.
5. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall execute and deliver to Standard Federal an Amended and
Restated Promissory Note (Line of Credit) in the stated principal amount of
$7,500,000.00 (the "Amended Note") to evidence the Line of Credit as hereby
amended and to replace the Note. The "Line of Credit Note" referred to in the
Loan Agreement shall hereafter be deemed to refer to the Amended Note.
2
<PAGE> 3
6. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall also execute and deliver amendment agreements whereby the
Mortgages are amended to secure the Line of Credit as hereby amended, and shall
cause McClain Industries, Inc., a Michigan corporation, to executed an
unlimited guaranty of payment of the obligations of the Borrower to Standard
Federal.
7. Except as herein amended, the Loan Agreement, Security
Agreement and Mortgages shall remain in full force and effect.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Amendment Agreement to be executed as of the day and year first written above.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
3
<PAGE> 4
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
4
<PAGE> 1
EXHIBIT 10.39
Note No. 0250012691
STANDARD FEDERAL BANK
AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit)
$9,000,000.00 Troy , Michigan
Due Date: March 31, 1997 Dated: May 5, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Nine Million
and 00/100 Dollars ($9,000,000.00) or such lesser amount as may from time to
time be outstanding by reason of having been advanced hereunder, plus interest
as hereinafter provided on all amounts from time to time outstanding hereunder,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to One-Half of One percent (0.50%) in excess of the Wall Street Journal
Prime Rate. As used herein the phrase "Wall Street Journal Prime Rate" shall
mean the "Prime Rate" published by the Wall Street Journal as the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks as the
same may be changed from time to time. If more than one Prime Rate is
published, the highest rate published shall be deemed the Wall Street Journal
Prime Rate. If the publishing of the Wall Street Journal Prime Rate is
discontinued during the term hereof, then the Effective Interest Rate shall be
based upon the index which is published by The Wall Street Journal in
replacement thereof based on similar base rates on corporate loans or, if no
such replacement index is published, the index which, in Standard Federal's sole
determination, most nearly corresponds to the Wall Street Journal Prime Rate.
If, in such event, Standard Federal selects an index which, in the Borrower's
opinion, does not correspond to the Wall Street Journal Prime Rate, Borrower's
sole remedy shall be to prepay this Note in full without penalty or premium.
Until such prepayment has been received by Standard Federal, the index selected
by Standard Federal shall apply for all purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest
charged by any particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall Street
Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on June 1, 1995.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a Loan Agreement of even date herewith by and between Standard
Federal and the Borrower (the "Loan Agreement"). Any and all indebtedness may
be repaid by the Borrower in whole or in part from time to time prior to the
Due Date. Standard Federal shall, from time to time prior to the Due Date,
make advances to Borrower hereunder upon request therefor by Borrower, provided
that, upon giving effect to such advance: (a) no Event of Default (as
hereinafter defined) and no event which with notice and/or the passage of time
would become an Event of Default shall exist at the time the advance is to be
made; (b) all representations and warranties of Borrower theretofore made are
true and correct; (c) Standard Federal shall not have previously or
concurrently declared all amounts owing hereunder to be immediately due and
payable; (d) the amount requested shall not cause the total amount outstanding
hereunder to exceed the Credit Limit, as defined in the Loan Agreement; and (e)
all other requirements for the making of advances provided for in the Loan
Agreement have been satisfied. The principal amount of indebtedness owing
pursuant to this Note shall change from time to time, decreasing in an amount
equal to any and all payments of principal made by the Borrower and increasing
by an amount equal to any and all advances made by Standard Federal to the
Borrower pursuant to the terms hereof, and the books and records of Standard
Federal shall be conclusive evidence of the amount of principal and interest
owing hereunder at any time. All payments made hereunder shall be applied
first against costs and expenses required to be paid hereunder, then against
accrued interest to the extent thereof and the balance shall be applied against
the outstanding principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against
-2-
<PAGE> 3
and in reduction of the principal due under this Note. If Standard Federal
shall reasonably determine that the Effective Interest Rate (together with all
other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of
-3-
<PAGE> 4
Standard Federal for collection of the Note and all other liabilities of
Borrower to Standard Federal and enforcement of rights hereunder, including
reasonable attorney fees and legal expenses including participation in
Bankruptcy proceedings. During any period(s) this Note is in default, or after
the Due Date, or after acceleration of maturity, the outstanding principal
amount hereof shall bear interest at a rate equal to two percent (2.0%) per
annum greater than the interest rate otherwise charged hereunder. If any
required payment is not made within ten (10) days after the date it is due,
then, at the option of Standard Federal, a late charge of not more than four
cents ($.04) for each dollar of the payment so overdue may be charged. In
addition to any other security interests granted to Standard Federal, Borrower
hereby grants Standard Federal a security interest in all of Borrower's bank
deposits, instruments, negotiable documents, and chattel paper which at any
time are in the possession or control of Standard Federal. After the
occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement dated September 15,
1994, as amended by a First Amendment to Loan Agreement, dated February 16,
1995 and by a Second Amendment to Loan Agreement of even date herewith, is
secured by a Security Agreement, dated September 15, 1994, and two Open-End
Commercial Mortgages and Assignments of Lease and Rentals, dated June 29,
-4-
<PAGE> 5
1993, as amended September 15, 1994, February 6, 1995 and February 16, 1995 and
as further amended of even date herewith, and is supported by a Guaranty
executed by McClain Industries, Inc., a Michigan corporation, of even date
herewith. Reference is hereby made to such documents for additional terms
relating to the transaction giving rise to this Note, the security given for
this Note and additional terms and conditions under which this Note matures,
may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION
OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT
OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
The undersigned has executed this Note in Galion, Ohio, as of the date
and year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY
-5-
<PAGE> 6
GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY AGREEMENT WITH THE
BORROWER, OR ANY OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree
that they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
-6-
<PAGE> 7
Taxpayer Identification Number:
----------------------------------
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.40
SECOND AMENDMENT TO LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
GALION HOLDING COMPANY,
GALION SOLID WASTE EQUIPMENT, INC.
AND GALION DUMP BODIES, INC.
THIS AMENDMENT AGREEMENT made and delivered this 5th day of May, 1995, by
and between Galion Holding Company, a Michigan corporation, Galion
Solid Waste Equipment, Inc., a Michigan corporation, and Galion Dump Bodies,
Inc., a Michigan corporation (collectively, "Borrower"), whose
address/principal office is 6200 Elmridge, Sterling Heights, Michigan 48310,
and Standard Federal Bank, a federal savings bank ("Standard Federal"), whose
address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement, as amended February 16, 1995 (the "Loan
Agreement"), pursuant to which the Borrower opened a revolving line of credit
facility with Standard Federal, Loan No. 0250012691, with a credit limit of up
to $7,500,000.00 (the "Line of Credit"), as evidenced by an Amended and
Restated Promissory Note (Line of Credit), dated February 16, 1995, in the
principal amount of $7,500,000.00 (the "Note"), secured by a Security
Agreement, dated September 15, 1994 (the "Security Agreement"), and two
Open-End Commercial Mortgages and Assignments of Lease and Rentals, dated June
29, 1993, as amended September 15, 1994, February 6, 1995 and February 16, 1995
(the "Mortgages").
B. The Borrower has requested an increase in the credit limit of
the Line of Credit, as herein provided, and Standard Federal is willing to
supply such financing subject to the terms and conditions set forth in this
Amendment Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual promises herein contained, the
Borrower and Standard Federal hereby agree as follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Amendment Agreement and the Loan Agreement (as
hereby amended) are valid and
<PAGE> 2
enforceable according to their terms and do not conflict with or violate
Borrower's corporate charter or by-laws or any agreement or covenants to which
Borrower is a party.
2. The Security Agreement is valid and enforceable in accordance
with its terms. Standard Federal's security interest in the collateral
described in the Security Agreement is valid and perfected and Borrower is
aware of no claims or interests in such collateral prior or paramount to
Standard Federal's.
3. The Mortgages are valid and enforceable in accordance with
their terms. Standard Federal holds valid first mortgage interests in the real
property described in the Mortgages which are valid and perfected and Borrower
is aware of no claims or interests in such property prior or paramount to
Standard Federal's.
4. Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and replaced by the following new Section 1.1:
1.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Line of Credit") which shall not exceed
at any one time outstanding the Credit Limit as hereafter defined.
The term "Credit Limit" shall mean the lesser of: (a) Nine Million and
00/100 Dollars ($9,000,000.00), or (b) an amount equal to the sum of:
(i) an amount equal to 80% of Eligible Accounts Receivable, plus (ii)
an amount equal to the lesser of: (1) Five Million and 00/100 Dollars
($5,000,000.00), or (2) an amount equal to 40% of Qualified Inventory.
As used herein, the term "Eligible Accounts Receivable" shall mean
accounts receivable of the Borrower less than 90 days old, not
doubtful as to collectibility or disputed as to existence or amount or
subject to offset, contra- indebtedness or return and not
intra-company or owing from any affiliated or related company or other
entity, exclusive of any account receivable arising under a government
contract, the assignment of which is subject to the Assignment of
Claims Act of 1940, as amended, or any other similar federal or state
statute or regulation governing the assignment of contracts with a
governmental agency. The term "Qualified Inventory" shall mean the
inventory of Borrower in which Standard Federal holds a perfected
first security interest exclusive of any returned or damaged items and
work-in-process.
5. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall execute and deliver to Standard Federal an Amended and
Restated Promissory Note (Line of Credit) in the stated principal amount of
$9,000,000.00 (the "Amended Note") to evidence the Line of Credit as hereby
amended and to replace the Note. The "Line of Credit Note" referred to in the
Loan Agreement shall hereafter be deemed to refer to the Amended Note.
2
<PAGE> 3
6. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall also execute and deliver amendment agreements whereby the
Mortgages are amended to secure the Line of Credit as hereby amended, and shall
cause McClain Industries, Inc., a Michigan corporation, to executed an
unlimited guaranty of payment of the obligations of the Borrower to Standard
Federal.
7. Except as herein amended, the Loan Agreement, Security
Agreement and Mortgages shall remain in full force and effect.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Amendment Agreement to be executed as of the day and year first written above.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
3
<PAGE> 4
STANDARD FEDERAL BANK, a
federal savings bank
By:____________________________
Its:________________________
4
<PAGE> 1
EXHIBIT 10.41
SECOND AMENDMENT TO LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
MCCLAIN INDUSTRIES, INC., MCCLAIN OF GEORGIA, INC.,
SHELBY STEEL PROCESSING COMPANY,
MCCLAIN TUBE COMPANY D/B/A QUALITY TUBE,
MCCLAIN INDUSTRIES OF OHIO, INC. AND
EPCO MANUFACTURING, INC.
THIS AMENDMENT AGREEMENT made and delivered this 22nd day of June,
1995, by and between McClain Industries, Inc., a Michigan corporation,
McClain of Georgia, Inc., a Georgia corporation, Shelby Steel Processing
Company, a Michigan corporation, McClain Tube Company d/b/a Quality Tube, a
Michigan corporation, McClain Industries of Ohio, Inc., a Michigan corporation
(collectively, "Borrower"), and Epco Manufacturing, Inc. ("Epco"), a New York
corporation, whose address/principal office is 6200 Elmridge, Sterling Heights,
Michigan 48310, and Standard Federal Bank, a federal savings bank ("Standard
Federal"), whose address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement, as amended by a First Amendment to Loan
Agreement, dated February 16, 1995 (the "Loan Agreement"), pursuant to which
the Borrower opened a revolving line of credit facility with Standard Federal,
Loan No. 0250006199, with a credit limit of up to $9,500,000.00 (the "Line of
Credit"), as evidenced by an Amended and Restated Promissory Note (Line of
Credit), dated February 16, 1995, in the principal amount of $9,500,000.00 (the
"Note"), secured by a Security Agreement dated September 15, 1994 (the
"Security Agreement").
B. The Borrower has requested an increase in the credit limit of
the Line of Credit and a change in the advance formula thereunder, as herein
provided, and Standard Federal is willing to supply such financing subject to
the terms and conditions set forth in this Amendment Agreement.
C. The Borrower has also requested the extension of an additional
equipment purchase line of credit and a term loan, as herein provided, and
Standard Federal is willing to supply such financing subject to the terms and
conditions set forth in this Amendment Agreement.
NOW, THEREFORE, in reliance upon the representations herein provided
and in consideration of the premises and the mutual prom-
<PAGE> 2
ises herein contained, the Borrower and Standard Federal hereby agree as
follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Amendment Agreement and the Loan Agreement (as
hereby amended) are valid and enforceable according to their terms and do not
conflict with or violate Borrower's corporate charter or by-laws or any
agreement or covenants to which Borrower is a party.
2. The Security Agreement is valid and enforceable in accordance
with its terms. Standard Federal's security interest in the collateral
described in the Security Agreement is valid and perfected and Borrower is
aware of no claims or interests in such collateral prior or paramount to
Standard Federal's.
3. Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and replaced by the following new Section 1.1:
1.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Line of Credit") which shall not exceed
at any one time outstanding the Credit Limit as hereafter defined.
The term "Credit Limit" shall mean the lesser of: (a) Eleven Million
and 00/100 Dollars ($11,000,000.00), or (b) an amount equal to the sum
of: (i) an amount equal to 80% of Eligible Accounts Receivable, plus
(ii) an amount equal to the lesser of: (1) Seven Million Five Hundred
Thousand and 00/100 Dollars ($7,500,000.00), or (2) an amount equal to
50% of Qualified Inventory. As used herein, the term "Eligible
Accounts Receivable" shall mean accounts receivable of the Borrower
less than 90 days old, not doubtful as to collectibility or disputed
as to existence or amount or subject to offset, contra-indebtedness or
return and not intra-company or owing from any affiliated or related
company or other entity, exclusive of any account receivable arising
under a government contract, the assignment of which is subject to the
Assignment of Claims Act of 1940, as amended, or any other similar
federal or state statute or regulation governing the assignment of
contracts with a governmental agency. The term "Qualified Inventory"
shall mean the inventory of Borrower in which Standard Federal holds a
perfected first security interest exclusive of any returned or damaged
items and work-in-process.
4. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall execute and deliver to Standard Federal a Second Amended and
Restated Promissory Note (Line of Credit) in the stated principal amount of
$11,000,000.00 (the "Amended Note") to evidence the Line of Credit as hereby
amended
2
<PAGE> 3
and to replace the Note. The "Line of Credit Note" referred to in the Loan
Agreement shall hereafter be deemed to refer to the Amended Note.
5. Epco is hereby added as a borrower under the Loan Agreement
and the term "Borrower," as used in the Loan Agreement, shall hereafter be
deemed to refer to Epco, jointly and severally with the other entities referred
to as "Borrower" in the Loan Agreement. Epco shall also execute and deliver
the Amended Note, jointly and severally, with the other entities referred to as
"Borrower" in the Loan Agreement. Epco shall also execute and deliver to
Standard Federal with this Amendment Agreement a Security Agreement whereby
Epco shall grant to Standard Federal a security interest of first priority in
all personal property of Epco, in accordance with the provisions of Section
5.1(b) of the Loan Agreement.
6. The following new sections are hereby added to the Loan
Agreement:
SECTION 1A1. EQUIPMENT PURCHASE LINES OF CREDIT
1A1A.1 First Line of Credit
1A1A.1(a) Standard Federal hereby extends to the Borrower a revolving
line of credit (the "First Line of Credit") which shall not exceed at
any one time outstanding the principal amount of Four Hundred Twenty
Six Thousand and 00/100 Dollars ($426,000.00) (the "First Credit
Limit").
1A1A.1(b) The First Line of Credit herein extended shall be subject
to the terms and conditions of a Promissory Note (Line of Credit with
Term Provisions) (First Line of Credit), in the principal amount of
Four Hundred Twenty Six Thousand and 00/100 Dollars ($426,000.00), of
even date herewith and all renewals and amendments thereof (the "First
Line of Credit Note"). This Loan Agreement and the First Line of
Credit Note are of equal materiality and shall each be construed in
such manner as to give full force and effect to all provisions of both
documents.
1A1A.1(c) If at any time the amount outstanding under the First
Line of Credit shall exceed the First Credit Limit, Borrower shall, on
demand, forthwith pay to Standard Federal such sums as are necessary
to reduce the amount outstanding to an amount not greater than the
First Credit Limit.
1A1A.1(d) Each advance under the First Line of Credit shall be
used solely for the purchase of equipment. Each advance shall be in
an amount not in excess of Eighty Five percent (85.0%) of the cost to
the Borrower of the equipment to be purchased with such advance.
Standard Federal shall make advances under
3
<PAGE> 4
the First Line of Credit only upon receipt by it in a form
satisfactory to it of a true and authentic copy of the dealer invoice
for the equipment purchased or to be purchased with the advance.
1A1A.1(e) Standard Federal shall, from time to time to and
until January 1, 1996 (the "First Term Date"), make advances to
Borrower under the First Line of Credit upon request therefor by
Borrower, subject to the other conditions contained in the First Line
of Credit Note.
1A1A.1(f) Accrued interest shall be payable under the First
Line of Credit Note on the 1st day of each month beginning on August
1, 1995 through and including the First Term Date. From and after the
First Term Date, Standard Federal shall make no further advances under
the First Line of Credit and the outstanding principal balance
thereunder as of the First Term Date, with interest, shall be repaid
in consecutive monthly payments of principal, each in the amount
determined by dividing the outstanding principal balance under the
First Line of Credit Note as of the First Term Date by 78, plus
interest accrued to the due date of each such payment, commencing on
February 1, 1996 and continuing on the same day of each consecutive
month thereafter and a final payment on July 1, 2002 in an amount
equal to the then unpaid principal and accrued interest under the
First Line of Credit Note.
1A1B.2 Second Line of Credit
1A1B.2(a) Standard Federal hereby extends to the Borrower an
additional revolving line of credit (the "Second Line of Credit") (the
First Line of Credit and the Second Line of Credit are sometimes
herein collectively referred to as the "Line of Credit") which shall
not exceed at any one time outstanding the principal amount of Four
Hundred Twenty Six Thousand and 00/100 Dollars ($426,000.00), less the
principal outstanding under the First Line of Credit as of the First
Term Date (the "Second Credit Limit").
1A1B.2(b) The Second Line of Credit herein extended shall be subject
to the terms and conditions of a Promissory Note (Line of Credit with
Term Provisions) (Second Line of Credit), in the principal amount of
Four Hundred Twenty Six Thousand and 00/100 Dollars ($426,000.00), of
even date herewith and all renewals and amendments thereof (the
"Second Line of Credit Note") (the First Line of Credit Note and the
Second Line of Credit Note are sometimes herein collectively referred
to as the "Line of Credit Notes"). This Loan Agreement and the Second
Line of Credit Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all
provisions of both documents.
4
<PAGE> 5
1A1B.2(c) If at any time the amount outstanding under the Second Line
of Credit shall exceed the Second Credit Limit, Borrower shall, on
demand, forthwith pay to Standard Federal such sums as are necessary
to reduce the amount outstanding to an amount not greater than the
Second Credit Limit.
1A1B.2(d) Each advance under the Second Line of Credit shall be used
solely for the purchase of equipment. Each advance shall be in an
amount not in excess of Eighty Five percent (85.0%) of the cost to
the Borrower of the equipment to be purchased with such advance.
Standard Federal shall make advances under the Second Line of Credit
only upon receipt by it in a form satisfactory to it of a true and
authentic copy of the dealer invoice for the equipment purchased or to
be purchased with the advance.
1A1B.2(e) Standard Federal shall, from time to time after the First
Term Date and to and until July 1, 1996 (the "Second Term Date"), make
advances to Borrower under the Second Line of Credit upon request
therefor by Borrower, subject to the other conditions contained in the
Second Line of Credit Note.
1A1B.2(f) Accrued interest shall be payable under the Second Line of
Credit Note on the 1st day of each month beginning on February 1, 1996
through and including the Second Term Date. From and after the Second
Term Date, Standard Federal shall make no further advances under the
Second Line of Credit and the outstanding principal balance thereunder
as of the Second Term Date, with interest, shall be repaid in
consecutive monthly payments of principal, each in the amount
determined by dividing the outstanding principal balance under the
Second Line of Credit Note as of the Second Term Date by 78, plus
interest accrued to the due date of each such payment, commencing on
August 1, 1996 and continuing on the same day of each consecutive
month thereafter and a final payment on January 1, 2003 in an amount
equal to the then unpaid principal and accrued interest under the
Second Line of Credit Note.
SECTION 1A2. MCCLAIN/EPCO TERM LOAN
1A2.1 Standard Federal hereby extends to the Borrower a term loan
(the "McClain/Epco Term Loan") in the principal amount of Two Hundred
Forty Thousand and 00/100 Dollars ($240,000.00).
1A2.2 The McClain/Epco Term Loan herein extended shall be subject
to the terms and conditions of a Promissory Note (Term Loan) of even
date herewith and all renewals and amendments thereof (the
"McClain/Epco Term Note"). The McClain/Epco Term Loan shall be
payable and shall bear interest as set forth in the McClain/Epco Term
Note. This Loan Agreement and the
5
<PAGE> 6
McClain/Epco Term Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all
provisions of both documents.
7. Except as herein amended, the Loan Agreement and Security
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Amendment Agreement to be executed as of the day and year first written above.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- ------------------------------
E. James Zabinski
Its: Treasurer
-------------------------
38-1867649
----------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-------------------------
58-1738825
----------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
------------------------
38-2205216
----------------------------------
Taxpayer Identification Number
6
<PAGE> 7
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------------
--------------------------------
Taxpayer Identification Number
EPCO MANUFACTURING, INC., a New York
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-
--------------------------------
Taxpayer Identification Number
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
7
<PAGE> 1
EXHIBIT 10.42
Note No. 0250006199
STANDARD FEDERAL BANK
SECOND AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit)
$11,000,000.00 Sterling Heights, Michigan
Due Date: March 31, 1997 Dated: June 22, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Eleven Million
and 00/100 Dollars ($11,000,000.00) or such lesser amount as may from time to
time be outstanding by reason of having been advanced hereunder, plus interest
as hereinafter provided on all amounts from time to time outstanding hereunder,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest charged
by any particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall Street
Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on August 1, 1995.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a Loan Agreement, dated September 15, 1994, as amended by a First
Amendment to Loan Agreement, dated February 16, 1995 and by a Second Amendment
to Loan Agreement of even date herewith, by and between Standard Federal and
the Borrower (the "Loan Agreement"). Any and all indebtedness may be repaid by
the Borrower in whole or in part from time to time prior to the Due Date.
Standard Federal shall, from time to time prior to the Due Date, make advances
to Borrower hereunder upon request therefor by Borrower, provided that, upon
giving effect to such advance: (a) no Event of Default (as hereinafter defined)
and no event which with notice and/or the passage of time would become an Event
of Default shall exist at the time the advance is to be made; (b) all
representations and warranties of Borrower theretofore made are true and
correct; (c) Standard Federal shall not have previously or concurrently
declared all amounts owing hereunder to be immediately due and payable; (d) the
amount requested shall not cause the total amount outstanding hereunder to
exceed the Credit Limit, as defined in the Loan Agreement; and (e) all other
requirements for the making of advances provided for in the Loan Agreement have
been satisfied. The principal amount of indebtedness owing pursuant to this
Note shall change from time to time, decreasing in an amount equal to any and
all payments of principal made by the Borrower and increasing by an amount
equal to any and all advances made by Standard Federal to the Borrower pursuant
to the terms hereof, and the books and records of Standard Federal shall be
conclusive evidence of the amount of principal and interest owing hereunder at
any time. All payments made hereunder shall be applied first against costs and
expenses required to be paid hereunder, then against accrued interest to the
extent thereof and the balance shall be applied against the outstanding
principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the
-2-
<PAGE> 3
maximum allowed by applicable law, then any and all such excess shall be and
the same is hereby waived by Standard Federal, and any and all such excess paid
shall be automatically credited against and in reduction of the principal due
under this Note. If Standard Federal shall reasonably determine that the
Effective Interest Rate (together with all other charges or payments related
hereto that may be deemed interest) stipulated under this Note is, or may be,
usurious or otherwise limited by law, the unpaid balance of this Note, with
accrued interest at the highest rate permitted to be charged by stipulation in
writing between Standard Federal and Borrower, at the option of Standard
Federal, shall immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
-3-
<PAGE> 4
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement and is secured by
a Security Agreement, dated September 15, 1994, and by a Security Agreement of
even date herewith. Reference is hereby
-4-
<PAGE> 5
made to such documents for additional terms relating to the transaction giving
rise to this Note, the security given for this Note and additional terms and
conditions under which this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
--------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
---------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
---------------------
--------------------------------
Taxpayer Identification Number
EPCO MANUFACTURING, INC., a New
York corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
---------------------
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.43
FIFTH AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE
AND ASSIGNMENT OF LEASE AND RENTALS
(Secures Future Advances)
Maximum Indebtedness not to Exceed $12,800,000.00
THIS AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE AND ASSIGNMENT OF LEASES
AND RENTALS, is made and entered into this 22nd day of June, 1995, by and
between Standard Federal Bank, a federal savings bank, of 2600 West Big Beaver
Road, Troy, Michigan 48084 ("Mortgagee"), and Galion Dump Bodies, Inc., a
Michigan corporation of 6200 Elmridge, Sterling Heights, Michigan 48318
("Mortgagor").
WITNESSETH:
WHEREAS, on June 29, 1993, in order to secure a promissory note dated June
29, 1993 by Mortgagor in favor of Mortgagee, Mortgagor granted to Mortgagee an
Open-End Commercial Mortgage and Assignment of Lease and Rentals (the
"Mortgage") on certain real property located in the City of Winesburg, County
of Holmes and State of Ohio, which real property is more particularly described
in the attached Exhibit A; and which Mortgage was recorded on July 13, 1993, in
Volume 202, Page 527, Holmes County Recorder, and
WHEREAS, the Mortgage was amended by an Amendment to Open-End
Commercial Mortgage and Assignment of Lease and Rentals, dated September 15,
1994, recorded on September 30, 1994, in Volume 214, Page 9, Holmes County
Recorder (the "First Amendment"), and
WHEREAS, the Mortgage was further amended by a Second Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated
February 6, 1995, recorded on March 9, 1995, in Volume 216, Page 1011, Holmes
County Recorder, and
WHEREAS, the Mortgage was further amended by a Third Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated
February 16, 1995, recorded on March 9, 1995, in Volume 216, Page 1016, Holmes
County Recorder (the "Third Amendment"), and
WHEREAS, the Mortgage was further amended by a Fourth Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated May 5,
1995, recorded on May 15, 1995, in Volume 218, Page 584, Holmes County
Recorder (the "Fourth Amendment"), and
WHEREAS, the parties hereto desire to further amend the Mortgage in the
manner hereinafter set forth.
NOW, THEREFORE, in consideration of One and No/100 Dollar ($1.00) and the
mutual covenants herein contained, the parties hereto hereby agree as follows:
1. The Mortgage is hereby amended to secure a Third Amended and Restated
Promissory Note (Line of Credit) from the Mortgagor to
<PAGE> 2
Mortgagee, of even date herewith, in the principal amount of $10,000,000.00
(the "Note"), whereby the line of credit evidenced by the Promissory Note (Line
of Credit) secured by the Mortgage under the provisions of the First Amendment,
the Third Amendment and the Fourth Amendment has been restated and increased,
such Note identified as being secured by the Mortgage by statements thereon,
including the payment of principal and interest of such indebtedness according
to the terms of the Note, and all other amounts payable by Mortgagor
thereunder, and any and all extensions and renewals thereof, however evidenced.
The Note has been executed pursuant to a Third Amendment to Loan Agreement of
even date herewith by and between the Mortgagor and the Mortgagee (the "Loan
Agreement"). The indebtedness secured by the Mortgage shall hereafter be
deemed to be the indebtedness and obligations evidenced by the Note and the
Loan Agreement, in the principal amount of $10,000,000.00 as well as a
Promissory Note (Term Loan) from the Mortgagor to Mortgagee, dated September
15, 1994, in the original principal amount of $2,000,000.00, which note is also
identified as being secured by the Mortgage by a statement thereon, and two
Promissory Notes (Line of Credit) evidencing a line of credit with a total
credit limit in the principal amount of $800,000.00, which notes are also
identified as being secured by the Mortgage by statements thereon, such that
the total original principal amount of the indebtedness secured by the Mortgage
is now $12,800,000.00.
2. In all other respects, the Mortgage is hereby ratified and confirmed
and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
WITNESSES:
Galion Dump Bodies, Inc., a Michigan
corporation
By:
- ------------------------- ------------------------------------
Carl Jaworski
Its: Treasurer
- ------------------------- --------------------------
-2-
<PAGE> 3
Standard Federal Bank, a federal
savings bank
By:
- ------------------------ ----------------------------------
Its:
- ------------------------ ------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this ____ day of
______________, 1995, by Carl Jaworski, who is the Treasurer of Galion Dump
Bodies, Inc., a Michigan corporation, on behalf of the corporation.
-------------------------------
Notary Public
County, Michigan
--------------
My Commission Expires:
---------
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this ___________
day of _________________, 1995, by ____________________, a _________________
of Standard Federal Bank, a federal savings bank, on behalf of the Bank.
-------------------------------
Notary Public
County, Michigan
--------------
My Commission Expires:
---------
DRAFTED BY: AFTER RECORDING RETURN TO:
Daniel C. Watson Commercial Loan Department
Standard Federal Bank Standard Federal Bank
2600 West Big Beaver Road 2600 West Big Beaver Road
Troy, Michigan 48084 Troy, Michigan 48084
-3-
<PAGE> 1
EXHIBIT 10.44
THIRD AMENDMENT TO LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
GALION HOLDING COMPANY,
GALION SOLID WASTE EQUIPMENT, INC.,
GALION DUMP BODIES, INC.
AND M.E.G. EQUIPMENT SALES OF FLORIDA, INC.
THIS AMENDMENT AGREEMENT made and delivered this 22nd day of June, 1995,
by and between Galion Holding Company, a Michigan corporation, Galion Solid
Waste Equipment, Inc., a Michigan corporation, and Galion Dump Bodies, Inc., a
Michigan corporation (collectively, "Borrower"), and M.E.G. Equipment Sales of
Florida, Inc. ("M.E.G."), a Florida corporation, whose address/principal office
is 6200 Elmridge, Sterling Heights, Michigan 48310, McClain Industries, Inc., a
Michigan corporation, whose address/principal office is 6200 Elmridge, Sterling
Heights, Michigan 48310 ("Guarantor"), and Standard Federal Bank, a federal
savings bank ("Standard Federal"), whose address is 2600 West Big Beaver Road,
Troy, Michigan 48084.
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement, as amended by a First Amendment to Loan
Agreement, dated February 16, 1995, and by a Second Amendment to Loan
Agreement, dated May 5, 1995 (the "Loan Agreement"), pursuant to which the
Borrower opened a revolving line of credit facility with Standard Federal, Loan
No. 0250012691, with a credit limit of up to $9,000,000.00 (the "Line of
Credit"), as evidenced by an Amended and Restated Promissory Note (Line of
Credit), dated May 5, 1995, in the principal amount of $9,000,000.00 (the
"Note"), secured by a Security Agreement, dated September 15, 1994 (the
"Security Agreement"), and two Open-End Commercial Mortgages and Assignments of
Lease and Rentals, dated June 29, 1993, as amended September 15, 1994, February
6, 1995, February 16, 1995 and May 5, 1995 (the "Mortgages") and supported by a
Guaranty, dated May 5, 1995, executed by the Guarantor (the "Guaranty").
B. The Borrower has requested an increase in the credit limit of
the Line of Credit and a change in the advance formula thereunder, as herein
provided, and Standard Federal is willing to supply such financing subject to
the terms and conditions set forth in this Amendment Agreement and the
Guarantor is agreeable thereto.
NOW, THEREFORE, in reliance upon the representations herein provided and
in consideration of the premises and the mutual prom-
<PAGE> 2
ises herein contained, the Borrower and Standard Federal hereby agree as
follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Amendment Agreement and the Loan Agreement (as
hereby amended) are valid and enforceable according to their terms and do not
conflict with or violate Borrower's corporate charter or by-laws or any
agreement or covenants to which Borrower is a party.
2. The Security Agreement is valid and enforceable in accordance
with its terms. Standard Federal's security interest in the collateral
described in the Security Agreement is valid and perfected and Borrower is
aware of no claims or interests in such collateral prior or paramount to
Standard Federal's.
3. The Mortgages are valid and enforceable in accordance with
their terms. Standard Federal holds valid first mortgage interests in the real
property described in the Mortgages which are valid and perfected and Borrower
is aware of no claims or interests in such property prior or paramount to
Standard Federal's.
4. The Guaranty is valid and enforceable in accordance with its
terms and the Guarantor presently has no valid and existing defense to
liability thereunder.
5. Section 1.1 of the Loan Agreement is hereby deleted in its
entirety and replaced by the following new Section 1.1:
1.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Line of Credit") which shall not exceed
at any one time outstanding the Credit Limit as hereafter defined.
The term "Credit Limit" shall mean the lesser of: (a) Ten Million and
00/100 Dollars ($10,000,000.00), or (b) an amount equal to the sum of:
(i) an amount equal to 80% of Eligible Accounts Receivable, plus (ii)
an amount equal to the lesser of: (1) Five Million and 00/100 Dollars
($5,000,000.00), or (2) an amount equal to 50% of Qualified Inventory.
As used herein, the term "Eligible Accounts Receivable" shall mean
accounts receivable of the Borrower less than 90 days old, not
doubtful as to collectibility or disputed as to existence or amount or
subject to offset, contra- indebtedness or return and not
intra-company or owing from any affiliated or related company or other
entity, exclusive of any account receivable arising under a government
contract, the assignment of which is subject to the Assignment of
Claims Act of 1940, as amended, or any other similar federal or state
statute or regulation governing the assignment of contracts with a
governmental
2
<PAGE> 3
agency. The term "Qualified Inventory" shall mean the inventory of
Borrower in which Standard Federal holds a perfected first security
interest exclusive of any returned or damaged items and
work-in-process.
6. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall execute and deliver to Standard Federal a Third Amended and
Restated Promissory Note (Line of Credit) in the stated principal amount of
$10,000,000.00 (the "Amended Note") to evidence the Line of Credit as hereby
amended and to replace the Note. The "Line of Credit Note" referred to in the
Loan Agreement shall hereafter be deemed to refer to the Amended Note.
7. M.E.G. is hereby added as a borrower under the Loan Agreement
and the term "Borrower," as used in the Loan Agreement, shall hereafter be
deemed to refer to M.E.G., jointly and severally with the other entities
referred to as "Borrower" in the Loan Agreement. M.E.G. shall also execute
and deliver the Amended Note, jointly and severally, with the other entities
referred to as "Borrower" in the Loan Agreement. M.E.G. shall also execute and
deliver to Standard Federal with this Amendment Agreement a Security Agreement
whereby M.E.G. shall grant to Standard Federal a security interest of first
priority in all personal property of M.E.G., in accordance with the provisions
of Section 5.1(c) of the Loan Agreement.
8. Simultaneously with the execution of this Amendment Agreement,
the Borrower shall also execute and deliver amendment agreements whereby the
Mortgages are amended to secure the Line of Credit as hereby amended.
9. Except as herein amended, the Loan Agreement, Security
Agreement, Mortgages and Guaranty shall remain in full force and effect.
10. Guarantor acknowledges and consents to the amendment to the
Loan Agreement herein provided and agrees that the Guaranty shall continue and
remain in full force and effect with respect to the Loan Agreement as herein
amended and to the Amended Note.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be executed as of the day and year first written above.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- --------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
M.E.G. EQUIPMENT SALES OF FLORIDA,
INC., a Florida corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
59-3241829
4
<PAGE> 5
GUARANTOR:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
5
<PAGE> 1
EXHIBIT 10.45
Note No. 0250012691
STANDARD FEDERAL BANK
THIRD AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit)
$10,000,000.00
Sterling Heights , Michigan
Due Date: March 31, 1997 Dated: June 22, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Ten Million and
00/100 Dollars ($10,000,000.00) or such lesser amount as may from time to time
be outstanding by reason of having been advanced hereunder, plus interest as
hereinafter provided on all amounts from time to time outstanding hereunder,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to One-Half of One percent (0.50%) in excess of the Wall Street Journal
Prime Rate. As used herein the phrase "Wall Street Journal Prime Rate" shall
mean the "Prime Rate" published by the Wall Street Journal as the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks as the
same may be changed from time to time. If more than one Prime Rate is
published, the highest rate published shall be deemed the Wall Street Journal
Prime Rate. If the publishing of the Wall Street Journal Prime Rate is
discontinued during the term hereof, then the Effective Interest Rate shall be
based upon the index which is published by The Wall Street Journal in
replacement thereof based on similar base rates on corporate loans or, if no
such replacement index is published, the index which, in Standard Federal's
sole determination, most nearly corresponds to the Wall Street Journal Prime
Rate. If, in such event, Standard Federal selects an index which, in the
Borrower's opinion, does not correspond to the Wall Street Journal Prime Rate,
Borrower's sole remedy shall be to prepay this Note in full without penalty or
premium. Until such prepayment has been received by Standard Federal, the
index selected by Standard Federal shall apply for all purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest charged
by any particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall Street
Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on August 1, 1995.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a Loan Agreement, dated September 15, 1994, as amended by a First
Amendment to Loan Agreement, dated February 16, 1995, and by a Second Amendment
to Loan Agreement, dated May 5, 1995, and by a Third Amendment to Loan
Agreement of even date herewith, by and between Standard Federal and the
Borrower (the "Loan Agreement"). Any and all indebtedness may be repaid by the
Borrower in whole or in part from time to time prior to the Due Date. Standard
Federal shall, from time to time prior to the Due Date, make advances to
Borrower hereunder upon request therefor by Borrower, provided that, upon
giving effect to such advance: (a) no Event of Default (as hereinafter defined)
and no event which with notice and/or the passage of time would become an Event
of Default shall exist at the time the advance is to be made; (b) all
representations and warranties of Borrower theretofore made are true and
correct; (c) Standard Federal shall not have previously or concurrently
declared all amounts owing hereunder to be immediately due and payable; (d) the
amount requested shall not cause the total amount outstanding hereunder to
exceed the Credit Limit, as defined in the Loan Agreement; and (e) all other
requirements for the making of advances provided for in the Loan Agreement have
been satisfied. The principal amount of indebtedness owing pursuant to this
Note shall change from time to time, decreasing in an amount equal to any and
all payments of principal made by the Borrower and increasing by an amount
equal to any and all advances made by Standard Federal to the Borrower pursuant
to the terms hereof, and the books and records of Standard Federal shall be
conclusive evidence of the amount of principal and interest owing hereunder at
any time. All payments made hereunder shall be applied first against costs and
expenses required to be paid hereunder, then against accrued interest to the
extent thereof and the balance shall be applied against the outstanding
principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
-2-
<PAGE> 3
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard Federal shall reasonably determine that the Effective
Interest Rate (together with all other charges or payments related hereto that
may be deemed interest) stipulated under this Note is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note, with accrued
interest at the highest rate permitted to be charged by stipulation in writing
between Standard Federal and Borrower, at the option of Standard Federal, shall
immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
-3-
<PAGE> 4
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement, is secured by a
Security Agreement, dated September 15, 1994, by a Security Agreement of even
date herewith, and by two Open-End
-4-
<PAGE> 5
Commercial Mortgages and Assignments of Lease and Rentals, dated June 29, 1993,
as amended September 15, 1994, February 6, 1995, February 16, 1995 and May 5,
1995 and as further amended of even date herewith, and is supported by a
Guaranty executed by McClain Industries, Inc., a Michigan corporation, dated
May 5, 1995. Reference is hereby made to such documents for additional terms
relating to the transaction giving rise to this Note, the security given for
this Note and additional terms and conditions under which this Note matures,
may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION
OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT
OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
The undersigned has executed this Note in Galion, Ohio, as of the date
and year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU
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<PAGE> 6
MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
ON THE CREDITOR'S PART TO COMPLY WITH ANY AGREEMENT WITH THE BORROWER, OR ANY
OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree
that they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
___________________________ By:________________________________
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
___________________________ By:_______________________________
E. James Zabinski
Treasurer
Taxpayer Identification Number:
__________________________________
GALION DUMP BODIES, INC., a Michigan
corporation
___________________________ By:_______________________________
Carl Jaworski
Treasurer
Taxpayer Identification Number:
__________________________________
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<PAGE> 7
M.E.G. EQUIPMENT SALES OF FLORIDA,
INC., a Florida corporation
___________________________ By:________________________________
E. James Zabinski
Treasurer
Taxpayer Identification Number:
59-3241829
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
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<PAGE> 1
EXHIBIT 10.46
SECURITY AGREEMENT
THIS AGREEMENT made and delivered this 22nd day of June, 1995, by
and between M.E.G. Equipment Sales of Florida, Inc., a Florida corporation,
whose address/principal office is 6200 Elmridge, Sterling Heights, Michigan
48310 ("Borrower") and Standard Federal Bank, a federal savings bank ("Standard
Federal").
WITNESSETH:
WHEREAS, the Borrower may from time to time request loans, advances or
other financial accommodations from Standard Federal and Standard Federal may,
in its discretion, honor such requests in whole or part;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and Standard Federal hereby agree as
follows:
SECTION 1. GRANT OF SECURITY INTEREST.
1.1 Borrower hereby grants to Standard Federal a continuing
security interest in the property and interests in property described in
Section 2.1 below (hereinafter referred to as the "Collateral") to secure the
payment of all loans and advances including any renewals or extensions thereof
from Standard Federal to Borrower and all obligations of any and every kind and
nature heretofore, now or hereafter owing from Borrower to Standard Federal,
however incurred or evidenced, whether primary, secondary, contingent or
otherwise, whether arising under this Agreement, under any other security
agreement(s), promissory note(s), guarantee(s), mortgage(s), lease(s),
instrument(s), document(s), contract(s), letter(s) of credit or similar
agreement(s) heretofore, now or hereafter executed by Borrower and delivered to
Standard Federal, or by oral agreement or by operation of law plus all
interest, costs, expenses and reasonable attorney fees which may be made or
incurred by Standard Federal in the disbursement, administration or collection
of such obligations and in the protection, maintenance and liquidation of the
Collateral (hereinafter collectively called "Liabilities").
1.2 All statements of account rendered by Standard Federal to
Borrower relating to Borrower's Liabilities, including all statements of
principal, interest, expenses and costs owing by Borrower to Standard Federal,
shall be presumed correct and accurate and shall constitute an account stated
between Borrower and Standard Federal unless within thirty (30) days after
mailing thereof to Borrower, Borrower shall deliver to Standard Federal by
registered or certified mail addressed to Standard Federal at its principal
place of business, written objection thereto specifying the error or errors, if
any, contained in any such statement.
<PAGE> 2
1.3 This Agreement shall be and become effective when, and
continue in effect as long as, any Liabilities of Borrower to Standard Federal
are outstanding and unpaid. Borrower will not sell, assign, transfer, pledge,
alienate or otherwise dispose of or encumber any Collateral to any third party
while this Agreement is in effect without the written consent of Standard
Federal.
SECTION 2. COLLATERAL.
2.l The Collateral covered by this Agreement is all the Borrower's
property described below, which it now owns or shall hereafter acquire or
create immediately upon the acquisition or creation thereof, and includes, but
is not limited to, any items listed on any schedule or list attached hereto:
Accounts, etc. All Accounts, Chattel Paper, Documents, Instruments,
General Intangibles, including any right to any refund of taxes paid
before or after the date of this Agreement to any governmental entity.
Equipment. All Equipment including without limitation all
machinery, furnishings, furniture and vehicles, together with all
accessions, parts, attachments, accessories, tools, dies or
appurtenances thereto or intended for use in connection therewith and
all substitutions, betterments and replacements thereof and additions
thereto.
Inventory, etc. All Inventory and Goods (other than Equipment),
including without limitation raw materials, work in process, finished
goods, tangible property, stock in trade, wares and merchandise held
for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in a business, including goods whose sale,
lease or other disposition has given rise to any Accounts and any
Goods which may have been returned to or repossessed or stopped in
transit by the Borrower.
Proceeds. Proceeds (whether Cash Proceeds or Noncash Proceeds) of the
Collateral, including without limitation proceeds of insurance payable
by reason of loss or damage to the Collateral and of eminent domain or
condemnation awards and all products of and accessions to the
Collateral and all Deposit Accounts or other sums at any time credited
by or due from Standard Federal to Borrower and all policies and
certificates of insurance, Accounts, Chattel Paper, Documents,
Instruments, General Intangibles, Goods, Deposit Accounts, Money,
Checks, Cash Proceeds and Noncash Proceeds (whether or not the same
are Collateral or Proceeds thereof hereunder) in which Borrower has an
interest which are now or are at any time hereafter in the possession
or under the control of Standard Federal or in transit by mail or
carrier to or from Standard Federal or in possession of or under the
control of
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<PAGE> 3
any third party acting on Standard Federal's behalf without regard to
whether Standard Federal received the same in pledge, for safekeeping,
as agent for collection or transmission or otherwise or whether
Standard Federal has conditionally released the same (excluding,
nevertheless, any of the foregoing assets of the Borrower which are
now or any time hereafter in possession or control of Standard Federal
under any written trust agreement wherein Standard Federal is trustee
and Borrower is trustor).
2.2 The Collateral is kept and maintained at Borrower's address
above and at the following addresses:
500 Sherman Street, Galion Ohio
666 Peabody-Dent Road, Winesburg, Ohio
2.3 All records pertaining to Accounts are kept and maintained at
the following address (if the same as Borrower's address above, insert "Same"):
Same
2.4 Borrower will give to Standard Federal prompt written notice
of any new address at which the Collateral is kept or maintained upon any
change in location of the Collateral or records pertaining to Accounts.
SECTION 3. PERFECTION OF SECURITY INTEREST.
3.1 Borrower shall execute and deliver to Standard Federal
concurrently with Borrower's execution of this Agreement and at any time or
times hereafter at the request of Standard Federal and pay the cost of filing
or recording same in all public offices deemed necessary by Standard Federal,
all financing statements, continuation financing statements, assignments,
certificates of title, applications for vehicle titles, affidavits, reports,
notices, schedules of Accounts, designations of Inventory, letters of authority
and all other documents that Standard Federal may reasonably request in form
satisfactory to Standard Federal to perfect and maintain Standard Federal's
security interests in the Collateral. In order to fully consummate all of the
transactions contemplated hereunder, Borrower shall make appropriate entries on
its books and records disclosing Standard Federal's security interests in the
Collateral.
SECTION 4. WARRANTIES.
4.1 Borrower warrants and agrees that while any of the Liabilities
remain unperformed and unpaid:
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<PAGE> 4
4.1(a) Borrower is the owner of the Collateral free and clear of all
liens or security interests, except Standard Federal's security interest and
any other lien or security interest set forth in Section 10.1 below, and all
Chattel Paper constituting Collateral evidences a perfected security interest
in the goods covered by it free from all other liens and security interests
other than those set forth in Section 10.1 below, and no financing statements,
other than that of Standard Federal and those set forth in Section 10.2 below,
are on file covering the Collateral or any of it, and if Inventory is
represented or covered by documents of title, Borrower is the owner of the
documents free of all liens and security interests other than Standard
Federal's security interest, the lien or security interest of any other
creditor named in Section 10.1 below and warehousemen's charges, if any, not
delinquent;
4.1(b) The address of Borrower's principal office is as set forth
above; the addresses of Borrower's other places of business where Collateral
and account records are now or may in the future be located, if any, are set
forth in Sections 2.2 and 2.3 above and Borrower's business locations shall not
be changed without the prior written consent of Standard Federal; Borrower
further warrants that the Collateral, wherever located, is covered by this
Agreement;
4.1(c) The Collateral will not be used, nor will Borrower permit the
Collateral to be used, for any unlawful purpose, whatever;
4.1(d) Borrower will neither change its name, form of business entity
nor address of its principal office or the office where account records are
maintained without giving written notice to Standard Federal thereof at least
ten (10) days prior to the effective date of such change, and Borrower agrees
that all documents, instruments, and agreements demanded by Standard Federal in
response to such change shall be prepared, filed, and recorded at Borrower's
expense prior to the effective date of such change;
4.1(e) Each Account, Chattel Paper and General Intangible
constituting Collateral is genuine and enforceable against the account debtor
according to its terms, and it, and the transaction out of which it arose,
comply with all applicable laws and regulations, the amount represented by
Borrower to Standard Federal as owing by each account debtor is the amount
actually owing and is not subject to setoff, credit, allowance or adjustment
except any discount for prompt payment, nor has any account debtor returned the
goods or disputed his liability, there has been no default according to the
terms of any such Collateral, and no step has been taken to foreclose the
security interest it evidences or to otherwise enforce its payment;
4.1(f) Borrower shall at all times maintain the Collateral in
first-class condition and repair;
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<PAGE> 5
4.1(g) The execution and delivery of this Agreement and any
instruments evidencing Liabilities will not violate nor constitute a breach of
Borrower's Articles of Incorporation, By-Laws, Partnership Agreement, or any
agreement or restriction of any type whatsoever to which Borrower is a party or
is subject;
4.1(h) All financial statements and information relating to Borrower
delivered or to be delivered by Borrower to Standard Federal are true and
correct and prepared in accordance with generally accepted accounting
principles, and there has been no material adverse change in the financial
condition of Borrower since the submission of any such financial information to
Standard Federal;
4.1(i) There are no actions or proceedings which are threatened or
pending against Borrower which might result in any material adverse change in
Borrower's financial condition or which might materially affect any of
Borrower's assets;
4.1(j) Borrower has duly filed all federal, state, and other
governmental tax returns which Borrower is required by law to file, and will
continue to file same during such time as any of the Liabilities hereunder
remain owing to Standard Federal, and all such taxes required to be paid have
been paid, in full; and
4.1(k) Borrower will indemnify and hold Standard Federal harmless
against claims of any persons or entities not a party to this Agreement
concerning disputes arising over the Collateral.
SECTION 5. INSURANCE, TAXES, ETC.
5.1 Borrower shall:
5.1(a) Pay promptly all taxes, levies, assessments, judgments, and
charges of any kind upon or relating to the Collateral, to Borrower's business,
and to Borrower's ownership or use of any of its assets, income, or gross
receipts;
5.1(b) At its own expense, keep and maintain all of the Collateral
fully insured against loss or damage by fire, theft, explosion and other risks
in such amounts, with such companies, under such policies and in such form as
shall be satisfactory to Standard Federal, which policies shall expressly
provide that loss thereunder shall be payable to Standard Federal as its
interest may appear (and Standard Federal shall have a security interest in the
proceeds of such insurance. Prior to the occurrence of an Event of Default,
any proceeds of insurance may be used, at Borrower's option, to repair or
replace the property damaged or applied upon the Liabilities. After the
occurrence of an Event of Default, all insurance proceeds shall be delivered to
Standard Federal, who may apply any such proceeds which may be received by it
toward payment
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<PAGE> 6
of Borrower's Liabilities, whether or not due, in such order of application as
Standard Federal may determine; and
5.1(c) Maintain at its own expense public liability and property
damage insurance in such amounts, with such companies, under such policies and
in such form as shall be satisfactory to Standard Federal, and, upon Standard
Federal's request, shall furnish Standard Federal with such policies and
evidence of payment of premiums thereon.
5.2 If Borrower at any time hereafter should fail to obtain or
maintain any of the policies required above or pay any premium in whole or in
part relating thereto, or shall fail to pay any such tax, assessment, levy, or
charge or to discharge any such lien, claim, or encumbrance, then Standard
Federal, without waiving or releasing any obligation or default of Borrower
hereunder, may at any time hereafter (but shall be under no obligation to do
so) make such payment or obtain such discharge or obtain and maintain such
policies of insurance and pay such premiums, and take such action with respect
thereto as Standard Federal deems advisable. All sums so disbursed by Standard
Federal, including reasonable attorney fees, court costs, expenses, and other
charges relating thereto, shall be part of Borrower's Liabilities, secured
hereby, and payable upon demand together with interest at the highest rate
payable in connection with any of the Liabilities from the date when advanced
until paid.
SECTION 6. SALE, COLLECTIONS, ETC.
6.1 If Accounts are Collateral hereunder, Standard Federal
authorizes and permits Borrower to collect Accounts from debtors. This
privilege may be terminated by Standard Federal at any time after the
occurrence of an Event of Default hereunder, whereupon Standard Federal shall
be vested with full title to the Accounts, and Standard Federal thereupon shall
be entitled to and have all of the ownership, title, rights, securities and
guarantees of Borrower in respect thereto, and in respect to the property
evidenced thereby, including the right of stoppage in transit, and Standard
Federal may notify any debtor or debtors of the assignment of Accounts and
collect the same. All Account debtors of the Borrower shall be entitled to
rely upon notice from Standard Federal that an Event of Default has occurred
hereunder and shall have no duty of inquiry as to the accuracy thereof or any
other obligation with respect thereto. The Borrower hereby fully and forever
releases all such Account debtors from any and all claims or liabilities which
the Borrower may claim to arise as a result of an Account debtor relying upon
and honoring a notice from Standard Federal that an Event of Default has
occurred and that all payments on Accounts are thereafter to be collected by
Standard Federal. Thereafter Borrower will receive all payments on Account as
agent of and for Standard Federal and will transmit to Standard Federal, on the
day of receipt thereof, all original checks, drafts,
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<PAGE> 7
acceptances, notes and other evidence of payment received in payment of or on
account of Accounts, including all cash moneys similarly received by Borrower.
Until such delivery, Borrower shall keep all such remittances separate and
apart from Borrower's own funds, capable of identification as the property of
Standard Federal, and shall hold the same in trust for Standard Federal. All
items or accounts which are delivered by Borrower to Standard Federal on
account of partial or full payment or otherwise as proceeds of any of the
Collateral shall be deposited to the credit of a deposit account (herein called
the "Collateral Deposit Account") of Borrower with Standard Federal, as
security for payment of the Liabilities. Borrower shall have no right to
withdraw any funds deposited in the Collateral Deposit Account. Standard
Federal may from time to time, at its discretion, and shall upon request of
Borrower made not more than once in a week, apply all or any of the then
balance, representing collected funds in the Collateral Deposit Account, toward
payment of the Liabilities, whether or not then due, in such order of
application as Standard Federal may determine, and Standard Federal may, from
time to time, in its discretion, release all or any of such balance to
Borrower. Borrower, if in default in the performance of any of the provisions
of this Agreement, upon demand, will open all mail only in the presence of a
representative of Standard Federal, who may take therefrom any remittance on
Accounts in which Standard Federal shall have a security interest. Standard
Federal or its representatives is authorized to endorse, in the name of
Borrower, any item howsoever received by Standard Federal, representing any
payment on or other proceeds of any of the Collateral, and may endorse or sign
the name of Borrower to Accounts, invoices, assignments, financing statements,
notices to debtors, bills of lading, storage receipts, or other instruments or
documents in respect to Accounts or the property covered thereby requested by
Standard Federal. Borrower will promptly give Standard Federal copies of all
Accounts, to be accompanied by such information and by such documents or copies
thereof as Standard Federal may require. Borrower will maintain such records
with respect to Accounts and the conduct and operation of its business as
Standard Federal may request, and will furnish Standard Federal all information
with respect to Accounts and the conduct and operation of its business,
including balance sheets, operating statements and other financial information,
as Standard Federal may request.
6.2 If Inventory is Collateral hereunder, until such time as
Standard Federal shall notify Borrower of the revocation of such power and
authority, which notice may not be given unless and until an Event of Default
shall have occurred hereunder, Borrower (a) may only in the ordinary course of
its business, at its own expense, sell, lease or furnish under contracts of
service any of the inventory normally held by Borrower for such purpose; (b)
may use and consume any raw materials, work in process or materials, the use
and consumption of which is necessary in order to carry on Borrower's business;
and (c) will at its own expense, endeavor to
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<PAGE> 8
collect, as and when due, all accounts due with respect to any of the
Collateral, including the taking of such action with respect to such collection
as Standard Federal may reasonably request or, in the absence of such request,
as Borrower may deem advisable. A sale in the ordinary course of business does
not include a transfer in partial or total satisfaction of a debt.
SECTION 7. INFORMATION.
7.1 Borrower shall permit Standard Federal or its agents upon
reasonable request to have access to, and to inspect, all the Collateral (and
Borrower's other assets, if any) and may from time to time verify Accounts,
inspect, check, make copies of, or extracts from the books, records, and files
of Borrower, and Borrower will make same available at any time for such
purposes. In addition, Borrower shall promptly supply Standard Federal with
financial and such other information concerning its affairs and assets as
Standard Federal may request from time to time.
SECTION 8. DEFAULT AND REMEDIES UPON DEFAULT.
8.1 The occurrence of any of the following shall constitute an
Event of Default hereunder: (a) If the Borrower shall fail to pay when due
any of the Liabilities; (b) If any warranty or representation made by or for
the Borrower or if any financial data or any other information now or hereafter
furnished to Standard Federal by or on behalf of the Borrower shall prove to be
false, inaccurate or misleading in any material respect; (c) If an event of
default shall occur under any promissory note secured hereby or if the Borrower
shall fail to perform any obligation or covenant hereunder, or shall fail to
comply with any of the provisions of any loan agreement or other agreement with
Standard Federal, (d) If the Borrower or any other party liable on any of the
Liabilities: (i) shall voluntarily suspend transaction of its business, (ii)
shall make a general assignment for the benefit of creditors, (iii) shall file
a voluntary petition in bankruptcy or for a reorganization to effect a plan or
other arrangement with creditors, or shall file an answer to a creditor's
petition or other petition for relief in bankruptcy or for a reorganization
which answer admits the material allegations thereof, or if any order for
relief shall be entered by any court of bankruptcy jurisdiction with respect to
it or shall have instituted against it bankruptcy, reorganization or
liquidation proceedings which remain undismissed for 60 days, (iv) shall have
entered against it any order by any court approving a plan of reorganization or
any other plan or arrangement with creditors, (v) shall apply for or permit the
appointment of a receiver, trustee or custodian for any substantial portion of
its assets, or (vi) shall become unable to meet its debts as they mature or
insolvent; (e) If a judgment shall be entered against the Borrower which is
not insured against or satisfied or appealed from and bonded within the time or
times limited by applicable rules of procedure for appeal as of right or
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<PAGE> 9
if a writ of attachment or garnishment shall be issued and levied on any of the
Deposit Account(s); (f) If the Borrower shall dissolve or shall merge or
consolidate with any other entity.
8.2 Upon the occurrence of any Event of Default, any and all of
the Liabilities may (notwithstanding any provisions thereof and unless
otherwise provided in any loan agreement executed in conjunction herewith), at
the option of Standard Federal, and without demand or notice of any kind, be
declared and thereupon shall immediately become due and payable and Standard
Federal may exercise from time to time any rights and remedies including the
right to immediate possession of the Collateral available to it under
applicable law. Standard Federal may directly contact third parties and
enforce against them all rights which arise with respect to the Collateral and
to which Borrower or Standard Federal would be entitled. Standard Federal
shall have the right to hold any property then in, upon or in any way
affiliated to said Collateral at the time of repossession even though not
covered by this Security Agreement until return is demanded in writing by the
Borrower. Borrower agrees, in case of Default, to assemble at its expense all
the Collateral at a convenient place acceptable to Standard Federal and to pay
all costs of Standard Federal of collection of the Liabilities, and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses,
including participation in Bankruptcy proceedings, and expense of locating the
Collateral and expenses of any repairs to any realty or other property to which
any of the Collateral may be affixed or be a part. If any notification of
intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if sent
at least seven (7) days before such disposition, postage pre-paid, addressed to
the Borrower either at the address shown above or at any other address of the
Borrower appearing on the records of Standard Federal. Borrower acknowledges
that Standard Federal may be unable to effect a public sale of all or any
portion of the Collateral because of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral and,
therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. Borrower consents to any such
private sale so made even though at places and upon terms less favorable than
if the Collateral were sold at public sale. Borrower waives the right to jury
trial in any proceeding instituted with respect to the Collateral. Out of the
net proceeds from sale or disposition of the Collateral, Standard Federal shall
retain all Indebtedness then owing to it and the actual cost of collection
(including reasonable attorney fees) and shall tender any excess to Borrower or
its successors or assigns. If the Collateral shall be insufficient to pay the
entire Indebtedness, Borrower shall pay to Standard Federal the resulting
deficiency upon demand. Borrower expressly waives any and all claims of any
nature, kind or description which it has or may hereafter have against Standard
Federal or its representatives, by reason of
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<PAGE> 10
taking, selling or collecting any portion of the Collateral. Borrower consents
to releases of the Collateral at any time (including prior to default) and to
sales of the Collateral in groups, parcels or portions, or as an entirety, as
Standard Federal shall deem appropriate. Borrower expressly absolves Standard
Federal from any loss or decline in market value of any Collateral by reason of
delay in the enforcement or assertion or nonenforcement of any rights or
remedies under this Agreement.
8.3 Borrower agrees that Standard Federal shall, in the event of
any default, have the right to peacefully retake any of the collateral.
Borrower waives any right it may have in such instance to a judicial hearing
prior to such retaking.
SECTION 9. GENERAL.
9.1 Time shall be deemed of the very essence of this Agreement.
Except as otherwise defined in this Agreement, all terms in this Agreement
shall have the meanings provided by the Michigan Uniform Commercial Code.
Standard Federal shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if it takes such
action for that purpose as Borrower requests in writing, but failure of
Standard Federal to comply with any such request shall not of itself be deemed
a failure to exercise reasonable care, and failure of Standard Federal to
preserve or protect any rights with respect to such Collateral against any
prior parties or to do any act with respect to the preservation of such
Collateral not so requested by Borrower shall not be deemed a failure to
exercise reasonable care in the custody and preservation of such Collateral.
9.2 Any delay on the part of Standard Federal in exercising any
power, privilege or right hereunder, or under any other instrument executed by
Borrower to Standard Federal in connection herewith shall not operate as a
waiver thereof, and no single or partial exercise thereof, or the exercise of
any other power, privilege or right shall preclude other or further exercise
thereof, or the exercise of any other power, privilege or right. The waiver of
Standard Federal of any default by Borrower shall not constitute a waiver of
any subsequent defaults, but shall be restricted to the default so waived. All
rights, remedies and powers of Standard Federal hereunder are irrevocable and
cumulative, and not alternative or exclusive, and shall be in addition to all
rights, remedies, and powers given hereunder or in or by any other instruments,
or by the Michigan Uniform Commercial Code, or any laws now existing or
hereafter enacted.
9.3 This Agreement has been delivered in Michigan and shall be
construed in accordance with the laws of the State of Michigan. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be
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<PAGE> 11
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement. The rights and privileges of Standard Federal hereunder shall
inure to the benefit of its successors and assigns, and this Agreement shall be
binding on all heirs, personal representatives, assigns and successors of
Borrower. Borrower hereby expressly authorizes and appoints Standard Federal
to act as its attorney-in-fact for the sole purpose of executing any and all
financing statements or other documents deemed necessary to perfect the
security interest herein contemplated.
9.4 The Borrower acknowledges that this is the entire Agreement
between the parties except to the extent that writings signed by the party to
be charged are specifically incorporated herein by reference either in this
Agreement or in such writings, and acknowledges receipt of a true and complete
copy of this Agreement.
9.5 WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN), OR ACTION OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY
WAY AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY
CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED
INSTRUMENT OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK
TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL
HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
SECTION 10. ADDITIONAL PROVISIONS.
10.1 The following constitutes all other liens and security
interests in the Collateral as referred to in Section 4.1(a) above:
None
10.2 The following is a complete description of all financing
statements on file covering the Collateral as referred to in Section 4.1(a)
above:
None
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IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Security Agreement to be executed as of the day and year first written above.
STANDARD FEDERAL BANK, a federal BORROWER:
savings bank
2600 West Big Beaver Road M.E.G. Equipment Sales of
Troy, Michigan 48084 Florida, Inc., a Florida
corporation
By: By:
------------------------------- -------------------------------
E. James Zabinski
Its: Its: Treasurer
--------------------------- ----------------------
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<PAGE> 1
EXHIBIT 10.47
FIFTH AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE
AND ASSIGNMENT OF LEASE AND RENTALS
(Secures Future Advances)
Maximum Indebtedness not to Exceed $12,800,000.00
THIS AMENDMENT TO OPEN-END COMMERCIAL MORTGAGE AND ASSIGNMENT OF
LEASES AND RENTALS, is made and entered into this 22nd day of June, 1995, by
and between Standard Federal Bank, a federal savings bank, of 2600 West Big
Beaver Road, Troy, Michigan 48084 ("Mortgagee"), and Galion Solid Waste
Equipment, Inc., a Michigan corporation of 6200 Elmridge, Sterling Heights,
Michigan 48318 ("Mortgagor").
WITNESSETH:
WHEREAS, on June 29, 1993, in order to secure a promissory note dated
June 29, 1993 by Mortgagor in favor of Mortgagee, Mortgagor granted to
Mortgagee an Open-End Commercial Mortgage and Assignment of Lease and Rentals
(the "Mortgage") on certain real property located in the City of Galion, County
of Crawford and State of Ohio, which real property is more particularly
described in the attached Exhibit A; and which Mortgage was recorded on July
13, 1993, in Book 469, Page 631, Crawford County Recorder, and
WHEREAS, the Mortgage was amended by an Amendment to Open-End
Commercial Mortgage and Assignment of Lease and Rentals, dated September 15,
1994, recorded on October 4, 1994, in Book 487, Page 428, Crawford County
Recorder (the "First Amendment"), and
WHEREAS, the Mortgage was further amended by a Second Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated
February 6, 1995, recorded on February 23, 1995, in Book 491, Page 630,
Crawford County Recorder, and
WHEREAS, the Mortgage was further amended by a Third Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated
February 16, 1995, recorded on March 13, 1995, in Book 492, Page 98, Crawford
County Recorder (the "Third Amendment"), and
WHEREAS, the Mortgage was further amended by a Fourth Amendment to
Open-End Commercial Mortgage and Assignment of Lease and Rentals, dated May 5,
1995, recorded on May 17, 1995, in Book 494, Page 440, Crawford County Recorder
(the "Fourth Amendment"), and
WHEREAS, the parties hereto desire to further amend the Mortgage in
the manner hereinafter set forth.
NOW, THEREFORE, in consideration of One and No/100 Dollar ($1.00) and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
<PAGE> 2
1. The Mortgage is hereby amended to secure a Third Amended and
Restated Promissory Note (Line of Credit) from the Mortgagor to Mortgagee, of
even date herewith, in the principal amount of $10,000,000.00 (the "Note"),
whereby the line of credit evidenced by the Promissory Note (Line of Credit)
secured by the Mortgage under the provisions of the First Amendment, the Third
Amendment and the Fourth Amendment has been restated and increased, such Note
identified as being secured by the Mortgage by statements thereon, including
the payment of principal and interest of such indebtedness according to the
terms of the Note, and all other amounts payable by Mortgagor thereunder, and
any and all extensions and renewals thereof, however evidenced. The Note has
been executed pursuant to a Third Amendment to Loan Agreement of even date
herewith by and between the Mortgagor and the Mortgagee (the "Loan Agreement").
The indebtedness secured by the Mortgage shall hereafter be deemed to be the
indebtedness and obligations evidenced by the Note and the Loan Agreement, in
the principal amount of $10,000,000.00 as well as a Promissory Note (Term Loan)
from the Mortgagor to Mortgagee, dated September 15, 1994, in the original
principal amount of $2,000,000.00, which note is also identified as being
secured by the Mortgage by a statement thereon, and two Promissory Notes (Line
of Credit) evidencing a line of credit with a total credit limit in the
principal amount of $800,000.00, which notes are also identified as being
secured by the Mortgage by statements thereon, such that the total original
principal amount of the indebtedness secured by the Mortgage is now
$12,800,000.00.
2. In all other respects, the Mortgage is hereby ratified and
confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
WITNESSES:
Galion Solid Waste Equipment, Inc.,
a Michigan corporation
By:
- -------------------------- ----------------------------------------
E. James Zabinski
Its: Treasurer
- -------------------------- ------------------------------
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<PAGE> 3
Standard Federal Bank, a federal
savings bank
By:
- -------------------------- ----------------------------------------
Its:
- -------------------------- ----------------------------------
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this _____ day of
_____________________, 1995, by E. James Zabinski, who is the Treasurer of
Galion Solid Waste Equipment, Inc., a Michigan corporation, on behalf of the
corporation.
_______________________________________
Notary Public
_________________ County, Michigan
My Commission Expires:_________________
STATE OF MICHIGAN )
) ss
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 1995, by _______________________________, a
________________________________ of Standard Federal Bank, a federal savings
bank, on behalf of the Bank.
_______________________________________
Notary Public
_________________ County, Michigan
My Commission Expires:_________________
DRAFTED BY: AFTER RECORDING RETURN TO:
Daniel C. Watson Commercial Loan Department
Standard Federal Bank Standard Federal Bank
2600 West Big Beaver Road 2600 West Big Beaver Road
Troy, Michigan 48084 Troy, Michigan 48084
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<PAGE> 1
EXHIBIT 10.48
CERTIFICATION OF RESOLUTION OF CORPORATION
AUTHORITY TO BORROW AND PLEDGE COLLATERAL
I hereby certify that I am the duly elected and qualified Treasurer and
keeper of the records and corporate seal of M.E.G. Equipment Sales of Florida,
Inc., a Florida corporation (the "Corporation"), and that the following is a
true and complete copy of a resolution duly adopted at a meeting of the Board
of Directors of the Corporation, held on June 22, 1995 in accordance with law,
and the by-laws of the Corporation, and that such resolution is still in full
force and effect and shall remain in full force and effect until Standard
Federal Bank is notified, in writing, as hereinafter
provided.
"RESOLVED, That the persons whose names, titles and signatures appear
below, all of whom are presently officers of this corporation ("Officer(s)"),
or any one of them, are hereby authorized for and on behalf of this corporation
to negotiate and procure loans and other financial accommodations from or
assume indebtedness to Standard Federal Bank, a federal savings bank ("Standard
Federal"), from time to time as they may deem necessary, to grant mortgages
upon and security interests in and to pledge to Standard Federal at any time
the receivables, stocks, bonds, other personal property, life insurance, or any
real property of this corporation as security for any such loans, financial
accommodations or assumptions of indebtedness, to discount with Standard
Federal bills receivable and any other paper held by this corporation without
limit as to amount and to sign all notes and other evidences of such loans,
financial accommodations or assumptions of indebtedness, all instruments of
pledge, assignment or lien, and to endorse and transfer all paper discounted.
"RESOLVED FURTHER, that Standard Federal is hereby authorized and directed
to pay the proceeds of any such loan, financial accommodation, assumption of
indebtedness or discount as directed by the Officers signing such instruments,
whether or not payable to the order of any Officer so signing, and whether or
not such proceeds are deposited to the individual credit of the Officers so
signing, or to the individual credit of any of the other Officers.
"RESOLVED FURTHER, Standard Federal shall be fully protected in
relying on a certification of these resolutions by an officer of this
corporation, and shall be indemnified for any claims, expenses, or loss
resulting from the honoring of any signature hereby certified, or refusing to
honor any signature not so certified. Notwithstanding any modification or
termination of the power of any Officer or other person to represent the
corporation, and notwithstanding any other notice thereof Standard Federal may
receive, these resolutions shall continue in force and bind this corporation or
its successors, and Standard Federal may recognize the present Officers of this
corporation as set forth below, as authorized to act for it hereunder, until
Standard Federal receives
<PAGE> 2
notice to the contrary either by first class mail addressed to: Standard
Federal Bank, Commercial Loan Department, 2600 West Big Beaver Road, Troy,
Michigan 48084, or by actual delivery to Standard Federal Bank, Commercial Loan
Department. Receipt of such notice shall not affect any action taken by
Standard Federal prior thereto.
TITLE NAME SIGNATURE
President
--------------------- ---------------------
Vice President
--------------------- ---------------------
Secretary
--------------------- ---------------------
Treasurer E. James Zabinski
--------------------- ---------------------
Chairman of
the Board
- ----------- --------------------- ---------------------
I further certify that the above resolutions contain the titles, names and
genuine signatures of the present Officers of the Corporation authorized by the
above resolution.
IN WITNESS WHEREOF, I E. James Zabinski have hereunto subscribed my name
as Treasurer and have affixed the seal of this Corporation on June 22, 1995.
CORPORATE
SEAL
----------------------
(Secretary or Other
Certifying Officer)
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<PAGE> 1
EXHIBIT 10.49
CERTIFICATION OF RESOLUTION OF CORPORATION
AUTHORITY TO BORROW AND PLEDGE COLLATERAL
I hereby certify that I am the duly elected and qualified
Treasurer and keeper of the records and corporate seal of Epco
Manufacturing, Inc., a New York corporation (the "Corporation"), and that the
following is a true and complete copy of a resolution duly adopted at a
meeting of the Board of Directors of the Corporation, held on July 18,
1995 in accordance with law, and the by-laws of the Corporation, and that
such resolution is still in full force and effect and shall remain in full
force and effect until Standard Federal Bank is notified, in writing, as
hereinafter provided.
"RESOLVED, That the persons whose names, titles and signatures appear
below, all of whom are presently officers of this corporation ("Officer(s)"),
or any one of them, are hereby authorized for and on behalf of this
corporation to negotiate and procure loans and other financial
accommodations from or assume indebtedness to Standard Federal Bank, a
federal savings bank ("Standard Federal"), from time to time as they may
deem necessary, to grant mortgages upon and security interests in and to
pledge to Standard Federal at any time the receivables, stocks, bonds, other
personal property, life insurance, or any real property of this
corporation as security for any such loans, financial accommodations
or assumptions of indebtedness, to discount with Standard Federal bills
receivable and any other paper held by this corporation without limit as to
amount and to sign all notes and other evidences of such loans, financial
accommodations or assumptions of indebtedness, all instruments of pledge,
assignment or lien, and to endorse and transfer all paper discounted.
"RESOLVED FURTHER, that Standard Federal is hereby authorized and
directed to pay the proceeds of any such loan, financial
accommodation, assumption of indebtedness or discount as directed by the
Officers signing such instruments, whether or not payable to the order of
any Officer so signing, and whether or not such proceeds are deposited to the
individual credit of the Officers so signing, or to the individual credit of
any of the other Officers.
"RESOLVED FURTHER, Standard Federal shall be fully protected in relying
on a certification of these resolutions by an officer of this corporation,
and shall be indemnified for any claims, expenses, or loss resulting from
the honoring of any signature hereby certified, or refusing to honor any
signature not so certified. Notwithstanding any modification or termination
of the power of any Officer or other person to represent the corporation,
and notwithstanding any other notice thereof Standard Federal may receive,
these resolutions shall continue in force and bind this corporation or its
successors, and Standard Federal may recognize the present Officers of this
corporation as set forth below, as authorized to act for it hereunder,
until Standard Federal receives
<PAGE> 2
notice to the contrary either by first class mail addressed to: Standard
Federal Bank, Commercial Loan Department, 2600 West Big Beaver Road, Troy,
Michigan 48084, or by actual delivery to Standard Federal Bank, Commercial
Loan Department. Receipt of such notice shall not affect any action taken by
Standard Federal prior thereto.
TITLE NAME SIGNATURE
President
--------------------- ---------------------
Vice President
--------------------- ---------------------
Secretary
--------------------- ---------------------
Treasurer E. James Zabinski
--------------------- ---------------------
Chairman of
the Board
- ----------- ---------------------- ---------------------
I further certify that the above resolutions contain the titles,
names and genuine signatures of the present Officers of the Corporation
authorized by the above resolution.
IN WITNESS WHEREOF, I E. James Zabinski have hereunto subscribed my
name as Treasurer and have affixed the seal of this Corporation on
July 18, 1995.
CORPORATE
SEAL
----------------------
(Secretary or Other
Certifying Officer)
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<PAGE> 1
EXHIBIT 10.50
Note No. 0250193871
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit with Term Provisions) [X] New
(Second Line of Credit) [ ] Renewal
$426,000.00 Troy, Michigan
Due Date: January 1, 2003 Dated: July 18, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Four Hundred
Twenty Six Thousand and 00/100 Dollars ($426,000.00) or such lesser amount as
may from time to time be outstanding by reason of having been advanced
hereunder in accordance with the provisions of a Loan Agreement, dated
September 15, 1994, as amended by a First Amendment to Loan Agreement, dated
February 16, 1995 and by a Second Amendment to Loan Agreement of even date
herewith (the "Loan Agreement"), plus interest as hereinafter provided on all
amounts from time to time outstanding hereunder, all in lawful money of the
United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest Rate
shall be determined by reference to the "Wall Street Journal Prime Rate" and
not by reference to the actual rate of interest charged by any particular bank
to any particular borrower or borrowers and shall automatically increase or
decrease when and to the extent that the Wall Street Journal Prime Rate shall
have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the Borrower
to Standard Federal arising as a result of advances or other credit which may
be made under this Note from time to time after January 1, 1996 to and until
July 1, 1996 (the "Term Date"). Any and all indebtedness may be repaid by the
Borrower in whole or in part from time to time prior to the Term Date.
Standard Federal shall, from time to time prior to the Term Date, make advances
to Borrower hereunder upon request therefor by Borrower, made in accordance
with the requirements of the Loan Agreement, provided that upon giving effect
to such advance no Event of Default (as hereinafter defined) and no event which
with notice and/or the passage of time would become an Event of Default shall
exist at the time the advance is to be made and that all representations and
warranties of Borrower theretofore made are true and correct and that Standard
Federal shall not have previously or concurrently declared all amounts owing
hereunder to be immediately due and payable and that the amount requested shall
not cause the total amount outstanding hereunder to exceed the First Credit
Limit as defined in the Loan Agreement. The principal amount of indebtedness
owing pursuant to this Note shall change from time to time, decreasing in an
amount equal to any and all payments of principal made by the Borrower prior to
the Due Date and increasing by an amount equal to any and all advances made by
Standard Federal to the Borrower pursuant to the terms hereof, and the books
and records of Standard Federal shall be conclusive evidence of the amount of
principal and interest owing hereunder at any time. All payments made
hereunder shall be applied first against costs and expenses required to be paid
hereunder, then against accrued interest to the extent thereof and the balance
shall be applied against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month beginning
on February 1, 1996 through and including the Term Date. From and after the
Term Date, Standard Federal shall make no further advances hereunder and the
outstanding principal balance hereunder as of the Term Date, with interest,
shall be repaid in consecutive monthly payments of principal, each in the
amount determined by dividing the outstanding principal balance hereunder as of
the Term Date by 78, plus interest accrued to the due date of each such
payment, commencing on August 1, 1996 and continuing on the same day of each
consecutive month thereafter and a final payment on the Due Date in an amount
equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or hereto,
shall be construed or so operate as to require the Borrower to pay, or charge,
interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest, or other charges, charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by applicable law, then
any and all such excess shall be and the same is hereby waived by Standard
Federal, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Standard
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized, validly
existing and in good standing and is duly authorized to make and perform this
Note, which constitutes its valid and binding legal obligation enforceable in
accordance with its terms. All financial data furnished to Standard Federal in
connection with this Note fairly present the financial condition of the
Borrower and its subsidiaries, if any, as of the dates thereof and there has
been no material adverse change in the condition (financial or otherwise) of
the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any notice
and the expiration of any grace, cure or notice period provided for in the Loan
Agreement, if any, and if no such notice or grace, cure or notice period is so
provided for in the Loan Agreement, then immediately, Standard Federal may
declare the entire unpaid and outstanding principal balance hereunder and all
accrued interest to be due and payable in full forthwith, without presentment,
demand or notice of any kind and may exercise any one or more of the rights and
remedies provided herein or in the Loan Agreement or in any mortgage, guaranty,
security agreement or other document relating hereto or by applicable law. The
remedies provided for hereunder are cumulative to the remedies for collection
of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of this
Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement and is secured by a
Security Agreement, dated September 15, 1994, and by a Security Agreement of
even date herewith. Reference is hereby made to such documents for additional
terms relating to the transaction giving rise to this Note, the security given
for this Note and additional terms and conditions under which this Note
matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------------
--------------------------------
Taxpayer Identification Number
EPCO MANUFACTURING, INC., a New York
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
------------------------
--------------------------------
Taxpayer Identification Number
-6-
<PAGE> 7
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.51
Note No. 0250193863
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit with Term Provisions) [X] New
(First Line of Credit) [ ] Renewal
$426,000.00 Troy , Michigan
Due Date: July 1, 2002 Dated: July 18, 1995
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Four Hundred
Twenty Six Thousand and 00/100 Dollars ($426,000.00) or such lesser amount as
may from time to time be outstanding by reason of having been advanced
hereunder in accordance with the provisions of a Loan Agreement, dated
September 15, 1994, as amended by a First Amendment to Loan Agreement, dated
February 16, 1995 and by a Second Amendment to Loan Agreement of even date
herewith (the "Loan Agreement"), plus interest as hereinafter provided on all
amounts from time to time outstanding hereunder, all in lawful money of the
United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime
Rate" and not by reference to the actual rate of interest charged by any
particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall
Street Journal Prime Rate shall have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other
credit which may be made under this Note from time to time to and until
January 1, 1996 (the "Term Date"). Any and all indebtedness may be repaid
by the Borrower in whole or in part from time to time prior to the Term
Date. Standard Federal shall, from time to time prior to the Term Date,
make advances to Borrower hereunder upon request therefor by Borrower,
made in accordance with the requirements of the Loan Agreement, provided
that upon giving effect to such advance no Event of Default (as
hereinafter defined) and no event which with notice and/or the passage of
time would become an Event of Default shall exist at the time the advance
is to be made and that all representations and warranties of Borrower
theretofore made are true and correct and that Standard Federal shall not
have previously or concurrently declared all amounts owing hereunder to be
immediately due and payable and that the amount requested shall not cause
the total amount outstanding hereunder to exceed the First Credit Limit as
defined in the Loan Agreement. The principal amount of indebtedness owing
pursuant to this Note shall change from time to time, decreasing in an
amount equal to any and all payments of principal made by the Borrower
prior to the Due Date and increasing by an amount equal to any and all
advances made by Standard Federal to the Borrower pursuant to the terms
hereof, and the books and records of Standard Federal shall be conclusive
evidence of the amount of principal and interest owing hereunder at any
time. All payments made hereunder shall be applied first against costs
and expenses required to be paid hereunder, then against accrued interest
to the extent thereof and the balance shall be applied against the
outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month
beginning on August 1, 1995 through and including the Term Date. From
and after the Term Date, Standard Federal shall make no further advances
hereunder and the outstanding principal balance hereunder as of the Term
Date, with interest, shall be repaid in consecutive monthly payments of
principal, each in the amount determined by dividing the outstanding
principal balance hereunder as of the Term Date by 78, plus interest
accrued to the due date of each such payment, commencing on February 1,
1996 and continuing on the same day of each consecutive month thereafter
and a final payment on the Due Date in an amount equal to the then unpaid
principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or hereto,
shall be construed or so operate as to require the Borrower to pay, or charge,
interest at a greater rate than the maximum allowed by the applicable law
relating to this Note. Should any interest, or other charges, charged, paid or
payable by the Borrower in connection with this Note, or any other document
delivered in connection herewith, result in the charging, compensation, payment
or earning of interest in excess of the maximum allowed by applicable law, then
any and all such excess shall be and the same is hereby waived by Standard
Federal, and any and all such excess paid shall be automatically credited
against and in reduction of the principal due under this Note. If Standard
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized, validly
existing and in good standing and is duly authorized to make and perform this
Note, which constitutes its valid and binding legal obligation enforceable in
accordance with its terms. All financial data furnished to Standard Federal in
connection with this Note fairly present the financial condition of the
Borrower and its subsidiaries, if any, as of the dates thereof and there has
been no material adverse change in the condition (financial or otherwise) of
the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any notice
and the expiration of any grace, cure or notice period provided for in the Loan
Agreement, if any, and if no such notice or grace, cure or notice period is so
provided for in the Loan Agreement, then immediately, Standard Federal may
declare the entire unpaid and outstanding principal balance hereunder and all
accrued interest to be due and payable in full forthwith, without presentment,
demand or notice of any kind and may exercise any one or more of the rights and
remedies provided herein or in the Loan Agreement or in any mortgage, guaranty,
security agreement or other document relating hereto or by applicable law. The
remedies provided for hereunder are cumulative to the remedies for collection
of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of this
Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement and is secured by a
Security Agreement, dated September 15, 1994, and by a Security Agreement of
even date herewith. Reference is hereby made to such documents for additional
terms relating to the transaction giving rise to this Note, the security given
for this Note and additional terms and conditions under which this Note
matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-----------------------
58-1738825
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By:
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
-------------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY TUBE,
a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC.,
a Michigan corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-------------------------
--------------------------------
Taxpayer Identification Number
EPCO MANUFACTURING, INC., a New York
corporation
By:
- -------------------------- -----------------------------
E. James Zabinski
Its: Treasurer
-------------------------
--------------------------------
Taxpayer Identification Number
-6-
<PAGE> 7
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.52
Note No. 0250193855
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Term Loan)
$240,000.00 Troy, Michigan
Due Date: July 1, 2002 Dated: July 18, 1995
FOR VALUE RECEIVED, the undersigned, jointly and severally (collectively,
"Borrower"), promise to pay to the order of Standard Federal Bank, a federal
savings bank ("Standard Federal"), at its office set forth below, or at such
other place as Standard Federal may designate in writing, the principal sum of
Two Hundred Forty Thousand and 00/100 Dollars ($240,000.00), plus interest on
all amounts from time to time outstanding hereunder, as hereinafter provided,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower or borrowers and shall automatically increase
or decrease when and to the extent that the Wall Street Journal Prime Rate
shall have been increased or decreased.
<PAGE> 2
Principal and interest shall be paid in consecutive monthly payments
of principal in the amount of $ 2,857.00 each, plus interest
accrued to the due date of each payment, commencing on August 1, 1995, and
continuing on the same day of each consecutive month thereafter and a final
payment on the Due Date in an amount equal to the then unpaid principal and
accrued interest.
All payments required to be paid hereunder shall first be applied to
costs and expenses required to be paid hereunder, then to accrued interest
hereunder and the balance shall be applied against the principal. This Note
may be prepaid, in full or in part, at any time, without the payment of any
prepayment fee or penalty. All partial prepayments shall be applied against
the last accruing installment or amount due under this Note; and no prepayments
shall affect the obligation of the undersigned to continue the regular
installments hereinbefore mentioned, until the entire unpaid principal and
accrued interest has been paid in full. Borrower understands that the
installment payments of principal provided for herein are not sufficient to
fully amortize the outstanding principal balance of this Note by the Due Date
and that the final payment due on the Due Date will be a balloon payment of all
then outstanding principal and accrued interest.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard Federal shall reasonably determine that the Effective
Interest Rate (together with all other charges or payments related hereto that
may be deemed interest) stipulated under this Note is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note, with accrued
interest at the highest rate permitted to be charged by stipulation in writing
between Standard Federal and Borrower, at the option of Standard Federal, shall
immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
-2-
<PAGE> 3
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default
-3-
<PAGE> 4
hereunder, Standard Federal may hold and apply at any time its own indebtedness
or liability to Borrower in payment of any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non-payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to a Loan Agreement, dated September
15, 1994, as amended by a First Amendment to Loan Agreement, dated February 16,
1995 and by a Second Amendment to Loan Agreement of even date herewith (the
"Loan Agreement"), and is secured by a Security Agreement, dated September 15,
1994, and by a Security Agreement of even date herewith. Reference is hereby
made to such documents for additional terms relating to the transaction giving
rise to this Note, the security given for this Note and additional terms and
conditions under which this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
-4-
<PAGE> 5
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
- -------------------------- By:
-----------------------------
E. James Zabinski
Its: Treasurer
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
- -------------------------- By:
-----------------------------
Carl L. Jaworski
Its: Secretary
58-1738825
--------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
- -------------------------- By:
-----------------------------
Carl L. Jaworski
Its: Secretary
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
- -------------------------- By:
-----------------------------
E. James Zabinski
Its: Treasurer
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
- -------------------------- By:
-----------------------------
E. James Zabinski
Its: Treasurer
--------------------------------
Taxpayer Identification Number
EPCO MANUFACTURING, INC., a New York
corporation
- -------------------------- By:
-----------------------------
E. James Zabinski
Its: Treasurer
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.53
SECURITY AGREEMENT
THIS AGREEMENT made and delivered this 18th day of July, 1995, by and
between Epco Manufacturing, Inc., a New York corporation, whose
address/principal office is 6200 Elmridge, Sterling Heights, Michigan 48310
(collectively, "Borrower") and Standard Federal Bank, a federal savings bank
("Standard Federal").
WITNESSETH:
WHEREAS, the Borrower may from time to time request loans, advances or
other financial accommodations from Standard Federal and Standard Federal may,
in its discretion, honor such requests in whole or part;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Borrower and Standard Federal hereby agree as follows:
SECTION 1. GRANT OF SECURITY INTEREST.
1.1 Borrower hereby grants to Standard Federal a continuing
security interest in the property and interests in property described in
Section 2.1 below (hereinafter referred to as the "Collateral") to secure the
payment of all loans and advances including any renewals or extensions thereof
from Standard Federal to Borrower and all obligations of any and every kind and
nature heretofore, now or hereafter owing from Borrower to Standard Federal,
however incurred or evidenced, whether primary, secondary, contingent or
otherwise, whether arising under this Agreement, under any other security
agreement(s), promissory note(s), guarantee(s), mortgage(s), lease(s),
instrument(s), document(s), contract(s), letter(s) of credit or similar
agreement(s) heretofore, now or hereafter executed by Borrower and delivered to
Standard Federal, or by oral agreement or by operation of law plus all
interest, costs, expenses and reasonable attorney fees which may be made or
incurred by Standard Federal in the disbursement, administration or collection
of such obligations and in the protection, maintenance and liquidation of the
Collateral (hereinafter collectively called "Liabilities").
1.2 All statements of account rendered by Standard Federal to
Borrower relating to Borrower's Liabilities, including all statements of
principal, interest, expenses and costs owing by Borrower to Standard Federal,
shall be presumed correct and accurate and shall constitute an account stated
between Borrower and Standard Federal unless within thirty (30) days after
mailing thereof to Borrower, Borrower shall deliver to Standard Federal by
registered or certified mail addressed to Standard Federal at its principal
place of business, written objection thereto specifying the error or errors, if
any, contained in any such statement.
<PAGE> 2
1.3 This Agreement shall be and become effective when, and continue in
effect as long as, any Liabilities of Borrower to Standard Federal are
outstanding and unpaid. Borrower will not sell, assign, transfer, pledge,
alienate or otherwise dispose of or encumber any Collateral to any third party
while this Agreement is in effect without the written consent of Standard
Federal.
SECTION 2. COLLATERAL.
2.l The Collateral covered by this Agreement is all the Borrower's
property described below, which it now owns or shall hereafter acquire or
create immediately upon the acquisition or creation thereof, and includes, but
is not limited to, any items listed on any schedule or list attached hereto:
Accounts, etc. All Accounts, Chattel Paper, Documents, Instruments,
General Intangibles, including any right to any refund of taxes paid
before or after the date of this Agreement to any governmental entity.
Equipment . All Equipment including without limitation all machinery,
furnishings, furniture and vehicles, together with all accessions,
parts, attachments, accessories, tools, dies or appurtenances thereto
or intended for use in connection therewith and all substitutions,
betterments and replacements thereof and additions thereto.
Inventory, etc. All Inventory and Goods (other than Equipment),
including without limitation raw materials, work in process, finished
goods, tangible property, stock in trade, wares and merchandise held
for sale or lease or furnished or to be furnished under contracts of
service or used or consumed in a business, including goods whose sale,
lease or other disposition has given rise to any Accounts and any
Goods which may have been returned to or repossessed or stopped in
transit by the Borrower.
Proceeds. Proceeds (whether Cash Proceeds or Noncash Proceeds) of the
Collateral, including without limitation proceeds of insurance payable
by reason of loss or damage to the Collateral and of eminent domain or
condemnation awards and all products of and accessions to the
Collateral and all Deposit Accounts or other sums at any time credited
by or due from Standard Federal to Borrower and all policies and
certificates of insurance, Accounts, Chattel Paper, Documents,
Instruments, General Intangibles, Goods, Deposit Accounts, Money,
Checks, Cash Proceeds and Noncash Proceeds (whether or not the same
are Collateral or Proceeds thereof hereunder) in which Borrower has an
interest which are now or are at any time hereafter in the possession
or under the control of Standard Federal or in transit by mail or
carrier to or from Standard Federal or in possession of or under the
control of
-2-
<PAGE> 3
any third party acting on Standard Federal's behalf without regard to
whether Standard Federal received the same in pledge, for safekeeping,
as agent for collection or transmission or otherwise or whether
Standard Federal has conditionally released the same (excluding,
nevertheless, any of the foregoing assets of the Borrower which are
now or any time hereafter in possession or control of Standard Federal
under any written trust agreement wherein Standard Federal is trustee
and Borrower is trustor).
2.2 The Collateral is kept and maintained at the Borrower's
address above and at the following addresses:
__________________________________________________________
__________________________________________________________
__________________________________________________________
2.3 All records pertaining to Accounts are kept and maintained at
the Borrower's address above and at the following addresses:
__________________________________________________________
__________________________________________________________
__________________________________________________________
2.4 Borrower will give to Standard Federal prompt written notice
of any new address at which the Collateral is kept or maintained upon any
change in location of the Collateral or records pertaining to Accounts.
SECTION 3. PERFECTION OF SECURITY INTEREST.
3.1 Borrower shall execute and deliver to Standard Federal
concurrently with Borrower's execution of this Agreement and at any time or
times hereafter at the request of Standard Federal and pay the cost of filing
or recording same in all public offices deemed necessary by Standard Federal,
all financing statements, continuation financing statements, assignments,
certificates of title, applications for vehicle titles, affidavits, reports,
notices, schedules of Accounts, designations of Inventory, letters of authority
and all other documents that Standard Federal may reasonably request in form
satisfactory to Standard Federal to perfect and maintain Standard Federal's
security interests in the Collateral. In order to fully consummate all of the
transactions contemplated hereunder, Borrower shall make appropriate entries on
its books and records disclosing Standard Federal's security interests in the
Collateral.
-3-
<PAGE> 4
SECTION 4. WARRANTIES.
4.1 Borrower warrants and agrees that while any of the Liabilities
remain unperformed and unpaid:
4.1(a) Borrower is the owner of the Collateral free and clear of all liens or
security interests, except Standard Federal's security interest, and all
Chattel Paper constituting Collateral evidences a perfected security interest
in the goods covered by it free from all other liens and security interests,
and no financing statements, other than that of Standard Federal, are on file
covering the Collateral or any of it, and if Inventory is represented or
covered by documents of title, Borrower is the owner of the documents free of
all liens and security interests other than Standard Federal's security
interest and warehousemen's charges, if any, not delinquent;
4.1(b) The address of Borrower's principal office is as set forth above; the
addresses of Borrower's other places of business where Collateral and account
records are now or may in the future be located, if any, are set forth in
Sections 2.2 and 2.3 above and Borrower's business locations shall not be
changed without the prior written consent of Standard Federal; Borrower further
warrants that the Collateral, wherever located, is covered by this Agreement;
4.1(c) The Collateral will not be used, nor will Borrower permit the
Collateral to be used, for any unlawful purpose, whatever;
4.1(d) Borrower will neither change its name, form of business entity nor
address of its principal office or the office where account records are
maintained without giving written notice to Standard Federal thereof at least
ten (10) days prior to the effective date of such change, and Borrower agrees
that all documents, instruments, and agreements demanded by Standard Federal in
response to such change shall be prepared, filed, and recorded at Borrower's
expense prior to the effective date of such change;
4.1(e) Each Account, Chattel Paper and General Intangible constituting
Collateral is genuine and enforceable against the account debtor according to
its terms, and it, and the transaction out of which it arose, comply with all
applicable laws and regulations, the amount represented by Borrower to Standard
Federal as owing by each account debtor is the amount actually owing and is not
subject to setoff, credit, allowance or adjustment except any discount for
prompt payment, nor has any account debtor returned the goods or disputed his
liability, there has been no default according to the terms of any such
Collateral, and no step has been taken to foreclose the security interest it
evidences or to otherwise enforce its payment;
-4-
<PAGE> 5
4.1(f) Borrower shall at all times maintain the Collateral in first-class
condition and repair;
4.1(g) The execution and delivery of this Agreement and any instruments
evidencing Liabilities will not violate nor constitute a breach of Borrower's
Articles of Incorporation, By-Laws, Partnership Agreement, or any agreement or
restriction of any type whatsoever to which Borrower is a party or is subject;
4.1(h) All financial statements and information relating to Borrower
delivered or to be delivered by Borrower to Standard Federal are true and
correct and prepared in accordance with generally accepted accounting
principles, and there has been no material adverse change in the financial
condition of Borrower since the submission of any such financial information to
Standard Federal;
4.1(i) There are no actions or proceedings which are threatened or pending
against Borrower which might result in any material adverse change in
Borrower's financial condition or which might materially affect any of
Borrower's assets;
4.1(j) Borrower has duly filed all federal, state, and other governmental tax
returns which Borrower is required by law to file, and will continue to file
same during such time as any of the Liabilities hereunder remain owing to
Standard Federal, and all such taxes required to be paid have been paid, in
full; and
4.1(k) Borrower will indemnify and hold Standard Federal harmless against
claims of any persons or entities not a party to this Agreement concerning
disputes arising over the Collateral.
SECTION 5. INSURANCE, TAXES, ETC.
5.1 Borrower shall:
5.1(a) Pay promptly all taxes, levies, assessments, judgments, and charges of
any kind upon or relating to the Collateral, to Borrower's business, and to
Borrower's ownership or use of any of its assets, income, or gross receipts;
5.1(b) At its own expense, keep and maintain all of the Collateral fully
insured against loss or damage by fire, theft, explosion and other risks in
such amounts, with such companies, under such policies and in such form as
shall be satisfactory to Standard Federal, which policies shall expressly
provide that loss thereunder shall be payable to Standard Federal as its
interest may appear. Standard Federal shall have a security interest in the
proceeds of such insurance. Prior to the occurrence of an Event of Default,
any proceeds of insurance may be used, at Borrower's option, to repair or
replace the property damaged or applied upon the Liabilities. After the
occurrence of an Event of Default, all
-5-
<PAGE> 6
insurance proceeds shall be delivered to Standard Federal, who may apply any
such proceeds which may be received by it toward payment of Borrower's
Liabilities, whether or not due, in such order of application as Standard
Federal may determine; and
5.1(c) Maintain at its own expense public liability and property damage
insurance in such amounts, with such companies, under such policies and in such
form as shall be satisfactory to Standard Federal, and, upon Standard Federal's
request, shall furnish Standard Federal with such policies and evidence of
payment of premiums thereon.
5.2 If Borrower at any time hereafter should fail to obtain or
maintain any of the policies required above or pay any premium in whole or in
part relating thereto, or shall fail to pay any such tax, assessment, levy, or
charge or to discharge any such lien, claim, or encumbrance, then Standard
Federal, without waiving or releasing any obligation or default of Borrower
hereunder, may at any time hereafter (but shall be under no obligation to do
so) make such payment or obtain such discharge or obtain and maintain such
policies of insurance and pay such premiums, and take such action with respect
thereto as Standard Federal deems advisable. All sums so disbursed by Standard
Federal, including reasonable attorney fees, court costs, expenses, and other
charges relating thereto, shall be part of Borrower's Liabilities, secured
hereby, and payable upon demand together with interest at the highest rate
payable in connection with any of the Liabilities from the date when advanced
until paid.
SECTION 6. SALE, COLLECTIONS, ETC.
6.1 If Accounts are Collateral hereunder, Standard Federal authorizes and
permits Borrower to collect Accounts from debtors. This privilege may be
terminated by Standard Federal at any time after the occurrence of an Event of
Default hereunder, whereupon Standard Federal shall be vested with full title
to the Accounts, and Standard Federal thereupon shall be entitled to and have
all of the ownership, title, rights, securities and guarantees of Borrower in
respect thereto, and in respect to the property evidenced thereby, including
the right of stoppage in transit, and Standard Federal may notify any debtor or
debtors of the assignment of Accounts and collect the same. All Account
debtors of the Borrower shall be entitled to rely upon notice from Standard
Federal that an Event of Default has occurred hereunder and shall have no duty
of inquiry as to the accuracy thereof or any other obligation with respect
thereto. The Borrower hereby fully and forever releases all such Account
debtors from any and all claims or liabilities which the Borrower may claim to
arise as a result of an Account debtor relying upon and honoring a notice from
Standard Federal that an Event of Default has occurred and that all payments on
Accounts are thereafter to be collected by Standard Federal. Thereafter
Borrower will receive all payments on Account as agent
-6-
<PAGE> 7
of and for Standard Federal and will transmit to Standard Federal, on the day
of receipt thereof, all original checks, drafts, acceptances, notes and other
evidence of payment received in payment of or on account of Accounts, including
all cash moneys similarly received by Borrower. Until such delivery, Borrower
shall keep all such remittances separate and apart from Borrower's own funds,
capable of identification as the property of Standard Federal, and shall hold
the same in trust for Standard Federal. All items or accounts which are
delivered by Borrower to Standard Federal on account of partial or full payment
or otherwise as proceeds of any of the Collateral shall be deposited to the
credit of a deposit account (herein called the "Collateral Deposit Account") of
Borrower with Standard Federal, as security for payment of the Liabilities.
Borrower shall have no right to withdraw any funds deposited in the Collateral
Deposit Account. Standard Federal may from time to time, at its discretion,
and shall upon request of Borrower made not more than once in a week, apply all
or any of the then balance, representing collected funds in the Collateral
Deposit Account, toward payment of the Liabilities, whether or not then due, in
such order of application as Standard Federal may determine, and Standard
Federal may, from time to time, in its discretion, release all or any of such
balance to Borrower. Borrower, if in default in the performance of any of the
provisions of this Agreement, upon demand, will open all mail only in the
presence of a representative of Standard Federal, who may take therefrom any
remittance on Accounts in which Standard Federal shall have a security
interest. Standard Federal or its representatives is authorized to endorse, in
the name of Borrower, any item howsoever received by Standard Federal,
representing any payment on or other proceeds of any of the Collateral, and may
endorse or sign the name of Borrower to Accounts, invoices, assignments,
financing statements, notices to debtors, bills of lading, storage receipts, or
other instruments or documents in respect to Accounts or the property covered
thereby requested by Standard Federal. Borrower will promptly give Standard
Federal copies of all Accounts, to be accompanied by such information and by
such documents or copies thereof as Standard Federal may require. Borrower
will maintain such records with respect to Accounts and the conduct and
operation of its business as Standard Federal may request, and will furnish
Standard Federal all information with respect to Accounts and the conduct and
operation of its business, including balance sheets, operating statements and
other financial information, as Standard Federal may request.
6.2 If Inventory is Collateral hereunder, until such time as
Standard Federal shall notify Borrower of the revocation of such power and
authority, which notice may not be given unless and until an Event of Default
shall have occurred hereunder, Borrower (a) may only in the ordinary course of
its business, at its own expense, sell, lease or furnish under contracts of
service any of the inventory normally held by Borrower for such purpose; (b)
may use and consume any raw materials, work in process or materials, the
-7-
<PAGE> 8
use and consumption of which is necessary in order to carry on Borrower's
business; and (c) will at its own expense, endeavor to collect, as and when
due, all accounts due with respect to any of the Collateral, including the
taking of such action with respect to such collection as Standard Federal may
reasonably request or, in the absence of such request, as Borrower may deem
advisable. A sale in the ordinary course of business does not include a
transfer in partial or total satisfaction of a debt.
SECTION 7. INFORMATION.
7.1 Borrower shall permit Standard Federal or its agents upon
reasonable request to have access to, and to inspect, all the Collateral (and
Borrower's other assets, if any) and may from time to time verify Accounts,
inspect, check, make copies of, or extracts from the books, records, and files
of Borrower, and Borrower will make same available at any time for such
purposes. In addition, Borrower shall promptly supply Standard Federal with
financial and such other information concerning its affairs and assets as
Standard Federal may request from time to time.
SECTION 8. DEFAULT AND REMEDIES UPON DEFAULT.
8.1 The occurrence of any of the following shall constitute an
Event of Default hereunder: (a) If the Borrower shall fail to pay when due
any of the Liabilities; (b) If any warranty or representation made by or for
the Borrower or if any financial data or any other information now or hereafter
furnished to Standard Federal by or on behalf of the Borrower shall prove to be
false, inaccurate or misleading in any material respect; (c) If an event of
default shall occur under any promissory note secured hereby or if the Borrower
shall fail to perform any obligation or covenant hereunder, or shall fail to
comply with any of the provisions of any loan agreement or other agreement with
Standard Federal, (d) If the Borrower or any other party liable on any of the
Liabilities: (i) shall voluntarily suspend transaction of its business, (ii)
shall make a general assignment for the benefit of creditors, (iii) shall file
a voluntary petition in bankruptcy or for a reorganization to effect a plan or
other arrangement with creditors, or shall file an answer to a creditor's
petition or other petition for relief in bankruptcy or for a reorganization
which answer admits the material allegations thereof, or if any order for
relief shall be entered by any court of bankruptcy jurisdiction with respect to
it or shall have instituted against it bankruptcy, reorganization or
liquidation proceedings which remain undismissed for 60 days, (iv) shall have
entered against it any order by any court approving a plan of reorganization or
any other plan or arrangement with creditors, (v) shall apply for or permit the
appointment of a receiver, trustee or custodian for any substantial portion of
its assets, or (vi) shall become unable to meet its debts as they mature or
insolvent; (e) If a judgment shall be entered against the Borrower which is
not insured against
-8-
<PAGE> 9
or satisfied or appealed from and bonded within the time or times limited by
applicable rules of procedure for appeal as of right or if a writ of attachment
or garnishment shall be issued and levied on any of the Deposit Account(s); (f)
If the Borrower shall dissolve or shall merge or consolidate with any other
entity.
8.2 Upon the occurrence of any Event of Default, any and all of
the Liabilities may (notwithstanding any provisions thereof and unless
otherwise provided in any loan agreement executed in conjunction herewith), at
the option of Standard Federal, and without demand or notice of any kind, be
declared and thereupon shall immediately become due and payable and Standard
Federal may exercise from time to time any rights and remedies including the
right to immediate possession of the Collateral available to it under
applicable law. Standard Federal may directly contact third parties and
enforce against them all rights which arise with respect to the Collateral and
to which Borrower or Standard Federal would be entitled. Standard Federal
shall have the right to hold any property then in, upon or in any way
affiliated to said Collateral at the time of repossession even though not
covered by this Security Agreement until return is demanded in writing by the
Borrower. Borrower agrees, in case of Default, to assemble at its expense all
the Collateral at a convenient place acceptable to Standard Federal and to pay
all costs of Standard Federal of collection of the Liabilities, and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses,
including participation in Bankruptcy proceedings, and expense of locating the
Collateral and expenses of any repairs to any realty or other property to which
any of the Collateral may be affixed or be a part. If any notification of
intended disposition of any of the Collateral is required by law, such
notification, if mailed, shall be deemed reasonably and properly given if sent
at least seven (7) days before such disposition, postage pre-paid, addressed to
the Borrower either at the address shown above or at any other address of the
Borrower appearing on the records of Standard Federal. Borrower acknowledges
that Standard Federal may be unable to effect a public sale of all or any
portion of the Collateral because of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral and,
therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. Borrower consents to any such
private sale so made even though at places and upon terms less favorable than
if the Collateral were sold at public sale. Borrower waives the right to jury
trial in any proceeding instituted with respect to the Collateral. Out of the
net proceeds from sale or disposition of the Collateral, Standard Federal shall
retain all Indebtedness then owing to it and the actual cost of collection
(including reasonable attorney fees) and shall tender any excess to Borrower or
its successors or assigns. If the Collateral shall be insufficient to pay the
entire Indebtedness, Borrower shall pay to Standard Federal the resulting
deficiency upon demand. Borrower expressly waives any and all claims of any
-9-
<PAGE> 10
nature, kind or description which it has or may hereafter have against Standard
Federal or its representatives, by reason of taking, selling or collecting any
portion of the Collateral. Borrower consents to releases of the Collateral at
any time (including prior to default) and to sales of the Collateral in groups,
parcels or portions, or as an entirety, as Standard Federal shall deem
appropriate. Borrower expressly absolves Standard Federal from any loss or
decline in market value of any Collateral by reason of delay in the enforcement
or assertion or nonenforcement of any rights or remedies under this Agreement.
8.3 Borrower agrees that Standard Federal shall, in the event of
any default, have the right to peacefully retake any of the collateral.
Borrower waives any right it may have in such instance to a judicial hearing
prior to such retaking.
SECTION 9. GENERAL.
9.1 Time shall be deemed of the very essence of this Agreement.
Except as otherwise defined in this Agreement, all terms in this Agreement
shall have the meanings provided by the Michigan Uniform Commercial Code.
Standard Federal shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if it takes such
action for that purpose as Borrower requests in writing, but failure of
Standard Federal to comply with any such request shall not of itself be deemed
a failure to exercise reasonable care, and failure of Standard Federal to
preserve or protect any rights with respect to such Collateral against any
prior parties or to do any act with respect to the preservation of such
Collateral not so requested by Borrower shall not be deemed a failure to
exercise reasonable care in the custody and preservation of such Collateral.
9.2 Any delay on the part of Standard Federal in exercising any
power, privilege or right hereunder, or under any other instrument executed by
Borrower to Standard Federal in connection herewith shall not operate as a
waiver thereof, and no single or partial exercise thereof, or the exercise of
any other power, privilege or right shall preclude other or further exercise
thereof, or the exercise of any other power, privilege or right. The waiver of
Standard Federal of any default by Borrower shall not constitute a waiver of
any subsequent defaults, but shall be restricted to the default so waived. All
rights, remedies and powers of Standard Federal hereunder are irrevocable and
cumulative, and not alternative or exclusive, and shall be in addition to all
rights, remedies, and powers given hereunder or in or by any other instruments,
or by the Michigan Uniform Commercial Code, or any laws now existing or
hereafter enacted.
9.3 This Agreement has been delivered in Michigan and shall be
construed in accordance with the laws of the State of Michigan. Whenever
possible, each provision of this Agreement shall be
-10-
<PAGE> 11
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. The rights and privileges of
Standard Federal hereunder shall inure to the benefit of its successors and
assigns, and this Agreement shall be binding on all heirs, personal
representatives, assigns and successors of Borrower. Borrower hereby expressly
authorizes and appoints Standard Federal to act as its attorney-in-fact for the
sole purpose of executing any and all financing statements or other documents
deemed necessary to perfect the security interest herein contemplated.
9.4 The Borrower acknowledges that this is the entire Agreement
between the parties except to the extent that writings signed by the party to
be charged are specifically incorporated herein by reference either in this
Agreement or in such writings, and acknowledges receipt of a true and complete
copy of this Agreement.
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Security Agreement to be executed as of the day and year first written above.
STANDARD FEDERAL BANK, a federal BORROWER:
savings bank
2600 West Big Beaver Road EPCO MANUFACTURING,INC., a
Troy, Michigan 48084 New York corporation
By: By:
---------------------------- ----------------------------
E. James Zabinski
Its: Vice President Its: Treasurer
------------------------ ---------------------
-11-
<PAGE> 1
EXHIBIT 10.54
Loan No. 0250012691 AMENDMENT AGREEMENT
Promissory Note
(Line of Credit)
THIS AGREEMENT made this 25th day of September, 1995 by and among
Standard Federal Bank, a federal savings bank ("Standard Federal"), Galion
Holding Company, a Michigan corporation, Galion Solid Waste Equipment, Inc., a
Michigan corporation, Galion Dump Bodies, Inc., a Michigan corporation, and
M.E.G. Equipment Sales of Florida, Inc., a Florida corporation (collectively,
"Borrower"), and McClain Industries, Inc. ("Guarantor").
RECITALS:
A. Borrower executed and delivered to Standard Federal a Third
Amended and Restated Promissory Note (Line of Credit) dated June 22, 1995, in
the principal amount of $10,000,000.00 (the "Note"), executed pursuant to a
Loan Agreement, dated September 15, 1994, as amended February 16, 1995, May 5,
1995 and June 22, 1995 (the "Loan Agreement"), secured by a Security Agreement
dated September 15, 1994 and a Security Agreement dated June 22, 1995 (the
"Security Agreements"), and Two Open-End Commercial Mortgages and Assignments
of Lease and Rentals dated June 29, 1993, as amended (the "Mortgages"), and
guaranteed by the Guarantor pursuant to a Guaranty dated May 5, 1995 (the
"Guaranty").
B. The Borrower has requested a decrease in the effective
interest rate under the Note and Standard Federal and the Guarantor are
agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and of other good and valuable consideration the receipt and sufficiency
whereof are hereby acknowledged, the parties hereto hereby warrant, represent
and agree as follows:
1. The Borrower is a Michigan or Florida corporation, as the case
may be, in good standing. All corporate resolutions heretofore delivered to
Standard Federal relative to borrowing money and granting security interests
remain in full force and effect. Borrower has duly authorized and validly
executed and delivered this Amendment Agreement and such Agreement and the Note
(as hereby amended) are valid and enforceable according to their terms and do
not conflict with or violate Borrower's corporate charter or by-laws or any
agreement or covenants to which Borrower is a party.
2. The first sentence of the second paragraph of the Note is
hereby deleted in its entirety and replaced by the following new sentence,
effective as of September 25, 1995:
The principal outstanding under this Note from time to time
shall bear interest ("Effective Interest Rate"), on a basis of a year
of 360 days for the actual number of
<PAGE> 2
days amounts are outstanding hereunder, at a rate per annum equal to
the Wall Street Journal Prime Rate.
3. Except as herein amended, the Note, Security Agreements,
Mortgages and Guaranty shall remain in full force and effect. This Amendment
Agreement may be attached to the Note as a rider, but such attachment shall not
be necessary to the validity thereof.
4. Guarantor acknowledges and consents to the amendment to the
Note herein provided and agrees that the Guaranty shall continue and remain in
full force and effect with respect to the Note as herein amended.
IN WITNESS WHEREOF the parties hereto have executed this agreement the
day and date first above written.
Witness: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
-2-
<PAGE> 3
M.E.G. EQUIPMENT SALES OF FLORIDA,
INC., a Florida corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
59-3241829
Address: 6200 Elmridge
Sterling Heights, MI 48318
GUARANTOR:
McClain Industries, Inc., a
Michigan corporation
By:
- -------------------------- --------------------------------
E. James Zabinski
Its: Treasurer
-------------------------
Standard Federal Bank, a federal
savings bank
By:
-----------------------------
Its:
-------------------------
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<PAGE> 1
EXHIBIT 10.55
Loan No. 0250017732
SECOND AMENDMENT AGREEMENT
Promissory Note
(Line of Credit with Term Provisions)
(First Line of Credit)
THIS AGREEMENT made this 25th day of September ___, 1995 by and among
Standard Federal Bank, a federal savings bank ("Standard Federal"), Galion
Holding Company, a Michigan corporation, Galion Solid Waste Equipment, Inc., a
Michigan corporation, and Galion Dump Bodies, Inc., a Michigan corporation
(collectively, "Borrower"), and McClain Industries, Inc. ("Guarantor").
RECITALS:
A. Borrower executed and delivered to Standard Federal a Promissory
Note (Line of Credit with Term Provisions) (First Line of Credit) dated
February 6, 1995, as amended March 20, 1995, in the principal amount of
$800,000.00 (the "Note"), secured by a Security Agreement dated September 15,
1994 (the "Security Agreement"), and Two Open-End Commercial Mortgages and
Assignments of Lease and Rentals dated June 29, 1993, as amended February 6,
1995 (the "Mortgages") and guaranteed by the Guarantor pursuant to a Guaranty
dated February 6, 1995 (the "Guaranty").
B. The Borrower has requested a decrease in the effective interest
rate under the Note and Standard Federal and the Guarantor are agreeable
thereto.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and of other good and valuable consideration the receipt and sufficiency
whereof are hereby acknowledged, the parties hereto hereby warrant, represent
and agree as follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered this
Amendment Agreement and such Agreement and the Note (as hereby amended) are
valid and enforceable according to their terms and do not conflict with or
violate Borrower's corporate charter or by-laws or any agreement or covenants
to which Borrower is a party.
2. The first sentence of the second paragraph of the Note is hereby
deleted in its entirety and replaced by the following new sentence, effective
as of September 25, 1995:
The principal outstanding under this Note from time to time shall
bear interest ("Effective Interest Rate"), on a basis of a year of 360
days for the actual number of days amounts are outstanding hereunder, at
a rate per annum equal to the Wall Street Journal Prime Rate.
<PAGE> 2
3. Except as herein amended, the Note, Security Agreement, Mortgages
and Guaranty shall remain in full force and effect. This Amendment Agreement
may be attached to the Note as a rider, but such attachment shall not be
necessary to the validity thereof.
4. Guarantor acknowledges and consents to the amendment to the Note
herein provided and agrees that the Guaranty shall continue and remain in full
force and effect with respect to the Note as herein amended.
IN WITNESS WHEREOF the parties hereto have executed this agreement the
day and date first above written.
Witness: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
Address: 6200 Elmridge
Sterling Heights, MI 48318
-2-
<PAGE> 3
GUARANTOR:
McClain Industries, Inc., a
Michigan corporation
By:
- -------------------------- --------------------------------
E. James Zabinski
Its: Treasurer
--------------------------
Standard Federal Bank, a federal
savings bank
By:
-----------------------------
Its:
-------------------------
-3-
<PAGE> 1
EXHIBIT 10.56
Loan No. 0250017683
THIRD AMENDMENT AGREEMENT
Promissory Note
(Line of Credit with Term Provisions)
(Second Line of Credit)
THIS AGREEMENT made this 25th day of September , 1995 by and among
Standard Federal Bank, a federal savings bank ("Standard Federal"), Galion
Holding Company, a Michigan corporation, Galion Solid Waste Equipment, Inc.,
a Michigan corporation, and Galion Dump Bodies, Inc., a Michigan corporation
(collectively, "Borrower"), and McClain Industries, Inc. ("Guarantor").
RECITALS:
A. Borrower executed and delivered to Standard Federal a
Promissory Note (Line of Credit with Term Provisions) (Second Line of
Credit) dated February 6, 1995, as amended February 27, 1995 and March 20,
1995, in the principal amount of $800,000.00 (the "Note"), secured by a
Security Agreement dated September 15, 1994 (the "Security Agreement"), and
Two Open-End Commercial Mortgages and Assignments of Lease and Rentals dated
June 29, 1993, as amended February 6, 1995 (the "Mortgages") and guaranteed
by the Guarantor pursuant to a Guaranty dated February 6, 1995 (the
"Guaranty").
B. The Borrower has requested a decrease in the effective interest rate
under the Note and Standard Federal and the Guarantor are agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and of other good and valuable consideration the receipt and
sufficiency whereof are hereby acknowledged, the parties hereto hereby
warrant, represent and agree as follows:
1. The Borrower is a Michigan corporation in good standing. All
corporate resolutions heretofore delivered to Standard Federal relative to
borrowing money and granting security interests remain in full force and
effect. Borrower has duly authorized and validly executed and delivered
this Amendment Agreement and such Agreement and the Note (as hereby
amended) are valid and enforceable according to their terms and do not
conflict with or violate Borrower's corporate charter or by-laws or any
agreement or covenants to which Borrower is a party.
2. The first sentence of the second paragraph of the Note is hereby
deleted in its entirety and replaced by the following new sentence,
effective as of September 25, 1995:
The principal outstanding under this Note from time to time shall
bear interest ("Effective Interest Rate"), on a basis of a year of 360
days for the actual number of
<PAGE> 2
days amounts are outstanding hereunder, at a rate per annum equal to the
Wall Street Journal Prime Rate.
3. Except as herein amended, the Note, Security Agreement,
Mortgages and Guaranty shall remain in full force and effect. This
Amendment Agreement may be attached to the Note as a rider, but such
attachment shall not be necessary to the validity thereof.
4. Guarantor acknowledges and consents to the amendment to the Note
herein provided and agrees that the Guaranty shall continue and remain in
full force and effect with respect to the Note as herein amended.
IN WITNESS WHEREOF the parties hereto have executed this agreement the
day and date first above written.
Witness: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- --------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
-2-
<PAGE> 3
Address: 6200 Elmridge
Sterling Heights, MI 48318
GUARANTOR:
McClain Industries, Inc., a
Michigan corporation
By:
- -------------------------- --------------------------------
E. James Zabinski
Its: Treasurer
-------------------------
Standard Federal Bank, a federal
savings bank
By:
--------------------------------
Its:
----------------------------
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<PAGE> 1
EXHIBIT 10.57
Loan No. 0250016750
AMENDMENT AGREEMENT
Promissory Note
(Term Loan)
THIS AGREEMENT made this 25th day of September , 1995 by and among
Standard Federal Bank, a federal savings bank ("Standard Federal"), Galion
Holding Company, a Michigan corporation, Galion Solid Waste Equipment, Inc., a
Michigan corporation, Galion Dump Bodies, Inc., a Michigan corporation, and
M.E.G. Equipment Sales of Florida, Inc., a Florida corporation (collectively,
"Borrower"), and McClain Industries, Inc. ("Guarantor").
RECITALS:
A. Borrower executed and delivered to Standard Federal a
Promissory Note (Term Loan) dated September 15, 1994, in the original principal
amount of $2,000,000.00 (the "Note"), executed pursuant to a Loan Agreement,
dated September 15, 1994, as amended February 16, 1995, May 5, 1995 and June
22, 1995 (the "Loan Agreement"), secured by a Security Agreement dated
September 15, 1994 and a Security Agreement dated June 22, 1995 (the "Security
Agreements"), and Two Open-End Commercial Mortgages and Assignments of Lease
and Rentals dated June 29, 1993, as amended (the "Mortgages"), and guaranteed
by the Guarantor pursuant to a Guaranty dated May 5, 1995 (the "Guaranty").
B. The Borrower has requested a decrease in the effective
interest rate under the Note and Standard Federal and the Guarantor are
agreeable thereto.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and of other good and valuable consideration the receipt and sufficiency
whereof are hereby acknowledged, the parties hereto hereby warrant, represent
and agree as follows:
1. The Borrower is a Michigan or Florida corporation, as the case
may be, in good standing. All corporate resolutions heretofore delivered to
Standard Federal relative to borrowing money and granting security interests
remain in full force and effect. Borrower has duly authorized and validly
executed and delivered this Amendment Agreement and such Agreement and the Note
(as hereby amended) are valid and enforceable according to their terms and do
not conflict with or violate Borrower's corporate charter or by-laws or any
agreement or covenants to which Borrower is a party.
2. The first sentence of the second paragraph of the Note is
hereby deleted in its entirety and replaced by the following new sentence,
effective as of ________________, 1995:
The principal outstanding under this Note from time to time
shall bear interest ("Effective Interest Rate"), on a basis of a year
of 360 days for the actual number of
<PAGE> 2
days amounts are outstanding hereunder, at a rate per annum equal to
the Wall Street Journal Prime Rate.
3. Except as herein amended, the Note, Security Agreements,
Mortgages and Guaranty shall remain in full force and effect. This Amendment
Agreement may be attached to the Note as a rider, but such attachment shall not
be necessary to the validity thereof.
4. Guarantor acknowledges and consents to the amendment to the
Note herein provided and agrees that the Guaranty shall continue and remain in
full force and effect with respect to the Note as herein amended.
IN WITNESS WHEREOF the parties hereto have executed this agreement the
day and date first above written.
Witness: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
GALION SOLID WASTE EQUIPMENT, INC.,
a Michigan corporation
By:
- --------------------------- --------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- --------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
-2-
<PAGE> 3
M.E.G. EQUIPMENT SALES OF FLORIDA,
INC., a Florida corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
59-3241829
Address: 6200 Elmridge
Sterling Heights, MI 48318
GUARANTOR:
McClain Industries, Inc., a
Michigan corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Its: Treasurer
-------------------------
Standard Federal Bank, a federal
savings bank
By:
-----------------------------
Its:
-------------------------
-3-
<PAGE> 1
EXHIBIT 10.58
FIRST AMENDED AND RESTATED LOAN AGREEMENT
BETWEEN
STANDARD FEDERAL BANK
AND
GALION HOLDING COMPANY,
MCCLAIN E-Z PACK, INC. (FORMERLY KNOWN AS
GALION SOLID WASTE EQUIPMENT, INC.),
GALION DUMP BODIES, INC.,
MCCLAIN GROUP SALES OF FLORIDA, INC., (FORMERLY KNOWN
AS M.E.G. EQUIPMENT SALES OF FLORIDA, INC.) AND
MCCLAIN INDUSTRIES, INC.
THIS AGREEMENT made and delivered this 2nd day of October , 1995, by and
among Galion Holding Company, a Michigan corporation, McClain E-Z Pack Inc., a
Michigan corporation, formerly known as Galion Solid Waste Equipment, Inc.,
Galion Dump Bodies, Inc., a Michigan corporation, and McClain Group Sales of
Florida, Inc., a Florida corporation, formerly known as M.E.G. Equipment Sales
of Florida, Inc., a Florida corporation (collectively, "Borrower"), whose
address/principal office is 6200 Elmridge, Sterling Heights, Michigan 48310,
Standard Federal Bank, a federal savings bank ("Standard Federal"), whose
address is 2600 West Big Beaver Road, Troy, Michigan 48084, and McClain
Industries, Inc., a Michigan corporation (the "Guarantor").
RECITALS:
A. On September 15, 1994, the Borrower and Standard Federal
entered into a Loan Agreement, as amended by a First Amendment to Loan
Agreement, dated February 16, 1995, a Second Amendment to Loan Agreement, dated
May 5, 1995, and a Third Amendment to Loan Agreement, dated June 22, 1995 (the
"Loan Agreement"), pursuant to which the Borrower opened a revolving line of
credit facility with Standard Federal, Loan No. 0250012691, with a credit limit
of up to $10,000,000.00, as evidenced by a Third Amended and Restated
Promissory Note (Line of Credit), dated June 22, 1995, in the principal amount
of $10,000,000.00, and Standard Federal made a term loan to the Borrower, Loan
No. 0250016750, as evidenced by a Promissory Note (Term Loan), dated September
15, 1994, secured by a Security Agreement, dated September 15, 1994, and a
Security Agreement, dated June 22, 1995 (collectively, the "Security
Agreement"), and two Open-End Commercial Mortgages and Assignments of Lease and
Rentals, dated June 29, 1993, as amended September 15, 1994, February 6, 1995,
February 16, 1995, May 5, 1995 and June 22, 1995 (the "Mortgages"), and
supported by a Guaranty, dated May 5, 1995 (the "Guaranty"), executed by the
Guarantor.
B. The Borrower has requested an additional line of credit to
provide additional working capital required to carry additional
<PAGE> 2
inventory of demonstrators and Standard Federal is willing to supply such
financing subject to the terms and conditions set forth in this Agreement.
C. Standard Federal and the Borrower therefore wish to restate
the Loan Agreement in its entirety as herein provided.
NOW, THEREFORE, in reliance upon the representations herein provided
and in consideration of the premises and the mutual promises herein contained,
the Borrower and Standard Federal hereby agree and the Loan Agreement is hereby
amended and restated in its entirety as follows:
SECTION 1. REVOLVING LINE OF CREDIT
1.1 Standard Federal hereby extends to the Borrower a revolving
line of credit (the "Revolving Line of Credit") which shall not exceed at any
one time outstanding the Revolving Credit Limit as hereafter defined. The term
"Revolving Credit Limit" shall mean the lesser of: (a) Ten Million and 00/100
Dollars ($10,000,000.00), or (b) an amount equal to the sum of: (i) an amount
equal to 80% of Eligible Accounts Receivable, plus (ii) an amount equal to the
lesser of: (1) Five Million and 00/100 Dollars ($5,000,000.00), or (2) an
amount equal to 50% of Qualified Inventory. As used herein, the term "Eligible
Accounts Receivable" shall mean accounts receivable of the Borrower less than
90 days old, not doubtful as to collectibility or disputed as to existence or
amount or subject to offset, contra-indebtedness or return and not intra-
company or owing from any affiliated or related company or other entity,
exclusive of any account receivable arising under a government contract, the
assignment of which is subject to the Assignment of Claims Act of 1940, as
amended, or any other similar federal or state statute or regulation governing
the assignment of contracts with a governmental agency. The term "Qualified
Inventory" shall mean the inventory of Borrower in which Standard Federal holds
a perfected first security interest exclusive of any returned or damaged items
and work-in-process.
1.2 The Revolving Line of Credit herein extended shall be subject
to the terms and conditions of a Third Amended and Restated Promissory Note
(Line of Credit), dated June 22, 1995, and all renewals and amendments thereof
(the "Revolving Line of Credit Note"). The Revolving Line of Credit shall be
payable and shall bear interest as set forth in the Revolving Line of Credit
Note. This Loan Agreement and the Revolving Line of Credit Note are of equal
materiality and shall each be construed in such manner as to give full force
and effect to all provisions of both documents.
1.3 Standard Federal shall, from time to time during the term
hereof, make advances to Borrower under the Revolving Line of Credit upon
request therefor by Borrower, provided that upon giving effect to such advance
no Event of Default (as defined in the
2
<PAGE> 3
Revolving Line of Credit Note or this Agreement) and no event which with notice
and/or the passage of time would become an Event of Default shall exist at the
time the advance is to be made; and provided further that upon giving effect to
such advance and at the time the advance is to be made all of the
representations and warranties of Borrower contained in this Agreement and all
other documents executed in connection with the Revolving Line of Credit are
true and correct in all material respects; and provided further that at the
time the advance is to be made Standard Federal shall not have previously or
concurrently declared all amounts owing under the Revolving Line of Credit Note
to be immediately due and payable; and provided further the amount requested
shall not cause the total amount outstanding under the Revolving Line of Credit
to exceed the Revolving Credit Limit.
1.4 If at any time the amount outstanding under the Revolving Line
of Credit shall exceed the Revolving Credit Limit, Borrower shall, on demand,
forthwith pay to Standard Federal such sums as are necessary to reduce the
amount outstanding to an amount not greater than the Revolving Credit Limit.
1.5 Borrower shall pay to Standard Federal, on the first day of
each month, commencing on October 1, 1995 and continuing on the same day of
each consecutive month thereafter until the termination of the Revolving Line
of Credit and all sums owing for principal and interest with respect to the
Revolving Line of Credit are paid in full, an Unused Line Fee in the amount of
0.25% per annum of the amount available for draw but not advanced from time to
time on the Revolving Line of Credit ("Unused Line"). The amount of the Unused
Line Fee payable on the first day of each month will be determined by
multiplying the average daily balance of the Unused Line for the calendar month
which ends one month prior to the due date of such Unused Line Fee by .020833%.
1.6 In all events, unless earlier terminated, the Revolving Line
of Credit shall terminate March 31, 1997 . Upon termination, Borrower
shall forthwith pay to Standard Federal all sums owing for principal and
interest with respect to the Revolving Line of Credit.
SECTION 1A. DEMONSTRATOR LINE OF CREDIT
1A.1 Standard Federal hereby extends to the Borrower a revolving
line of credit (the "Demonstrator Line of Credit") (the Demonstrator Line of
Credit and the Revolving Line of Credit are hereinafter collectively referred
to as the "Line of Credit") which shall not exceed at any one time outstanding
the principal amount of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) (the "Demonstrator Credit Limit").
1A.2 The Demonstrator Line of Credit herein extended shall be
subject to the terms and conditions of a Promissory Note (Line of
3
<PAGE> 4
Credit) of even date herewith, and all renewals and amendments thereof (the
"Demonstrator Line of Credit Note") (the Demonstrator Line of Credit Note and
the Revolving Line of Credit Note are hereinafter collectively referred to as
the "Line of Credit Note"). The Demonstrator Line of Credit shall be payable
and shall bear interest as set forth in the Demonstrator Line of Credit Note.
This Loan Agreement and the Demonstrator Line of Credit Note are of equal
materiality and shall each be construed in such manner as to give full force
and effect to all provisions of both documents.
1A.3 Standard Federal shall, from time to time during the term
hereof, make advances to Borrower under the Demonstrator Line of Credit upon
request therefor by Borrower, provided that upon giving effect to such advance
no Event of Default (as defined in the Demonstrator Line of Credit Note or this
Agreement) and no event which with notice and/or the passage of time would
become an Event of Default shall exist at the time the advance is to be made;
and provided further that upon giving effect to such advance and at the time
the advance is to be made all of the representations and warranties of Borrower
contained in this Agreement and all other documents executed in connection with
the Demonstrator Line of Credit are true and correct in all material respects;
and provided further that at the time the advance is to be made Standard
Federal shall not have previously or concurrently declared all amounts owing
under the Demonstrator Line of Credit Note to be immediately due and payable;
and provided further the amount requested shall not cause the total amount
outstanding under the Demonstrator Line of Credit to exceed the Demonstrator
Credit Limit.
1A.4 Each advance under the Demonstrator Line of Credit shall be
used solely for the purchase of inventory of the Borrower for demonstrator
purposes, as determined in a manner acceptable to Standard Federal. Each
advance shall be in an amount not in excess of Eighty Five percent 85.0% of the
inventory at cost of the Borrower's demonstrator inventory as reflected in the
demonstrator inventory reports properly furnished by the Borrower as required
under Section 3.2(e) hereof.
1A.5 If at any time the amount outstanding under the Demonstrator
Line of Credit shall exceed the Demonstrator Credit Limit, Borrower shall, on
demand, forthwith pay to Standard Federal such sums as are necessary to reduce
the amount outstanding to an amount not greater than the Demonstrator Credit
Limit.
1A.6 In all events, unless earlier terminated, the Demonstrator
Line of Credit shall terminate March 31, 1997. Upon termination, Borrower
shall forthwith pay to Standard Federal all sums owing for principal and
interest with respect to the Demonstrator Line of Credit.
4
<PAGE> 5
SECTION 1B. TERM LOAN
1B.1 Standard Federal has extended to the Borrower a term loan (the
"Term Loan") in the principal amount of Two Million and 00/100 Dollars
($2,000,000.00).
1B.2 The Term Loan herein extended shall be subject to the terms
and conditions of a Promissory Note (Term Loan), dated September 15, 1994, and
all renewals and amendments thereof (the "Term Note"). The Term Loan shall be
payable and shall bear interest as set forth in the Term Note. This Loan
Agreement and the Term Note are of equal materiality and shall each be
construed in such manner as to give full force and effect to all provisions of
both documents.
SECTION 1C. CONDITIONS TO MAKING LOANS
1C.1 The following are conditions precedent to the obligation of
Standard to make the Line of Credit and the Term Loan hereunder:
1C.1(a) The Borrower shall have delivered or shall have had delivered to
Standard Federal, in form and substance satisfactory to Standard Federal and
its counsel, each of the following:
a. A duly executed copy of this Loan Agreement;
b. A duly executed copy of the Line of Credit Note, the Term
Note, a security agreement and such other loan documents as
Standard Federal shall require to evidence and document the
Line of Credit and the Term Loan;
c. Such credit applications, financial statements,
authorizations, and such information concerning the Borrower
and its business, operations, and condition (financial and
otherwise) as Standard Federal may reasonably request;
d. Certified copies of resolutions of the Boards of Directors of
the Borrower approving the execution and delivery of the loan
documents required hereunder;
e. A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign the loan documents
required hereunder;
f. Copies of each of the Articles of Incorporation of the
Borrower, certified by the Secretary of State of Michigan as
of a recent date;
g. Copies of each of the Articles of Incorporation and Bylaws of
the Borrower, certified by the Secretary or an Assistant
Secretary of the Borrower as of the date of this Agreement as
being accurate and complete;
h. Certificate of good standing of the Borrower from the
Secretary of State of Michigan as of a recent date;
5
<PAGE> 6
i. Certificates of authority and good standing of the Borrower
for each state in which the Borrower is qualified to do business;
j. A certificate of compliance of the chief financial officer or
treasurer of the Borrower in form satisfactory to Standard
Federal dated as of the date of this Agreement;
k. Such certificates, binders or other evidence of all insurance
required of the Borrower under this Loan Agreement as Standard
Federal may reasonably require; and
l. Acknowledgement copies of all UCC-1 financing statements filed
with respect to the Collateral accompanied by a search report
showing such financing statements as duly filed and evidencing
that the security interest of Standard Federal in the
Collateral is prior to all other security interests of record.
1C.1(b) All acts and conditions (including, without limitation, the obtaining
of any necessary regulatory approvals and the making of any required filings,
recordings, or registrations) required to be done and performed and to have
happened precedent to the execution, delivery, and performance of the loan
documents required hereunder and to constitute the same legal, valid, and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
1C.1(c) All documentation, including, without limitation, documentation for
corporate and legal proceedings in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to Standard Federal and its counsel and all fees and charges, including
recording and filing fees, shall have been paid as required hereunder.
1C.2 As conditions precedent to Standard Federal's obligation to
make the Term Loan and to fund any request for an advance under the Line of
Credit, at and as of the date of the funding thereof;
a. The representations and warranties of the Borrower contained
in the Loan Documents shall be accurate and complete in all
respects as if made on and as of such date;
b. The Borrower shall have paid all fees and expenses, including
any recording fees and charges, required hereunder;
c. There shall not have occurred an Event of Default or any event
which with the passage of time of the giving of notice or both
would constitute an Event of Default;
d. The Borrower shall have delivered a Borrowing Base Certificate
in form satisfactory to Standard Federal; and
6
<PAGE> 7
e. Following the making of such loan or advance, the aggregate
principal amount outstanding will not exceed the limitations
described in Sections 1, 1A and 1B.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to Standard Federal that
as of the date of acceptance of this Agreement, as of the time any advance is
to be made hereunder and, unless expressly provided otherwise herein or agreed
to by a writing signed by Standard Federal, at all times any amounts are
outstanding hereunder:
2.1 The Borrower and each of its subsidiaries, if any, are
corporations duly organized, validly existing and in good standing under the
laws of the state of their incorporation; the Borrower and each of its
subsidiaries (if any) have the legal power and authority to own their
properties and assets and to carry out their business as now being conducted
and each is qualified to do business in the State of Ohio, the State of
Michigan and in every jurisdiction where the nature of its business or the
property owned or operated by it makes such qualification necessary and is
otherwise in compliance with all applicable laws, statutes, regulations, rules
and requirements of any federal, state, judicial, regulatory or administrative
body having jurisdiction of the Borrower or any of its assets; the Borrower has
the legal power and authority to execute and perform this Agreement, to borrow
money in accordance with its terms, to execute and deliver the Line of Credit
Note and the Term Note and other documents contemplated hereby, to grant to
Standard Federal mortgages and security interests in the Collateral, as hereby
contemplated, and to do any and all other things required of it hereunder; and
this Agreement, the Line of Credit Note, the Term Note and all other documents
contemplated hereby, when executed by the Borrower's duly authorized officers
will constitute its valid and binding legal obligations enforceable in
accordance with their terms.
2.2 The execution, delivery and performance of this Agreement, the
borrowings hereunder and the execution and delivery of the Line of Credit Note
and the Term Note and other documents contemplated hereby (a) have been duly
authorized by all requisite corporate action, (b) do not require governmental
approval or the approval of any person not a party to this Agreement, (c) will
not result (with or without notice and/or the passage of time) in any conflict
with or breach or violation of or default under, any provision of law, the
Articles of Incorporation or Bylaws of the Borrower or any indenture, agreement
or other instrument to which the Borrower is a party, or by which it or any of
its properties or assets are bound, and (d) will not result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower other than in favor of Standard
Federal and as contemplated hereby.
7
<PAGE> 8
2.3 There is not pending or, to the best of the knowledge of the
Borrower, threatened, any litigation, proceeding or governmental investigation
which could materially and adversely affect the business of the Borrower or its
subsidiaries, if any, or its ability to perform its covenants hereunder.
2.4 Borrower has good and marketable title to its properties given
as security as herein described, and, except for liens in favor of Standard
Federal, liens for taxes not delinquent or being contested in good faith and
liens created in connection with worker's compensation, unemployment insurance
and social security, or to secure the performance of bids, tenders or contracts
(other than for the repayment of borrowed money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like nature made
in the ordinary course of business, none of the Borrower's or any of its
subsidiaries' (if any) assets are subject to any mortgage, pledge, lien,
security interest, or other encumbrance of any kind or character except as have
been disclosed to Standard Federal in writing. The Borrower owns all material
patents, trademarks, service marks, trade names, copyrights, licenses and other
rights, free from any material restrictions, that are necessary for the
operation of its business as presently conducted.
2.5 All financial data which has been or shall hereafter be
furnished to Standard Federal for the purposes of, or in connection with, this
Agreement, including particularly, but without limitation, the audited
consolidated financial statements of McClain Industries, Inc. as of September
30, 1994, prepared by Rehmann Robson & Co., and the Form 10-Q's filed with the
Securities and Exchange Commission by McClain industries, Inc. pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly
periods ended December 31, 1994, March 31, 1995 and June 30, 1995, and the
transactions contemplated hereby has been and/or shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and does or will fairly present the financial condition of the Borrower as of
the dates, and the results of its operations for the periods, for which the
same is furnished to Standard Federal.
2.6 There has been no material adverse change in the business,
properties or condition (financial or otherwise) of the Borrower or its
subsidiaries (if any) since the date of the latest financial statements
provided to Standard Federal and there are no material debts, liabilities or
obligations (absolute or contingent) of the Borrower except as reflected in
such financial statements (or in the notes thereto).
2.7 The Borrower is not in default in the repayment of any
indebtedness for money borrowed by it nor has there occurred any event which,
with or without notice or the passage of time or both,
8
<PAGE> 9
would constitute a default by the Borrower under any agreement or instrument
pertaining to any indebtedness for money borrowed by it.
2.8 Borrower has filed all reports and tax returns required by
governmental authority to be filed by it prior to the date hereof and Borrower
has received no notice that such reports or returns have been rejected,
declared insufficient, or otherwise challenged by such governmental authority.
2.9 The principal officers of the Borrower ("Principal Officers")
are as follows:
Galion Holding Company:
Chairman of the Board Kenneth D. McClain
Vice President E. James Zabinski
Treasurer E. James Zabinski
Secretary Carl L. Jaworski
McClain E-Z Pack, Inc.:
Chairman of the Board Kenneth D. McClain
Vice President E. James Zabinski
Treasurer E. James Zabinski
Secretary Carl L. Jaworski
Galion Dump Bodies, Inc.:
Chairman of the Board Kenneth D. McClain
Vice President E. James Zabinski
Treasurer Carl L. Jaworski
Secretary Carl L. Jaworski
McClain Group Sales of Florida, Inc.:
Chairman of the Board Kenneth D. McClain
Vice President E. James Zabinski
Treasurer E. James Zabinski
Secretary Carl L. Jaworski
9
<PAGE> 10
2.10 McClain E-Z Pack, Inc., a Michigan corporation, and Galion
Dump Bodies, Inc., a Michigan corporation, are each wholly-owned subsidiaries
of Galion Holding Company, a Michigan corporation, which is a wholly-owned
subsidiary of McClain Industries, Inc., a Michigan corporation. McClain
Industries, Inc., McClain E-Z Pack Inc. and Galion Dump Bodies, Inc. each hold
one-third of the outstanding capital stock of McClain Group Sales, Inc.,
Michigan corporation, of which McClain Group Sales of Florida, Inc., a Florida
corporation, is a wholly-owned subsidiary. Galion Holding Company, as of the
date of this Loan Agreement, owns no other subsidiaries.
2.11 None of the proceeds of the Line of Credit or Term Loan will
be used for the purpose of purchasing or carrying any "margin stock" as defined
in Regulation U or G of the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 221 and 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation U or G. Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stocks. Neither Borrower nor any person acting on behalf of Borrower
has taken or will take any action which might cause the Line of Credit Note and
the Term Note or any of the other documents executed in conjunction therewith,
including this Agreement, to violate Regulations U or G or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. Borrower and its subsidiaries, if any, own no
"margin stock" except for that described in the financial statements provided
to Standard Federal and, as of the date hereof, the aggregate value of all
"margin stock" owned by Borrower and its subsidiaries, if any, does not exceed
25% of all of the value of all of Borrower's and its subsidiaries', if any,
assets.
2.12 Except as disclosed in the environmental reports listed in
attached Schedule 2.12, copies of which the Borrower has furnished to Standard
Federal, neither the Borrower nor, to the best of Borrower's knowledge after
due inquiry, any other person or entity, has caused or permitted any waste,
oil, pesticides, or any substance or material of any kind which is currently
known or suspected to be toxic or hazardous, including but not limited to any
substance defined as a "Hazardous Waste" in Title 40, Part 261 of the Code of
Federal Regulations, (hereinafter referred to as "Hazardous Material") to be
discharged, dispersed, released, disposed of, or allowed to escape on, under or
at any property owned, occupied or operated by any Borrower in violation of any
Hazardous Materials Laws (as hereinafter defined), nor has any property owned,
occupied or operated by any Borrower, or any part thereof, ever been used by
the Borrower or, to the best of Bor-
10
<PAGE> 11
rower's knowledge after due inquiry, any prior owner or any other person, as a
dump, storage or disposal site for any Hazardous Material, nor has there
occurred any other violation of the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., 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 Material ("Hazardous Materials
Laws") with respect to any property owned, occupied or operated by any
Borrower. No asbestos or asbestos-containing materials have been installed,
used, incorporated into, or disposed of on any property owned, occupied or
operated by any Borrower. No polychlorinated biphenyls ("PCBs") are located on
or in any property owned, occupied or operated by any Borrower, in the form of
electrical transformers, fluorescent light fixtures with ballasts, cooling
oils, or any other device or form. All underground storage tanks located on
any property owned, occupied or operated by any Borrower have been installed
and are being operated in full compliance with all applicable Hazardous
Materials Laws. The Borrower: (a) has not received any notice of any release,
threatened release, escape, seepage, leakage, spillage, discharge or emission
of any Hazardous Materials in, under or upon any property owned, occupied or
operated by any Borrower or of any violation of any Hazardous Materials Law,
and (2) does not know of any basis for any such notice or violation.
2.13 No "reportable event," as defined in the Employee Retirement
Income Security Act of 1974 and any amendments thereto ("ERISA"), has occurred
and is continuing with respect to any employee pension and/or profit sharing
benefit plan maintained by or on behalf of the Borrower for the benefit of any
of its employees. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted proceedings to terminate any such employee pension and/or profit
sharing plan or to appoint a trustee to administer such plan. The Borrower
has maintained and funded and caused each of its subsidiaries, if any, to
maintain and fund all employee pension and/or profit sharing plans in
accordance with their terms and with all applicable provisions of ERISA.
Neither the Borrower nor any duly appointed administrator of any employee
pension and/or profit sharing plan: (a) has incurred any liability to PBGC with
respect to any such plan other than for premiums not yet due or payable, (b)
has instituted or intends to institute proceedings to terminate any such plan
under Section 4042 or 4041A of Erisa, or (c) has withdrawn from any
Multi-Employer Pension Plan (as that term is defined in Section 3(37) of
ERISA).
2.14 There is no material fact that the Borrower has not disclosed
to Standard Federal which could have a material adverse effect on the
properties, business, prospects or condition (financial or otherwise) of the
Borrower or any of its subsidiaries. For purposes of this Section 2.14, a
"material adverse effect" means any circumstance or event which (a) could
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<PAGE> 12
have any adverse effect whatsoever upon the validity, performance or
enforceability of any material provision of the Loan Documents, (b) is or might
be material and adverse to the financial condition or business operations of
the Borrower or any subsidiary, (c) could impair the ability of the Borrower to
fulfill its obligations under the Loan Documents, or (d) causes an Event of
Default or any event which, with notice or lapse of time or both, could become
an Event of Default. Neither the financial statements referred to in Section
2.5 hereof, nor any certificate or statement delivered herewith or heretofore
by Borrower in connection with the negotiations of this Loan Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary to keep the statements contained herein or therein, under the
circumstances in which they were made, from being misleading.
2.15 Each request for an advance under the Line of Credit shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Event of Default
exists and that all representations and warranties contained in this Section 2
or in any mortgage, guaranty, security agreement or other document given to
secure or relating to the Line of Credit Note or this Agreement are true and
correct at and as of the time the advance is to be made.
SECTION 3. AFFIRMATIVE COVENANTS OF BORROWER
3.1 Prior to Standard Federal's disbursement of any advances under
the Line of Credit, or closing of the Term Loan, the Borrower shall; (a)
furnish to Standard Federal, if Standard Federal so requires, certified copies
of its Articles of Incorporation, Bylaws and Certificate of Good Standing,
which Articles of Incorporation and Good Standing Certificate are to be
certified by the appropriate official of the Borrower's state of incorporation;
(b) furnish to Standard Federal if Standard Federal so requires a statement of
the Borrower and the chief financial officer of Borrower certifying that they
are unaware of the occurrence of an Event of Default or of any event which with
notice and/or the passage of time could become an Event of Default; and (c)
furnish Standard Federal such other instruments, documents, opinions or
certificates as Standard Federal or its counsel shall reasonably require. All
actions, proceedings, instruments and documents required or requested hereunder
shall be satisfactory to and approved by Standard Federal and/or its counsel
prior to the disbursement of advances under the Line of Credit or closing of
the Term Loan.
3.2 From the date hereof until all amounts owing under the Line of
Credit and the Term Loan are paid in full and all obligations under the Line of
Credit Note and the Term Note, this Agreement and all other documents executed
in connection with the Line of Credit and the Term Loan are fully paid,
performed and
12
<PAGE> 13
satisfied and so long as Standard Federal has any commitment to make advances
hereunder, the Borrower covenants and agrees it will:
3.2(a) Furnish to Standard Federal as soon as available and, in any event,
within 90 days after the close of each fiscal year of the parent corporation of
the Borrower, McClain Industries, Inc. ("McClain"), or, in the event McClain
obtains an extension of the filing date from the Securities Exchange
Commission, by such extended date, detailed financial statements of McClain as
of the close of such fiscal year, containing a consolidated balance sheet of
McClain and its subsidiaries and statements of income and cash flows of McClain
and its subsidiaries for such fiscal year prepared in accordance with generally
accepted accounting principles and in a manner consistent with prior such
statements containing an analysis of sources and uses of funds and such other
comments and financial details as are usually included in similar reports.
Such statements shall be accompanied by an opinion thereon (which shall not be
qualified by reason of any limitation imposed by Borrower or McClain) of
independent certified public accountants selected by McClain and acceptable to
Standard Federal as to the fairness of the statements included in the report
and to the effect that the examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances.
3.2(b) Furnish to Standard Federal, as soon as available and in any event
within 45 days after the close of each quarter of each fiscal year of McClain,
or, in the event McClain obtains an extension of the filing date from the
Securities Exchange Commission, by such extended date, detailed financial
statements of McClain as of the close of such fiscal period containing a
consolidated balance sheet of McClain and its subsidiaries and statements of
income and cash flows of the McClain and its subsidiaries for such fiscal
period and for the portion of the fiscal year ending with such period in
reasonable detail and form acceptable to Standard Federal and certified by the
chief financial officer of McClain as being true and correct and as having been
prepared in accordance with generally accepted accounting principles
consistently applied, subject to year-end adjustments, if any.
3.2(c) Furnish to Standard Federal in a form acceptable to Standard Federal
within a reasonable time not to exceed 20 days after the end of each calendar
month during the term hereof a statement of accounts receivable of Borrower
certified as correct by Borrower or a Principal Officer showing the agings
thereof and the payment, write-off or other disposition of former accounts
receivable the disposition of which has not previously been reported to
Standard Federal, and such other information and data as Standard Federal may
reasonably require. Borrower will further
13
<PAGE> 14
specifically disclose any facts known to Borrower which facts would tend to
render doubtful the collectibility of any account receivable disclosed in such
statements, or which would indicate that the existence or amount of such
account is disputed by the debtor thereon or which would preclude any account
from being included in the computation of Eligible Accounts Receivable herein
defined.
3.2(d) Furnish to Standard Federal in a form acceptable to Standard Federal
within a reasonable time not to exceed 20 days after the end of each calendar
month during the term hereof a statement of inventory of the Borrower certified
as correct by Borrower or a Principal Officer showing the method of reporting
and all additions to and dispositions of inventory since the previous inventory
report and such other information and data as Standard Federal may reasonably
require.
3.2(e) Furnish to Standard Federal in a form acceptable to Standard Federal
within a reasonable time not to exceed 20 days after the end of each calendar
month during the term hereof a statement of the Borrower's demonstrator
inventory, as determined in a manner acceptable to Standard Federal, certified
as correct by Borrower or a Principal Officer showing the method of reporting
and all additions to and dispositions of demonstrator inventory since the
previous Demonstrator report and such other information and data as Standard
Federal may reasonably require.
3.2(f) Furnish to Standard Federal, promptly after McClain sends, files or
publishes the same, copies of all proxy statements, financial statements and
reports that McClain sends to its public shareholders and copies of all
regular, periodic and special reports and all registration statements and
amendments thereto that McClain files with the Securities and Exchange
Commission or any other governmental authority and any Exchange, and copies of
all press releases issued by McClain.
3.2(g) Promptly inform Standard Federal of the occurrence of any Event of
Default or of any event (including without limitation any pending or threatened
litigation or other proceedings before any governmental body or agency) which
could have a materially adverse effect upon the Borrower's business,
properties, financial condition or ability to comply with its obligations
hereunder or under the Line of Credit Note or the Term Note.
3.2(h) Furnish such other information as Standard Federal may reasonably
request and permit Standard Federal and its agents, attorneys and employees to
inspect all of the books, records and properties of the Borrower at any
reasonable time.
3.2(i) Maintain adequate insurance with responsible companies in such amounts
and against such risks and hazards as are normally insured against by similar
businesses, and provide Standard Federal
14
<PAGE> 15
evidence of such insurance upon request; policies of casualty insurance shall
contain a customary mortgagee clause requiring payment of proceeds to Borrower
and to Standard Federal as their interests may appear and all other insurance
shall contain a customary loss payable clause requiring payment of proceeds to
Borrower and to Standard Federal as their interests may appear and all
insurance policies shall provide that no cancellation, reduction in amount,
change in coverage or expiration thereof shall be effective until at least 30
days prior written notice has been given by the insurer to Standard Federal;
and pay when due all taxes, assessments, fees and similar charges of every kind
and nature lawfully assessed upon the Borrower and/or its property, except to
the extent being contested in good faith; and in the event the Borrower fails
to maintain such insurance or to pay promptly any taxes or charges when due,
then and in such event Standard Federal, in its sole discretion, may, but shall
not be required to, pay the same and any amounts expended by Standard Federal
for such purpose shall become a part of the Line of Credit and shall bear
interest at the rate applicable to the outstanding principal balance owing
under the Line of Credit Note.
3.2(j) Preserve and keep in full force and effect its own and its material,
operating subsidiaries' (if any) corporate existence in good standing and
maintain voting control in its present controlling shareholder(s); keep current
all filings of assumed name certificates for each name under which and each
county in which the Borrower does business and promptly inform Standard Federal
of any assumed names under which it does business which were not used by the
Borrower on the date of this Agreement; continue to conduct and operate its
business substantially as presently conducted and operated in accordance with
all applicable laws and regulations; maintain and protect all franchises and
trade names and preserve all the remainder of its property used or useful in
the conduct of its business and keep the same in good repair and condition; pay
its indebtedness and obligations when due under normal terms and maintain
proper books of record and account, and; otherwise remain in compliance with
all applicable laws, statutes, regulations, rules and requirements of any
federal, state, judicial, regulatory or administrative body having jurisdiction
of the Borrower or any of its assets, except to the extent noncompliance is
immaterial and would not have a material adverse effect on Borrower.
3.2(k) Cause McClain to maintain on a consolidated statement basis "Tangible
Net Worth" of not less than the amounts specified below as of the end of each
fiscal quarter during the fiscal years ending on the dates specified below:
<TABLE>
<CAPTION>
Minimum
"Tangible
Fiscal Year-End Net Worth"
--------------- ----------
<S> <C>
09/30/94 $16,500,000
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
09/30/95 $18,000,000
09/30/96 $19,000,000
</TABLE>
"Tangible Net Worth" shall mean total assets less trademarks,
franchises, copyrights, licenses, goodwill, similar intangible assets and all
liabilities (excluding debt subordinated to Standard Federal upon terms and
conditions acceptable to Standard Federal) of the Borrower.
3.2(l) Cause McClain to maintain on a consolidated statement basis the ratio
of "Current Assets" to "Current Liabilities" of not less than the ratios
specified below as of the end of each fiscal quarter during the fiscal years
ending on the dates specified below:
<TABLE>
<CAPTION>
Fiscal Year-End Minimum Current Ratio
--------------- ---------------------
<S> <C>
09/30/94 2.25 to 1.00
09/30/95 2.30 to 1.00
09/30/96 2.35 to 1.00
</TABLE>
"Current Assets" shall include all assets considered current in
accordance with generally accepted accounting principles as in effect as of the
date of this Agreement, consistently applied, less all amounts due Borrower
from any of its directors, officers, employees, its shareholders, or any
company controlled by any of its shareholders. "Current Liabilities" shall
include all liabilities considered current in accordance with generally
accepted accounting principles as in effect as of the date of this Agreement,
consistently applied, except that portion of McClain's $5,000,000.00 line of
credit with Standard Federal which is payable within a twelve-month period.
3.2(m) Cause McClain, on a consolidated statement basis, to maintain the
ratio of "Liabilities" to "Tangible Net Worth" of not more than the ratios
specified below as of the end of each fiscal quarter during the fiscal years
ending on the dates specified below:
<TABLE>
<CAPTION>
Fiscal Year-End Maximum Liabilities-to-Worth Ratio
--------------- ----------------------------------
<S> <C>
09/30/94 2.75 to 1.00
09/30/95 2.65 to 1.00
09/30/96 2.55 to 1.00
</TABLE>
"Liabilities" shall mean all liabilities of McClain and its
consolidated subsidiaries as defined in accordance with generally
16
<PAGE> 17
accepted accounting principles as in effect as of the date of this Agreement,
consistently applied.
"Tangible Net Worth" shall mean total assets less trademarks,
franchises, copyrights, licenses, goodwill, similar intangible assets and all
liabilities (excluding debt subordinated to Standard Federal upon terms and
conditions acceptable to Standard Federal) of McClain.
3.2(n) Cause McClain, on a consolidated statement basis, to maintain an
Interest Coverage Ratio of not less than 2.00 to 1.00 for each fiscal year.
The "Interest Coverage Ratio" shall be defined as the ratio of McClain's net
income, plus interest charges, income and other taxes and amortization and
depreciation for the fiscal year to all interest expense of the Borrower for
such fiscal year, as determined in accordance with generally accepted
accounting principles.
3.2(o) Cause McClain, on a consolidated statement basis, to maintain a Fixed
Charge Coverage Ratio of not less than 1.75 to 1.00 for each fiscal year. The
"Fixed Charge Coverage Ratio" for each fiscal year shall be defined as the
ratio of McClain's net income, plus amortization and depreciation for the
fiscal year, to current maturities of long term debt, as determined in
accordance with generally accepted accounting principles.
3.2(p) At all times meet and cause each of its subsidiaries, if any, to meet
the minimum funding requirements of ERISA with respect to all employee pension
and/or profit sharing plans subject to ERISA and, with respect to any such
employee benefit plan, promptly notify Standard Federal in writing of any
reportable event, as defined in ERISA, or any proposed termination (voluntary
or otherwise) which could give rise to material termination liability within
the meaning of ERISA Section 4062.
3.3 The Borrower will not make any change in its accounting
policies or financial reporting practices and procedures, except changes in
accounting policies which are required or permitted by generally accepted
accounting principles and changes in financial reporting practices and
procedures which are required or permitted by generally accepted accounting
principles.
3.4 The Borrower shall use the monies loaned hereunder only for
the purpose(s) set forth in the preamble hereto.
3.5 The Borrower shall allow Standard Federal's participant in the
Line of Credit and Term Loan and staff or independent accountants or auditors
selected by Standard Federal's participant to conduct a full audit of the
Borrower's financial statements and its books and records twice during the
first year of the term of the Line of Credit and Term Loan and once in each of
the second and third years of the term of the Line of Credit and Term Loan.
17
<PAGE> 18
Standard Federal's participant shall schedule such audits during normal
business hours of the Borrower and shall provide Borrower not less than two (2)
business days notice of the commencement of each audit. The Borrower shall
make adequate facilities available on its premises at Borrower's expense to
enable Standard Federal's participant to conduct the audits herein described
and shall make available all of its books, records and other documents and
information as may be reasonably requested to facilitate the audits. The
Borrower agrees to pay to Standard Federal's participant an audit fee of
$3,000.00 plus travel expenses for each audit so conducted by the participant.
SECTION 4. NEGATIVE COVENANTS
4.1 From the date hereof until all amounts owing under the Line of
Credit are paid in full and all obligations under the Line of Credit Note and
the Term Note, this Agreement and all other documents executed in connection
with the Line of Credit and the Term Loan are fully paid, performed and
satisfied and so long as Standard Federal has any commitment to make advances
hereunder, the Borrower covenants and agrees that it will not do and will not
permit any subsidiary, if any, to do any of the following without the prior
written approval of Standard Federal:
4.1(a) Create, incur, assume or permit to exist (a) any mortgage, pledge,
security interest, lien or charge of any kind upon any of its property or
assets whether now owned or hereafter acquired other than in favor of Standard
Federal, except as required or permitted by Standard Federal, or (b) any
indebtedness or liability for borrowed money, except indebtedness to Standard
Federal or indebtedness subordinated to the prior payment in full of the
Borrower's indebtedness to Standard Federal which is approved in writing by
Standard Federal, except as otherwise required or permitted in writing by
Standard Federal.
4.1(b) Make loans, advances or extensions of credit to any Entity (which in
this Agreement means any individual, partnership, corporation or other legal
entity), other than a parent or subsidiary of the Borrower, in excess of
$100,000.00 in principal amount, except for sales on open account and in
ordinary course of business; or guarantee or in any way become responsible for
obligations of any other Entity except by endorsement of negotiable instruments
for deposit or collection in the ordinary course of business; or subordinate
any indebtedness due it from an Entity to indebtedness of any other creditor of
such Entity.
4.1(c) Sell, lease or transfer, during any fiscal year, except inventory in
the ordinary course of business, any substantial portion of its assets; or
consolidate with or merge into any other Entity, or permit another to merge
into it; or acquire by lease or purchase all or substantially all the business
or assets of any Entity; or enter into any lease-back arrangement with any
Entity.
18
<PAGE> 19
4.1(d) Allow McClain to acquire or expend for, by lease, purchase or
otherwise, during any fiscal year, fixed assets in excess of $4,500,000.
SECTION 5. SECURITY
5.1 In order to secure: (1) the full and timely performance of the
Borrower's covenants set forth herein and in the Line of Credit Note and the
Term Note, (2) the repayment of any and all indebtedness of the Borrower to
Standard Federal arising pursuant to the Line of Credit Note, the Term Note
(including any renewals or substitutions thereof), this Agreement and any
mortgage, guaranty, security agreement or other document given to secure or
relating to the Line of Credit Note, the Term Note or this Agreement, and (3)
all other indebtedness and liabilities of the Borrower to Standard Federal
arising under this Agreement, the Line of Credit Note or the Term Note, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising:
5.1(a) The Borrower hereby grants unto Standard Federal a security interest
in the following property and the proceeds thereof: (i) any and all securities
or other property received by the Borrower with respect to, on account of or in
exchange for any item of Collateral; (ii) all stock and/or liquidating
dividends (whether the same be in the form of cash or other property) paid
upon, on account of or with respect to any item of Collateral; and (iii) all
bank deposits, instruments, negotiable documents, chattel paper and any and all
other property of the Borrower of any kind whatsoever which shall at any time
be in the possession or under the control of Standard Federal; and
5.1(b) The Borrower has executed and delivered to Standard Federal the
Mortgages and the Security Agreement, the provisions of which are hereby
incorporated herein by reference (herein, together with the property described
in Sections 5.1(a) (i), (ii) and (iii) above, referred to as the "Collateral"
or "item(s) of Collateral").
5.2 The Borrower shall execute and deliver to Standard Federal any
and all documents (including financing statements) as Standard Federal may
require to insure the perfection and priority of its liens and security
interests in the Collateral and furnish, if Standard Federal so requires, proof
of hazard insurance policies, in accordance with Section 3.2(i) above, relating
to the Collateral. Borrower shall also furnish a standard ALTA mortgage title
insurance policy without exceptions (provided that the policy may contain
exceptions approved in writing by Standard Federal) insuring Standard Federal
mortgage interest in the properties described in the Mortgages.
19
<PAGE> 20
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the events enumerated in Sections 6.1
to 6.11 below shall constitute an Event of Default for purposes of this
Agreement:
6.1 FAILURE TO PAY MONIES DUE. If any indebtedness of the
Borrower to Standard Federal on the Line of Credit or the Term Loan is not paid
when due, regardless of whether such indebtedness has arisen pursuant to the
terms of the Line of Credit Note, the Term Note, this Agreement or any
mortgage, security agreement, guaranty, instrument or other agreement executed
in conjunction herewith.
6.2 MISREPRESENTATION. If any warranty or representation made by
or for the Borrower and/or any endorser or guarantor of the Line of Credit Note
or the Term Note in connection with the loan(s) evidenced thereby, or if any
financial data or any other information now or hereafter furnished to Standard
Federal by or on behalf of the Borrower and/or any endorser or guarantor of the
Line of Credit Note or the Term Note shall prove to be false, inaccurate or
misleading in any material respect.
6.3 NONCOMPLIANCE WITH AFFIRMATIVE COVENANTS AND OTHER AGREEMENTS.
If the Borrower shall fail to perform any of its obligations and covenants
under Section 3 of this Agreement, or shall fail to comply with any of the
other provisions of this Agreement, other than under Section 4 hereof, or the
Line of Credit Note, the Term Note, or any other agreement with Standard
Federal to which it may be a party, other than the payment of principal and
interest.
6.4 NONCOMPLIANCE WITH NEGATIVE COVENANTS. If the Borrower shall
fail to perform any of its obligations and covenants described in Section 4 of
this Agreement.
6.5 BUSINESS SUSPENSION. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note or the Term Note shall voluntarily suspend
transaction of its business.
6.6 BANKRUPTCY, ETC. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note or the Term Note: (a) makes a general
assignment for the benefit of creditors; (b) shall file a voluntary petition in
bankruptcy or for a reorganization to effect a plan or other arrangement with
creditors; or shall file an answer to a creditor's petition or other petition
against Borrower and/or any endorser or guarantor of the Line of Credit Note or
the Term Note for relief in bankruptcy or for a reorganization which answer
admits the material allegations thereof; or if any order for relief shall be
entered by any court of bankruptcy jurisdiction with respect to the Borrower
and/or any endorser or guarantor of the Line of Credit Note or the Term Note,
or if bankruptcy, reorganization or liquidation proceedings are instituted
against
20
<PAGE> 21
Borrower and/or any endorser or guarantor of the Line of Credit Note or the
Term Note and remain undismissed for 60 days; (c) has entered against it any
order by any court approving a plan for the reorganization of the Borrower or
any endorser or guarantor of the Line of Credit Note or the Term Note or any
other plan or arrangement with creditors of the Borrower or any endorser or
guarantor of the Line of Credit Note or the Term Note; (d) shall apply for or
permit the appointment of a receiver, trustee or custodian for any substantial
portion of the Borrower's and/or any endorser's or guarantor's properties or
assets; or (e) becomes unable to meet its debts as they mature or becomes
insolvent.
6.7 JUDGMENTS AND WRITS. If there shall be entered against the
Borrower and/or any endorser or guarantor of the Line of Credit Note or the
Term Note one or more judgments or decrees which are not insured against or
satisfied or appealed from and bonded within the time or times limited by
applicable rules of procedure for appeal as of right or if a writ of attachment
or garnishment against the Borrower and/or any endorser or guarantor of the
Line of Credit Note or the Term Note shall be issued and levied in an action
claiming $100,000.00 or more and not released, bonded or appealed from within
30 days after the levy thereof.
6.8 MERGER. If the Borrower shall merge or consolidate with another
entity.
6.9 CHANGE OF CONTROL OR MANAGEMENT. If the Borrower or a
controlling portion of its voting stock or a substantial portion of its assets
comes under the practical, beneficial or effective control of any person or
persons other than those having such control as of the date of execution of the
Line of Credit Note and the Term Note, whether by reason of merger,
consolidation, sale or purchase of stock or assets or otherwise, if any such
change of control, in the sole and absolute discretion of Standard Federal,
adversely impacts upon the ability of the Borrower to carry on its business as
theretofore conducted.
6.10 OTHER DEFAULTS. If the Borrower and/or any endorser or
guarantor of the Line of Credit Note or the Term Note shall default in the due
payment of any material indebtedness to whomsoever owed, or shall default in
the observance or performance of any material term, covenant or condition in
any mortgage, security agreement, guaranty, instrument, lease or agreement to
which the Borrower and/or any endorser or guarantor of the Line of Credit Note
or the Term Note is a party.
6.11 REPORTABLE EVENT. If there shall occur any "reportable
event", as defined in the Employee Retirement Income Security Act of 1974 and
any amendments thereto, which is determined to constitute grounds for
termination by the Pension Benefit Guaranty Corporation of any employee pension
benefit plan maintained by or on behalf of the Borrower for the benefit of any
of its employees
21
<PAGE> 22
or for the appointment by the appropriate United States District Court of a
trustee to administer such plan and such reportable event is not corrected and
such determination is not revoked within 30 days after notice thereof has been
given to the plan administrator or the Borrower; or the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
employee benefit pension plan or to appoint a trustee to administer such plan;
or the appointment of a trustee by the appropriate United States District Court
to administer any such employee benefit pension plan.
SECTION 7. REMEDIES UPON EVENT OF DEFAULT
7.1 Upon the occurrence of any Event of Default described in
Sections 6.2, 6.3 or 6.10 hereof which is not cured or waived in writing by
Standard Federal within 15 days after written notice to the Borrower of such
default; or upon the occurrence of any Event of Default described in Section
6.1 which continues unremedied for 10 days, or upon the occurrence of any Event
of Default described in Sections 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.11, Standard
Federal's commitment to lend hereunder, if any, shall terminate and Standard
Federal may, without notice, declare the entire unpaid and outstanding
principal balance of the Line of Credit and the Term Loan and all accrued
interest to be due and payable in full forthwith, without presentment, demand
or notice of any kind, all of which are hereby expressly waived by Borrower,
and thereupon Standard Federal shall have and may exercise any one or more of
the rights and remedies provided herein or in the Line of Credit Note or the
Term Note or in any mortgage, guaranty, security agreement or other document
relating hereto or granted secured parties under the Michigan Uniform
Commercial Code, including the right to take possession of and dispose of the
Collateral, or otherwise provided by applicable law, and to offset against the
Line of Credit and the Term Loan any amount owing by Standard Federal to the
Borrower.
SECTION 8. MISCELLANEOUS.
8.1 No default shall be waived by Standard Federal except in
writing and a waiver of any default shall not be a waiver of any other default
or of the same default on a future occasion. No single or partial exercise of
any right, power or privilege hereunder, or any delay in the exercise hereof,
shall preclude other or further exercise of the rights of the parties to this
Agreement.
8.2 No forbearance on the part of Standard Federal in enforcing
any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the
Borrower hereunder shall constitute a waiver of any of the terms of this
Agreement or of any such right.
22
<PAGE> 23
8.3 This Agreement shall be construed in accordance with the law of the
State of Michigan.
8.4 All covenants, agreements, representations and warranties made
in connection with this Agreement and any document contemplated hereby shall
survive the borrowing hereunder and shall be deemed to have been relied upon by
Standard Federal. All statements contained in any certificate or other
document delivered to Standard Federal at any time by or on behalf of the
Borrower pursuant hereto shall constitute representations and warranties by the
Borrower.
8.5 The Borrower agrees that it will pay all costs and expenses
incurred by Standard Federal in enforcing Standard Federal's rights under this
Agreement and the documents contemplated hereby, including without limitation
any and all reasonable fees and disbursements of legal counsel to Standard
Federal.
8.6 This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that the Borrower
shall not assign or transfer its rights or obligations hereunder without the
prior written consent of Standard Federal.
8.7 If any provision of this Agreement shall be held or deemed to
be or shall, in fact, be inoperative or unenforceable as applied in any
particular case in any or all jurisdictions, or in all cases because it
conflicts with any other provision or provisions hereof or any constitution or
statute or rule of public policy, or for any other reason, such circumstances
shall not have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatever. The invalidity of any one or more phrases, sentences,
clauses or sections contained in this Agreement, shall not affect the remaining
portions of this Agreement, or any part thereof.
SECTION 9. ADDITIONAL PROVISION
9.1 In addition to the terms, covenants and conditions set forth
above, Borrower has caused the Guarantor to execute and deliver to Standard
Federal the Guaranty, which is an unlimited and continuing guaranty of payment
of the obligations of Borrower under the Line of Credit and the Term Loan.
Guarantor acknowledges and agrees that the Guaranty supports all obligations
and liabilities of the Borrower to Standard Federal as herein described.
23
<PAGE> 24
IN WITNESS WHEREOF, the Borrower and Standard Federal have caused this
Line of Credit Loan Agreement to be executed as of the day and year first
written above.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Vice President/Treasurer
Taxpayer Identification Number:
38-3060196
McCLAIN E-Z PACK, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
----------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
----------------------------------
24
<PAGE> 25
McCLAIN GROUP SALES OF FLORIDA,
INC., a Florida corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Treasurer
Taxpayer Identification Number:
59-3241829
GUARANTOR:
McCLAIN INDUSTRIES, INC., a Michigan
corporation
By:
- --------------------------- -------------------------------
E. James Zabinski
Its: Treasurer
-----------------------
38-1867649
Taxpayer Identification Number
STANDARD FEDERAL:
STANDARD FEDERAL BANK, a
federal savings bank
By:
----------------------------
Its:
------------------------
25
<PAGE> 26
Schedule 2.12
1. Final Report Phase I Environmental Assessment Peabody-Galion
Corporation, Winesburg, Holmes County, Ohio, prepared by
Stearns & Wheler, Environmental Engineers and Scientists,
dated February, 1993, Project No. 2471.
2. Final Report Phase II Site Investigation, Galion Site,
Winesburg, Ohio, prepared by Stearns & Wheler, Environmental
Engineers and Scientists, dated September, 1993, Project No.
2471.
3. Phase II Site Investigation Peabody-Galion Site, Galion, Ohio,
prepared by Stearns & Wheler, Environmental Engineers and
Scientists, dated January, 1993, Project No. 2429.
26
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 1,173,370
<SECURITIES> 0
<RECEIVABLES> 14,284,478
<ALLOWANCES> 0
<INVENTORY> 31,229,399
<CURRENT-ASSETS> 48,169,122
<PP&E> 33,078,135
<DEPRECIATION> 11,894,922
<TOTAL-ASSETS> 73,974,197
<CURRENT-LIABILITIES> 13,931,585
<BONDS> 0
0
0
<COMMON> 5,572,846
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<SALES> 82,263,202
<TOTAL-REVENUES> 82,263,202
<CGS> 63,901,196
<TOTAL-COSTS> 63,901,196
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 2,478,350
<INCOME-PRETAX> 3,811,755
<INCOME-TAX> 1,300,000
<INCOME-CONTINUING> 2,511,755
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,511,755
<EPS-PRIMARY> .54
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</TABLE>
